GREENING THE SUPPLY CHAIN

LAYUGAN, MARK LOUIE B., LEACHON RICA B., LEJOS DANIELA ANN M., &
LOYOLA JOHN MICHAEL B.

1. Objectives

After the completion of the chapter, students will be able to:

1. Define green supply chain management (GSCM) ;
2. Identify the advantages, benefits and drivers of GSCM;
3. Define environmentally preferable purchasing (EPP); and
4. Define an environmental management system (EMS).

2. Instructions to the Learner

This module focuses on greening the supply chain. It covers topics from defining,
benefits and drivers of greening the supply chain to Environmentally Preferable Purchasing
(EPP) and Environmental Management System. Pre-test, learning assessment and
post-test were included to measure the learning ability of the students.

3. Pre-Test

B. True or False. Write True if the statement is correct otherwise writes False. Any form of
erasure is considered wrong. No use of pencil. (2 pts each)

1. Environmentally preferable purchasing (EPP) brings together the people, policies, plans,
review mechanisms, and procedures used to manage environmental issues at a facility
or in an organization. (False)

2. The idea behind a green supply chain is to use environmentally friendly corporate
methods to reduce environmental damage and manage waste, water, and air pollution.
(True)

3. Environmental management system (EMS) is the aspect of the organization’s overall

management structure that addresses immediate and long-term impacts of its products,
services and processes on the environment. (True)

4. Domestic environmental regulations are a group of regulations that induce organizations

to acquire appropriate relevant programs and strategies to promote their ecological
effects. (True)

5. Suppliers can be socially responsible by adopting ethical practices and being compliant
with legislative obligations and other actions that benefit society such as equality,
diversity, regeneration, and integration. (True)

6. There is a common conception that reducing the environmental impact of a business

comes at a cost. (False)

7. GSCM can be also seen as a result of an innovative and modern managers’ strategy.
(True)

1
8. ISO 9001 is a management system that helps you identify gaps in your business where
you could make green efficiency savings. (False)

9. Community stakeholders have the potential power to affect and change the society’s
feelings of a firm. (True)

10. Supplier’s asking for green products and services have now become the most significant
driver for green initiatives. (False)

4. Learning Activities

4.1 Definition of GSCM

The idea behind a green supply chain is to use environmentally friendly corporate
methods to reduce environmental damage and manage waste, water, and air pollution.
Unquestionably, the primary goal of the "green concept" is to improve environmental
sustainability, but businesses sometimes refer to it as "killing two enemies with one bullet."
As a result, green supply chains can increase economic growth, provide competitive
advantages in the form of higher customer satisfaction, a favorable public image, and a solid
reputation, as well as improved opportunities to sell their goods to nations that support the
environment. With new developments and methods to safeguard environmental
sustainability, the definition of "green" is evolving. Examples include corporate social
responsibility, green manufacturing, waste reduction, recycling and remanufacturing,
sustainable/environmentally friendly supply chains, and green supply chains.

The term sustainable or green supply chain refers to the idea of integrating
sustainable environmental processes into the traditional supply chain. This can include
processes such as supplier selection and purchasing material, product design, product
manufacturing and assembling, distribution and end-of-life management. Instead of
mitigating the harmful impact of business and supply chain operations, the green supply
chain involves value addition and/or value creation through the operations of the whole
chain. Undeniably, reducing air, water and waste pollution is the main goal of green supply
chain, while green operations also enhance firms’ performance in terms of less waste
manufacturing, reuse and recycling of products, reduction in manufacturing costs, greater
efficiency of assets, positive image building, and greater customer satisfaction. Figure 1
displays a green supply chain of a child's crib manufacturer as an example.

2
 Figure 1 Green supply chain of child’s crib manufacturer.

Applications of the primary sustainable development plan stand out because of green
supply chains. Figure 2 shows a straightforward model of a green supply chain and
underlines how green practices may be applied in businesses to reduce environmental
degradations and improve their economic and operational performance. The principles of
sustainable and green supply chain management have been described by Khan et al.

Figure 2 Simple model of GSCM

4.2 Benefits of GSCM

1. Reduced Environmental Impact

There is a common misconception that reducing the environmental impact of a

business comes at a cost. In fact, it can lead to big savings. By reducing waste and
increasing the efficiency of buildings, vehicles and machinery, you can quickly see returns.

2. Improve continuity of supply chain

Diversify your supply chain to avoid over-reliance on a single link in your chain. There
have been many cases over the years of suppliers being unable to fulfill a service or product,
which has then had knock-on effects for other businesses. Having multiple suppliers in
different parts of the world can help improve the continuity of your products or services,
preventing costly downtime and reputation damage.

