Green Supply Chain Advantages and Challenges | Free Essay Example

Green Supply Chain Advantages and Challenges

Words: 2051
Topic: Business & Economics
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Abstract

Greening the supply chain refers to the inclusion of various innovative strategies aimed at reducing environmental pollution in the course carrying out the operations of a firm. It involves greening all the activities making up the supply chain. The process comprises four basics, viz. green purchasing, green manufacturing, green distribution, and reverse logistics. Initially, environmental pollution was not a concern, and thus most firms did not consider this aspect in their business plans.

However, greening the supply chain has gained popularity over the past few decades with almost every business engaging in innovation to improve the supply chain and reduce pollution, which has been evident in the supply chains of most companies. Some of the measures adopted by companies include recycling wastes products and using improved machines that minimize the emission of harmful gases such as carbon dioxide.

Introduction

The nature of entrepreneurship today has taken a different shape as many firms indulge in global business to maximize profits through reaching a wide range of customers, hence increasing turnover. Inasmuch as the global market has attracted businesses, it has also presented ethical issues that revolve around the conservation of the environment. Most multinational companies have been in the spotlight due to the pollution that they cause to the environment during their operations.

Environmental pollution has been attributed to climatic changes, and thus businesses are encouraged to observe their philanthropic duty of ensuring that the countries where they operate do not suffer the adverse effects of pollution. Most global companies have embarked on research to unravel innovative ways of implementing green supply chains and reduce environmental pollution.

This paper explores the progress made by various companies in the quest to adopt green supply chain to mitigate the environmental impact of their activities. The paper will also analyze the advantages of going green and describe the major setbacks facing companies in their going green initiatives.

Need for Green Supply Chain

The need for a green supply chain has been prompted by two major factors, viz. environmental changes and the scarcity of resources.

Environmental Changes

Previously, businesses would conduct their operations without facing the issues of environmental pollution concerns (Ballou, 2007). The lack of clear laws requiring businesses to maintain a clean environment even as they seek to maximize their profits provided an incentive for firms to ignore the importance of conserving the environment.

However, due to the recent climatic changes that have characterized most countries in the world, it has become necessary to enact laws compelling businesses to embrace the concept of social responsibility by conserving the environment. Most countries have come up with legislations aimed at conserving the environment and averting the adverse climatic changes that have affected economies negatively.

Experts in the field of weather analysis and forecasting have identified climatic changes such as heat waves, rains, snowfall, and hurricanes, which have become a common phenomenon in the contemporary world, and attributed the listed changes to environmental pollution (Zhu, Sarkis, & Lai, 2008). This aspect has prompted most governments to place strict laws seeking to protect the environment.

Resource Depletion

In addition to climatic changes that have impacted the global economy negatively, resource depletion has also contributed significantly to the need to conserve the environment. The natural resources available for exploitation by businesses are scarce, and they are disappearing quickly. Therefore, the maximum utilization of the available resources is achieved without much wastage.

According to a report by the World Bank, about 80 countries in the world are suffering from water shortages, which is an indicator that natural resources are being degraded at an alarming rate. Therefore, businesses need to make maximum use of the available resources and avoid wastages.

To achieve maximum use of such resources, firms are considering minimizing waste products by recycling byproducts from the manufacturing processes. The fast depletion of resources coupled with the diverse climatic changes is harmful to the global economy, and thus measures must be put in place to mitigate such issues.

Globalization and Greening the Supply Chain

Globalization has influenced the greening supply-chain campaign significantly. This assertion holds because most companies have sought to increase their overall profits by globalizing their activities. The global market has presented issues concerning ethics in the backdrop of the rising climatic changes, which are attributed to environmental pollution. Most multinational companies are locked in ethical crises due to their disregard of the environment.

In some cases, such companies have been forced to pay huge fines for damages caused when conducting business. Such fines have limited the companies’ main objectives, which revolve around maximizing the shareholders’ value. To cut down the operating costs and ensure that business operations are in line with the legal and ethical framework in the global market setting, most companies have embarked on innovation to embrace green supply chain.

The restrictions on environment pollution placed upon organizations have provided incentives for most business to embrace innovation as a way of greening their operations, maximize their profits, and increase their competitive advantage.

Benefits of Green Supply Chain

Cost Reduction

Research indicates that companies with a well-implemented green supply chain in their operations benefit from reduced operational costs (Testa & Iraldo, 2010). The reduction in operational costs is attributed to the innovations made by such companies in their endeavors to achieve pollution-free supply chain.

The innovations give way to efficiency, which in turn leads to high profits for the organizations. Even though critics argue that no immediate benefits are realizable in the short run, research indicates that such businesses benefit greatly in the long term. Increasing efficiency through the introduction of better machinery translates into high profits for the firm. Cost reduction arguments are also justifiable through the decrease in the expenditure coming from fines to a firm due to unethical practices.

Sustainability of Resources

Green supply chain initiatives are directed towards establishing effective utilization of the limited resources, which are available to a company through maximizing the gains accruable from the exploitation of such resources (Wang & Gupta, 2011). Some activities adopted by organizations in their attempts to go green encourage the utilization of every available resource. This aspect has seen the practice of recycling waste gain popularity over the past few decades.

Recycling of waste maximizes the utility of the available resources, and in turn makes businesses highly profitable. In addition, it is a way of ensuring that the concept of corporate philanthropy is achieved. Therefore, businesses seeking to green their supply chain will gain the confidence of its customers, which leads to customer loyalty and increased turnover.

