� DANIEL A. SAMSON, Feature Editor, University of Melbourne, Australia
Developing Strategies for Green
Supply Chain Management
by Dayna Simpson, Oregon State University, and
Danny Samson, University of Melbourne
T he ﬁeld of supply chain management
has more recently directed its atten-
tion to the role of the supply chain in both
suppliers to meet guidelines for sustain-
able farming. Other organizations have
introduced purchasing requirements that
(a) impacts to the natural environment ensure suppliers avoid speciﬁc materials
and (b) the generation of environmental such as chemicals that may be deemed
Dayna Simpson performance change. This shift in our hazardous to the environment (DuPont,
is an assistant professor of expectations for the supply chain has Seventh Generation, and organic supply
supply chain and operations arisen from growing social pressure, chains). An increasing number of supply
management at Oregon State legislative changes around packaging chains invest in recycling systems intend-
University. She earned a PhD
and end-of-life goods, identiﬁed supply ed to retrieve waste or used product from
in management from the Uni-
versity of Melbourne. Her chain risks, and increasing use of envi- customers (Kodak, Hewlett Packard, and
research interests are in the ronmental requirements being cascaded Fuji-Xerox).
area of environmentally sound supply chain strate- from customers to suppliers. Several Much is still unknown, however,
gies. She previously worked as an environmental years of research into the occurrence regarding the management efﬁcacy and
scientist in the petroleum, automotive, and agri-
of green-supply-chain-management likely costs to the supply chain from
cultural industries. She has recent publications on
relational strategies for managing the green supply activity (GSCM) has led to a general ac- altering its traditional focus of cost, qual-
chain, sustainable operations and reverse logistics, ceptance of its relevance and purpose. ity, and service to include environmental
and has continued this work most recently in the At this point in the ﬁeld’s development, performance. The extent of the supply
banking and non-proﬁt sectors. She is a member of however, there is substantial scope for chain’s legitimate control over such envi-
the Academy of Management and of the European
improving our understanding of poten- ronmentally focused activity is an area of
Operations Management Association.
tial strategies of GSCM rather than just active debate. For example, the organiza-
a series of related greening practices tion that claims ‘carbon neutrality’ for its
without a deﬁnite purpose. Owing to product supply chain may be unlikely to
Danny Samson increasing and rapid developments in the effectively monitor or control the carbon
is a professor of manage- ﬁeld of green supply chain management, generating activities of upstream suppli-
ment in the Department of we describe an evolving set of distinct ers. The supply chain is comprised of a
Management and Marketing, supply chain strategies in support of series of entities, activities, customers,
University of Melbourne. He
this type of activity and propose some cultures, and goals that frequently fail to
has served as head of the de-
partment and associate dean directions for the future. In the manner ﬁnd alignment on anything but the most
in the Faculty of Economics of Fisher (1997) —what might be the basic of concerns. Very few activities in a
and Commerce. He holds a BEng and a PhD in most appropriate GSCM strategy for a supply chain are likely to succeed if they
management from the University of New South particular product, process, or industry are not accompanied by some form of re-
Wales. He has previously held academic positions
context? lationship control that will (a) justify the
at the University of Illinois and Melbourne Busi-
ness School. He has published many dozens of level of investment for both parties and
scholarly articles and eight books in areas ranging Background (b) guarantee its implementation.