3. Protecting against reputational damage

With information readily available online, your supply chain also affects your brand
reputation. It's important to protect your reputation to enhance business growth. Ensure your
strategy for sustainability enhances the lives of every worker throughout the chain. This

3
includes ensuring fair working conditions, pay and minimizing environmental impact. Never
subject workers to unnecessary risk.

4. Potential for new partnerships

This one may be less obvious. A business with a sustainable supply chain, is also an
attractive prospect for other companies looking to partner with it. Your environmental
credentials will likely align with the values of another brand. In turn, this opens up potential
partnership opportunities.

5. Win more business

A sustainable supply chain can land you more business as you prove your green
credentials. You can further support this through internationally recognised standards, such
as ISO 14001. Often a requirement in business tenders, ISO 14001 is a management
system that helps you identify gaps in your business where you could make green efficiency
savings. With an accreditation to support your environmental efforts, you are showing
potential clients that you’re taking essential strides to reduce your impact on the world.

Why is there a need for Green Supply Chain Management?

- Increasing environmental constraints due to global warming

- Corporate social responsibility
- Beneficial for organization
- Eco-friendly
- Increasing environmental awareness in stakeholders
- Evolving consumer and client demand
- Response to increasing fuel prices

4.3 Drivers of GSCM

The determining factors of GSCM adoption can be classified between:

4
 -“External Factors” mostly related to “stakeholders pressures” and “environmental
regulation “; which named as relational motives arise from the aspiration of a organization
part, to become legitimized and to advance the existing relationship among the company’s
different stakeholders;

- “Internal Factors” linked to a set of business-led strategic motives.

1. EXTERNAL MOTIVATIONS

a. Regulatory pressure. Increasing environmental problems and natural resource scarcity

have caused regulations at different, whether international or domestic levels to state more
rigid regulations. With these socio-political changes, companies have adopted various
environmental practices in different production stages, such as cleaner production, and ISO
14001 certification.

-Domestic environmental regulations - This group of regulations induces

organizations to acquire appropriate relevant programs and strategies, in order to
promote their ecological effects.

-Government environmental policy - Increasing the environmental awareness of

the public sector, the legal necessities resulting from government regulations and
policies and community stakeholders are usually considered to be the drivers that
forces companies to adopt green initiatives and policies.

-International environmental agreements - Domestic environmental regulations

appear to be a more potent force behind the adoption of green policies than the
group of financial policies linked to WEEE. However, the majority of governments and
businesses are impacted by international environmental laws, such as the Climate
Change Treaty, the Kyoto Contract, and the Montreal Protocol.

b. External stakeholders pressures. Broadly spiking stakeholders including any individual

or group community, who may influence or is influenced by the organization. The GSCM
practices main external stakeholders are believed to include, customers, suppliers and
community stakeholders.

-Customers - Customers’ ask for green products and services have now become the
most significant driver for green initiatives (Doonan, Lanoie et al. 2005).

-Suppliers - Manufacturer- supplier association, is considered as a vital factor of

acquiring a sustainable competitive advantage for companies (Sheth and Sharma
1997; Homburg 2001). Partnering with suppliers who consider their ecological
footprint, now become a major criteria in most of the companies (Clark 1999)

-Community Stakeholders - As health impacts and sustainable solutions are to be

recognized with confidence, it is necessary that community perceptions be sufficiently
represented and that they affect decision-making process. Most of the experts have
stated that, community stakeholders has the potential power to affect and change the
society’s feelings of a firm

5
2. INTERNAL STRATEGIC MOTIVATIONS

Following a sustainable “environmental performance” can include different meanings and

can be done in various manners. The three most cited strategic views which can induce firm
to adopt such practices are following:

-Reputation-led strategic motives: Consequently, adopting some certain practices

and policies by organizations may improve the organization’s legitimacy. Accordingly
adopting green initiatives and environmental sound practices such as , setting a
collaborative green logistic network (in-bound and out-bound) , forcing suppliers to
decrease their transportation emissions as well as making customers aware of this
system, can contribute to create a positive corporate environmental image which can
lead to increase their market share.

-Efficiency-Led Strategic Motives: According to what stated Roa (2006), and Min &
Galle (2001), the Expected Business Benefits (EBB) (or expected financial benefits,
specially from 3 “Re” ,reuse recycle, remanufacturing ) , is one of the most significant
issues inspiring GSCM adoption. Furthermore, it is well-known that making revenue
and financial profits are the most significant objectives of any organization.
Accordingly, the economic benefits expected to be generated from Green practices in
any stage and level of supply chain, specially from the recycling part.

-Innovation-Led Strategic Motives: GSCM can be also seen as a result of an

innovative and modern managers’ strategy. The firms who are seeking to develop
products in an innovative manner, both from technological and organizational point of
view, can see , in the way of pioneeristic and uniqueness, the GSCM practices an
opportunity to increase their market share and fortify their leadership compared to
their competitors in the market.

