insight | survey report 2008 supply chain monitor “how...

2008 Supply Chain Monitor“How mature is the GreenSupply Chain?”

Insight | Survey Report

With the support of:

BearingPoint, Inc. has taken every care in preparing this document. However, given the large volume of informationcontained and discussed in this document, the Author cannot guarantee the truthfulness, completeness or accuracyof that information.Therefore, the Author accept no liability whatsoever with regard to the Information contained in this document/andor the use of that information.Furthermore, the reader assumes sole responsibility for any decisions made on the basis of this document or theInformation it contains and/or any use of the information and/or of this document, and the Author cannot in any waybe held liable for such decisions.

© 2008 – BearingPoint, Inc.

All rights reserved. The trading names and brands and/or any other distinctive emblems of companies and productscited in this document are the commercial property of their respective holders. ABCAL, APQC, BearingPoint, ChainStore Age, ESCP-EAP, Logi-Biz, Supply Chain Magazine, Supply Chain Standard and VIB accept no liability in the eventof errors or omissions.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

1. Summary and conclusions of the study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

2. Context and concept of the Green Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

2.1. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

2.2. From sustainable development to the Green Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

2.3. What is the Green Supply Chain? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

3. The Green Supply Chain: interest, motives and misgivings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

3.1. Environmental concerns are widely embraced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

3.2. Multiple business drivers but regulation and brand image are most prominent . . . . . . . . . . . . . . . . . . . .10

3.3. Many priority measures, the importance of which varies depending on country and market sector . . . . .11

3.4. Level of involvement of third party stakeholders: various scenarios, depending on the country . . . . . . . .12

3.5. The degree of institutionalisation of the “green” function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

3.6. The main effects of environmental regulation on companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

3.7. The main business drivers for implementing a Green Supply Chain and its benefits . . . . . . . . . . . . . . . . .14

4. The main activities in the Green Supply Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

4.1. Green design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

4.2. Green sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

4.3. Green manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

4.4. Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

4.5. Reverse logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

5. Study methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

6. Profile of the participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

7. Green Supply Chain in practice: GPN case study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

About BearingPoint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

About survey supporters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

Acknowledgments

We would like to thank the following organisations for their support of the Green Supply Chain Survey: ABCAL, APQC,Chain Store Age, ESCP-EAP, Logi-Biz, Supply Chain Magazine, Supply Chain Standard, VIB.

Particular thanks go to all the companies who kindly participated in the survey and their invaluable contribution.

Limiting damage to the environmentis the major challenge society facesover the coming years. As the environmental debate broadens,companies are increasingly beingurged to play their part in takingaction to avert long term, irreversi-ble damage to our planet.

Now that companies are beginningto step up their environmental programmes, they are looking forways to incorporate a green policythroughout the various stages of theSupply Chain. Their objective is tocreate a Green Supply Chain, whichis defined as a Supply Chain which

seeks to minimise the environmentalfootprint of a product or a service.How mature is the Green SupplyChain operated by companies?How have companies implementedGreen Supply Chain processes?Will this new imperative be a sourceof innovation or constraint?

These are the questions that havebeen explored in this global surveyof more than 600 professionals,which identifies emerging trends inthe deployment of Green SupplyChains.The study was carried out byBearingPoint together with ESCP-EAP,

Supply Chain Magazine, Supply ChainStandard, APQC, VIB, ABCAL, Log-Bizand Chain Store Age, who kindly lenttheir support to this initiative invarious countries.

6 Insight | Survey Report

Introduction

BearingPoint’s global survey exami-nes the impact of the environmentalagenda on the Supply Chain andlooks at what companies are doing,what is driving them to action andwhat is holding them back. Evidenceindicates that when companies takeaction, they are typically taking the easy route of reputation andbrand protection on green messa-ging. When the “recycled rubber”meets the road companies are challenged to invest meaningfully inGreen Supply Chains.

The study was based on informationcollected from over 600 professionalswithin companies of all sizes andvarious business sectors. The respon-dents were senior executives involvedin Supply Chain, operations, environ-ment and purchasing. The survey wasconducted among a wide audiencewhich included Europe (France andUnited Kingdom predominantly),North America and Japan. In additionto the questionnaires received, aseries of qualitative interviews wasconducted with 30 companies in orderto gain insight into their perspectives.

• Environmental matters are beingconsidered, motivated by regulatory requirements and corporate image

The study reveals that 83% of compa-nies claim to factor environmentalconcerns into their strategic decisions.This high general level of considera-tion is firm evidence of a wider aware-ness which is driving companies, ifnot to act, then at least to express aninterest in the environment. At the same time, half of the compa-nies which claim not to factor in environmental concerns plan to do soin the not too distant future.

Companies are motivated to takeenvironmental concerns into conside-

ration by compliance with regulatoryconstraints and a desire to improvethe company’s brand image: 73% ofthe companies surveyed are “motiva-ted” by applying environmental rulesand directives. 60% of them claim to be motivated by the desire to portray themselves as "a good corporate citizen".

• The Green Supply Chain: significantly different levels ofinvolvement between countriesOverall, 35% of companies say thatthey have established a Green SupplyChain strategy. Only half of compa-nies that have a high concern forenvironmental issues have actuallytaken account of this in the manage-ment of their Supply Chain.The bigger the company, the greaterthe level of interest in the GreenSupply Chain: 54% of companies withturnover in excess of 1 billion dollarsclaim to have established a GreenSupply Chain, but this percentagedrops to 29% for companies with tur-nover of less than 100 million dollars.One exception to this is Japan where100% of the companies surveyed haveadopted a green Supply Chainapproach, regardless of size. The pic-ture is quite different in other coun-tries. The percentage of companieswho have a Green Supply Chain stra-tegy in place is just 38% for Europe,with big gaps between the UK (45%),France (30%) and the United States(with just 24%).

• There are four main drivers pushing companies to establish a Green Supply Chain strategy:

- Regulation: (22%) compliance withrelevant laws and anticipation offuture requirements.

- Brand image and "influence" on amarket: (19%) compliance with customer requirements. The figuresreveal that companies operating in

the mass market/large-scale distri-bution sectors tend to be drivenmore by brand concerns and imple-ment measures that are "more visible" to consumers.

- Innovation (product/processes):(15%) the different green SupplyChain approaches (logistics, sour-cing, manufacturing, design,reverselogistics) together provide new sources of innovation.

- Cost-cutting: (13%) reducing thevolume of purchases and consump-tion, process optimisation, improvingthe efficiency of the organisation.This motive, which focuses on optimi-sing costs and processes, is citedmainly by companies operating inthe B2B and industrial sectors.

• Lack of information appears to bethe biggest obstacle to establishinga Green Supply Chain strategy.The reasons for the reluctance toestablish a Green Supply Chainapproach are threefold: - Lack of information (36%): was

named as the main disincentive (little information on recent regula-tions etc.)

- The complexity of implementingsuch a strategy (18%)

- The lack of return on investmentand/or high costs (9%)

• Little visibility of investments inenvironmental projectsWhen companies are questionedabout how much of their budget theyinvest in a Green Supply Chain, two scenarios emerge: 1- The people questioned lack infor-

mation and have no visibility ofthis subject (38%).

2- The budgets generally invested are low: almost 50% say they invest less than 10% of the totalbudget set aside for Supply Chainoperations.

Insight | Survey Report 7

1. Summary and conclusions of the study

• Logistics is the link in the chainwhich attracts the most interest.Among the companies which claim tohave established a Green SupplyChain: - 81% have made changes to their

transport/ logistics operations.Interestingly, where logistics isconcerned, the most common envi-ronmental measure (41%) involvesoverhauling logistics organisation toreduce the number of journeys.

- 66% have adopted a green sourcingapproach, i.e. an approach whichfavours purchases of less pollutingproducts/materials. In this regard,the procurement function plays avital role in encouraging suppliersand other service providers/subcon-tractors to follow suit.

- 65% have changed their productionoperations. The two main courses of action taken are modifying pro-duction processes (35%) and usingless polluting manufacturing mate-rials/equipment (24%).

- 59% have implemented a green design approach for products and/ormanufacturing procedures.

- 59% have implemented a reverselogistics initiative in order to reco-ver products. Half of reverse logis-tics operations (50%) involve fini-

shed products, with the main purpose of repairing faulty products(39%).

The complexity of implementing mea-sures varies from one phase to thenext. Whilst green sourcing generallyinvolves restructuring the procure-ment function (buyer training, etc.),green manufacturing and reverse logistics often necessitate biggerinvestments.

• The study reveals four levels ofmaturity among companies inregard to the Green Supply Chain:

Level 1: the company established aGreen Supply Chain approach nomore than two years ago and simply abides by the relevant regu-lations.Level 2: the company established aGreen Supply Chain approach nomore than five years ago and frequently reviews its transportwith a view to reducing costs.Level 3: the Green Supply Chainbecomes a matter of strategy forthe company, which uses “the envi-ronment” as a means of innovatingand creating a competitive advan-tage. At this level of maturity, companies involve third parties in

their approach (suppliers, serviceproviders and so on).Level 4: the company embraces theGreen Supply Chain as a means ofdevelopment and growth.