from management science, operations manage-
An increasing number of organizations The explosion of GSCM activity in
ment, and general management. He serves on the practical realm has led to an increas-
numerous editorial boards including as associate have introduced ‘greening’ requirements
to both upstream and downstream sup- ing body of empirical work regarding
editor of the Journal of Operations Manage-
ment. He is a member of the Global Manufactur- ply chain activity—purchasing clauses, both external inﬂuences leading to the
ing Research Group and recently ﬁnished a term targets, practices, and technologies. uptake of green supply chain manage-
as GMRG president. He has consulted widely to
Automotive firms frequently require ment practices, and their impact on
business organisations around the world in indus- ﬁrm performance. Investigation in this
tries ranging from manufacturing to banking and suppliers to certify to ISO 14001 (Toyota
and Ford). Starbucks Coffee as well as area has generally fallen into four main
Ben and Jerry’s require raw material categories:
12 Decision Line, July 2008
•� Use of compliance-based strategies altering or improving aspects of sup- 2003), (b) third party or arms-length man-
that support the cascading of basic en- ply chain performance. These are es- agement of performance, and (c) a system
vironmental requirements generically sentially competitive pressure (rely on recognized globally by other organiza-
across all suppliers (Melnyk, Sroufe, the market); evaluation or certiﬁcation tions. This third aspect improves the
& Calantone, 2003; King, Lenox, & schemes (rely on a third party); incen- efﬁcacy of uptake by suppliers because
Terlaak, 2005) tives; and direct involvement (Krause the system is recognized by the market
•� Aligning supply chain goals for both et al, 2000; Modi & Mabert, 2007). All and other industry members, reducing
efficiency and pollution-reduction modes are possible—though with dif- the ambiguity of desired performance
(Corbett & Klassen, 2006; Rothenberg, ferent outcomes—regardless of whether levels and minimizing the need for cus-
Pil, & Maxwell, 2001) the climate of a relationship is more co- tomer involvement. From the perspective
• Transfer of environmentally speciﬁc ercive or collaborative. We draw on the of competitive advantage, however, the
innovations or technologies from cus- relationship implications of supply chain beneﬁts are limited because of the ease
tomers to suppliers (Geffen & Rothen- performance improvement as well as the of implementation, a lack of unique-
berg, 2000; Klassen & Vachon, 2003) possible pathways to development of ness, and a growing use by other supply
supply chain resources to establish a ty- chains. A similar approach to basic certi-
•� Collaboration or competition between
pology of strategies for GSCM. We move ﬁcation schemes is the use of broad state-
ﬁrms to develop re-manufacturing or
away from the traditional discussion of ments within purchasing guidance or
closed-loop recycling systems (Guide
GSCM strategies built around reputa- principles to include ‘supplier activities’
& Van Wassenhove, 2002; Pagell, Wu,
tional or societal pressures and instead among the organization’s environmental
& Murthy, 2007).
build a typology based in more tradi- responsibilities. Such systems based on
tional supply chain management theories risk minimization only and managed in a
Relevance of the Supply Chain to move the GSCM ﬁeld forward. climate of low relational investment only
Relationship guarantee supply chain compliance with
Supply chains achieve performance Strategies of Green Supply Chain local or national regulations. The end re-
improvements or resource development Management sult being that risk can be minimized and
through either building-speciﬁc capabili- reputation enhancement is possible, but
ties over time or by looking to the sup- Risk-based Strategies no additional innovation or complemen-
ply relationships to gain access to new tary economic beneﬁts are likely.
The simplest strategy of GSCM with
resources (Eisenhardt & Schoonhoven,
regard to inter-organizational invest- Efﬁciency-based Strategies
1996). This may occur through either:
ment resource development is one of risk
(a) coercive pressure—pass responsibil- A more complex and developing strat-
minimization. Firms adopting this strat-
ity upstream or introduce contractual egy in recent years has been the ‘eco-ef-
egy are proposed to do so in response
clauses for suppliers (Pagell et al, 2007; ﬁciency’ or ‘lean-and-green’ approach
ostensibly to stakeholder requirements.
