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12 Decision Line, July 2008

Developing Strategies for GreenSupply Chain Management

by Dayna Simpson, Oregon State University, andDanny Samson, University of Me ourne

suppliers to meet guidelines for sustain-

able farming. Other organizations haveintroduced purchasing requirements that

ensure suppliers avoid specific materialssuch as chemicals that may be deemed

hazardous to the environment (DuPont,Seventh Generation, and organic supplychains). An increasing number of supply

chains invest in recycling systems intend-

ed to retrieve waste or used product fromcustomers (Kodak, Hewlett Packard, andFuji-Xerox).

Much is still unknown, however,regarding the management efficacy andlikely costs to the supply chain from

altering its traditional focus of cost, qual-ity, and service to include environmental

performance. The extent of the supplychains legitimate control over such envi-

ronmentally focused activity is an area ofactive debate. For example, the organiza-

tion that claims carbon neutrality for its

product supply chain may be unlikely toeffectively monitor or control the carbon

generating activities of upstream suppli-ers. The supply chain is comprised of a

series of entities, activities, customers,cultures, and goals that frequently fail to

find alignment on anything but the mostbasic of concerns. Very few activities in asupply chain are likely to succeed if they

are not accompanied by some form of re-lationship control that will (a) justify the

level of investment for both parties and(b) guarantee its implementation.

The explosion of GSCM activity inthe practical realm has led to an increas-ing body of empirical work regarding

both external influences leading to theuptake of green supply chain manage-

ment practices, and their impact onfirm performance. Investigation in this

area has generally fallen into four maincategor es:

The field of supply chain managementhas more recently directed its atten-ion to the role of the supply chain in both

(a) impacts to the natural environmentand (b) the generation of environmental

performance change. This shift in ourxpectations for the supply chain has

arisen from growing social pressure,

legislative changes around packaging

and end-of-life goods, identified supplyhain risks, and increasing use of envi-onmental requirements being cascaded

from customers to suppliers. Severalears of research into the occurrence

of green-supply-chain-management

activity (GSCM) has led to a general ac-eptance of its relevance and purpose.

At this point in the fields development,however, there is substantial scope for

improving our understanding of poten-ial strategies of GSCM rather than just

a series of related greening practices

without a definite purpose. Owing toincreasing and rapid developments in the

field of green supply chain management,we describe an evolving set of distinct

upply chain strategies in support ofhis type of activity and propose some

directions for the future. In the mannerof Fisher (1997)what might be themost appropriate GSCM strategy for a

particular product, process, or industryontext?

ackground

An increasing number of organizationshave introduced greening requirements

o both upstream and downstream sup-ply chain activitypurchasing clauses,

argets, practices, and technologies.Automotive firms frequently require

uppliers to certify to ISO 14001 (Toyotaand Ford). Starbucks Coffee as well asBen and Jerrys require raw material

Danny Samsons a professor of manage-

ment in the Department ofManagement and Marketing,University of Melbourne. Hehas served as head of the de-

partment and associate deann the Faculty of Economics

and Commerce. He holds a BEng and a PhD inmanagement from the University of New SouthWales. He has previously held academic positionsat the University of Illinois and Melbourne Busi-ness School. He has published many dozens ofscholarly articles and eight books in areas ranging

from management science, operations manage-ment, and general management. He serves onnumerous editorial boards including as associateeditor of the Journal of Operations Manage-ment. He is a member of the Global Manufactur-ng Research Group and recently finished a term

as GMRG president. He has consulted widely tousiness organisations around the world in indus-

tries ranging from manufacturing to banking andprofessional services.

d.samson@unimelb.edu.au

PRODUCTION/OPERATIONS MANAGEMENT

DANIEL A. SAMSON, Feature Editor, University of Melbourne, Australia

Dayna Simpsonis an assistant professor ofsupply chain and operationsmanagement at Oregon StateUniversity. She earned a PhD

in management from the Uni-versity of Melbourne. Herresearch interests are in the

area of environmentally sound supply chain strate-ies. She previously worked as an environmental

scientist in the petroleum, automotive, and agri-cultural industries. She has recent publications onrelational strategies for managing the green supplychain, sustainable operations and reverse logistics,and has continued this work most recently in theanking and non-profit sectors. She is a member of

the Academy of Management and of the EuropeanOperations Management Association.

