Environmental concerns are finally finding its way from strategy and board room meetings to operations and to supply chain management (SCM). A growing number of companies have realized the world over that implementing supply chain management is only one of the objectives they need to realize. The other important agenda is to make this SCM environmentally friendly. This has catapulted SCM to a new height that promises to give a major contribution to the companies overall strategy.

The companies are implementing ESCM (Environmental SCM) by looking beyond their own facilities. Ofcourse this is only after they have ensured that their manufacturing facility is friendly to the environment and does not throws or generates harmful waste products into the environment. Companies are also involving their suppliers in environmental initiatives and agendas. This is done by screening suppliers for environmental performance, working collaboratively with them on green design initiatives and providing training and information to build suppliers’ environmental management capacity.

Environmental supply chain management recognizes the crucial role to be played by the purchasing and the function’s involvement in activities that include reduction, recycling, reuse and the substitution of materials. Working with suppliers on environmental issues not only generates significant environmental benefits, but also opportunities for cost containment, improved risk management and enhanced quality and brand image. This will also help companies streamline their supply base and develop more co-operative, long-term relationships with key suppliers, a practice that has fostered greater opportunities to work together on environmental issues.

It is hence important that Indian companies too make ESCM an important part of their agenda. Already Asian Paints, M&M and some other companies have taken great strides in this area.

However large scale adoption of environmental aspects within the framework of SCM is essential. The starting point as for any other major strategy is the top management commitment to the environmental issues. This is not only essential but is critical for the overall success of the project. It should be the mission of the company’s top management to sensitize everyone in the company towards environmental issues. It will also be a good idea to have a separate environmental department reporting directly to the top management. This department should look at all the aspects of the environment barometer and track its progress on a regular basis. Any discrepancy is immediately reported to the CEO.

However, it is equally important to make everybody participate in the process with the same gusto. This can happen by empowering the employees to act immediately in response to the environmental problems, rather than simply offering suggestions. The rewards and incentive structure also emphasizes results. This will allow the employees to think and be innovative in implementing environmentally friendly policies and procedures.

It is important to spread the message to the customers and thereby making them participate in the environment journey. This can be achieved by branding the company and its products on environmental lines. This can be done by bringing out the synergy between the company’s strategy and its strong environmental image and reputation, and environmentally sensitive products, suppliers etc. it deals with.
Next it is important to connect with the most vital link of the company – its suppliers. A holistic approach, such as supply chain integration to environmental management links reduction in energy consumption to waste generation and release of pollutants. Setting aggressive and progressive environmental goals is important. This can be done by using tools such as life-cycle management (LCM) and environmental audits (EA) improve environmental and operating performance. Suppliers are asked to keep track of their cost of waste (COW) so that this can be reduced. Supplier negotiations and selection revolve around COW and other environmental issues.

Supplier audits on environmental issues are an absolute must and this process should be a cross-functional initiative. This should involve employees from quality assurance, environmental affairs and purchasing. Similarly, teams should include financial analysts who decide whether suppliers will be the most productive from the perspective of maximizing Environment Value Add (EVA) make-or-buy decisions. Adherence of suppliers to quality and environment standards is a necessary prerequisite for achieving a company’s various objectives. Early sourcing and early supplier involvement in basic product developmental work is required and while doing so it will be easy for the companies to strictly adhere to the norms it has prescribed for itself. These sourcing decisions must also take into consideration safety issues, capacity of suppliers, and ability to treat compounds and effluents. Products and processes should be subjected to continual critical analysis at every stage of the value-added process. The early integration of suppliers into all decisions affecting them is critical to environmental effectiveness.

The close alignment of supplier capabilities with buying firm’s environmental goals is critical to program success. This alignment can be achieved through an alliance supporting organizational and informational framework and the benchmarking of performance with environmental, quality, and cost parameters.

Purchasing with its proximity to its suppliers needs to play a broader role in the company’s environmental agenda. It needs to conduct timely supplier evaluations using criteria such as risk and environmental capability. Because of the emphasis on environmental value-added performance, companies turn to suppliers for use of their waste treatment facilities. Companies also seek to develop suppliers who can collect, clean and reship process waste back to the company.

Finally, companies must carefully justify all environmental changes through either cost reduction or customer satisfaction issues. The focus of continuous improvement (used so effectively during TQM program implementation) can be applied quite effectively to improving environmental efficiency and effectiveness. The cross-functional relevance of environmental supply chain management is ensured by its direct impact on the supplier selection and management processes. Change should be viewed as a competitive tool and environmental efficiency viewed as a positive catalyst for change.