ENVIRONMENTAL ORIENTATION OF SUPPLY CHAIN:...

ENVIRONMENTAL ORIENTATION OF SUPPLY CHAIN: ANTECEDENTS AND CONSEQUENCES

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Chapter 3

CASE STUDIES

An in-depth study of the secondary literature was done basically from the company websites,

reports and supply chain digest and it was confirmed that indeed the antecedents and

consequences mentioned in the conceptual framework have led to fruitful transformations in

several companies. A brief summary of the case study findings based on the conceptual

framework are given below. Only the supply chain aspects of the cases are focussed upon.

3.1 For Profit/ Non Profit Companies

3.1.1 CASE STUDY OF GENERAL ELECTRIC (GE)

According to ecomagination Annual Report, (2008), GE is one of the world’s leading

corporations. Its products and services range from jet engines, power generation, water

processing, to medical devices. It operates in more than 100 countries and has over 300,000

employees. Although GE is a For Profit Company, it has established an ecomagination

advisory board that counsels the ecomagination team on critical environmental and business

issues. The board includes thought leaders from environmental nongovernmental

organizations, academics, and business leaders from other industries.


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The “ecomagination” goals include

• Develop and sell innovative environmental products and services

• Improve energy intensity by 30 percent by 2012 from its 2004 baseline level

• Reduce water use by 30 percent by 2015 from its 2006 baseline

For this GE has increased its R&D efforts, conducted an “energy treasure hunt

process” which engages employees to identify projects that drive energy efficiency and even

reduced the water consumption of its facilities by improving valve operation.

3.1.2 CASE STUDY OF CARENET SERVICES INC.

CareNET Services Inc1. Is a not-for-profit association of over 400 Canadian healthcare

providers consisting of hospitals and long term care facilities, 100 healthcare product

suppliers, group purchasing organizations and solution providers advancing and facilitating

the use of standards-based electronic commerce and supply chain best practices.

Led by GS1 Canada, the Carenet Strategy is the industry-driven strategy to modernize the

Canadian healthcare supply chain using the GS1 System of standards. GS1 Standards will

result in:

• Patient Safety Benefits:

1 www.carenet.ca


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Efficient bedside verification, reduced medication errors, more effective product

recalls, improved data integrity

• Supply Chain Efficiency and Cost Savings Benefits:

Improved order and invoice processes, improved service levels/fill rates and

inventory management, system-wide visibility and traceability

• Government Policy and Program Compliance:

Medical device identification, efficient drug traceability, effective electronic health

records implementation

3.2 Export Orientation

3.2.1 CASE STUDY OF BIOFIBA L IMITED

Biofiba Limited of Australia2 is marketing a new biodegradable material that can be

used to make pallets and this BiofibaTechnology can help increase Australia’s export income.

Pallets are used extensively in global trade and the wood needed to make these pallets

represents 40% of total global timber use. Export shipping pallets are used to transport goods

2 Retrieved from http://www.biofiba.com/biofiba/what-is-biofiba.html


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by sea and air. Timber pallets are used only once so they make as solid waste in landfills.

Trees are a renewable resource but they take a long time to grow.

Biofiba is a patent pending ‘Green Eco Composite’ comprising, organic starches,

binding agents and cellulose fibre sourced from commercially grown, renewable, non-food

crops. Its flag ship product is Biofiba88 specifically formulated to produce an extruded

simulated timber alternative for high volume production of biodegradable Biopallets that will,

by design decompose naturally into harmless, safe, and potentially valuable, garden mulch

that will not contaminate land fill, or damage the environment. According to USEPA, plastic

production plants have a heavy carbon dioxide footprint and the chemical deca-bromine used

in it is carcinogenic.

3.3 Pollution Prevention

3.3.1 CASE STUDY OF ENVIRONMENT CANADA

There are three programs in place by Environment Canada3 to manage pollution prevention in

transit transportation.

3 Retrieved from http://www.ec.gc.ca/ccipp-cppic/en/rs-ss.cfm?sectSearch=step2&catId=6&sectId=296


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The first is The Greenhouse Gas Equivalencies Calculator from the U.S. Climate

Technology Cooperation Gateway which enables individuals, public and private sector

organizations to translate greenhouse gas (GHG) reductions from units that are typically used

to report reductions (e.g., metric tons of carbon dioxide equivalent) into terms that are easier

to conceptualize (e.g., equivalent number of cars not driven for one year). This may lead to

greenhouse gas reduction strategy. GHG equivalency conversions can also be calculated

based on gallons of gasoline, kilowatt-hours of electricity, and the number of cars and light

trucks not driven for one year.

