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Understanding the Environmental and sustainability aspects of the Value chain Management

31. 8. 2016
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This article explores the impact of resources sustainability thinking on the organizations competitiveness and how leaders prioritize the environmental impact objectives of their operations among other business considerations.  Studies revealed that in today’s business environment the sustainability if employed in the value chain, companies would experience different pattern of reputation and gain advantage over competitors.

This article explores the impact of resources sustainability thinking on the organizations competitiveness and how leaders prioritize the environmental impact objectives of their operations among other business considerations.  Studies revealed that in today’s business environment the sustainability if employed in the value chain, companies would experience different pattern of reputation and gain advantage over competitors.

 The organizations that pay attention to resource scarcity and operations impact on the environment have the opportunities to develop business strategies responds to the group of stakeholdrers concerns and pressure. These strategies will have an effect on different activities such as management system, supply chain, operations, lifecycle evaluation and marketing.

Keywords:

Competitive advantage, Environmental management, Life-cycle thinking, Sustainable procurement, Value chain, value chain stakeholders,

Background

In today’s economy business organizations are required to be highly concerned with resources as much they are concerned with market share. The consumer interests and resource scarcity are changing the way they do business. In order to maintain competitiveness, companies must manage and consider sustainability in their own process and operations to pursue growth, and to seek opportunities to add value to their businesses rather than focusing on reputation alone. By reducing their environmental footprint and optimizing resources utilization across the entire value chain, companies will establish unique competitive advantage and different pattern of reputation.

By working closely with value chain partners and other key stakeholders, companies can discover optimal solutions and drive impactful action.

The group of stakeholders who are providing requirements for many firms are known to be the major suppliers of an industrial value chain. These groups are the first who are required to experience the burden of various stakeholder groups for improving the performance. The requirements related to the performance of a company usually have a higher position in the upstream condition of the value chain. This is because all the people who are involved in the improvement process are aware of the effects of raw materials and product components. This result in the development of a situation in which the smallest value chain companies are needed to enhance their performance. Bradford (2000) has claimed that the supply chain and market pull issues will decide the demands of growth for improving the performance of firms. According to a research, there is huge pressure on firms for adopting management systems, for product labelling and paying attention with the stakeholder concerns. An important way of communicating the performance of a company to the stakeholders is to have an appropriate management system. The management systems give an importance to the life cycle thinking in the environmental management if there are no requirements about life cycle evaluation.

Life- Cycle Thinking  

The environmental management of companies mainly deals with the cleaning up the production aspect. Various methods like cleaner production and the pollution prevention are considered to be distinctive for these methods. The emissions due to various processes have greatly decreased and other impacts of product life cycle are gaining increased attention. The industrial procedures are not accountable for the effects on environment but they are responsible for the product life-cycle stages. As a result, the environmental management of companies has transferred from the methods of production to the product oriented approach. The life cycle evaluation is a method that has been created for supporting the product oriented policies of environment of the firms. The life cycle evaluation research focuses on the potential impacts and the environmental features in the overall life of a product. This initiates from the procurement of raw materials to the stage of manufacturing, usage and waste. The common environmental impact categories require consideration comprising ecological results, use of resources and the human health (Pesonen, 2001).

The lifecycle evaluation is not the product but it is the overall system manufacturing, usage and waste process that is required for supplying the product (Weidema 1993) including the complete chain. As a result, the main focus of product development must not be on the related with the characteristics of product. However, it must be based on the improvement process. The lifecycle evaluation is identified as a technique for evaluating the environmental effects that are linked with a product. This evaluation includes formation of inventory outputs and inputs in product system, and assessing the impacts of potential environment that are related with outputs and inputs. The lifecycle evaluation gives significant information to the external audiences including shareholders, environmental pressure groups, consumers and other interested parties. A common use of lifecycle evaluation can be identified in the eco-labelling schemes. The economic labels are the methods for communicating the green claims to the consumers (Pesonen, 2001).

Sustainability Agenda on Supply chain management

The potential response of procurement to the objectives of sustainability is required to be identified. These facilitate in the development of evaluation and the sustainability criteria, contract terms and the performance measures. The sustainable supply management and procurement responses can be utilized to facilitate in the identification of the process of procurement. The process of procurement is different for all the services and it can be affected for the different factors like the readiness of market, supply availability, maturity and the complications of product along with the needs of organization that are known to be from the market research. If the issues of sustainability are taken for the final selection of the supplier then it is fundamental that the objectives of sustainability and responses are explained in the strategy of procurement for the arrangement (Walker et al. 2012).

It will further inform the specification development. The possible responses of procurement are required for the identification of the objectives of sustainability. A decision is needed to be created that can facilitate in addressing the impacts of sustainability. A comprehensive consideration is required to the stage that is appropriate having several options that can facilitate in achieving the different outcomes. The sustainability agenda can be incorporated in the different procurement stages like evaluation, negotiation, contract management and the specification (Walker et al. 2012).      

Procurement Function  

The procurement function is differently planned for the leading of organizations in the unsettled conditions in which the economies, environment and the society is being challenged (Kilger et al. 2015). Firstly the demand within the company is managed. Secondly, the sourcing is carried out by the sustainable sources and the suppliers are motivated in order to use the less resources. An increase in the ethical challenge and the environmental function can increase the procurement profile and cause the improvement in the business access for the opportunities of future. The corporate social responsibility and the sustainability are the features whose implementation is also being carried out at a faster pace. In the recent economic climate, the companies are required to identify that how much sustainability can result in the contribution to the bottom line. The cost cutting is very necessary in the challenging conditions (Meehan and Bryde, 2011). A survey of procurement directors was carried out in the year 2009 which identified that the cost reduction has impact on the indirect and direct spending as an overwhelming priority. In addition, there has been more than 94% of ranking as the high or the highest priority. This type of response does not immediately allows the supporting of sustainability policies that involve the investments and sourcing from the expensive suppliers (Bruel et al. 2009).

Unexpectedly, the sustainable procurement is considered to be on the third priority. There are more than 90% of respondents who has labelled the issue as important or critical. The companies are required to deal efficiently with this unexpected situation. There are several companies that have successfully integrated the sustainability and margin concerns in the innovative policies of sourcing and the sustainability is used as a source of competitive advantage. There are several best practices which are considered to be inspiring for the improvement of sustainable sourcing (Bruel et al. 2009). 

Author: Shihabeldin Elawad Abdelhadi, student at LIGS University


Bibliography:

Bradford, D. (2000). Motivating SMEs towards Improved Environmental Performance. The Institute for Prospective Technological Studies (IPTS) Report, 25-29.

Bruel, O., Menuet, O., & Thaler, P. F. (2009) Sustainable Procurement: a Crucial Lever to End the Crisis? HEC Paris, SNCF, and Ecovadis.

Kilger, C., Reuter, B., & Stadtler, H. (2015). Collaborative planning. In Supply chain management and advanced planning (pp. 257-277). Springer Berlin Heidelberg.

Meehan, J., & Bryde, D. (2011). Sustainable procurement practice. Business Strategy and the Environment, 20(2), 94-106.

Pesonen, H. L. (2001). Environmental management of value chains. Greener Management International, 2001(33), 45-58.

Walker, H., Miemczyk, J., Johnsen, T., & Spencer, R. (2012). Sustainable procurement: Past, present and future. Journal of Purchasing and Supply Management, 18(4), 201-206.

Weidema, B. P. (Ed.). (1993). Environmental assessment of products: a textbook on life cycle assessment. University-Enterprise Training Partnership in Environmental Engineering Education.