Zhu & Sarkis, 2007); or (b) collabora- to GSCM. This type of strategy derives
Such a strategy is ideal for the orga-
tion—utilize social capital within existing environmental performance beneﬁts for
nization that retains minimal internal
relationships to develop new competen- the supply chain beyond mere regulatory
environmental management resources
cies (Liker & Choi, 2004; Paulraj, Lado, & compliance through the requirement
or has only recently begun to consider
Chen, 2008). With regard to environmen- for suppliers to meet operations-based
the introduction of a supply chain green-
tal performance management, coercive efﬁciency targets. Much of the environ-
ing program. It is based on minimal
pressure provides a minimum level of mental performance beneﬁt arises from
inter-organizational engagement. Such
compliance to requirements amongst specific manufacturing practices that
efforts might involve the inclusion of
suppliers but tends to be limited in its have been found to provide secondary
basic clauses in purchasing contracts for
capacity to encourage advanced perfor- environmental performance benefits.
suppliers to meet all relevant regulatory
mance outcomes such as new knowledge The point of departure for the efﬁciency-
requirements. Most frequently used with
or innovation. Collaboration on envi- based strategy from the risk-based strat-
this approach is the cascading of an estab-
ronmental performance issues tends to egy is the availability of dual economic
lished international standard such as ISO
increase the range and complexity of pos- and environmental performance beneﬁts
14001 (King, Lenox, & Terlaak, 2005). The
sible outcomes—such as new products or to the supply chain and the requirement
use of an existing performance standard,
technologies—but requires a far greater for higher levels of engagement between
an approach used initially by the Ford
level of involvement for customers and customers and suppliers. The efﬁcien-
Motor Company with its suppliers and
suppliers. cy-based strategy ties environmental
now more frequently by other organiza-
Several modes of interaction be- performance to operational processes
tions for their supply chains, offers: (a)
tween a customer and its suppliers are in the supply chain, and this strategy
established environmental performance
available with the express purpose of allows the extension of performance
beneﬁts (Melnyk, Sroufe, & Calantone,
Decision Line, July 2008 13
requirements into the supply chain begun to guarantee more comprehen- disposable cameras, Hewlett Packard’s
that maximize economic performance sive product life-cycle considerations retrieval of used printer cartridges, and
and provide secondary environmental for consumers of their products. Once a BMW’s end-of-life vehicle requirements
performance benefits through waste supply chain begins to consider special- for suppliers (Guide et al, 2002). The
and resource use reductions. It requires ized processes, technologies, or complex motivation for a closed-loop strategy
more comprehensive and supply chain performance standards for suppliers remains low for basic reasons of poor
speciﬁc performance speciﬁcations than such as chemical avoidance, the level of and distributed control over the reverse
the simpler risk-based strategy. It also knowledge exchange and relational in- supply chain, lack of available infrastruc-
requires a higher level of involvement vestment begins to change. Moving from ture, and the inability of supply chains to
between supply chain partners arising an efﬁciency-based GSCM strategy to a believe that such activity is economically
from the use of more complex inter-ﬁrm greater level of innovation or integration viable. Designing and successfully using
performance requirements. Using this of environmental performance in supply a closed-loop strategy presents one of the
strategy to facilitate greater efﬁciency chain and product design requires spe- most complex endeavours for a single or-
in the supply chain does not require the cialized environmental resources (Lenox ganization to undertake within its supply
development of co-specialized resources & King, 2004). Keeping up-to-date with chain (Richey et al, 2005). In its simplest
speciﬁc to environmental performance. environmental legislation changes and form, ‘closing the loop’ may involve
The necessity for collaboration on ef- training suppliers in environmentally product take-back and reverse logistics
ﬁciency, however, provides a facilitat- relevant process changes requires more implemented only in the retail portion
ing role for context-specific, complex dedicated environmental resources, of the supply chain. In more complex
problems such as waste reduction and specialized personnel, and design. The ‘closed-loop’ systems, used or obsolete
recycling (Geffen & Rothenberg, 2000; development of such resources provides products and waste are taken back by
Klassen & Vachon, 2003). The strategy the conditions for an organization to shift the producer and remanufactured or
can provide a cost-reduction advantage from an efﬁciency-based to an innova- recycled rather than being disposed
to the supply chain and readily ﬁts with tion-based GSCM strategy. For products, of to landﬁll. The closed-loop strategy,
pre-existing organizational goals of the resources developed could be used however, represents an approach that
optimization. But the efﬁciency-based to incorporate innovative environmental seamlessly integrates issues of economic,
supply chain strategy does not allow planning into speciﬁc product designs, operational, and environmental per-
for more knowledge-intensive environ- characteristics, functionality, or life-cycle formance. Organizations considering
mental management activities such as related activities (e.g., service, repair, implementation of a closed loop supply
product design, material substitution, or and recycling). At the process level they chain require high levels of control over
innovation. Product recalls because of a could be deployed to develop environ- the capture and return of used materials.