The second is the EcoLogoM Program, a voluntary eco-labelling program that was

created to help consumers identify products and services that place a much smaller burden on

the environment. Companies may use this for advertising and promotion. In order to obtain

the EcoLogo, a product or service must be made or offered in a way that: improves energy

efficiency; reduces hazardous by-products; uses recycled materials; is reusable or provides

some other environmental benefit.

The third is the Carbon neutral program that allows individuals and organizations to

offset their emissions of carbon dioxide and other greenhouse gases from various daily

activities including air travel, home energy use, vehicle use, meetings and conferences, etc.

When carbon offsets are purchased from these programs, investments are made in renewable

energy projects across Canada and around the world which provide alternative sources of

energy which reduce emissions of greenhouse gases.


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3.3.2 CASE STUDY OF TRISTAR TECHNOLOGIES INC.

Tri-Star Technologies, Inc.4 is a manufacturer of double-sided and multilayer

printed wiring boards, specializing in products for the electronics industry. With 220

employees at their 120,000 ft2 facility, they produce 1,000,000 surface square feet

annually.

Tri-Star's pollution prevention team is able to obtain funding for projects that

require larger capital investments. These projects also offer increased cost savings in the

long term.

Tri-Star's two gas-fired air make-up units, each with a capacity of 40,000 cubic

feet per minute (cpm) operated at a fixed rate; they were on continuously, even during

non-production hours. In addition to the operating energy they consumed, the units also

required the air conditioning or heating systems to work overtime. In the summer, the

units blew hot, humid air into the facility. In the winter, the units heated the air blown in.

This resulted in a concentrated heat source that caused great temperature inconsistencies

4 Retrieved from http://www.epa.gov/dfe/pubs/pwb/case_stu/case6/index.html


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throughout the building, with the hot air in some areas shutting down the thermostats,

making the cold areas even colder.

Tri-Star found state-of-the-art variable speed controllers that could be retrofitted

to the make-up air units. With these controllers, the flow rate is determined based on the

air exhaust rate from the exhausting equipment. Significant savings in electric and gas

bills were realized. A unique feature of this project is that it required no capital

investment; the electric and gas company paid for the new equipment. The facility

estimates annual savings to be $22,900 on gas and $15,600 on electricity. Additionally,

the project reduced air pollution through energy savings of 31,000 therms and 192,800

kilowatt-hours (KWH). This translates to annual reductions of:

• CO2 (global warming) of 212,100 pounds

• SO2 (acid rain) of 1,700 pounds

• NOx (acid rain & smog) of 600 pounds

In another energy conservation project, Tri-Star had been using two 100 HP and

two 50 HP compressors which had some trouble meeting the compressed air demand.

With help from the "Energy Initiative" program run by the electric company (Mass

Electric), Tri-Star added a reserve air tank, replaced the four compressors of 300 HP

combined capacity with three 50 HP energy efficient compressors (150 HP combined

capacity) and set up the units to cycle based on the compressed air demand in the facility.

Annual energy cost savings from this project are estimated to be $13,300, based on a

164,800 KWH reduction in electricity use. This translates to annual reductions of:


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• CO2 (global warming) of 181,300 pounds

• SO2 (acid rain) of 1,500 pounds

• NOx (acid rain & smog) of 500 pounds

These energy use reduction projects have improved plant operations, saved money,

and reduced virgin oil consumption, waste oil (hazardous waste) generation, and air

pollution to the community. These energy savings from Tristar projects are equal to

taking 50 cars off the road/year and 27,000 gallons of crude oil/year.

In a water conservation project, Tri-Star installed flow controls on rinses, increased

counterflow rinsing, and implemented other "smart rinsing" techniques on their

electroless copper line. By re-counting rinse water from one set of counterflow rinse

tanks to another, Tri-Star cut the incoming water sources from seven to four, and reduced

their water usage on the line from 19 gpm to 4 gpm thus reducing water use by 79%. In

addition to water savings, these changes also reduced the chemicals needed for additions

by 25% for the affected baths (glass etch, microetch, sulfuric acid dip, and accelerator).

Overall, Tri-Star estimates that "smart rinsing" has reduced their water usage by 2.5

million gallons per year, resulting in cost savings of approximately $15,000.