-Environmental Management System (EMS) Adoption: An EMS is a systematic

process that companies use, in order to achieve environmental objectives, policies
and responsibilities as well as usual auditing of its all parts. EMS part existent in
companies is the basis of motivations which leads to implement self-regulation
methods by companies such as ISO 14001 certification or EMAS. Based on
experiences of EMS adapters, it could be concluded that the EMS tool can be
efficient, both in managing a company’s environmental issues and in a broad
approach, it is effective especially in dealing with environmental effects originating
from different stages of the supply chain.

4.4 Environmentally Preferable Purchasing (EPP)

6
 Environmentally preferable purchasing involves choosing products and
services that will have no negative effect on the human body, society and the
environment when competing with products and services that serve the same
purpose, adding to the traditional parameters of price, quality, and functionality.

Purchasing decisions can have significant environmental and social impacts,

particularly for the tourism and hospitality sectors so this is what I will be using as an
example. They are under constant pressure to impress and live up to guest expectations,
thus they import large numbers of goods, including food, from distant countries to cater for
guests’ demands. Apparently, there is no such thing as a stupid question/demand, however
anyone who believes that has clearly never worked in the hotel industry.
Why is the role of purchasing in the hotel industry so important?

-Nearly all waste that leaves a hotel on a daily basis comes in through purchasing.
Purchasing departments are a central standard setting point for nearly every product or
service used in the hotel. During the procurement process, suppliers are required to reduce
the environmental impact of their products by using EPP Resources to know what
environmental questions to ask and the specifications to use.

It considers the following:

● Is the purchase necessary;
● Materials the products are made of;
● The conditions under which they have been made;
● Distance they have traveled;
● Product usage/consumption; and
● The method of disposal.

Environmentally Preferable Purchasing Principles:

● Opt for the highest quality you can afford, whether for furniture, uniforms, or
appliances; have them repaired or serviced when necessary—it’s generally more
cost effective than replacement and reduces waste.
● Green products are also more environmentally sound with lower water and electricity
consumption, green manufacturing processes etc.
● Avoid products containing toxic substances. Opt for non-harmful alternatives,
including non-toxic, water-based, hypoallergenic, and biodegradable cleaning
products, zero VOC paints and chemical-free amenities.
● Choose certified organic or fair-trade food and drink products, and cotton where
possible.
● Unless they are biodegradable or can be recycled, they add to the accumulation of
landfill so choose an alternative with a useful lifespan.
● Use products with less or recycled packaging. The trend now is to use less
impressive, more humble, environmentally friendly packaging.

7
 The benefits of adopting an Environmentally Preferable Purchasing approach are
numerous. The receiver of the benefits can be the environment and the purchaser or the
supplier.

Benefits to the purchaser can include:

● Securing best value for money and achieving a more efficient use of public
resources.
● Generating financial savings through greater energy efficiency; reduced waste
disposal (including reduced packaging to waste); reduced water use; and reusing
materials and products, thereby lowering the cost of a product over its life cycle.
● Achieving positive publicity associated with the purchase and use of products,
services, and suppliers with good environmental and social responsibility records. It
promotes innovation and encourages suppliers to invest in sustainable products,
processes, and technologies.

Suppliers can be socially responsible by adopting ethical practices and being

compliant with legislative obligations and other actions that benefit society such as equality,
diversity, regeneration, and integration.

Social impacts that can be taken into consideration across sustainable procurement
activities include:
● Support and promotion of fair-trade suppliers and adoption of ethical practices by the
government.
● Due consideration of the impacts on human health.
● Supporting local small businesses.
● Supporting socially inclusive practices, such as employment and training focused on
disadvantaged groups.
● Assessing the impact of occupational health and safety concerns (both here and
abroad).
● Staying in line with rules and regulations.

4.5 Environmental Management System

An Environmental Management System (EMS) is a set of management processes

and procedures that allows an organization to evaluate, control, and reduce the
environmental impacts of its activities, products, and services and operate with greater
efficiency and control.

An EMS brings together the people, policies, plans, review mechanisms, and
procedures used to manage environmental issues at a facility or in an organization.

Features of EMS
● Serves as a tool, or process, to improve environmental performance and information
mainly "design, pollution control and waste minimization, training, reporting to top
management, and the setting of goals"
● Provides a systematic way of managing an organization’s environmental affairs
● Is the aspect of the organization’s overall management structure that addresses
immediate and long-term impacts of its products, services and processes on the
environment.
● Focuses on continual improvement of the system and a way to implement policies
and objectives to meet a desired result. This also helps with reviewing and auditing
the EMS to find future opportunities.