In conclusion, most companies consi-der the environment when makingstrategic decisions but significantlyfewer have implemented “GreenSupply Chains”, citing the lack ofinformation as the main reason. However, steps to start turning theSupply Chain Green are not as hard totake as they might seem. From thequalitative interviews, it was seenthat many small initiatives wherebenefits arise quickly are a popularway to begin the journey. This suggests the answer is unlikely to be revolution, but evolution.Nonetheless, introducing an effectivegreen perspective to the Supply Chainis a major change and not one to beundertaken lightly even though such a strategy must be adopted toensure companies remain competi-tive in today’s (and tomorrow’s) global market.


Motivation Age of the Presence of a Functions Partners Measures/approach dedicated function affected involved follow-up

Level 1 None or Less than No No function None Noneregulation only 2 years affected in its entirety

Yes, but very slight and only within

Level 2 Regulation More than 2 years big companies; At least one None Noneand cost-cutting and less than 5 years localised with (often transport)

no corporate alignment

Means of innovating At least 5 years Yes, but limited; regional At least 2 (transport One partner Currently Level 3 and enhancing and less than but with linkage and production (generally being set up;

competitive advantage 10 years to corporate in general) a supplier) transactional(through image etc.) framework

Yes, heavily institutionalised: All (from design Collaborative Already in place.horizontal function, to recycling, real time Incorporated

Level 4 Part of the company’s More than present at different levels including logistics involvement of in reward raison d’être 10 years of the organisation; and production) third parties systems

Enterprise alignment throughout the across divisions Supply Chain

Figure 1: Company behaviour within an evolving Green Supply Chain

Source: 2008 Supply Chain Monitor “How mature is the Green Supply Chain?”

2.1. Context

Sustainable development is a hottopic, and is a concept which meldseconomic development with princi-ples such as social equity and ecologi-cal prudence. In recent years, globalwarming, the scarcity and rising pri-ces of resources, and ecological disas-ters have brought into sharp focusthe environmental importance of sus-tainable development.

Up until the mid-1990s, sustainabledevelopment was of concern to just ahandful of militant companies (TheBody Shop, Nature & Découverte).Nowadays, however, environmentalissues are kept in the public spotlightby the media (Al Gore; Nobel Peace Prize: “An Inconvenient Truth”),governments (France: the “Grenelle de l’Environnement”) multi-partydebate, and other Non-GovernmentalEnvironmental Organisations (NGEOs).As a result they are becoming a major corporate preoccupation.

Against this backdrop, sustainabledevelopment has become a new stra-

tegic imperative, which companiesmust henceforth take on board intheir development.

2.2. From sustainable development to the GreenSupply ChainThere are a number of definitions of sustainable development. The ear-liest definition is attributed to theBrundtland commission (1987): “sustai-nable development is development thatmeets the needs of the present withoutcompromising the ability of futuregenerations to meet their own needs”.

In 1992, the United Nations Conferenceon environment and development, alsoknown as the Rio Summit added to thisdefinition by stipulating that any deve-lopment policy must incorporate economic, social and environmentalcomponents. Summits and other confe-rences since then have added othercomponents to these three pillars.

Implementing a sustainable develop-ment approach within a company is ahorizontal task, inasmuch as it

impacts on almost all the company'sfunctions (production, transport, andso on). In this sense, sustainable deve-lopment policy has a bearing - eitherdirect or indirect - on the SupplyChain, which therefore has a key roleto play, particularly in terms of protec-ting and preserving the environment.

2.3. What is the Green Supply Chain?

2.3.1. The concept

“The Green Supply Chain is anapproach which seeks to minimise a product or service’s ecologicalfootprint”.

2.3.2. Delimiting the Green SupplyChain

The Supply Chain seeks to optimise themanagement of all flows of informa-tion, physical flows and interfaces between the various producers andsuppliers involved in making a productor service available. It is, by definition,a horizontal activity embracing all thecompany’s functions.The concept of the Green SupplyChain covers all the phases of a pro-duct’s life cycle, from the extractionof raw materials through the design,production and distribution phases,to the use of products by consumersand their disposal at the end of theproduct’s life cycle (reconditioning,reuse, recycling).

Taking this view of the Green SupplyChain, a product’s life cycle must beconsidered in its entirety, as eachphase can be a source of negativeimpacts on the environment. Thelinear model of the traditional SupplyChain is therefore giving way to acyclical model, and the approachinvolves all the players, including subcontractors, suppliers, distribu-tors, buyers and consumers.


2. Context and concept of the Green Supply Chain

design

Figure 2: Delimiting the Green Supply Chain


3.1. Environmental concernsare widely embraced

Overall, 83% of companies say theyfactor environmental matters intotheir strategic decisions. This highpercentage is firm evidence of wides-pread awareness of environmentalissues amongst companies, leadingthem if not to take direct action, thenat least express an interest in consi-dering the environment.

In addition, half of the companieswhich say they do not currently factorenvironmental concerns into theirplanning intend to do so in the nottoo distant future (24% in less thantwo years).

The level of preoccupation with theenvironment appears to vary fromone country to the next. France sitsat the bottom of the class, with 78%,very closely followed by NorthAmerica (79%), while the UK sitsslightly above the average with 86%and Japan has a very high level ofinterest, with 93% of respondentssaying they embrace environmentalconcerns. This high level of interestamong Japanese companies is duemainly to the high proportion of verylarge companies among the Japaneserespondents in our sample. However,the importance of adopting an envi-ronmental strategy in Japan is stillevident once these differences havebeen taken into account.

Beyond national distinctions, the sizeof the company appears to have astrong influence on its attitude to theenvironment: the bigger the com-pany, the more wide-ranging theconcern for the environment.Roughly 77% of companies with tur-nover of less than 500 million

dollars claim to be concerned by envi-ronmental matters, compared with87% for companies with turnover ofbetween 500 million and 1 billion dol-lars and 88% for those with turnoverexceeding 1 billion. This differencecan be chiefly ascribed to the availabi-lity of resources and how long thecompany has had an environmentalstrategy. 50% of companies with turnover of more than one billion dollars adopted an environmentalapproach more than 5 years ago,whilst smaller companies have morerecent practices.

Lastly, environmental awarenessvaries depending on the market sector. Industrial sectors (automo-tive, metallurgy, chemicals, electro-nics etc.) are highly mobilised (from 84% for electronics or 87% for chemi-cals/pharmaceuticals to 100% formetallurgy and aeronautics), distri-bution and services less so (75%) andtextiles much less so, with only 60% of companies claiming to beconcerned by these matters.

The length of time that companieshave seriously considered environ-mental issues varies greatly. While36% of companies have been takingenvironmental concerns on board formore than 5 years, almost 40% havebeen doing so for less than 3 years.Nevertheless, how long the practiceshave been in place varies considera-bly from one country to the next.Japan in particular is exceptional,with 85% of companies taking theenvironment into consideration formore than 5 years (compared with22% in France, 32% in the UK and 52%in the USA).

3.2. Multiple business driversbut regulation and brandimage are most prominent

The primary drivers for adopting an environmental strategy are com-pliance with regulatory requirementsand improving the company’s image.Indeed, these factors are consistentlyquoted regardless of country, vertical


Figure 3: Consideration for environmental issues

3. The Green Supply Chain: interest, motives and misgivings

Does your firm take environmental concerns into account when making strategic decisions?


sector or size of the company in question.

Of these two drivers, the dominantdriver is compliance with regulation,cited in 24% of the responses given bycompanies who declared they consi-dered environmental issues as part oftheir decision making. In Japan,almost 85% of companies cite regula-tion as a motive, compared with afigure of 75% in the UK, 72% in NorthAmerica and 67% in France. Thisobservation underscores the impor-tance of the regulatory frameworkand suggests that the most environ-mentally-active countries are alsothose which have the toughest ecological regulations.

Unsurprisingly, the service and distri-bution sectors cite regulation as a rea-son for factoring the environment intotheir decisions much less frequentlythan the industrial sectors such as che-micals, electronics or automotive.Within services industries, improvingthe image of the company is the mainmotivating factor.

Lastly, the bigger the company, thegreater the pressure that regulationappears to exert. As the Japanesecompanies responding to the survey

were mainly large organisations, thismay explain why Japan’s results putthem in at the top of the table interms of establishing an environmen-tal strategy.

Enhancing company image is thesecond most common motive foradopting a green strategy and is citedby 20% of all respondents. The impor-tance assigned to image concerns isconsistent from one country to thenext (17% for North America, 19% forthe UK and 18% for Japan). OnlyFrance appears to attach greaterimportance to this factor: 24% of res-ponses (compared with 20% on ave-rage) cite enhancing the company’simage as the primary motive for imple-menting environmental initiatives.