Additionally, they saved on chemical purchases resulting from reduced chemical use.


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3.3.3 CASE STUDY OF HEWLETT PACKARD

Hewlett-Packard (HP)5 specializes in developing and manufacturing computing,

storage, and networking hardware, software and services. It ships about 100 million

printers and computers annually.

HP was the first major IT Company to report greenhouse gas (GHG) emissions

linked with its supply chain. Its website has an energy calculator that allows a comparison

of HP products to competitor’s models in terms of energy usage. Due to its GHG emission

reduction programs HP was ranked first in Newseek’s 2009 Green Ranking of America’s

500 Largest Corporations. Furthermore, HP has made efforts to remove toxic substance

from its products.

It has taken the following actions to Reduce Shipping Footprint

1. Supply chain optimization and logistics by direct shipment to the customers

2. Usage of marine transportation between continents and rail transportation over

land.

5 http://www.tc.gc.ca/eng/programs/environment-ecofreight-shippers-hewlett-packard-1906.htm


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3. Usage of trucking companies that have environmental programs to reduce fuel

consumption and GHGs.

4. HP won Wal-Mart’s Home Entertainment Design Challenge by reducing

packaging of expanded polyethylene and corrugated box material for its laptops

sold in Wal-Mart stores by 97%. This also enabled double units beings shipped

besides reducing greenhouse gas emissions. Moreover, the packaging tote bag

also became a selling feature.

5. For tracking results the annual reports keep supply chain transparent.

6. HP works with suppliers to report energy use, carbon emissions and to set energy

efficiency and carbon emissions reduction targets.

In North America, HP contracts only with trucking companies that are US EPA

SmartWay5 Partners, recommending that carriers that use leading-edge technologies like

idle reduction, improved aerodynamics, improved freight logistics, automatic tire

inflation systems, hybrid powertrain technology. HP also received SmartWay Excellence

Award.

In order to ensure environmental compliance HP maintains a General Specification

for the Environment (GSE) tool that provides global product content specification for

restricting or prohibiting certain chemical compounds or materials in HP products or

manufacturing processes. In addition, HP includes environmental criteria in RFQ’s

(Request for Quotations) and continues to decrease the amount of paper in operations


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(electronic freight bills and invoices). HP has also implemented no idling and energy

efficient lighting with motion sensors at many of our warehouses around the world.

3.4 Attitude

Tim Kenyon, a senior market analyst at GfK Roper, which conducts regular “Green Gauge”

consumer surveys, told GreenBiz.com. “In a developing economy, there’s much more of a

personal self-interest involved in making green purchasing choices, and less emphasis on the

greater good.”

3.5 Coordination

3.5.1 CASE STUDY OF CANADIAN TIRE

Canadian Tire is6 a general merchandise retailer and owns 485 stores. It has a strategic

plan of procurement of quality products globally. It also expects an increase in the

procurement from 34.5% in 2005 to 52.4% in 2015.

6 http://www.tc.gc.ca/eng/programs/environment-ecofreight-shippers-canadian-tire-corporation-2454.htm


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In 1995, Canadian Tire was a pioneer in the use of transloading – the transfer from

sea-shipping to land-shipping containers in Canada, which provided environmental and

operational benefits to the company. The company developed a trifold Strategy viz. to grow

the business without increasing the net carbon footprint of the economy, to eliminate

unnecessary packaging while sending zero waste to landfills and provide innovative and

sustainable products and services that meet customers’ needs.

To accomplish first strategy it developed a complex transportation and distribution

network to service its 485 stores. It transloaded product and ship directly to stores on the

west coast detouring the need to utilize its distribution centres. Transloading minimizes

handling, trips between various distribution centres, the number of containers required, and

transportation distance and each ocean container’s cycle time.

To accomplish the second strategy, it has partnered with Century Distribution

Systems, a freight movement specialist, to collect details of all products loaded onto ocean

containers from the port of origin.

Similarly third strategy involved packaging optimization. So, Canadian Tire worked

with vendors to change the packaging of its Likewise brand of garbage bags from a flat-

fold format to a new roll format. This reduced the size of the package and related product

by 30% and reduced the weight by 11%.

3.5.2 CASE STUDY OF IBM


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According to the IBM Global Chief Supply Chain Officer Study (2010) IBM foresees

a future supply chain which will be instrumented, meaning information will be mainly

machine generated, interconnected, meaning that it will be connected with suppliers,

customers and IT system and lastly intelligent, meaning the supply chain decision will be

based on analytics and modeling.

