Green Supply Chain Management and SMEs

In this highly competitive 21st century, it has become very crucial for businesses to have an efficient supply chain management (SCM) system for surviving in the market. In any business, SCM plays an important role in meeting the market demands and customer needs. At first, SMEs faced challenges in developing a good SCM system owing to their lack of resources. However, the amazing technological advances today have opened better opportunities for SMEs to compete in the global marketplace.

Of late, there has been an increase in environmental and social awareness for SCM. Social and environmental standards/pressures are having a direct or indirect impact on businesses and supply chain management systems. Keeping the environmental requirements in mind, apart from competing globally, SMEs also need to create capabilities for the management of their environmental impact. Many big companies like Sony have partnered with suppliers who work towards solving the environmental issues. Sony refers to this strategy as ‘Green Partnership’. Large companies also exercise the term supply Chain Environmental Management (SCEM). SCEM refers to the process of responding to environmental/green concerns with regard to the production, design, use, reuse, distribution, acquisition and disposal of a company’s services and goods. Implementing green supply chain management requires relevant tools and resources, which is quite a challenge for small businesses.

When it comes to organisational awareness about their impact on the environment, it relates directly to the organisational structure, governmental pressures, geographic location and the type of products/services offered by the company. When companies operate across borders, certain environmental standards must be met according to the laws applicable in different locations. This makes firms more aware of green practices and pushes them to undertake respective environmental initiatives in order to avoid unnecessary delays in delivery. Therefore, environmental responsibility can be considered almost as an extension of quality in that it is much similar to the quality improvement programs.

Competition among different firms acts as a catalyst in the increasing demand for green supply chain management systems. This is because, when one competitor effectuates environmental strategies to reduce environmental degradation, other competitors do the same so as to stay in competition and not give away market share. However, due to the large production distributed in different sites among autonomous partnerships, complex supply chains pose much difficulty in implementing and sustaining environmental management. For efficient management of green process and to gain competitive advantage, the entire supply chain must coordinate and participate in green initiatives. If suppliers are reluctant in implementing environmental practices, it will be a barrier for firms that want to carry out green initiatives.

SMEs generally stay away from green process implementation because it requires additional money, people and knowledge that most businesses lack. Furthermore, limited information on the implementation of green supply chain management in small businesses acts like a hindrance to the SMEs that already lack resources. In the past years, there was no pressure on small firms to undertake initiatives for environment protection because their impact on the environment was negligible. But today, SMEs are also expected to implement green practices in the entire supply chain so as to conform to environmental standards. Laws and bigger firms have begun to demand smaller companies to reduce their impact on the environment. This is because larger firms that are focusing on environmental protection and relying on smaller suppliers for their operations expect the suppliers to adhere to environmental norms as well. Customer demands and trends also add to the pressure of implementing green practices.

As per survey, the main factors acting as barriers in the implementation of green practices in SMEs include lack of technology, process and green materials, complexity of green process, complexity of system design, low economic benefits, high investment, lack of regulatory authorities’ support and lack of consumer support. Uncertainty of the outcome of green process, lack of supplier reward systems and lack of flexibility in switching to green system also add to the difficulty in implementing green supply chain management system.

However, SMEs can implement green practices effectively with the help of proper research, adequate training and education. All in all, green supply chain management will not only aid in creating a green industry (which is the need of the hour) but also help companies work towards sustainability in their own operations. Adhering to laws and embracing new changes will in turn ensure success for small businesses.

– Swathi Bhat

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