The next two business drivers mayseem contradictory: the desire toinnovate (14% of responses) and cost-cutting (13% of responses). The roleof executive leadership is the nextmost important motive (12% of res-ponses) and highlights the criticalrole these individuals play in opera-tionalising a green agenda. This istrue in small (turnover < 100 milliondollars) and large (turnover > 1 billiondollars) companies alike.It is rather surprising that competitor

behaviour (4%) and social pressure(2% of responses) appear to have relatively little influence.

3.3.Many priority measures,the importance of which variesdepending on country andmarket sector

The reprocessing of waste and packa-ging are the main environmentalmeasures taken by companies, beingcited in 13% and 11% of responsesrespectively. Many other measuresare deemed important and cited byroughly half of respondents, such asmeasures associated with reducinguse of consumables (paper, water)and energy in both offices (11% of res-ponses) and factories (9% of respon-ses), improving health conditions foremployees (10% of responses), redu-cing journeys (9% of responses), themode of transport chosen (8% of responses) and water reprocessing(9% of responses).

As with other results, Japan showsthat it is ahead of other countriesregarding its level of consideration of different environmental factors.Regardless of the area in question,Japanese companies demonstrated


Less than 1 year 1 to 3 years 3 to 5 years More than5 years

I don't know

Figure 4: Maturity of environmental strategies

How long has your company factored environmental concerns into strategic decision making ?


a greater penetration of awareness. In particular, Japanese companies consider choice of raw materialshighly important (10% of responsescompared with 5% for countries suchas France or the UK). On the otherhand decisions on reprocessing andrecycling packaging appear less crucialto the Japanese (7% of responses asopposed to 11% overall and as muchas 13% in the UK). This suggests thatJapanese companies are more motiva-ted to take action on areas which prevent pollution in the future, ratherthan corrective action to deal with existing pollution. It is further evidenceof the higher level of environmentalmaturity of Japanese companies.

North American companies are mostpreoccupied with addressing environ-mental issues connected with water.However, they are much less focusedon transport, packaging and consu-mables such as paper than theEuropeans. These disparities illustratecultural, structural and institutionaldifferences. For example, in NorthAmerica rail freight transport is farmore developed than in Europe.However, there is a demand for policies that promote transportationapproaches that combine differentmodes of transport (rail, sea, air, road,waterways) to reduce overall emis-sions. This is forcing companies, boththe European Community and indivi-

dual member states, to make changing modes of transport used oneof their key environmental priorities.

The differences observed betweenvertical sectors chiefly reflect the spe-cific traits of the individual industry.For example, companies in the industrial sector, are more interestedin energy consumption and water processing than those in the servicesectors. Likewise, some sectors, such as automotive (11% of responses)place greater emphasis on employeehealth while the textile industry,which has decentralised much of itsproduction and distribution, is at painsto reduce transport costs.

3.4. Level of involvement of third party stakeholders:various scenarios, dependingon the country

Suppliers are the third party stakehol-ders most involved in the implemen-tation of environmental strategiescited by 76% of respondents, followedby subcontractors (56%) and logisticsproviders (47%), which can be regarded as private suppliers. Thisdemonstrates that third parties aremost involved in the upstream section in the Supply Chain. In thelater stages of the Supply Chain thoseinvolved are customers, cited by 42%

of the respondents and the endconsumer, cited by 36%, whilegovernment authorities are noted fortheir involvement by 41% of compa-nies. The role of associations andother organisations dedicated to environmental issues is more limited,and referenced by only 20% and 24%of respondents respectively.

3.5. The degree of institutionalisation of the “green” function

More than half of the companies surveyed (55%) have a departmentdedicated to environmental issues.

The presence of a dedicated depart-ment depends heavily on the size ofthe company. 78% of companies witha turnover in excess of 1 billion dollarssay they have a dedicated depart-ment, but just 22% of companies withturnover of less than 100 million dol-lars have a department in place.

Again, there are variations by country.95% of Japanese companies, for ins-tance, have a dedicated department,versus 52%, 50% and 51% for NorthAmerica, UK and France respectively .The figures also reveal there is a strongcorrelation between how importantregulation was seen as a driver forcreating a green strategy and the pro-


0 5 10 15 20 25

regulations

Pressure of lobby groups

Figure 5: Main business drivers behind importance of environmental issues

Source: 2008 Supply chain Monitor “How mature is the Green Supply Chain?”

cess of creating a function focused onenvironmental concerns. This begs thequestion whether the introduction oftough regulatory constraints wouldprompt the decision to set up a depart-ment dedicated to environmental

issues. In addition, it’s worth noting that thelink between “size of company” and“level of concern with regulation” isimpacted by the fact that larger companies are subject to considera-

bly tougher regulation than smalland medium-sized enterprises. This istrue in terms of imposed limits on emissions, compliance with recycling requirements, and manyother factors.


0 3 6 9 12 15

13%

11%

11%

10%

9%

9%

9%

8%

7%

6%

6%

1%

Figure 6: Priority environmental issues

Which of the following environmental factors does your firm take into consideration when taking strategic decisions ?


Ccentral

administration

Figure 7: Degree of involvement of third parties in environmental strategies

Which of the following third party groups are involved in your environmental strategic decisions?


3.6. The main effects of environmental regulation oncompanies

Having observed that regulationoften prompts companies to addressthe environmental impact of theiroperations, it is worthwhile lookingin more depth at how the companiesview regulation.

52% of companies feel that regula-tion presents companies with anopportunity to embark upon an innovation process. Nonetheless,there are big disparities betweencountries in this regard: while 64% ofcompanies in the UK believe regula-tion has a potentially positive impacton innovation, in France and theUnited States, this percentage dropsto 50% and 51% respectively, andplummets to 5% in Japan! 69% ofJapanese companies feel that their

activities are greatly restricted byenvironmental regulation, comparedwith an average of 23% across allcountries.

3.7. The main business driversfor implementing a GreenSupply Chain and its benefits

Overall, 35% of companies say thatthey have established a “GreenSupply Chain”. Comparing this figurewith the percentage of companieswho factor environmental issues intotheir decision-making (83% cf. 4.1)demonstrates that just half of compa-nies that recognise the importance ofenvironmental issues have appliedthis specifically to their Supply Chainoperations.

Again, there are substantial differen-ces between countries and betweencompanies of different sizes. In linewith many of our previous findings,the bigger the company, the greaterthe level of interest in the GreenSupply Chain: 54% of companies withturnover exceeding one billion dollars


I don't know5%

No40%

Yes55%

Figure 8: Existence of an “environmental” department

O%

20%

40%

60%

80%

100%

120%

North AmericaUKFranceJapanAverag

Environmental department

Importance of regulation

Figure 9: Institutionalisation of an “environmental” department

Institutionalisation of the environmental department and importance of regulation



Does your company have a department dedicated to environmental issues?

claim to have established a GreenSupply Chain, but this percentagedrops to 29% for companies with tur-nover of less than 100 million dollars.Again, the discrepancy is particularlyimportant between Asia and the restof the world. Indeed, 100% of thecompanies surveyed in Japan areimplementing a Green Supply Chainstrategy. Conversely, this percentageis only 38% in Europe, with big dispa-rities between the United Kingdom -45% - and France - with just 30% - orthe United States - 24%.

The reasons cited for implementing aGreen Supply Chain are almost identi-cal to those which drive the adoptionof an overall environmental strategy(cf. 4.2). The two overriding motivesare the importance of regulation, followed by the desire to improve cor-porate image.Nevertheless, some discrepanciesrelating to the size of the company, orthe country, do differ somewhat fromthose previously observed. Indeed,neither the size of the company, northe country, appear to have much

impact on the reasons for implemen-ting a Green Supply Chain.Copying competitors appears to havea particularly limited influence, asthis factor accounts for just 3% of responses. Almost half of the direc-tors surveyed (46%) say they are notaware of their competitors’ GreenSupply Chain practices. Among theother half, companies are split 50/50as to whether they take account of anyaction taken by their competitors inthis area. This finding underscores thenotion that competitors are not a model


An opportunityto innovate

Critical toyour business

A constraint I don't know With no impacton activity

Other

Figure 10: Perception of environmental regulations

Do you think of environmental regulation as...


0 5 10 15 20 25

regulations

Figure 11: The motives for implementing a Green Supply Chain


for Green Supply Chain practices.

As regards the methods used to establish a Green Supply Chain, collaboration with third parties is even less common than collabora-tion on broader environmental initia-tives. Just 34% of companies thathave deployed a Green Supply Chain

claim to do so in collaboration withthird parties.It is difficult to gain an exact pictureof how much is invested in environ-mental projects. Nonetheless, it isclear that the relative amountsinvested are small across the board.Many people surveyed lack informa-tion on the subject (38% of respon-

dents answered “don’t know” ove-rall, and 72% in Japan). Moreover, thebudgets generally invested are small:48% of companies say they invest lessthan 10% of the total budget earmar-ked for the Supply chain and 30% ofthose companies invest less than 5%in environmental projects.