In a recent Global Chief Supply Chain Officer Study, IBM spoke with 400 senior

executives from North America, Western Europe and the Asia Pacific region who are

responsible for their organizations’ supply chain strategies and operations. Their discussions

revealed five key findings related to:

Fig 3.1: Key Findings of Global Chief Supply Chain Officer Study


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These findings suggest that supply chains are under severe pressure and as information flows

multiply, supply chains become more complex, costly and vulnerable. More than half of all

supply chain executives have implemented practices aimed at improving visibility, such as

continuous replenishment and inventory management with customers. Twice as many report

extensive implementations of collaborative planning with suppliers and vendor managed

inventory (VMI).

3.6 Risk

3.6.1 CASE STUDY OF IBM CONTINUED

“Risk management is a fundamental building block of any supply chain strategy,”

according to Greg McKenna, Supply Chain Manager, Venture Production plc.

Risk management emerged as supply chain executives’ second largest challenge in the IBM

study. This was due to recall headlines as well as a realization that globalization and greater

supply chain interdependence have not only raised risk, but also made it more difficult to

manage. About 69% formally monitor risk, but only 31% manage performance and risk

together. The lack of standardized processes, insufficient data and inadequate technologies

were cited as the greatest hurdles to effective risk management.


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3.6.2 CASE STUDY OF ZURICH

According to Bolgar (2012) Supply chains can be complex. For instance, a U.S.

business might buy a part from a British supplier, whose factory is in China and is supplied by

components from other countries. A number of tools are available for helping businesses tame

the data and draw a clear picture of their supply chain risks. They may overlay risks on a map

of the world, use flow charts to show tiers of interdependence or illustrate degrees of risks

with heat maps. Dr. Otto Kocsis, global head of technical center business resilience and

principal engineer at Zurich Insurance Company says impact analysis is one of the tools that

look in depth at the consequences of losing a critical process or supplier, with respect to

severity as well as frequency.

Zurich has a number of proprietary tools including a tool to model business

interruptions, present the disruptions graphically and provide quantitative supply chain

exposures. The first step is to model the value chain, then identify the scenarios, both with

respect to severity as well as impact, then get the effect of those scenarios on the balance

sheet.

Tim Astley, Regional Practice Leader for Strategic Risk at Zurich looks at 25 supply

chain risk factors to understand the breadth of management control and the extent to which a

business is exposed to each factor. Scenarios encompass many kinds of risk, from internal


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ones like fires or machinery breakdowns to external ones such as geopolitical risk, natural

catastrophes, or economic problems like high inflation.

“A business can gain competitive advantage by getting to a supplier first and securing

supplies that may soon be hard to get,” Mr. Astley says. PI Benchmark has worked with

Zurich Insurance to identify and map all the nodes of a supply chain, decomposing each

component into the most granular bits. This can help highlight concentrations of exposures,

for example, suppliers could have a factory near the catastrophe zone. Supply Risk Solutions

checks out not just a company’s suppliers’ factories but also the factories of the suppliers’

critical sub-tier suppliers. All the suppliers and critical sub-tier suppliers’ factories are

mapped and then married to the global disaster feeds. This way companies can be notified

immediately when an event occurs within, say, a 150-kilometer radius of key supplier or

subtier factories. In tandem with identifying tiers of suppliers and their factory locations, it’s

critical to take steps to reduce risk ahead of any crisis event.

Some risk tools go beyond data capture to include site visits by risk engineers. Zurich,

for example, has a vast team of risk engineers who collect data about suppliers with the

experience of knowing what has gone wrong in other companies and other industries.

3.6.3 CASE STUDY OF CISCO SYSTEMS INC.

Cisco7 hardware, software and service offerings make networks possible. To protect

itself from disastrous events, Cisco created a supply chain risk framework that included a

7 http://www.cisco.com/


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resiliency index and a set of metrics related to recovery from events and crises. Each “node”

(suppliers, manufacturing partners, logistics centers) in the Cisco supply chain is responsible

for tracking and reporting its “time to recover” and ensuring recovery plans and capabilities

are in place prior to any actual disaster.