ayna.Simpson@bus.oregonstate.edu

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Decision Line, July 2008 13

Use of compliance-based strategieshat support the cascading of basic en-

vironmental requirements genericallyacross all suppliers (Melnyk, Sroufe,& Calantone, 2003; King, Lenox, &

Terlaak, 2005)

Aligning supply chain goals for bothfficiency and pollution-reduction

(Corbett & Klassen, 2006; Rothenberg,il, & Maxwell, 2001)

Transfer of environmentally specificinnovations or technologies from cus-omers to suppliers (Geffen & Rothen-

berg, 2000; Klassen & Vachon, 2003)

Collaboration or competition betweenfirms to develop re-manufacturing or

losed-loop recycling systems (Guide& Van Wassenhove, 2002; Pagell, Wu,

& Murthy, 2007).

Relevance of the Supply Chain

Relationship

upply chains achieve performanceimprovements or resource development

through either building-specific capabili-ties over time or by looking to the sup-ply relationships to gain access to new

resources (Eisenhardt & Schoonhoven,1996). This may occur through either:

(a) coercive pressurepass responsibil-ity upstream or introduce contractual

lauses for suppliers (Pagell et al, 2007;Zhu & Sarkis, 2007); or (b) collabora-tionutilize social capital within existing

relationships to develop new competen-ies (Liker & Choi, 2004; Paulraj, Lado, &

Chen, 2008). With regard to environmen-tal performance management, coercive

pressure provides a minimum level ofompliance to requirements amongstuppliers but tends to be limited in its

apacity to encourage advanced perfor-mance outcomes such as new knowledge

or innovation. Collaboration on envi-ronmental performance issues tends to

increase the range and complexity of pos-ible outcomessuch as new products or

technologiesbut requires a far greater

level of involvement for customers anduppliers.

Several modes of interaction be-tween a customer and its suppliers are

available with the express purpose of

altering or improving aspects of sup-ply chain performance. These are es-

entially competitive pressure (rely onhe market); evaluation or certificationchemes (rely on a third party); incen-

ives; and direct involvement (Krause

t al, 2000; Modi & Mabert, 2007). Allmodes are possiblethough with dif-ferent outcomesregardless of whether

he climate of a relationship is more co-rcive or collaborative. We draw on theelationship implications of supply chain

performance improvement as well as thepossible pathways to development of

upply chain resources to establish a ty-pology of strategies for GSCM. We move

away from the traditional discussion ofSCM strategies built around reputa-

ional or societal pressures and instead

build a typology based in more tradi-ional supply chain management theories

o move the GSCM field forward.

Strategies of Green Supply Chain

anagement

isk-based Strategies

The simplest strategy of GSCM with

egard to inter-organizational invest-ment resource development is one of risk

minimization. Firms adopting this strat-

gy are proposed to do so in responseostensibly to stakeholder requirements.

uch a strategy is ideal for the orga-nization that retains minimal internal

nvironmental management resourcesor has only recently begun to consider

he introduction of a supply chain green-ing program. It is based on minimalinter-organizational engagement. Such

fforts might involve the inclusion ofbasic clauses in purchasing contracts for

uppliers to meet all relevant regulatoryequirements. Most frequently used with

his approach is the cascading of an estab-lished international standard such as ISO14001 (King, Lenox, & Terlaak, 2005). The

use of an existing performance standard,an approach used initially by the Ford

Motor Company with its suppliers andnow more frequently by other organiza-

ions for their supply chains, offers: (a)stablished environmental performance

benefits (Melnyk, Sroufe, & Calantone,

2003), (b) third party or arms-length man-agement of performance, and (c) a system

recognized globally by other organiza-tions. This third aspect improves theefficacy of uptake by suppliers because

the system is recognized by the market

and other industry members, reducingthe ambiguity of desired performancelevels and minimizing the need for cus-

tomer involvement. From the perspectiveof competitive advantage, however, the

benefits are limited because of the ease

of implementation, a lack of unique-ness, and a growing use by other supply

chains. A similar approach to basic certi-fication schemes is the use of broad state-

ments within purchasing guidance orprinciples to include supplier activitiesamong the organizations environmental

responsibilities. Such systems based onrisk minimization only and managed in a

climate of low relational investment onlyguarantee supply chain compliance with

local or national regulations. The end re-sult being that risk can be minimized and

reputation enhancement is possible, butno additional innovation or complemen-tary economic benefits are likely.