0 10 20 30 40 50 60 70 80

advantage

Optimise

Optimise

Figure 12: Benefits of the Green Supply Chain

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Figure 13: Functions most involved in a Green Supply Chain



The impact of Green Supply Chainapproaches varies: they deliverresults in terms of image (70% of res-ponses) and improving customer rela-tionship (62%), but, to a lesserextent, they also deliver results interms of cost optimisation (logisticsproviders and manufacturers), production processes and flows.

Underlying these figures are stillsome pronounced differences bet-ween market sectors and differentsizes of company. For instance, while57% of companies on average are see-king to make their business distinc-tive, this figure rises to 70% for com-panies with turnover of less than 100million dollars. For these companies,establishing a Green Supply Chainacts as a much stronger differentiatorthan for large companies.

As with the drivers, the benefitsobserved vary depending on the mar-ket sector and the cost structure typical of each market sector: in theautomotive sector, for instance,

reducing production costs (57% ofresponses) and logistics costs (57% of responses) is one of the main bene-fits of the strategy, whilst in distribu-tion, logistics costs dominate the responses (69% of responses for redu-cing logistics costs compared with23% for reducing manufacturingcosts). Improving image (85%) andincreasing customer satisfaction(77%) were also cited as the mainresults achieved by establishing a Green Supply Chain.

Lastly, a number of companies (59%)mention obstacles to establishing aGreen Supply Chain. These are: lack ofinformation (36% of responses), followed by the complexity of imple-menting this strategy (18%) and alack of return on investment and/orhigh costs (9%).

A more detailed analysis reveals thatsome parts of the Supply Chain aremore concerned with environmentalissues than others.

Specifically, logistics is the functionmost heavily involved in taking environmental measures. This can beexplained in part because mediacoverage and regulation link reducinggreenhouse gases with transport.Furthermore, these measures arerelatively quick and simple to imple-ment (driver training, vehicle deve-lopment, optimisation of truck flowsand loads) and, in many cases, enablecosts to be cut while also reducingimpact on the environment. For thesame reasons, the next most activefunctions are sourcing and produc-tion. Being less intuitive and more complex to implement, activity in thesphere of eco-design and recycling(reverse logistics) is less widespread.Nonetheless 60% of companies whichoperate a Green Supply Chain domake efforts in these areas.


4.1. Green design

“Green design is an approach whichseeks to improve a product's ecolo-gical quality, by reducing its nega-tive impact on the environmentthroughout its life cycle. It involvestaking account of the environmentduring a product's design or impro-vement phase.”

4.1.1. Concept of green design

“80% of the environmental impactsof a product are determined duringthe design phase.”Green design is an essential compo-nent of the Green Supply Chain, as the most important levers forimproving or developing a product’senvironmental profile are to be foundduring the product design phase.According to the “GermanEnvironment Agency”, 80% of a product’s environmental impact isdetermined during the design phase. The environmental dimension isincorporated in the product from itsinception, i.e. as soon as the product’s technical and functionalcharacteristics are determined.Therefore, green design is still ameans of anticipating and reducing

the product’s impact on the environ-ment throughout its life cycle.

4.1.2. Scope and field of applicationof green design

In most cases, the green designapproach is applied to the product(95%) or the various elements whichmake up the product, such as thecomponents and packaging. In asmall percentage of cases (5%), it isapplied to other elements, such asmanufacturing processes, to reduceenergy consumption or reduce production waste. Likewise, there arevarious types of green designapproach:

• partial green design: improvingexisting products and/or procedures

• full green design: the productsare radically transformed, creatingnew products. In this sense, greendesign can be a source of innovation.

“Green design with a view to recycling: almost 70% of companiesthat have adopted a green designapproach believe they have madetheir products easier to recycle.”

Green design is a progressive process,which is part of a continuous, cyclical

improvement approach. Not until theproduct has been launched, used andprocessed at the end of its life can weidentify the improvements made interms of its recyclability.Products are designed with their everyday use in mind, but also, andabove all, their processing at the endof their life.

4.1.3. The motives and main disincentives

“Green design to improve the company’s brand image”

Across the whole sample, the majo-rity of the companies surveyed claimto have adopted a green designapproach in order to improve thecompany’s brand image. Public awa-reness of environmental issues is gro-wing day by day. Green design is ameans of highlighting a product’secological value while responding toconsumer expectations. In 40% ofcases, green design is adopted inorder to improve brand image, satisfyneeds and increase consumer confi-dence. Faced with such objectives,many companies - particularly in thedistribution and mass market sectors- now make efforts to be able to


Component21%

Product40%

Other5%

Other2%

Packaging34%

Improve anexisting product

25%

Comply withlegislation

26%

Respondto marketdemand

23%

Green design anew product

24%

Figure 14: Where green design is being applied

This green design approach has been applied in order to... This green design approach has been applied to...

4. The main activities in the Green Supply Chain


inform the end customer of each product’s overall impact on the environment.

“The disincentives to green designappear to be cultural in naturerather than financial or technical."

If we consider why companies arereluctant to adopt a green designapproach, we note that the main obs-tacle is, quite simply, a lack of trai-ning or information (28%). Green designed products can someti-mes cost more than conventional pro-ducts, because investment is requiredin order to implement more environ-mentally-friendly manufacturing pro-cesses. Yet the high costs and com-plexity of implementation are citedby just 6% and 14% of companies res-pectively, which suggests that thereluctance is not born of technical orfinancial constraints. Green designinvolves questioning procedures andother operating methods (it entails“rethinking” the product). It is, there-fore, a fundamental approach for themedium/long term, which can onlybe adopted progressively. It is interes-

ting to note that, among the compa-nies which claim to have employed agreen design approach, Japanesecompanies (87%) top the table quitesome way ahead of companies inother countries. This significant diffe-rence still applies, albeit a little less

pronounced, once the discrepanciesin terms of size of company in thenational samples are taken intoaccount (large companies are heavilyrepresented in Japan).

4.1.4. Green design and regulations

Regulations also play an importantrole. For some companies, the greendesign approach is proactive, whilstfor others it is a response to theimplementation of directives aimedat reducing the use of hazardoussubstances. Among these directives,three recently-adopted laws meritparticular mention: Restriction of Hazardour Susbtances (RoHS),Waste Electrical and ElectronicEquipment (WEEE) and Registration,Evaluation, Authorisation andRestriction of Chemicals (REACH).

Restriction of Hazardous Substances:the ROHS directiveThis European directive is aimed atmanufacturers of electronics andcomputer equipment. It is intended tolimit the use of six hazardous substan-ces used in soldered joints, cathoderay tubes, relays or printed circuitboards. Equipment which does notmeet the standards cannot thereforebe sold in the European Union. As thedirective applies in Europe, it indi-rectly affects every major IT Group inthe world. Manufacturers have beenforced to find alternative products(hence the use of copper and silver toreplace lead in soldered joints). Thereare exceptions to these directives,which are bound by certain thresholdsor periods of time. There are equiva-lents to the ROHS directive in someStates of the US and in Japan.

Waste recycling: the WEEE directiveIn Europe, the WEEE directive sets outthe framework for the recycling ofelectrical and electronic equipmentwaste. This directive requires electri-cal and electronic equipment wasteto be collected and recovered, givingpriority to reusing and recyclingmaterials and products. Hazardouscomponents within the waste mustsystematically processed. This direc-tive therefore requires manufacturers to set up recovery and recycling


27%

Lack ofinformation

Not ourresponsability

No return oninvestment

Too complexto implement

High costsOther

21% 20%

14%12%

6%

15%

14%

14%

14%

13%

11%

9%

9%

1%

Reduce manufacturing costs

Other

Improve company image

Meet market demand

Increase customer confidence

Achieve regulatory compliance

Facilitate recycling

Differentiate from competitors

Reduce logistics costs

0 3 6 9 12 15

Figure 15: The motives for and disincentives to a green design approach

Which were your main decision criteria in the green design initiative?

What is the main reason for not implementing green design?

All North France Japan Unitedcountries America Kingdom

Green design 59% 71% 56% 87% 45%

Have you adopted a green design approach?


channels for their products or components.

REACH: The REACH directive is intended tohave a considerable impact on allmarket sectors, as it requires “users”of chemical substances to provideproof of their non-toxicity.

4.1.5. The main green design measures

“Essentially, green design is aboutchoosing less polluting materialsand manufacturing procedures”

1- Substitution and choice of materialsThe first step taken in a green designapproach is to choose and use lesspolluting materials (20%). Avoidinghazardous substances in productshelps reduce processing costs, andusing recycled materials can proveless expensive.For the companies surveyed, choo-sing to incorporate as many recycla-ble or renewable materials as possi-ble in the design of products enablesthem to make savings on the reco-very, dismantling and recycling ofproducts.