8
Potential Benefits of EMS
● Improved environmental performance
● Enhanced compliance
● Pollution prevention
● Resource conservation
● Increased efficiency/reduced costs
● Enhanced employee morale
● Enhanced image with public, regulators, lenders, investors
● Employee awareness of environmental issues and responsibilities

ISO 14001: AND EMS

ISO 14001 sets out the criteria for an “environmental management system”. It does
not state requirements for environmental performance, but maps out a framework that a
company or organization can follow to set up an effective environmental management
system. Certification in meeting this standard allows companies to claim state-of-the-art
ecological responsibility. ISO 14001 is relevant to any organization seeking to improve and
manage resources more effectively.

Figure 4: The continuous improvement cycle.

Figure 4 shows the five main stages of an EMS, as defined by the ISO 14001
standard. An EMS encourages an organization to continuously improve its environmental
performance. The system follows a repeating cycle (see figure 4). The organization first
commits to an environmental policy, then uses its policy as a basis for establishing a plan,
which sets objectives and targets for improving environmental performance. The next step is
implementation. After that, the organization evaluates its environmental performance to see
whether the objectives and targets are being met. If targets are not being met, corrective
action is taken. The results of this evaluation are then reviewed by top management to see if
the EMS is working. Management revisits the environmental policy and sets new targets in a
revised plan. The company then implements the revised plan. The cycle repeats, and
continuous improvement occurs.

EMS and GSCM

Organizations that adopt EMSs more frequently implement GSCM practices,
regardless of how long the EMS has been in place. EMSs and GSCM may complement

9
each other, and that EMS adopters have a stronger probability of improving the environment
not just within their organizational boundaries, but throughout their network of buyers and
suppliers. The net effect may be an overall increase in environmental sustainability, since
mechanisms are in place to enhance network-wide environmental performance (Darnall et
al., 2007).

5. Post-Test

B. True or False. Write True if the statement is correct otherwise writes False. Any form of
erasures is considered wrong. No use of pencil. (2 pts each)

1. Environmentally preferable purchasing (EPP) brings together the people, policies, plans,
review mechanisms, and procedures used to manage environmental issues at a facility
or in an organization. (False)

2. The idea behind a green supply chain is to use environmentally friendly corporate
methods to reduce environmental damage and manage waste, water, and air pollution.
(True)

3. Environmental management system (EMS) is the aspect of the organization’s overall

management structure that addresses immediate and long-term impacts of its products,
services and processes on the environment. (True)

4. Domestic environmental regulations are a group of regulations that induce organizations

to acquire appropriate relevant programs and strategies to promote their ecological
effects. (True)
5. Suppliers can be socially responsible by adopting ethical practices and being compliant
with legislative obligations and other actions that benefit society such as equality,
diversity, regeneration, and integration. (True)
6. There is a common conception that reducing the environmental impact of a business
comes at a cost. (False)

7. GSCM can be also seen as a result of an innovative and modern managers’ strategy.
(True)

8. ISO 9001 is a management system that helps you identify gaps in your business where
you could make green efficiency savings. (False)

9. Community stakeholders have the potential power to affect and change the society’s
feelings of a firm. (True)

10. Supplier’s asking for green products and services have now become the most significant
driver for green initiatives. (False)

6. References

- Hajikhani, M., Wahiza Binti Abdul Wahat, N., & Idris, K. (2012, August). Considering
Green Supply Chain Management Drivers, as a Strategic Organizational
Development Approach, Malaysian perspective. ajbasweb.com. Retrieved from
http://www.ajbasweb.com/old/ajbas/2012/August/246-265.pdf

10
- Merwe, S.V.D (2014). What is Environmentally Preferable Purchasing? Retrieved
from
https://www.procurementexpress.com/business-development/what-is-environmentally
-preferablepurchasing/?fbclid=IwAR3N1UKPOuyF0Gg_CjMGFA5QqZhrJkkRaqCiFG
EPe_G0NnldaJwnfibus20
- U.S. Environmental Protection Agency. (2022, September 23). Learn About
Environmental Management Systems. US EPA. Retrieved September 30, 2022, from
https://www.epa.gov/ems/learn-about-environmental-management-systems#what-is-
an-EMS
- Darnall, N., Jolley, G. J., & Handfield, R. (2007). Environmental management
systems and green supply chain management: compliments for sustainability?
Business Strategy and the Environment, 17(1), 30–45.
https://doi.org/10.1002/bse.557
- Abu, K. B. (n.d.). Environmental management systems [Slide show]. academia.edu.
https://www.academia.edu/21838158/Environmental_Management_Systems
- https://www.greenbiz.com/sites/default/files/document/GreenBiz_Report_Greening_t
he_Supply_Chain.pdf
- https://www.intechopen.com/chapters/63678
- https://www.youtube.com/watch?v=zgRnqEjLqvo

11