Cisco’s solution, the first of its kind, has evolved from a forum of supply chain risk

management practitioners invited from many industries to create best practices. It starts with

Business Continuity Planning, in order to understand the vulnerabilities and resiliencies

across the supply chain. When an earthquake hit China in 2008, Cisco’s forward-looking

business continuity process allowed it to identify the potential exposure and initiate a

mitigation plan before the disruption resulted in any customer or revenue impact. Cisco was

able to identify which nodes were affected and assess the potential impact within hours of the

event. Using that impact assessment, Cisco was able to work with its suppliers and

manufacturing partners to avoid any component disruptions (IBM Study, 2009).

3.7 Customer Satisfaction and Collaboration

3.7.1 CASE STUDY OF IBM CONTINUED

The IBM study further reveals that about 80% companies design products jointly with

their suppliers and 68% with customers, so the focus is more on suppliers than on customers.


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Customer interaction is perceived as costly and time-consuming. Nevertheless profitably will

drive out excess inventory, lost sales and missed innovation opportunities caused by

inadequate customer collaboration.

3.7.2 CASE STUDY OF DELL

In 2008 Dell8 announced to move into retail business and make other changes to its

supply chain. Dell is well known for its make to order business, however it employed a new

strategy whereby it added new supply chain capabilities to serve diverse markets and multiple

customers. To accomplish this it also employed Quality Function Deployment (QFD) and

incorporated the voice of customer. It recognized its customer segments and the different

supply chains needed to cater to them.

3.8 Suppliers Environmental Orientation

3.8.1 CASE STUDY OF PROCTER & GAMBLE

8 Video cast Retrieved from http://www.sctvchannel.com/webinars/videocast3.php


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Procter & Gamble9, a consumer goods company based in Ohio employs 127000 employees

working in 80 countries worldwide and 75000 suppliers. Its products are sold in over 185

companies mainly through mass merchandisers, grocery stores, membership club stores, drug

stores and high frequency stores.

P&G has employed holistic view of opportunities. In Manufacturing they make

efforts to reduce water, waste, energy and carbon dioxide. They apply smart eco-design and

give life to waste. They have discovered that a highly productive plant like sugarcane could

be a sustainable feedstock for producing next-generation renewable plastic containers. Plant

based plastic is a significant environmental innovation as it reduces greenhouse gas emissions

by more than 170%.

In logistics they apply sustainable design and thus reduce waste. They have also

optimized their transportation efficiency by making changes to the rate, route, mode and

method of transportation. They have eliminated inefficiencies like loading and unloading

delays, rush transport up-charge, dead legs and production line stops.

They collaborate closely with suppliers. They have implemented a supplier

sustainability scorecard which assesses environmental footprint of suppliers and thus reduce

the environmental footprint across the entire supply chain. In a video interview Rick Hughes,

Chief Purchasing Officer mentioned that the company first started with 20 inputs to

scorecards and kept adding. They have supplier diversity as 400 are chemical suppliers and

others who are not aware so a simple training module is used along with spreadsheet also.

9 http://www.pg.com/en_US/sustainability/environmental_sustainability/operations_suppliers/index.shtml


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The World Resources Institute (WRI) and the World Business Council on Sustainable

Development (WBCSD) gave the industry standard GHG Protocol for greenhouse gas

emissions. These emissions take three forms- direct emissions onsite, indirect emissions from

electricity etc and various travel and supply chain emissions. So, effective management of

supply chain emissions is a cost saving measure.

Greenhouse gas emissions are a good indicator of fossil fuel usage intensity. By

reducing the emissions, the fossil fuel usage will decrease which will lead to reduction in

costs and risks due to future price volatility. For instance Walmart has made strict guidelines

for its suppliers to manage greenhouse gas emissions, to perform rigorous audits and to

disclose all information.

3.8.2 CASE STUDY OF WALMART

Wal-Mart10 a giant retailer operates under 69 different banners in 27 countries. It

operates 8,400 retail units around the world and works with 100,000 suppliers. Its distribution

system is generally regarded as the most efficient

It was blacklisted as ruining local businesses, low wages, pitiable treatment of

workers, not promoting women etc. The unions are also not pleased with Walmart. However

10 Retrieved from http://www.walmartstores.com/sites/responsibility-report/2012/pdf/WMT_2012_GRR.pdf


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with a turnaround of greening attitude, this situation has brought it to a leader position. In Feb

Feb 2010 it announced that its plans to cut some 20 million metric tons of greenhouse gas

emissions from its supply chain by the end of 2015, equivalent to removing more than 3.8

million cars from the road for a year.