2- Using clean technologiesThe second action taken is the use of

clean technologies (19%). In this scenario, companies believe it ismore profitable to invest in a cleantechnology rather than in equipmentdesigned to process production wasteand decontamination downstream inthe production process (waste watertreatment plants, waste processingcentres, etc.)

4.1.6. Initial conclusions: the futureof green design

The fundamental idea behind greendesign is to reduce ecological impactthroughout all phases of a product’slife cycle, by employing better design.This approach helps minimise proces-sing costs at the end of a product'slife, and maximise the profits fromrecovered materials.

4.2. Green sourcing

4.2.1. Concept and definition

In our study, the concept of greensourcing embraces everything sour-ced from suppliers, subcontractors,service providers and so on, whichincorporates environmental criteria.These environmental criteria can beapplied to all the phases of a sourcingprocess, but they mainly come intoplay when defining needs.

Japan is the undisputed leader of thepack of countries that are most activein green sourcing. 87% of theJapanese companies surveyed claimto have adopted a green sourcingapproach, as opposed to just 50% ofFrench companies, 50% of NorthAmerican companies and 67% ofBritish companies. The action takenby the Japanese government in themid-1990s (cf. GPN case study) partlyexplains why this practice is so wides-pread.

The “procurement" function is anessential function in any green sour-cing approach, for two key reasons:

• This function involves numerousstakeholders (including suppliers,subcontractors and service providers)and can create a domino effect acrossall operators in the Supply Chain.

• Because of their “upstream" posi-tion in the chain, buyers are in a position to identify any environmen-tal risks from the outset. By way ofexample, in low-cost countries therisks of non-compliant products canbe considerable.

The main disincentives to the adop-tion of a green sourcing approach

Green sourcing does not alwaysenable companies to reduce their


Change rawmaterials

Use new andcleaner technologies

Modifyprocesses

Reprocessingof waste

Implementationof Environmental

ManagementSystem (EMS)

Change suppliers

Other

20%19%

17%16% 16%

2%

11%

Figure 16: Main measures involved in green design

Which types of actions have been undertaken?


procurement costs. As we have justseen in the green design section,green designed products can, in somecases, be more expensive thanconventional products (due mainly to the investments in clean technologies).

When buying a "green friendly" pro-duct, it is vital to consider not just theacquisition cost, but all the costsgenerated throughout the product'slife cycle, namely the cost of use, thecost of maintenance and the cost ofprocessing at the end of the product’slife (recovery, recycling and so on).This total cost of ownership (TCO),comprises all the costs of a productgenerated over the full length of itslife cycle. For example, nowadays,when comparing the offers made bysuppliers many companies takeaccount of the energy consumptioncosts of a particular product or pieceof equipment.

Besides cost, which is sometimesgiven as the reason for the reluctanceof some companies to commit to agreen sourcing policy (10%), a lack ofinformation appears to be the majorobstacle (44%). Buyers (and thoseworking in small structures in parti-cular) are impeded by a lack of infor-mation about risks and regulatory

frameworks. This situation is furthercompounded by the fact that thesefactors change very quickly, someti-mes even from one year to the next.

The second barrier to establishing a green sourcing approach is the difficulty of establishing such anapproach (31%): adopting a “greenfriendly” procurement policy entailsreviewing the overall procurementstrategy and, by extension, the inter-nal procurement procedures.

4.2.2. The measures

The green sourcing approach hasimplications for every phase in thesourcing process. It is expressed inthe action taken by the:

• Company,• Supplier, subcontractor, etc.• Company and supplier jointly.

1- Upstream phase of the sourcingprocess: definition of material/product requirements and identifica-tion of suppliers.“42% of the companies that haveadopted a green sourcing approach,claim the materials/products theybuy from their suppliers are less polluting than the standard.”This stage, during which buyers voicetheir requirements, is the initial phase

of the sourcing process. At this stage,the buyer incorporates the technicaland functional specifications for theproduct, and the environmental criteria, in the list of requirements.Here, the main difficulty for the buyeris to identify suppliers who are capa-ble of meeting the requirements interms of quality, quantity and envi-ronmental criteria. Obtaining a sour-cing guarantee from the supplier isone of the biggest challenges facedby some companies. Not all suppliersin Europe are able to offer and supply“green” products, due mainly to theintroduction of recent regulations.

2- Downstream phase of the sourcing process: supplier monito-ring and evaluation.“Almost 80% of suppliers are invol-ved in green sourcing.”Green sourcing is all the more effec-tive when suppliers are “perma-nently” involved in implementingthis strategy.Supplier involvement in a green sour-cing initiative takes the form ofjointly developing and designing newproducts. This collaborative approachenables a better understanding of customer needs and creates trans-parency with regard to the mate-rials/means employed in designingthe product. It also enables both


Lack of information Too complex toimplement

No return oninvestment

Not our responsibility todeal with environmental

issues

High costs

44%

31%

10% 10%

5%

Figure 17: The main obstacles to adopting a green sourcing approach

What is your main reason for not adopting a green sourcing approach?


parties to improve their environmen-tal performance and encourage innovation.

Three quarters of companies motiva-ted by these issues claim that theyconduct audits and produce productperformance indicators to monitorand assess their suppliers. The objec-

tive of these audits is to verify thatthe requirements are being met,identify non-conformities/disfunc-tions and establish an action plan.

This approach can only be successfulif it is part of a sustainable processinvolving the suppliers. Audits andother action plans are a means of sup-

porting and driving suppliers, in orderto improve their performance.

4.3. Green manufacturing

4.3.1. Context and issues

Lessening environmental impactFor the purposes of green manufactu-ring, lessening environmental impactper se involves two different approa-ches:

• Better consumption: reducingharmful emissions, the consumptionof toxic products and the production of waste (concept: lesspolluting production).

• Lower consumption: reducingconsumption of energy and raw mate-rials, reducing waste (consumables).

Closely linked, these two approachesrely on the same production optimisa-tion process, Lean Manufacturing,the primary purpose of which is toeradicate waste - clean - before takingaction on flows - lean.


No8%

I don'tknow13%

Yes79%

New productdesign

OtherEnvironmentalcharter signature

Mutual developmentenvironment projects

38%

29%

23%

9%

No13%

I don'tknow10%

Yes77%

Auditing OtherKey performance indicator

56%

36%

8%

Figure 19: Supplier involvement and monitoring

Are your suppliers involved in your “green sourcing“ approach?

How are they involved in your “green sourcing“ approach?

Do you evaluate their environmental compliance performance? How do you evaluate their performance?

Changesuppliers

Purchase lesspolluting

materials/products

41%

ImplementEnvironmentalManagement

System in your suppliers

Other2%

24%

32%

Figure 18: Main actions taken to implement green sourcing

Which types of actions have been undertaken?



Beyond purely environmental consi-derations, these two issues reflectthe concerns of manufacturers interms of optimising both productioncosts and overall operating costs. By taking direct action with regard toresources and other means of manu-facturing, companies guard themsel-ves more effectively against moreonerous remedial measures at theend of the production cycle.

4.3.2. Drivers for and against theadoption of a green manufacturingstrategy

Although the move to sustainabledevelopment encourages companiesto communicate more openly abouttheir environmental activities, theprimary reasons for adopting a greenmanufacturing approach are:

• Regulation: complying with cur-rent legislation (in 99% of cases,implementing a green manufacturingapproach has enabled the companyto comply with current legislation)

• Financial performance: reducing

costs by optimising energy consump-tion, reducing waste and so on.

4.3.3. The measures employed

Of the concrete measures taken bycompanies, the following merit particular mention:

1- Modifying the product processwith a view to “reducing consump-tion of energy and raw materials”Among the companies surveyed, morethan a third have taken action to optimise their manufacturing proces-ses in order to limit the environmentalimpact of their production cycles.With the numerous Lean Manufac-turing (and related) tools that havebeen developed (5S, Kaisen, SMED, 6Sigma, etc.), companies have an arsenal of methods to reduce theiroperating costs and any form ofwaste. Several of the seven types ofwaste identified by the ToyotaProductive System directly and indi-rectly have an environmental dimen-sion, in particular over-production,

transport, reducing stocks and reducing rework or scrap.

Over-production and rework/scrap, inparticular, result in the over-consumption of materials andenergy, not to mention the largevolume of waste and associated emis-sions. Consequently, refining salesforecasts and optimising sourcingmethods to reduce stocks areamongst the first steps towards greenmanufacturing.

Modifying production processes is,therefore, a vast subject which cantouch upon many improvement axes,the environmental aim of which isclosely bound up with the financialperformance sought. This type ofapproach evidently offers the bestratio of investment to environmentaland financial performance.


