The Best Chief Technology Officer

SMEs and Green Supply Chain Management

SMEs and Green Supply Chain Management

In order to compete in the 21st century developing a global supply chain strategy is necessary. Advances in technology has opened previously closed markets to small and medium enterprises (SMEs) that otherwise lacked the resources to compete globally. Along with the ability to compete globally SMEs need to develop capabilities for managing their environmental impact.

Operating across boarders requires firms to meet certain environmental standards. Products must clear customs to move across borders, therefore, firms are more aware of and responsive to environmental issues that may delay deliveries. Environmental responsibility should be viewed as an extension of quality as it has many of the same characteristics of quality improvement programs.

Organizational awareness of environmental impact is directly related to four things: geographic location, governmental pressures, organizational structure, and type of service or product the firm provides.

Where a firm is located impacts environmental performance, because some countries have more regulations than others. Developing countries are likely to have fewer regulations than developed countries. Also countries who have signed treaties under the influence of the United Nations (UN) or who have ratified the Kyoto Treaty must adhere to guidelines and have success with setting, meeting, and maintain environmental objectives. Nongovernment organizations have less influence than governments enforcing environmental standards, but they are important because they help businesses set and meet environmental goals. Public firms, such as manufacturers, are more likely to implement green strategies especially in countries that are environmentally aware.

Smaller private firms that are not in the public eye have less pressure to reduce environmental impact. However, firms with global supply chains and outsourcing strategies are forced to monitor environmental impact to reduce risk. Environmental awareness in global supply chains also affects which suppliers a firm is willing to use. Suppliers receive pressure from buyers to reduce impact. Customer trends and demands are another factor that pressure firms to develop green strategies. Customer demand creates reciprocal dynamics. This means that when a firm develops a green product it generates public interest through marketing and gains competitive advantage if customer needs are met.

This is why the type of service or product provided impacts environmental practices, because a customer driven firm is more likely to engage in customer approved activities (protecting the environment) than a commodity-oriented firm. Competition also works as a catalyst to reduced environmental impact. When one competitor implements environmental strategies others will respond in an effort not to be left behind, miss an opportunity, and as a way to not unintentionally give away market share by not appropriately responding.

Increasingly complex supply chains make it difficult to implement and sustain environmental management, because of increased production distributed in multiple sites and autonomous partnerships. Management of green and global supply chains needs to be coordinated to achieve the desire affect. The whole supply chain needs to engage in green initiatives to gain competitive advantage. Firms may encounter barriers to green implementation and subsequent benefits if suppliers are resistant to implementing green initiatives.

Barriers to SMES Adopting Green Initiatives

SMEs are resistant to implementing green initiatives because many lack the resources (people, money, or knowledge). While much research has been done on environmental management in supply chains, little research has focused on green supply chain management in SMEs. The lack of information focusing on green supply chain management in SMEs acts as a deterrent, especially for SMEs with limited resources. Additional reasons SMEs may not engage in green supply chain management include:

• Lack of environmental awareness,
• Belief that environmental practices cost more than it pays,
• Belief that it is time consuming to implement green initiatives.

Training, effective research, and education are necessary to assist SMEs in effectively implementing green programs.

In the past SMES were not under pressure to engage in environmental initiatives, since SMEs have little individual impact on the environment. However, SMEs supplying large organizations are now under pressure from those organizations, seeking to green entire supply chains, to conform to environmental standards. Laws and large customers (such as Wal-Mart) are starting to demand that smaller firms reduce environmental impact.

Larger firms often invest in the environmental capacity of smaller suppliers because the environmental goal of the larger firm can not be met without increasing the environmental capacity of the supplier. It is crucial for SME suppliers to be involved in green initiatives, because a green supply chain is hard to achieve without full participation. Suppliers not engaged in green initiatives present a risk to larger firms pursuing green initiatives.