Wal-Mart CEO Lee Scott saw the two goals as intertwined: “being a good steward of

the environment and being profitable are not mutually exclusive. They are one and the same”

(MSNBC, 2005). The company launched a campaign to convince its suppliers to provide

environmentally safe products in recyclable or biodegradable packaging. Then it began

promoting the products with green-colored shelf tags.

According to the Supply Chain Management Review, Wal-Mart CEO Lee Scott

committed the company to the three green goals-

• To be supplied 100% by renewable energy

• To create zero waste

• To sell products that sustain people and the environment

In fact Wal-Mart started many environmental initiatives. For example, since 2005,

Wal-Mart has achieved a 60 percent increase in truck fleet efficiency in the United States. In

2009 it reduced its plastic bag waste use globally by nearly 66.5 million pounds which was a

16.1 percent reduction.

Walmart requires its suppliers to examine the carbon lifecycle of their products, from

the raw materials used in manufacturing and packaging to the recycling phase. The suppliers


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will bear the costs related to making the products more energy-efficient. This will ensure Wal-

Mart to sustain its low prices.

In May 2009, Wal-Mart revealed the initial version of the GreenWERCS tool, which

screens chemical based products on the shelves for harmful environmental impacts. In July

2009, Wal-Mart announced the development of a Sustainable Product Index which will

complete in the next five years. This tool will drive product innovation, bring greater

transparency into Wal-Mart’s supply chain and evolve into an information tool for

sustainability of a product for stakeholders.

Walmart confirms ethical sourcing and states that it audited 96% of its supplier

facilities and that 94.8% of direct import factories have received one of the two highest

ratings under its evaluation system.

While Wal-Mart is building value added networks of government agencies, non-

profits, employees and suppliers to “green” its supply chains, the company is using a network

approach to lower overall carbon and environmental footprint in order to increase profitability

while increasing margins.

3.8.3 CASE STUDY OF HERMAN M ILLER


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Herman Miller11 has been a global leader in building a sustainable product line, and

has won multiple environmental awards. The company has a sustainability plan called

“Perfect Vision 2020,” which calls for a basically zero impact company, both in operations

and across the product line, by 2020.

According to W. Drew Schramm, Herman Miller’s SVP of Global Supply & Quality,

obtaining chemical compositions and formulas from suppliers and suppliers’ suppliers was

very difficult especially if they were located in countries like China. On the other hand the

company could not make the cost more for environment friendly products for its customers.

So sometimes the company shared costs or passed it to customers or bear the whole upon

itself.

“The Cost High-Wire Act” is about creating an entirely sustainable product line

without losing customers. For instance, Schramm cited their “Mirra” chair. The chair had a

metal rod for a spine in the back that was coated in plastic, and thus not recyclable. So

Herman Miller challenged the supplier to find a solution, and they came up with a wholly

plastic spine that is 100% recyclable, lighter, attractive and cheaper.

3.9 Government Norms

3.9.1 NEWS

11 www.hermanmiller.com


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1. According to Reuters (2012), The Obama administration has made fuel efficiency

an environmental and energy priority since cars and trucks account for 20 percent

of carbon emissions and more than 40 percent of U.S. oil consumption. Fuel

efficiency of U.S. cars and light trucks will nearly double by 2025. American

vehicles will get 54.5 miles to the gallon in the new standard that aims to save

consumers at the fuel pump, while cutting dependency on foreign oil imports

and greenhouse gas emissions. The new fuel efficiency standards will save consumers

$1.7 trillion in gasoline costs and reduce U.S. oil consumption by 12 billion barrels

over the period, according to the White House.

2. The Federal Motor Carrier Safety Administration (SC Digest, 2011) in US

changed the driving time and total driving window and made an effort to provide

for mid-day breaks in order to ensure road safety and driver health. The

government enacted several laws regarding trucks on highways and tariffs levied

and regulate carbon emissions.

3. Government regulations in Europe over the last half decade – including REACH,

RoHS and the Emission Trading Scheme – are driving strategic attention to

sustainability.

4. Then the use of formaldehyde in wood boards is a key component and reduced

formaldehyde boards are expensive. However, the State of California introduced

legislation limiting the amount of the chemical in wood board. This urged the


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suppliers of Herman Miller Company to be compliant and they stepped up

manufacturing of reduced or formaldehyde-free board, driving down prices

(Upham, 2009).

