The green supply chain: integrating suppliers into environmental management processes.

INTRODUCTION

The environment has become a critical issue in business today. In the 1960s and 1970s businesses typically considered environmental compliance to be a "fringe" issue which elicited little discussion at executive levels. Since then, several highly visible environmental disasters (e.g., Love Canal, Three Mile Island, Exxon Valdez) have demonstrated the importance of having a comprehensive environmental strategy in place. As is true of Total Quality Management (TQM), environmental strategies must be conceived and supported by top management, but deployed in every functional area of an organization to be meaningful. Previous research showed how cross-functional "buy-in" is necessary to integrate environmental strategies with supply chain management.[1] This study extends the findings of that research by focusing on the role of purchasing and supply chain management in improving the environmental performance of an organization. The next section discusses the growing importance of environmental management to business. Case studies are discussed and a set of generic guidelines regarding the role of purchasing and supply chain management in environmental management is presented. The final section summarizes the conclusions and insights from the study.

APPROACHES TO ENVIRONMENTAL MANAGEMENT

The traditional view of environmental management in business has been either "we need only comply to the letter of the law," or worse yet, "ignore it and it might go away." These attitudes grew out of the perception that any actions which improved the environment were detrimental to interests of business. Such perceptions were often fueled by the news media (e.g., the ongoing dispute concerning the logging industry and the spotted owl in the Pacific Northwest). Traditional "anti-business" environmental perceptions also led to instances where companies decided it was in their best interest to pollute and pay a small fine, instead of finding ways to prevent or eliminate the waste. Penalties associated with polluting escalated with the passage of the Superfund in the 1970s, SERA in the 1980s, and other legislation in the 1990s, and businesses began to realize that some level of compliance would be necessary. The typical response of companies was to comply with the legislation, but to rarely integrate these policies across the company. This type of response to environmental issues can be termed "resistant adaptation."[2]

A slightly more developed environmental management approach accepts the goal of minimizing waste, without trying to eliminate the source of the waste. Companies pursuing this approach often try to find ways to "clean up" or store the waste once it is created. Companies that install smokestack devices to reduce the level of pollutants emitted into the air, without trying to reduce the level of pollutants produced, are "embracing without innovating." This reactive approach to environmental issues is characterized by "end-of-the-pipe" solutions.[3] While embracing environmental issues without changing current processes provides the company with a sense of social legitimacy,[4] it usually leads to narrow, incremental solutions.[5] As such, companies are not realizing the competitive implications of environmentally-friendly supply chain practices; they merely experience penalty avoidance.

Companies are now starting to recognize the possible competitive advantages associated with environmental awareness.[6] However, as environmental management makes its way into corporate strategic planning, it must also be integrated with the day-to-day processes of the organization. Companies which make minimal changes to optimize their current processes can be called "receptive" to environmental issues. Companies which look beyond their current processes to find and eliminate sources of waste are more "constructive" in their response. Constructive responses to environmental issues focus on the value embodied in the product and process by integrating product planning and changes into environmental planning and response. Constructive responses also rely on companies adopting a resource-productivity framework to maximize benefits attained from environmental initiatives.[7]

The weakness with these modes of environmental management response is that each focuses only on the internal functions of an organization. One environmental expert suggests that a "proactive" company will "thrive only when it acts as a whole system that includes not just executives and workers, but customers, suppliers, and neighbors," and by integrating total quality environmental management (TQEM) into its planning and operations processes.[8] This paradigm implies that companies wanting to reap the greatest benefits from their environmental management processes must integrate other members of the supply chain into these processes. Companies are compelled to include suppliers if they want truly environmentally-friendly practices (EFP) for purchasing and materials management, which is tantamount to "greening the supply chain".