KEY CONCEPT

A new study shows that collaborating with suppliers, rather than just monitoring them, is more effective in ensuring that they are engaging in green and sustainable practices. Internal non-coercive drivers (for example, pressure from top management rather than government regulators) encourage buyer/supplier collaboration. 

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IDEA SUMMARY

Many companies recognize the reputational risk of the environmental reputation of their suppliers. As a result, companies launch green supply chain management (GSCM) initiatives, working with suppliers to ensure that their activities and processes are environmentally friendly.

There are two ways for companies to engage with suppliers on environmental issues. One is to monitor their environmental performance. For example, companies might send their suppliers environmental audits, requesting the details of their practices and processes. 

The second way to engage with suppliers is to proactively collaborate with them on pro-environment practices and processes. Collaboration can include providing suppliers with resources such as materials, standards or technologies; jointly developing more environmentally friendly products; and helping them to implement sustainable production processes.

Internal and external factors known as “environmental drivers” will impact the implementation and success of a company’s monitoring and collaboration activities. Government regulations, top management support, influence from customers and best practices from competitors are examples of some of these drivers, which can be categorized as either coercive (e.g., government regulations, environmental standards) or non-coercive (e.g., top management support, customer influence, industry best practices).

A new study from Esade Business School in Barcelona and the Universidad Carlos III in Madrid explored the effectiveness of monitoring and collaborative GSCM on the environmental performance of suppliers — and whether coercive or non-coercive environmental drivers made a difference. The study was based on survey answers from more than 70 purchasing and supply chain managers working in a variety of Spanish industries. The surveys questioned the managers on their GSCM practices, environmental performance (e.g. reduced waste, reduced environmental risks, and improved environmental reputation), and GSCM environmental drivers.

The results of the survey study revealed the following:

1. Monitoring alone does not have a direct impact on suppliers’ environmental practices. For example, simply monitoring suppliers’ waste and pollution levels does not inspire them to have environmentally friendly production processes.
2. On the other hand, collaboration through the joint efforts described above does have a direct impact on environmental performance.
3. Monitoring supports the collaboration effort, which means that it is still important. For example, monitoring can help identify in what areas firms need to be collaborating with their suppliers. Thus, monitoring has an indirect impact on environmental performance.
4. Non-coercive drivers encourage and support both monitoring and collaborative GSCM activities.
5. Coercive environmental drivers have a mixed impact. While they encourage monitoring, they do not seem to have a real effect on how much companies collaborate with their suppliers on green practices — and, surprisingly, may even have a negative impact.

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BUSINESS APPLICATION

Companies recognize the importance of a positive environmental image. Internally, they need to ensure that their own activities and processes are environmentally friendly. This study demonstrates, however, that company must focus externally as well, working with their suppliers to improve their impact on the environment.

The second lesson of this study is that simply monitoring suppliers is not enough. Companies must engage in joint projects and initiatives to ensure the highest environmental performance. This collaboration can be undermined rather than reinforced by external pressure. It’s best to use internal motivators (e.g., top management initiative rather than compliance) for GSCM.  

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REFERENCES

Green Supply Chain Management Approaches: Drivers And Performance Implications. Elcio M. Tachizawa, Cristina Gimenez & Vicenta Sierra. International Journal of Operations & Production Management (November 2015). 

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