poor choice of low-cost but hazardous mentally robust methods and systems Goods need to be managed for qual-
materials represent the inherent risk in for the production, distribution, and use ity considerations and aggregation of
focusing only on efﬁciency in the sup- of products. collection and sorting activities allows
ply chain. The efﬁciency-based strategy for the creation of economies of scale.
is considered technically weak but more Closed-loop Strategies Such a high level of integration, coor-
socially complex than the risk-based Closed-loop strategies are a more recent dination across partners, and socially
strategy. type of GSCM strategy and represent the complex knowledge requires years of
most complex and collaborative form of development effort. Socially complex,
Innovation-based Strategies this type of activity. Often referred to in collaborative relationships provide the
The innovation-based green supply chain its simplest form as ‘reverse logistics,’ basic foundation for a closed-loop supply
management strategy is distinct from the closing the loop involves the capture and chain strategy.
efficiency-based approach because of recovery of materials for either re-manu-
its use of a supply chain environmental facture (high-value) or recycling (low Directions for Future Research
performance strategy that is more en- value) (Kocabasoglou et al, 2007). These There are many issues that require fur-
vironmentally speciﬁc. Organizations are materials can arise during production, as ther scholarly research, which needs to be
increasingly aware of the potential for returned goods, post-use, and at end-of- of ‘best practice’ case studies, and larger
narrow purchasing policies to in-source life. The closed-loop strategy ties or inte- ﬁeld studies that map the ﬁeld and its
components or services from suppli- grates environmental performance to the progress. We also need to extend existing
ers that may be legally non-compliant whole supply chain. Very few examples theories and principles of competitive
with environmental regulations or who of coordinated recycling or closed-loop advantage, operations management/
themselves procure goods in an envi- activity in the supply chain currently ex- SCM, resource-based view of the ﬁrm
ronmentally irresponsible way (Bowen ist however. Prominent examples include and others, to fully take account of ma-
et al, 2001). Some organizations have Kodak’s return and re-manufacture of its ture GSCM practices and their integra-
14 Decision Line, July 2008
tion into the mainstream of managerial requirements will likely secure a pool The impact on plant-level environmental
work. Some suggested research areas and of suppliers unavailable to other sup- investment. Production and Operations
issues follow. ply chains providing exclusive access to Management, 12(3), 336-352.
As raw material costs increase and limited resources. Kocabasoglu, C., Prahinski, C., & Klassen,
environmental protection legislation be- Firms wishing to rapidly release R. (2007). Linking forward and reverse
comes increasingly stringent, a focus on environmentally themed products and supply chain investments: The role of
one ﬁrm’s green operational excellence services, or make claims to such endea- business uncertainty. Journal of Operations
is becoming the norm in organizations. vours, cannot bypass the earlier phases Management, 25(6), 1141-1160.
To attain even greater cost savings from of supply chain strategy development. Krause, D., Scannell, T., & Calantone, R.
waste reduction, meet comprehensive so- Supply chain strategies that are designed (2000). A structural analysis of the ef-
cial and environmental responsibility tar- for resource use efﬁciency and capture fectiveness of buying ﬁrms’ strategies to
gets and ﬁnd new products with smaller of all waste or by-products through the improve supplier performance. Decision
ecological footprints, firms are now product life-cycle provide not just high Sciences, 31(1), 33-55.
extending their goals for environmental levels of environmental performance Lenox, M., & King, A. (2004). Prospects for
performance into their suppliers’ opera- but also the capacity to withstand ap- developing absorptive capacity through
tions. This type of activity is an effective proaching resource scarcity or legislative internal information provision. Strategic
mechanism for ﬁrms to improve their changes that affect and often re-deﬁne Management Journal, 25, 331-345.
record on corporate social responsibility, industries. Liker, J., & Choi, T. (2004). Building deep
lower reputational risks, reduce wastes, supplier relationships. Harvard Business
and improve supply chain response-time References Review, December.
to new environmental regulations. Melnyk S., Sroufe R., & Calantone, R. (2003).