3.10 Image

There is a saying that “who has seen a peacock dancing in the jungle?” meaning if an

enterprise delivers outcomes but no one measures them, the effort is likely to go

unrecognized. Using a sustainable supply chain approach to create value depends on

willingness by the top management, taking an initiative, choosing the appropriate metrics and

then accurately measuring and tracking performance with those metrics. Leading companies

although good at correcting their supply chain processes fail to measure the impact of the

improvements. However, if they do, it serves as benchmarks for other companies to follow

suit. It is interesting to note that a company’s supply chain excellence affects its reputation.

For instance Procter and Gamble’s supply chain reputation made Unilever and Kimberely

Clark to make efforts, similarly Dell’s reputation affected IBM and HP to do likewise.


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3.10.1 CASE STUDY OF EUROPEAN COMMISSION

In August 2011 the European Commission appointed Ecorys to carry out a study on

“Incentives driving the improvement of the environmental performance of companies”. The

overall objective of the study was to analyse the effectiveness of incentives in changing the

environmental behaviour of companies.

In general, incentives empower drivers and reduce barriers. Firms are expected to

make improvements in their environmental performance after receiving the incentives. For

e.g. improving the potential for financial gains, or offering more opportunities to present a

positive company image; and/or by reducing the barriers, for example by improving access to

information or creating ‘smart’ regulation.

The incentives were divided into three different types, viz. administrative, economic

and reputational.

The key findings were-

• Regulation remains an important driver of environmental behaviour for many firms and

sectors and its effectiveness can be enhanced with incentives.

• Administrative incentives are most attractive to SMEs and are most effective when they

are automatically applied and when the burden reduction is tangible.

• Economic incentives are attractive to all firms, although large firms are more proactive

and SMEs more reactive to them. Reputational incentives can be effective tools for


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improving poor performance and rewarding good performance. The increased importance

of reputation can be financial risks associated with a drop in reputational standing.

Naming and shaming poor performers can induce action, while good performers can seek

to differentiate themselves by the positive reputation these incentives can help create.

Specific success factors for reputational incentives are simplicity, comparability,

transparency; inclusiveness and effective communication are key success factors.

The main recommendations were-

• New incentives need to be carefully assessed for coherence with existing incentives

• If tied to voluntary schemes, measures need to be put in place to guarantee sufficient

take up

• The design of incentives needs to reflect the type of sector

• Any targets set within incentives need to be clearly defined and relevant

• Incentives should be retained for a clearly defined period. Conditions of phasing-out

need to be clear from the beginning.

• Measures planned in case the incentive fails to reach the desired objective must be

defined at the beginning.


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3.11 Sales and Profits

3.11.1 CASES FROM WALMART , CLOROX, OGILVY EARTH AND

ACCENTURE12

According to SC Digest, in 2007 and 2008, major retailers and consumer products

companies took initiatives in greening. For instance, in 2007 Wal-Mart announced a new

“Living Better Index” which tracked sales of products in "sustainability." Similarly, Home

Depot launched the “Eco Options” program, which enabled customers to easily identify

environmental friendly products. Consumer packaged goods companies also launched a flurry

of Green-oriented products, and spent heavily on advertising to promote them.

In 2008, Clorox introduced Green Works, an environment-friendly cleaning line with

lot of advertising, marketing dollars, and merchandising support from WalMart. Sales for the

line reached $100 million. However, it is observed that sales declined as customers did not

wish to pay a premium.

12 Retrieved from htpp: // www.scdigest.com/assets/FirstThoughts/11-07-27.php?cid=4784


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An article in New York Times quoted "The consumer’s love affair with Green

products, from recycled toilet paper to organic foods to hybrid cars, faded like a bad

infatuation." A new report from OgilvyEarth, found that that 82% of Americans have good Green

intentions but only 16% are dedicated to fulfilling these intentions.

The consultants at Accenture surveyed 250 senior business executives from across the

globe and the results revealed that, “investing for growth” far exceeded efficiency/cost

cutting.