Efficiency-based Strategies

A more complex and developing strat-

egy in recent years has been the eco-ef-ficiency or lean-and-green approachto GSCM. This type of strategy derives

environmental performance benefits forthe supply chain beyond mere regulatory

compliance through the requirementfor suppliers to meet operations-based

efficiency targets. Much of the environ-mental performance benefit arises fromspecific manufacturing practices that

have been found to provide secondaryenvironmental performance benefits.

The point of departure for the efficiency-

based strategy from the risk-based strat-egy is the availability of dual economicand environmental performance benefitsto the supply chain and the requirement

for higher levels of engagement betweencustomers and suppliers. The efficien-

cy-based strategy ties environmentalperformance to operational processes

in the supply chain, and this strategyallows the extension of performance

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14 Decision Line, July 2008

requirements into the supply chainthat maximize economic performance

and provide secondary environmentalperformance benefits through wasteand resource use reductions. It requires

more comprehensive and supply chain

pecific performance specifications thanthe simpler risk-based strategy. It alsorequires a higher level of involvement

between supply chain partners arisingfrom the use of more complex inter-firmperformance requirements. Using this

trategy to facilitate greater efficiencyin the supply chain does not require the

development of co-specialized resourcespecific to environmental performance.

The necessity for collaboration on ef-ficiency, however, provides a facilitat-ing role for context-specific, complex

problems such as waste reduction andrecycling (Geffen & Rothenberg, 2000;

Klassen & Vachon, 2003). The strategyan provide a cost-reduction advantage

to the supply chain and readily fits withpre-existing organizational goals of

optimization. But the efficiency-basedupply chain strategy does not allow

for more knowledge-intensive environ-

mental management activities such asproduct design, material substitution, or

innovation. Product recalls because of apoor choice of low-cost but hazardous

materials represent the inherent risk infocusing only on efficiency in the sup-ply chain. The efficiency-based strategy

is considered technically weak but moreocially complex than the risk-based

trategy.

Innovation-based Strategies

The innovation-based green supply chain

management strategy is distinct from thefficiency-based approach because of

its use of a supply chain environmental

performance strategy that is more en-vironmentally specific. Organizations areincreasingly aware of the potential fornarrow purchasing policies to in-source

omponents or services from suppli-rs that may be legally non-compliant

with environmental regulations or whothemselves procure goods in an envi-

ronmentally irresponsible way (Bowent al, 2001). Some organizations have

begun to guarantee more comprehen-ive product life-cycle considerations

for consumers of their products. Once aupply chain begins to consider special-

ized processes, technologies, or complex

performance standards for suppliers

uch as chemical avoidance, the level ofknowledge exchange and relational in-vestment begins to change. Moving from

an efficiency-based GSCM strategy to agreater level of innovation or integrationof environmental performance in supply

hain and product design requires spe-ialized environmental resources (Lenox

& King, 2004). Keeping up-to-date withnvironmental legislation changes and

raining suppliers in environmentallyelevant process changes requires more

dedicated environmental resources,

pecialized personnel, and design. Thedevelopment of such resources provides

he conditions for an organization to shiftfrom an efficiency-based to an innova-

ion-based GSCM strategy. For products,he resources developed could be used

o incorporate innovative environmentalplanning into specific product designs,haracteristics, functionality, or life-cycle

elated activities (e.g., service, repair,and recycling). At the process level they

ould be deployed to develop environ-mentally robust methods and systems

for the production, distribution, and useof products.