Production

Process

Raw Materials

Energy

Waste & Emissions

Water

Waste & Scrap

Products

Reducing Waste=

Better consumption

Reducing Needs=

Lower consumption

Figure 20: Green manufacturing process


2- The use of less polluting materialsand/or equipment with a view to“better consumption”24% of the companies surveyed saythey have made sustainable invest-ments by directly modifying theirresources or their respective means of production, which suggests thatthere is a real awareness of environ-mental issues.One can assume that change wasmotivated by two main reasons:

• The need to comply with a newregulation.

• The quick payback of such investments.

3- Establishing an EnvironmentalManagement System (EMS)More than a quarter of the compa-nies surveyed have established anEnvironmental Management System,so presumably the same proportionof companies has initiated a corres-ponding certification process.

Following the corporate enthusiasmfor quality-based management, withthe emergence of the ISO 9000 standards in the 1990s, the new envi-ronmental preoccupations have nowengendered new regulatory require-ments, and effectively placed

the series of ISO 14000 standards centre-stage.These standards enable companies toanticipate new, future regulatoryrequirements and ensure that the systems implemented are sound.With regard to the evaluation andreporting of performance, 14% ofthe companies surveyed have createddedicated performance indicators tomonitor and steer the various measu-res being taken and thereby gain abetter insight into the efficiency ofthe environmental management system employed.

In general, there are a number ofadvantages to be gained from imple-menting a green manufacturingapproach:

• Reduction in overall operatingcosts, due to the effective rationalisa-tion of the consumption of energyand materials. In 94% of cases, theapproach has enabled the companyto optimise its energy consumption.

• Improvement in environmentalperformance, due to measures takento reduce toxic emissions and opti-mise resources, as well as an increasein recovery and reuse of "waste”. In96% of cases, the return on invest-ment from green manufacturingtakes the form of less waste and in98% of cases, the optimisation ofenergy consumption.

24


Optimise energyconsumption

Yes

Reduce environmentaldischarge (water, soil, air)

Reduce the amountof waste

Achieve regulatory compliance

90%

95%

100%

94%

6%

96%

4%

98%

2%

99%

1%

No

Figure 22: Benefits of green manufacturing

Have environmental measures in the manufacturing phase enabled your company to...

Implementationof Environmental

ManagementSystem (EMS)

Manufacturingprocess

modification35%

Replacementof product

24%

Other1%

Environmentalmanagement

dashboard

14%

26%

Figure 21: Main measures taken in green manufacturing

Which types of compliance measures have been undertaken?




4.4. Transport

4.4.1. Context and issues

Transport is a fast-growing activity,both in Europe and globally. SinceWorld War II, the rate of growth ininternational trade has outpaced therate of growth in global industrialproduction. Because of this, optimi-sing modes of transport is a top priority, both in terms of financialpressures (e.g. sharp rise in the priceof oil) and environmental (green-house gas emissions).

Furthermore, the market is impactedby other inflationist tensions andstructural difficulties such as:

• Liberalisation of transport at theEuropean level with strong competi-tion, but lack of social and fiscal harmonisation

• Strong pressure of loaders on prices• Shortage of drivers• Transport capacity lower than the

increase in transported volumes• Saturation of road networks• Imbalance of the North South axis.

Sustainable transport is transportwhich generates less pollution whilestill meeting specific volume and costperformance targets. Essentially,

the aim is to reconcile financial performance with environmental performance.

The transport sector accounts foralmost half the world’s consumptionof oil products. The other forms ofenergy used (electricity, biomass andgas) are still marginal. Moreover thetransport sector has one of thehighest levels of greenhouse gasemissions.

The development of trade within eacheconomic region in recent years hasbenefited road transport, often to thedetriment of other, less pollutingmodes of transport such as rail or waterways. At the same time the geographical distance between pro-duction zones and consumptionzones is growing.

4.4.2. Business drivers and obstacles

The main drivers for implementing agreen logistics approach include opti-mising logistics flows (18%) andimproving the company's image. The complexity and high cost ofimplementing measures to reduceenvironmental damage are the maindisincentives noted by companies.

4.4.3. The measures taken to adopta green logistics strategy

1- Optimisation of transport: over-hauling the organisation of logistics

The most popular green logistics measure taken by the companies surveyed is an overhaul of the logis-tics organisation (41%).Since road haulage is a major sourceof greenhouse gas emissions, over-hauling the planning and organisa-tion of logistics in order to optimisetransport flows appears to be a powerful operational lever.In some instances, overhauling theorganisation of logistics takes theform of pooling logistics resources,which involves exploiting operationalsynergies between various players inthe same branch of industry so as tooptimise and rationalise the varioustransport flows (truck load factorsand so on).Pooling can just as easily be appliedto circuits, vehicles and infrastructu-res (warehouses and so on).


Optimise logisticsflow

Improve corporateimage

Reduce logisticscosts

Achieve regulatorycompliance

Develop alternativenetworks

Satisfy customerrequirements

Differentiate fromcompetitors

18%16%

15% 15%14%

11%10%

Figure 23: Drivers for green logistics

What are your main drivers for green logistics?


For example, to limit the number of trucks driven empty, and thereforepolluting unnecessarily, some solu-tions involve:

• Searching for complementaryflows with inversed seasonality.

• Using shared databases, mana-ged by specialized companies, to opti-mise reloading.

Thus overhauling the organisation oflogistics is a means of rationalisingtransport and, ultimately, reducing

greenhouse gas emissions by optimi-sing both vehicle load factors androad mileage.

Aside from environmental concerns,projects of this nature can also deliver savings by:

• Reducing the total number ofwarehouses along the logistics chain

• Reducing traffic volumes (numberof journeys, distances covered, etc.)

• Reducing delivery times• Reducing the cost of journeys.

2- The use of less polluting modes oftransportIf we see pooling flows as the bestmodel for organising sustainablelogistics operations, then the shift intypes of transport used should beseen as the best practice accompani-ment. Recent European policy deve-lopments are contributing to thetightening link between logistics andtransport in order to achieve sustai-nability.It is therefore no surprise that thesecond most popular measure takenby companies to reduce transport-related emissions is the use of lesspolluting modes of transport (31%).

These alternative modes of transportare (in order of importance):

• Shipping• Rail• Combined transport (rail-road,

sea-road, waterway-road) • Waterway.

The principle behind ‘combined trans-port’ is to minimise the journey byroad by combining at least twomodes of transport along a logisticschain. There is no unloading andreloading of goods during the jour-ney, much of which is covered by rail,


rail13%

road79%

waterways2%

oil pipelines6%

101995

combined transport

1997 2000 2001 2002 2003

20

30

40

50

60

Total

conventional transport

Figure 25: Development of combined transport and land transport (scope: France)

Trend in combined transport in rail transport (in billions of t-km)

Share of road in land transport in 2003

Source : SNCF Sources : VNF, SNCF, SES

Revising thelogisticsschemes

41%Adopting the least

polluting transportationmeans (train,

waterways)31%

Bringing production sites closer to consumers

12%

Using the nearestsupply sources

14%

Other2%

Figure 24: Main measures taken to implement green logistics

Which types of environmental actions have been undertaken?


inland waterways or sea. Therefore,only the container (swap body, semi-trailer, etc.) is moved from one modeof transport to another. Althoughcombined transport has long beenused in long-haul transport, somecompanies are exploring what bene-fits it can offer over shorter distances,particularly in urban areas, in orderto overcome congestion and trafficrestrictions (including timetables anddelivery zones).

The goals for alternative transport aretwofold:

• In financial terms, to offer agenuine and efficient alternative to100% road-based transport

• To limit the environmental impactof a global logistics chain.

4.5. Reverse logistics

4.5.1. Concept and definition ofreverse logistics

The purpose of the reverse logis-tics process is to ensure that products/materials are returned fromthe user to the producer in order tobe recycled, reused or recondition-ned. In traditional logistics, flows aredefined unidirectionally, i.e. from theproducer to the end customer. Inreverse logistics the chain is coveredin the opposite direction.

Reverse logistics therefore denotes aset of planning, execution and flowcontrol measures for raw materialsand finished products, with the aimof recovering and recycling those pro-

ducts or materials. Logistics involvesa whole range of activities, includingcollection, sorting, processing andreconditioning.

Returns management embraces:returns at the end of a product’s life,commercial returns (leasing, mailorder, B2C), contractual returns(newspapers, publishers), returnsunder warranty (faulty goods), pro-duction waste and scraps, and “func-tional” returns, such as packaging tobe reused for the same purpose(containers, packaging). Reverselogistics used to be the preserve ofdistributors of newspapers and maga-zines (products which have a verylimited life span) and mail order distributors (covering products notwanted by consumers). Nowadays,


Raw materials Waste

Machined raw materials

Finished products

Availableproducts

Recycled materials Recyclable Waste Non- recyclable waste

Storage

StorageTransport

Transport

StorageTransport

ProcessingAssembly

Availability

Recovery

Sorting

Processing

Logistics Chain

Reverse Logistics

Extraction

Production Distribution

Use

Collection

Recycling

Redistribution

Figure 26: Reverse logistics process (example: product recycling)


however, the growth in reverse logis-tics is due to other factors:

• Mounting regulation concerningthe environment (for example theWEEE directive which obliges manu-facturers of electronic and electricalequipment to recover their products).