Bowen, F., Cousins, P., Lamming, R., &
As possible GSCM strategies become Assessing the impact of environmental
Faruk, A. (2001a). The role of supply
more complex and involve greater levels management systems on corporate and
management capabilities in green supply.
of relationship investment, their potential environmental performance. Journal of
Production and Operations Management,
for competitive advantage also increases. Operations Management, 21(3), 329-351.
Several supply chains have already de- Modi, S., & Mabert, V. (2007). Supplier
Corbett & Klassen. (2006). Extending the
veloped systems of green supply chain development: Improving supplier per-
horizons: Environmental excellence as
management that may be many years formance through knowledge transfer.
key to improving operations. Manufactur-
ahead of or perhaps entirely out of reach Journal of Operations Management, 25(1),
ing and Service Operations Management,
for other supply chains (i.e., Hewlett 42-64.
Packard, Toyota, and Ben and Jerry’s ice- Pagell, M., Wu, Z., & Murthy, N. (2007). The
Eisenhardt, K., & Schoonhoven, C. (1996).
cream). Other supply chains may only supply chain implications of recycling.
Resource-based view of strategic alliance
require the addition of environmental Business Horizon, 50, 133-143.
formation: Strategic and social effects in
performance clauses into purchasing entrepreneurial ﬁrms. Organization Sci- Paulraj A., Lado, A., & Chen, I. (2008). In-
activities to adapt their supply chain to ence, 7(2), 136–150. ter-organizational communication as a
changing industry norms. More complex relational competency: Antecedents and
Fisher, M. (1997). What is the right supply
types of green supply chain strategy, performance outcomes in collaborative
chain for your product? Harvard Business
however, offer increasing levels of eco- buyer–supplier relationships. Journal of
Review, March-April, 105-116.
Operations Management, 26, 45–64.
nomic, operational, and environmental Geffen, C., & Rothenberg, S. (2000). Suppli-
performance. Richey, R., Chen, H., Genchev, S., & Daugh-
ers and environmental innovation: The
At the supply chain level, orga- erty, P. (2005). Developing effective
automotive paint process. International
nizations that involve suppliers and reverse logistics programs. Industrial
Journal of Operations and Production Man-
third parties in the greening process Marketing Management, 34(8), 830-840.
agement, 20(2), 166-186.
early—and well in advance of com- Rothenberg, S., Pil, F., & Maxwell, J. (2001).
Guide, D., & Van Wassenhove, L. (2002).
petitors—start a development path that Lean, green and the quest for superior en-
The reverse supply chain. Harvard Busi-
may provide a sustained competitive vironmental performance. Production and
ness Review, 80(2), 25-26.
advantage that lasts well into the future. Operations Management, 10(3), 228-243.
King, A., Lenox, M., & Terlaak, A. (2005).
For example, selecting and developing Zhu, Q., & Sarkis, J. (2007). The moderat-
The strategic use of decentralized in-
suppliers who retain unique capabilities ing effects of institutional pressures on
stitutions, Exploring certiﬁcation with
in product take-back or re-processing or emergent green supply chain practices
the ISO14001 management standard.
who exhibit high levels of environmental and performance. International Journal of
Academy of Management Journal, 48(6),
Production Research, 45(18-19), 4333–4355.
performance can provide a ﬁrst-mover 1091-1106.
competitive advantage. Early selection of Klassen, R., & Vachon, S. (2003). Collabora-
suppliers that are capable of delivering tion and evaluation in the supply chain:
environmentally focused performance
Decision Line, July 2008 15