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What is Green Supply Chain Management?

While Supply Chain Management (SCM) primarily considers costs, quality, supplier relationships and supply chain structure, Green Supply Chain Management (GSCM) also takes in to consideration environmental impacts at all levels of Supply Chain Management. GSCM reduces the carbon and pollution footprints of a firm and as information about the causes of climate change has become more and more widespread, GSCM has become an increasingly popular business strategy.

Why Should Corporations Care:

The corporatized global economy will soon have to face the impending reality of a world where environmental disaster and climate change hinder business operations, increase supply chain costs, and impact profitability. While rising temperatures are likely to increase costs of goods and services 100 years in the future, the purchasing power of consumers should hardly be the primary concern. First on the list of negatives include global food shortages, massive population homelessness (shoreline loss), natural disasters, and air and water pollution. Each of these are likely to have a considerable impact on the health and safety of the global populace. While sustainable business practices such as GSCM certainly fall under the umbrella of Corporate Responsibility, GSCM can also improve competitive advantage, be part of the effort to ensure a healthy consumer base, and prevent negative environmental impacts on business operations. It is becoming increasingly evident that business health and business success depends upon the integration of corporate sustainability practices such as Green Supply Chain Management. In fact, in January 2017, researchers from the UK found a positive relationship between GSCM practices and the economic health of firms in Asian Emerging Economies.

Business Benefits from Sustainable Sourcing

  • Corporate Branding – One of the most commonly discussed ways in which sustainable sourcing can benefit a company is the raw marketability of those practices. Have you ever seen that quinoa protein bowl at the supermarket, with the label that says something like “Vegan, Organic and grown in SOLAR powered greenhouses”? Well, your company doesn’t have to go all-out hippy to reap the benefits of this type of corporate branding. The use of Eco Labelling is one example of how corporations have increasingly advertised their sustainable practices. This additional marketing tool can help solidify a company’s consumer base.
  • Attracting Investment – In addition to consumer marketing, sustainable business practices such as GSCM may attract investment from socially concerned investors. These investors may be a reliable source of capital in that their loyalty depends on the alignment of their values with a corporations triple bottom line, instead of solely on monetary returns.
  • Eco Efficiency – A green supply chain generally involves practices that save money and generate revenue by improving efficiency in the purchase, allocation and use of direct and indirect materials needed for business operations. Efficiency is an obvious benefit to both Business health, and to the environment.
  • Value of Resources – Adopting green sourcing practices might contribute to a re-framing of corporate sourcing practices, including the valuation of increasingly limited resources that were not previously considered finite.
  • Integrated Green Supply Chain Practices– A group of economists found that both Intra-Organizational Environmental Management (IEM) and Customer Green Cooperation (CGC) are positively associated with a firms economic health. IEM integrates sustainable practices into the organizational structure and company culture while CGC takes environmental input directly from consumers, and integrates feedback into product/service design and sourcing strategy.

Today, the global economy is largely dependent upon the consumption of finite natural resources and the use of carbon-intensive and environmentally damaging production practices. A sustainable supply chain can reduce a corporation’s contribution to global environmental degradation while at the same time de-incentivize the use of less sustainable practices in production. If this topic matters to you, check out the next installation in this series: Does Green Look Good on YOU? A dive into Green Supply Chain Management: Models and Real-World Examples.