8.2.3: Strategies for green supply chain management

Green Procurement

Green procurement stems from environmental damage prevention, waste minimization, resource efficient principles and activities. Also known as environmental purchasing, green procurement compares price, technology, quality and the environmental impact of the product, service or contract. Green procurement programs may be as simple as purchasing renewable energy or choosing recycled office paper over virgin paper. Or, they can be more involved, such as setting environmental requirements for supplier and contractor compliance.

Before a green procurement program can be implemented, current purchasing practices and policies must be reviewed and assessed. A life cycle assessment of the environmental impacts of products or services is required along with the establishment of environmental criteria on which purchase and contract decisions are to be made. The outcome is a regularly reviewed green purchasing policy that is integrated into other organizational plans, programs, and policies.

Green procurement policies and programs can reduce expenditure and waste; increase resource efficiency; and, influence production, markets, prices, available services and organizational behavior. They can also assist countries in meeting multi-lateral requirements such as the Kyoto Protocol and Rotterdam Convention. International Standards Organization and other bodies have established guidelines for green procurement programs.

---

(Eco)Efficiency-based Strategies

Efficiency-based strategies tie environmental performance to operational processes within the supply chain. These strategies improve supply chain efficiency, maximize economic performance, and enhance the environmental performance benefits achieved through resource and waste reductions. It exceeds mere regulatory compliance and is achieved by encouraging higher levels of engagement between consumers and suppliers, and by requiring suppliers to meet operations-based efficiency targets.

The success of efficiency-based strategies hinges on the communication and cooperation of supply chain partners to improve environmental performance of all parties. For example, collaboration are usually aimed at improving context-specific, complex problems such as waste reduction and recycling.

From a competitive advantage perspective, this strategy provides a cost-reduction benefits to the supply chain and readily fits with pre-existing organizational goals of optimization. However, it has limited potential to support more knowledge-intensive environmental management activities such as product design, material substitution, or innovation.

---

Innovation-based Strategies

Innovation-based GrSCM strategies vary from efficiency-based approaches because of its environmental focus and specific objectives for supply chain performance. Increased environmental compliance regulations, resource scarcity, and general environmental awareness have encouraged organizations to consider life-cycle aspects of products and guarantee the sustainability of the life cycle to consumers. This change has encouraged organizations to implement specialized processes, technologies, and enforce complex performance standards for suppliers that have enhanced supply chain knowledge exchange and improved relationships and investments.

Moving towards innovation-based strategies requires the commitment of dedicated resources and specialized personnel to improve integration of environmental performance into supply chains and product design, ensure compliance with environmental legislation changes, and educate suppliers on environmental performance updates. Firms develop capabilities and skills that can be used to incorporate innovative environmental planning into specific product designs, characteristics, functionality, or life-cycle related activities (e.g., service, repair, and recycling). Firms can also develop process capabilities to develop environmentally robust methods and systems for the production, distribution, and the use of products.

---

Closed-loop Strategies

Closed-loop approaches represent the most complex and collaborative form of GrSCM strategy. Closing the loop involves the capture and recovery of materials for either re-manufacture (high value) or recycling (low value). These materials can be recovered during production, as returned goods, post-use, and at end-of life. The closed-loop strategy present an approach that seamlessly integrates issues of economic, operational, and environmental performance across the whole supply chain. Refer to Section 3.4 and Section 7.2 for more details on “closing the loop” and closed loop production.

Designing and implementing a closed-loop strategy is one of the most complex endeavors an organization can undertake with its supply chain. Organizations considering implementation of a closed loop supply chain require high levels of control over the capture and return of used materials. Goods need to be managed for quality. The aggregation of collection and sorting activities allows economies of scale to be created. Such a high level of integration, coordination across partners, and socially complex knowledge requires years of development effort. Socially complex, collaborative relationships provide the basic foundation for a closed-loop supply chain strategy.