• Tough competition, forcing manu-facturers to take account of customerexpectations by offering the option toreturn faulty, unsatisfactory or oldproducts.

• The possibility of recovering theseproducts in order to reuse them oruse the materials, thereby makingsavings.

A reverse logistics structure can beset up:

• by the company, in order to takecharge of recycling, destroying or reu-sing products at the end of their life,

• by a group of companies,• by a third party either as a com-

mercial service or outsourced by oneor several companies.

4.5.2. Drivers for and against establishing reverse logistics

Interestingly, one third of companiesinvolved in a sustainable Supply

Chain believe that a reverse logisticsstructure is not necessary in theirsphere of activity.

The decision to establish a reverselogistics structure depends, amongother things, on the nature of the products and the market sector. As aresult of the European WEEE directive,the electronics/IT sector is one of themarket sectors most heavily involved inreverse logistics. This directive requiresmanufacturers to create recovery andrecycling channels for their products orcomponents. While manufacturersbear ultimate responsibility for reco-very and recycling, it is the task oflarge-scale distributors to collect, sort,store and deliver the products to the manufacturers.

The degree of complexity and theassociated difficulties are the second biggest disincentive to companiesconsidering a reverse logistics struc-ture (19%). Companies regard thewhole reverse logistics chain as being complex, firstly because it entails awhole range of collection, sorting,warehousing and (re)processing activities and, secondly, becausevarious intermediaries are likely to be

involved at each stage.In reality, the complexity of establi-shing a reverse logistics structuredepends on the type of productsinvolved.

Two features of a product determinethe complexity of reverse logisticsnetworks:

• The number of components andmaterials used in the design of a product may necessitate the involve-ment of several recovery and recycling channels. In this scenario,therefore, intermediaries are requiredto manage the distribution of the different components to the appro-priate channels.

• The amount of processing neces-sary before the product or its compo-nents can be reused.

There are various measures that canreduce the complexity of reverse logistics. Green design, for example,seeks to optimise the number of com-ponents and the "dismantlability” ofthe products (e.g. modular products).This in turn can reduce the number ofreprocessing channels and reduce thecycles involved in collection, sortingand so on.


20%33%

19%

13%11% 11% 11%

6%

1%

16%15%

13%13%13%

9%

1%

Satisfy customerrequirements

Improvecorporate

image

Differentiatefrom

competitors

Developalternativenetworks

Not necessary Lack ofinformation

Not ourresponsability

High costs

Too complexto implementOptimise logistics

flowReduce

logistics costsTake back laws Other

No returnon investment

Other

Figure 27: Motives and disincentives

What were your main reason for developing these processes?

What is the main reason for not implementingreverse logistics processes?


However, in reverse logistics it is stillquite difficult to predict the exactnumber of returns (faulty products),which can make the process morecomplex.

Consumer expectations are the mainmotive for companies deciding toestablish a reverse logistics structure. Changing expectations and theconsumer demand for productswhich will be easy to recycle are for-cing companies to establish new pro-cedures and, in particular, new net-works to accommodate these priori-ties. Accordingly, companies decidingto establish a reverse logistics struc-ture are motivated first and foremostby the desire to "respond to consu-mer expectations", which is cited

by 91%: reverse logistics is a meansfor companies to acquire the badge ofa “corporate citizen” and reinforcetheir customer loyalty and satisfac-tion policies.

4.5.3. The measures employed

“Managing the disposal of productsat the end of their lifecycle is animportant environmental considera-tion. More often than not, recyclingappears to be the most suitable res-ponse.”

Reverse logistics is primarily the pro-cess of returning old/used products.Of the companies that have set upreverse logistics, most manage returnsof their old/used products (50%).

In almost 40% of cases, these pro-ducts have been returned becausethey are faulty or need repairing. The objective of reverse logistics is tomake maximum use of the productsor materials. Therefore, if the pro-ducts cannot be repaired or reused intheir current condition, they are des-troyed then recycled. In a reverselogistics network, recycling is thenumber one “destination” for bothfinished products and packaging.


Productionwaste17%

PackagingTake-Back

28%

Finished GoodsTake-Back

51%

Other4% 22%

28%31%

17% 17% 16%13%

6%

1%

23%

19%17%

12%

1%

Defectiveproducts

Recycling andrecuperation

Recycling Disposal Recovery Other

Reuse afterrefurbishingor cleaning

Reconditioningor refurbishingfor integration

into stock

Destruction Immediateresale

Return tosupplier

Other

Productsfor repair

End-of-lifeproducts

Obsoleteproducts

Unsoldproducts

Productsrefused by

the consumer

17% 17%16%

14% 14%

Reuse as is Resale

Figure 28: Source of products going into reverse logistics

Which is the nature of the returned products? Nature of the returned products

In the case of packaging Take-Back, which actions are performed?

In the case of finished goods Take-Back, which actions are performed?


This study seeks to gauge the matu-rity level of companies in regard tothe Green Supply Chain, and identifythe main trends in the field.A survey was conducted amongSupply Chain, operations, environ-ment and purchasing directors andmanagers within large organisationsas well as small and medium sizedenterprises. Companies were sur-veyed simultaneously in several coun-tries (France, United Kingdom, USA,Canada, Nordic Countries, Belgiumand Japan). They represented a widevariety of vertical sectors includingtransport, energy, high-tech distribu-tion, automotive, textiles, electro-nics/IT and consumer goods.

The survey was conducted in two phases:

• Quantitative phase:

This phase took the form of an onlinequestionnaire sent to decision-makers involved in the supply chainin the broad sense. The data were pro-cessed and analysed for a total sam-ple of 600 respondents.

• Qualitative phase:

The qualitative study took the form offace-to-face interviews. Around thirtyinterviews were conducted with sup-ply chain directors and environmentdirectors of companies directly invol-ved in green supply chain operations.

The final study draws together thequantitative and qualitative data. Theanalysis and conclusions of this studyaim to present companies’ maturitylevel regarding Green Supply Chainand identify major trends.

The outlook for reverse logistics

Nowadays, reverse logistics is stron-gly associated with environmentalissues (recycling and recovery of products/materials). Clearly, theconcept of reverse logistics is warran-ted by the environmental concerns ofconsumers and governments alike (cf. legislation).The benefits to the environment areevident and tangible (recycling andrecovery of hazardous substances,etc.).

Although reverse logistics is not as new a practice as green sourcingand green design, it has become astrategic issue in recent years.


5. Study methodology

CATEGORY SOURCE DESTINATION

Finished products

Packaging

Waste / Scrap

- Faulty products- Products for repair- Products rejected by the

consumer

- Packaging materials

- Production waste- Production scrap

Recycling / Recovery /Reconditioning

Recycling / Reuse

Recycling


“An international sample, represen-ted by diverse market sectors”

The sample is mainly represented bythe United Kingdom (43% of the sam-ple), France (26%), the United States(12%) and Japan (7%).It includes large companies with aturnover exceeding 1 billion dollars(40%) and SMEs with a turnover ofless than 100 millions dollars (26%).

The spread of vertical sectors repre-sented in this study is very broad.However 57% of the sample isaccounted for by the following fivesectors: consumer goods (16%),large-scale distribution (13%), trans-port (10%), electronics/IT (10%) andpharmaceuticals (8%).

6. Profile of the participants

Nordics Countries

1%

Belgium4%

Other*7%

USA12% *Other includes: Germany, Italy,

Spain, Netherlands

UK43%

USA12% Japan

7%

France26%

Figure 29: Nationality of companies

13%

40%> 1 billion USD

26%

21%

< 100 millions USD

100-500 millions USD

500-1,000 millions USD

Figure 30: Size of companies surveyed



16%

13%

10% 10%

8%7%

6% 6%5% 5%

4% 4%3%

2% 2%1%

Consumer

goods Retail

Transport

Electronics/IT

Chemical/

Pharmaceutical OtherServices

Metal industry

Energy

Automotive

Construction

Public servicesTelecom

Plastics / Packaging labelTextile

Aeronautics

Figure 31: Market sectors of the companies



0 5 10 15 20 25 30 35 40 45

42%

14%

8%

7%

7%

6%

5%

4%

3%

3%

1%

Supply Chain/Logistics

P

Operations director/manager

Purchasing director/manager

CEO/Board Member

Sustainability director/manager

Other

Strategy director/manager

Quality director/manager

Business director/manager

IT director/manager

Financial director/manager

Figure 32: Positions held by respondents


Almost half of the executives who responded to this survey hold the position of Supply Chain director ormanager.

The second most-represented positionis that of director/manager of opera-

tions (manufacturing), held by 14% ofrespondents.

Overall, almost two thirds of the res-pondents (64% excluding and 68%including quality managers) hold posi-tions associated with the management

of a core part of the Supply Chain (production, procurement, logistics).