Closed-loop Strategies

losed-loop strategies are a more recentype of GSCM strategy and represent the

most complex and collaborative form ofhis type of activity. Often referred to in

its simplest form as reverse logistics,

losing the loop involves the capture andecovery of materials for either re-manu-

facture (high-value) or recycling (low

value) (Kocabasoglou et al, 2007). Thesematerials can arise during production, aseturned goods, post-use, and at end-of-

life. The closed-loop strategy ties or inte-

grates environmental performance to thewhole supply chain. Very few examples

of coordinated recycling or closed-loopactivity in the supply chain currently ex-

ist however. Prominent examples includeKodaks return and re-manufacture of its

disposable cameras, Hewlett Packardsretrieval of used printer cartridges, and

BMWs end-of-life vehicle requirementsfor suppliers (Guide et al, 2002). Themotivation for a closed-loop strategy

remains low for basic reasons of poor

and distributed control over the reversesupply chain, lack of available infrastruc-ture, and the inability of supply chains to

believe that such activity is economicallyviable. Designing and successfully usinga closed-loop strategy presents one of the

most complex endeavours for a single or-ganization to undertake within its supply

chain (Richey et al, 2005). In its simplestform, closing the loop may involve

product take-back and reverse logisticsimplemented only in the retail portionof the supply chain. In more complex

closed-loop systems, used or obsoleteproducts and waste are taken back by

the producer and remanufactured orrecycled rather than being disposed

of to landfill. The closed-loop strategy,however, represents an approach that

seamlessly integrates issues of economic,operational, and environmental per-formance. Organizations considering

implementation of a closed loop supplychain require high levels of control over

the capture and return of used materials.Goods need to be managed for qual-

ity considerations and aggregation ofcollection and sorting activities allowsfor the creation of economies of scale.

Such a high level of integration, coor-dination across partners, and socially

complex knowledge requires years ofdevelopment effort. Socially complex,

collaborative relationships provide thebasic foundation for a closed-loop supplychain strategy.

Directions for Future Research

There are many issues that require fur-ther scholarly research, which needs to beof best practice case studies, and largerfield studies that map the field and its

progress. We also need to extend existingtheories and principles of competitive

advantage, operations management/SCM, resource-based view of the firm

and others, to fully take account of ma-ture GSCM practices and their integra-

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Decision Line, July 2008 15

tion into the mainstream of managerialwork. Some suggested research areas and

issues follow.As raw material costs increase and

nvironmental protection legislation be-

omes increasingly stringent, a focus on

one firms green operational excellenceis becoming the norm in organizations.To attain even greater cost savings from

waste reduction, meet comprehensive so-ial and environmental responsibility tar-

gets and find new products with smaller

cological footprints, firms are nowxtending their goals for environmental

performance into their suppliers opera-tions. This type of activity is an effective

mechanism for firms to improve theirrecord on corporate social responsibility,lower reputational risks, reduce wastes,

and improve supply chain response-timeto new environmental regulations.

As possible GSCM strategies becomemore complex and involve greater levels

of relationship investment, their potentialfor competitive advantage also increases.

everal supply chains have already de-veloped systems of green supply chainmanagement that may be many years

ahead of or perhaps entirely out of reachfor other supply chains (i.e., Hewlett

Packard, Toyota, and Ben and Jerrys ice-ream). Other supply chains may only

require the addition of environmentalperformance clauses into purchasingactivities to adapt their supply chain to

hanging industry norms. More complextypes of green supply chain strategy,

however, offer increasing levels of eco-nomic, operational, and environmental

performance.At the supply chain level, orga-

nizations that involve suppliers and

third parties in the greening processarlyand well in advance of com-

petitorsstart a development path thatmay provide a sustained compet t ve

advantage that lasts well into the future.For example, selecting and developinguppliers who retain unique capabilities

in product take-back or re-processing orwho exhibit high levels of environmental

performance can provide a first-moverompetitive advantage. Early selection of

uppliers that are capable of deliveringnvironmentally focused performance

equirements will likely secure a poolof suppliers unavailable to other sup-

ply chains providing exclusive access tolimited resources.

Firms wishing to rapidly release

nvironmentally themed products and

ervices, or make claims to such endea-vours, cannot bypass the earlier phasesof supply chain strategy development.

upply chain strategies that are designedfor resource use efficiency and captureof all waste or by-products through the

product life-cycle provide not just highlevels of environmental performance

but also the capacity to withstand ap-proaching resource scarcity or legislative

hanges that affect and often re-defineindustries.

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