3.12 Funding

3.12.1 CASE STUDY OF NATIONAL ENVIRONMENT AGENCY (NEA)

The National Environment Agency (NEA)13 provides several schemes to help

companies reduce their costs in energy saving equipment and technologies. For example

Funds and Incentives like 3D partnership, 3R Fund, Clean Development Mechanism

Documentation Grant, Design for Efficiency Scheme (DfE), Environment Technology

Research Program, EASe Scheme, Grant for Energy Efficient Technology (GREET), Green

Vehicle Rebate, Incentives for Energy Efficient Equipment and Technology, Innovation for

Environmental Sustainability (IES) Fund, SCEM Training Gran and Tax Incentive Scheme

for Highly Efficient Pollution Control Equipment.

13 Retrieved from http://app2.nea.gov.sg/index.aspx


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If companies lack the expertise to manage their energy consumption, they can engage

an Energy Services Company (ESCO) to conduct an energy audit for their building or facility,

identify energy saving measures and implement projects to reduce energy consumption.

3.12.2 CASE STUDY OF TESLA

Tesla14, a company that was basically flat on its back, was one of three recipients with

Ford and Nissan of $8 billion in advanced technology loan funds for making electric cars.

Tesla received $465 million as federal funds to build a manufacturing plant for the new ultra-

fast Model S Sedan in Southern California, and a second battery plant in the Bay Area.

3.13 Vendors Environmental Orientation

3.13.1 CASE STUDY OF COMPLIANCE NETWORKS

According to Compliance Networks (2007) Green initiatives in the supply chain and

logistics sector are directly facilitated by Vendor Compliance Optimization. A best-in class

Vendor Compliance Optimization program can enable a retailer to decrease costs, increase

revenues, and mitigate risk. It will enable the retailer to measure supply chain performance.

Supply chain performance has been shown to improve in as little as 120 days.

14 http://www.thedailygreen.com/living-green/blogs/cars-transportation/tesla-funding-460609#ixzz25RtwKfkv


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Compliance Networks offers a supplier compliance optimization package. The product

highlights supplier noncompliance and aids in the development of suppliers as partners

working together to meet demand.

A best-in-class Vendor Compliance Optimization solution enables retailers to

implement four supply chain processes that are essential for aligning vendor performance

with enterprise goals-

• Vendor Compliance System - The software, hardware, and database infrastructure that will

support vendor compliance activities.

• Vendor Compliance Workflow - The integration of human activities with the Vendor

Compliance System that will execute the Vendor Compliance program.

• Retail Supply Chain Collaboration - The communication, planning, and cooperative

activities that facilitate optimal execution of the supply chain.

• Retail Continuous Improvement - The leveraging of the supply chain performance data

captured and produced by vendor compliance optimization activities, to enable the enterprise

to identify supply chain execution failures and successes and adjust merchandising and other

supply chain planning and execution.


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3.14 Final Comment

3.14.1 CRADLE TO CRADLE APPROACH

The Cradle to Cradle concept15 was developed by W. McDonough and M. Braungart.

The Cradle to Cradle approach starts with intelligent design, covers supply chains (the

recycling of natural resources via product and manufacturing design, to high value reuse) and

also involves systems (key supplies, ecosystems, space and energy) as well as management

(via money, rules, spatial planning). It is a concept that contributes to a reduction of the use of

raw materials, generates less environmental pollution, contributes to our economic growth and

allows us to make better use of scarce space.

Both McDonough and Braungart have further developed the framework which

resulted in the book Cradle to Cradle: Remaking the Way We Make Things (2002). Three

principles are essential in developing Cradle to Cradle:

• “waste equals food”: Everything is a nutrient for something else.

• “use of current solar income”: The use of energy sources that are renewable

• “celebrate diversity”: promoting and combining biological, cultural and conceptual diversity

15 Retrieved from http://www.c2cn.eu/sites/default/files/C2C_theor_framework.pdf


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3.14.2 CASES OF PROCTER & GAMBLE , FORD, NIKE AND BASF16

Many companies including Procter & Gamble have adopted this concept and

transformed themselves. For instance W. McDonough and partners collaborated with Herman

Miller, a Michigan-based furniture company integrated ecologically intelligent design into

business practice. They hired dedicated staff to pursue a new design protocol and engaged its

supply chain in materials assessment.

Another example is W. McDonough and Partners collaborated with Ford for a $2

billion restoration of Ford's 1,100-acre Rouge River manufacturing complex in Dearborn,

Michigan and with Nike for incorporating ecological intelligence into product design. They

collaborated with BASF to start nylon 6 program which led to the development of the systems

and logistics for the reclamation of technical materials.

16 Retrieved from http://www.mcdonough.com/writings_c2c_case_studies.htm

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