7. Green Supply Chain in practice: GPN case studyGPN case study: implementation of the Green Purchasing Network in Japan: “an initiative that is snowballing…”Based on an interview conducted byBearingPoint with Hiroaki Koshibu,Adviser of Green Purchasing Networkand Akira Kataoka, Manager ofInternational Green PurchasingNetwork.

With the aim to create an advancedgreen market structure, the JapaneseGovernment initiated a move towardscreating a network to promote greenpurchasing. In 1996, the GreenPurchasing Network (GPN) was formed with 73 starting memberswho were a mixture of business organisations (mostly manufacturersof automobiles and electronicappliances), local governments, non-governmental organisations(NGOs) and academia. The membersshared the view that if buyers at largeorganisations demanded that pro-ducts met a specific level of environ-mental quality suppliers would naturally change their policies andtheir behaviour. In this way ‘green’criteria would be treated as seriouslyas other requirements such as costs,quality and high level of service.Providers who did not meet the newstandards would simply lose marketshare.

The main mission of GPN is to promote green purchasing and itsapproach is based on four main principles:

- Weighing up the real need foreach purchase

- Taking account of a product’s envi-ronmental impact at every stage ofits life cycle

- Taking account of the environmen-tal performance of suppliers and dis-tributors

- Gathering all the environmental

information necessary to make agreen purchase.

The initiative owes its success tovoluntary grass-roots action muchmore than government-led instruc-tion. Although GPN initially receivedsome financial support from theGovernment, its decision-making pro-cess has always been completelyindependent. This distance from theGovernment has encouraged variousstakeholders to join GPN and allowedcandid discussion amongst members.It has also increased the credibility ofthe GPN members in promoting greenpurchasing within each of their orga-nisations.

The success of GPN was followed bythe enactment of new legislation in2000: the Law Concerning thePromotion of Eco-Friendly Goods andServices by the State and OtherEntities. This law obliges the publicsector, with around 20% of Japan’smarket share, to buy green productsand asks large businesses to followsuit. This Law gave another boost toGPN, creating a snowballing of commitment amongst Japanese orga-nisations to buy greener products.

The strong demand by theGovernment and large businessesmeans that green products can bedeveloped with less risk and at lowerprices. It also ensures that more dealers stock green products, therebymaking them accessible to the general public.

During the early years of GPN, assem-bly industries played a key role inencouraging a genuine behaviouralshift in industry. They have acted aspowerful promoters of green marketsbecause they have a dual role to play;buyers and producers of materials aswell as parts and complete products

providers in the supply chain.Alleviating environmental impact in asupply chain is a prerequisite for theproduction of green products. Bycoordinating with each other to pro-duce what they themselves wouldlike to buy, they acted as self-cata-lysts for the green market.

GPN is one of the most successfulindependent, non-profit making orga-nisations in Japan. As of 25th January2008, its executive board consists of37 member organisations from busi-nesses, local governments, consumergroups and academia. The GPN’sapproach is supported by a further2,439 companies, 303 non-profitmaking organisations and 294 localauthorities or government agencies.

GPN played a key role in setting upthe International Green PurchasingNetwork (IGPN) in 2005 with the following missions:

- Promote green purchasing practi-ces at the international level

- Share information and know-howregarding green purchasing

- Harmonise efforts in this regard.A government initiative has succeededin causing a significant behaviouralshift in Japanese industry. TheJapanese government lit the pilot-light and allowed it to grow on itsown. The scheme has snowballed sothat the impact is now spread acrossthe whole of Japanese industry.


About ABCAL

Belgian Association for Purchasingand Logistics Managers, aims to promote a professional approach to purchasing and logistics. In orderto achieve this, ABCAL organizes trai-ning and events, communicates onpurchasing and logistics topics andencourages contact between diffe-rent stake holders.For more information, visitwww.abcal.org/fr.

About APQC

For more than 30 years, APQC hasworked with organizations across all industries to find practical, cost-effective solutions to drive producti-vity and quality improvement.We are a member-based nonprofit currently serving more than 500 organizations in all sectors of business, education, and govern-ment.For more information, visitwww.apqc.org.

About Chain Store Age

Chain Store Age is published byDiamond-Friedman Co. The publica-tion was launched in 1970 when theDiamond Inc of Japan and Lebhar-Friedman Inc of the US merged andhas been supporting the modernisa-tion and innovation of Japanese retailers ever since. Together withChain Store Age, the company’s otherpublications are read by manage-ment teams, store managers andbuyers of leading retailers in Japan. The information provided by ChainStore Age, and the company’s suppor-ting seminars, help solve the problems faced by the distributionindustry and food manufacturers indelivering the products.For more information, visitwww.chainstoreage.com.

About ESCP-EAP

Europe's top Management GrandeEcole dedicated to management tea-ching and research with 5 campusesin Paris, London, Berlin, Madrid andTurin, 125 permanent professors andmore than 800 contributors, ESCP-EAP welcomes 3500 students of 90different nationalities each year.ESCP-EAP meets the highest interna-tional academic standards and is developing an original, trans-European management training programme for future managers andestablished executives. Today, theschool has a network of 30,000alumni and boasts the first EuropeanFoundation. Accredited by the AACSB, EQUIS and AMBA, ESCP-EAP is a higher education school of management of the Chamber ofCommerce and Industry in Paris. ESCP-EAP trains Supply ChainManagement professionals on its Specialised Masters Programmes“Strategy and Operations Mana-gement: Supply Chain, Procurement,Quality” and STEGE (business mana-gement training course) “SupplyChain Management”. For more information, visitwww.escp-eap.eu.

About survey supporters

About BearingPointBearingPoint, Inc. (NYSE: BE) is one ofthe world's largest providers ofmanagement and technology consul-ting services to Global 2000 compa-nies and government organizations in60 countries worldwide. Based inMcLean, Va., the firm has more than17,000 employees focusing on the

Public Services, Financial Servicesand Commercial Services industries.BearingPoint professionals have builta reputation for knowing what ittakes to help clients achieve theirgoals, and working closely with themto get the job done. Our service offe-rings are designed to help our clients

generate revenue, increase cost-effec-tiveness, manage regulatory com-pliance, integrate information andtransition to “next-generation” tech-nology. For more information, visit the company's Web site at www.bearing-point.com.


About Logi-Biz

LOGI-BIZ is the leading Japanesemagazine, which covers variousissues of Supply-Chain Managementin Japan such as inventory manage-ment, SCM software and RFID. Through carrying as many case stu-dies as possible, the magazine sup-ports 3PL providers as well as ship-pers to achieve best practice.The magazine is also well-known forits extensive coverage from Europe,North America or China, where manyof its readers are developing theirbusiness.For more information, visitwww.logi-biz.com.

About Supply Chain Magazine

As a source of professional informa-tion, ‘Supply Chain Magazine’ isaimed at all decision-makers in theworld of logistics. Its unique featureis that it offers concise and high qua-lity information to subscribers, free ofcharge.Compiled by renowned professionaljournalists, ‘Supply Chain Magazine’offers three different products :

• a monthly paper (50,000 readers)• a website (25,000 pages read/

month, on average)• a daily electronic newsletter

(more than 50,000 readers/day)For more information, visitwww.supplychainmagazine.fr.

About Supply Chain Standard

Supply Chain Standard is Europe’s lea-ding Supply Chain managementmagazine. Our mission is to bring together inprint, via events and online, the bestthat Europe can offer in Supply Chainexcellence. Our focus is on best prac-tice, thought leadership and strategicdevelopment throughout the SupplyChain.Our co-operation with the EuropeanLogistics Association, combined withour own extensive research, marketknowledge, partnerships, and pre-sence at leading industry events,ensures that the magazine is read byEurope’s senior Supply Chain profes-sionals. For more information, visitwww.supplychainstandard.com.

About VIB

Since 1981, the Belgian Purchasingand Logistics Association, hasbrought together purchasing andlogistics managers from various sec-tors of industry, commerce, servicesand the public sector. VIB promotesthe professional interests of its members and offers training andcontinuous education for all thoseinvolved in the Supply Chain. By orga-nising seminars, conferences andworkshops the association providescontinuously updated information.For more information, visitwww.bevib.be.

About BearingPointBearingPoint, Inc. (NYSE: BE) is one of the world's largest providers of management and technology consulting services to Global 2000 companiesand government organizations in 60 countries worldwide. Based in McLean, Va.,the firm has more than 17,000 employees focusing on the Public Services,Financial Services and Commercial Services industries. BearingPoint professionalshave built a reputation for knowing what it takes to help clients achieve theirgoals, and working closely with them to get the job done. Our service offeringsare designed to help our clients generate revenue, increase cost-effectiveness,manage regulatory compliance, integrate information and transition to “next-generation” technology. For more information, visit the company's Web site at www.bearingpoint.com.

www.bearingpoint.com

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