Product Differentiation and Competitive Advantage

Greening the supply chain centers on the implementation of initiatives aimed at reducing the overall environmental effect when doing business. Such initiatives are congruent with the concept of corporate philanthropy that requires firms to guarantee the welfare of the immediate communities neighboring the business (Sheu & Talley, 2011). Therefore, greening the supply chain paints a positive image of the firm and its products, hence leading to customer loyalty. Customer loyalty to a business translates into increased profits for the involved firm.

Adapting to Regulation and Reducing Risk

Environmental pollution is one of the major ethical issues affecting most businesses today. Therefore, greening the supply chain is one of the undertakings that could help firms in avoiding unnecessary expenses in the form of fines due to unethical behavior.

Companies That Are Greening Their Supply Chain

eBay

eBay is one of the few companies in the world that have embraced the idea of greening the supply chain to minimize pollution. In its initiative, the company aims at reducing the overall environmental impact coming from poor waste disposal. The firm has launched a website that facilitates the meeting of buyers and sellers of the company’s waste products. This aspect gives the company’s products a longer lifespan and eliminates chances of poor disposal of the waste materials.

Starbucks

Starbucks is another example of an organization that has made a step forward towards greening its supply chain. The company is setting out to achieve the “LEED certification for all its new outlets by purchasing Fair Trade Certified and certified organic coffee” (Zhu et al., 2008, p. 81). Through its going green initiatives that center on the creation of green stores, the company has achieved a great reduction in the overall cost of production, thus leading to increased profits.

Google

Google is among the fastest growing organizations in the technology industry. Its fast growth is largely attributed to the good reputation that it has built with its customers. Google sponsors training conferences for farmers in which they are taught the best ways to ensure that farming operations cause the least possible pollution to the environment.

In addition, it acts as a role model for the go green initiatives through adopting green supply strategies. For example, the company powers its machinery through renewable energy sources that cut the overall operational costs coupled with minimizing environmental pollution.

Subway

Subway restaurant is another company that has indicated its commitment to reducing the impact of its operations on the environment. The company has implemented new strategies aimed at increasing efficiency and reducing carbon emission to the environment. In the achievement of this goal, the company targets four major sections of its supply chain, viz. resource conversation, energy efficiency, food safety, and waste reduction (Wang & Gupta, 2011). Since the company adopted the strategies, it has reduced the annual amounts of carbon emissions. Data from the company reveals that Subway has reduced carbon emissions by 120,000 metric tons.

Major Blocks to Achieving a Green Supply Chain

Lack of Skills and Experience

The major challenge facing most companies in their efforts to go green is the inadequacy of knowledge regarding the best practices to be used to implement a credible green supply chain effectively (Testa & Iraldo, 2010). Most managers are not familiar with the concept of greening the supply chain. Therefore, their attempts to introduce the strategy results in failure.

In addition, there are numerous legislations governing the implementation of the green supply chain that managers are not familiar with in their day-to-day running of organizations. For example, in the US, the ISO 9000 and ISO 14000 are the two controversial standards that govern the implementation of the green supply chain in the country. However, most organizational managers are not acquainted with the two standards. Since the two standards have varying provisions, managers are not sure on which option to consider when greening their supply chains.

Resources and technological Shortfalls

The implementing a green supply chain in a company requires a change in the processes involved in production and distribution. Such changes require a huge investment in terms of machinery, research, and staff training (Sheu & Talley, 2011).

Most companies cannot afford the costs involved, and thus they remain reluctant in embracing such changes. Besides, technological downfalls are a major challenge to most companies. Since the process involves innovation, deficiency in technology may pose great challenges to most companies.

Lack of Government Support

The majority of governments in the world have imposed legislations requiring organizations to adopt green supply chains. However, minimal financial support is afforded to such companies from the governments (Ballou, 2007). In addition, no incentives are in place to encourage innovation and the overall implementation of the concept of the green supply chain. Therefore, governments should provide support to companies in the form of tax incentives on machinery and other equipment needed in the process of greening the supply chain.

Conclusion

The majority of environmental changes have been attributed to pollution caused by businesses in the course of their operations. Various gases emitted to the environment are harmful, and they cause climatic changes among other adverse effects. As businesses embark on measures to green their supply chains, the shareholders’ value will be improved. This assertion holds because firms will embrace innovative measures in the process achieving a green supply chain, which is environment-friendly.

Such innovations lead to increased efficiency coupled with increased reputation of a firm, thus leading to high profits in the long term. Today, most companies have invested greatly in innovative projects aimed at greening the supply chain for legal compliance and maintaining their competitive advantage over other companies in the same line of business. Companies such as eBay and Google are examples of businesses that have been in the forefront in the go green campaigns.

References

Ballou, R. (2007). Business Logistics/Supply Chain Management. New York, NY: Pearson Education.

Sheu, B., & Talley, W. (2011). Green supply chain management: trends, challenges, and solutions. Transportation Research Part E: Logistics and Transportation Review, 47(6), 791-792.

Testa, F., & Iraldo, F. (2010). Shadows and lights of GSCM (Green Supply Chain Management): determinants and effects of these practices based on a multi-national study. Journal of Cleaner Production, 18(10), 953-962.

Wang, F., & Gupta, S. (2011). Green supply chain management: Product life cycle approach. New York, NY: McGraw Hill Professional.

Zhu, Q., Sarkis, J., & Lai, K. (2008). Confirmation of a measurement model for green supply chain management practices implementation. International Journal of Production Economics, 111(2), 261-273.