Green Supply Chain Management in Asia-Pacific
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Transcript of Green Supply Chain Management in Asia-Pacific
www.globalintelligence.com All Rights Reserved ©2009
GIA Industry White Paper
Green Supply Chain Management in Asia-Pacific
August 2009 Global Intelligence Alliance ©2009. All rights reserved. Contact: Kelvin Inn [email protected] Kim Khoo [email protected] Web: www.globalintelligence.com Tel: Singapore (65) 6423 1681 Hong Kong (852) 2107 4299
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
Executive Summary To green or not to green? Asia-Pacific’s stance on green practices Not included here Green supply chain management tools Not included here Asia-Pacific green SCM case studies Not included here
This GIA Industry White Paper provides an overview of green supply chain management practices in the Asia-Pacific region. The report is provided as is, free of charge and without any warranty or guarantee. Global Intelligence Alliance rejects responsibility for errors or omissions, or for any loss or consequential loss arising as a result of decisions taken based on its contents. ©2009 Global Intelligence Alliance. All rights reserved. This report is copyright, however individual pages or portions thereof may be copied referencing “Global Intelligence Alliance” as the source. Global Intelligence Alliance (GIA) is a strategic market intelligence and advisory group. GIA was formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.
Today, we are the preferred partner for organizations seeking to understand, compete and grow in international markets. Our industry expertise and coverage of over 100 countries enables our customers to make better informed decisions worldwide. For further information please see the About Global Intelligence Alliance section at the end of this report, contact the author or visit www.globalintelligence.com
Contents
This contains excerpts from GIA’s “Green Supply Chain Management in Asia-Pacific” White Paper. For the free white paper, please visit www.globalintelligence.com or email [email protected].
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
Abbreviations and acronyms 3Rs Reduce, Reuse and Recycle – waste
management strategies, in order of importance
CDM Clean Development Mechanism
CPG Consumer Packaged Goods CSR Corporate Social Responsibility
EPA Environmental Protection Administration, Executive Yuan, Taiwan
ESG Environmental, Social & corporate Governance – issues in responsible investing
EU European Union
GG Guitang Group (China) GSC Green Supply Chain
GSCM Green Supply Chain Management ICT Information and Communications
Technology
ISO14000 Standards for an Environmental Management System (EMS) set by the “International Organization for Standardization” (ISO)
LCC Low Cost Country
MOE Ministry of the Environment, Japan
MNC Multi-National Corporation
NDRC National Development and Reform Commission , China
NEA National Environment Agency, Singapore
PRI Principles for Responsible Investing
REACH Registration, Evaluation, Authorisation and Restriction of Chemical substances (European Community directive 2002/95/EC)
RoHS Restriction on Hazardous Substances (European Community directive 2002/95/EC)
SCM Supply Chain Management
SPB Seshasayee Paper & Board (India)
VC Venture Capital
WEEE Waste Electrical and Electronic Equipment (European Community directive 2002/96/EC)
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Executive summary
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
Asia’s Rationale For Going Green
Green SCM adoption set to rise, affecting most industries in the Asia-Pacific region
Executive summary
MULTIPLE STAKEHOLDERS
(retailers, customers, consumers,
government) are driving new focus on sustainability and corporate
governance in the market place.
MARKET FORCES (scarce resources, bottom line improvement need) are driving firms’ new focus
on “green-ing” their supply chains -
manufacturing, sourcing & logistics.
Firms in Asia, as the major sources of raw materials, components and finished products worldwide, are
being pressured by MAJOR DOWNSTREAM
CUSTOMERS (e.g. Walmart) to go “green”.
STRICTER EUROPEAN ENVIRONMENTAL REGULATIONS (RoHS, WEEE, REACH) have
influenced Asian governments to pass similar laws that focus on process & pollution prevention and product
regulation; these force change within companies competing in the global supply chain, and also affect their relationships
with other organizations.
IMPACT on UPSTREAM suppliers:
• Chemicals, Paints, Additives, Oils
• Materials - Cement, Concrete, Ceramics, Glass, Iron & Steel, Paper, Minerals & non-ferrous Metals, Textiles
IMPACT on DOWNSTREAM users:
• Cosmetics
• Electronics
IMPACT on consumer durable & nondurable goods such as:
1. Food & Beverages
2. Consumer electronics
3. Apparel
• IMPACT on all industries
• “Green” supply chain management offers an expanded way to think about cost reduction and profit improvement.
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
Case studies yield some green supply chain best practices to reduce costs and increase revenues
Executive summary
Asian examples of “green” best practices • The Chinese sugar refinery and Indian paper firm case studies brilliantly apply the green “3Rs” principle of “Reduce, Reuse
and Recycle”; with both firms diversified into related industries - sugar, paper, alcohol and cement – and utilising waste products of the other industries as raw materials or for power generation.
• Case studies also highlight the importance of building effective incentives with external parties (suppliers, competitors, customers and government) to improve the robustness of the supply chain system on all levels: local, national and international.
• The Japanese IT multinational case study illustrates the benefits of centralization, sharing infrastructure and route optimization in a local context, that can result in relatively large efficiency improvements and cost reductions.
Reduce, Reuse & Recycle waste products
Raw materials
for another product
Energy generation for plant
Establish supporting network of external parties motivated to ensure sustainability
of green supply chain
Suppliers Customers
Government Competitors
1. Logistical centralization for economies of scale.
2. Share logistical overhead with partners for cost reduction.
3. Optimize transportation routes to further reduce costs.
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To green or not to green?
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
Green supply chain adoption driven by management, organizational learning, market pressures and government regulations
To green or not to green
Now
Future
Dri
vers
In
hibi
tors
International customer pressure
and competitive advantage for
suppliers, e.g. 2nd-tier local supplier
could be chosen over MNC’s home supplier
Now
Future
Insufficient management commitment
and supply chain partner
support
Insufficient green SCM
knowledge by many SC
professionals
Inconsistent government regulations across Asian
countries increases compliance complexity, except where strictest
standards adopted
Fears of high upfront costs
and long payback
period
Scarce resources &
unstable prices mean competitive advantages from better
resource use & efficiency
Government introduction of stricter
domestic and international
regulations, e.g. RoHS, WEEE and environmental
guidelines such as ISO14001
Consumers are environmentally-
conscious and apply institutional pressure,
e.g. Principles of Responsible Investment
(RPI) framework & Environmental, Social &
corporate Governance (ESG) criteria
Company/management Market Government
Company/management Government
Source: Global Intelligence Alliance research & analysis
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
To green or not to green
Green supply chain has tangible cost & efficiency advantages as well as intangible & emotional benefits
Green Supply Chain Management (GSCM)
Benefits
Suppliers and Manufacturers • Reduced input costs (raw materials,
utilities, logistics) and overall production costs
• Reduced waste disposal costs. • Better operational efficiency and
resource usage leading to possible competitive advantages.
• New revenue opportunities
Customers • Lower lifecycle cost of ownership for
customers
Environment • Lower environmental load for local
environment and ecosystem
Society • Less consumption of finite global
resources
Tangible
All Supply Chain Players • Improved motivation, pride
and moral about “doing good” for society among stakeholders throughout supply chain (e.g.. employees, shareholders, management, partners)
• Improved corporate image and branding for suppliers and manufacturers
• Improved customer “feel-good” factor and quality of life
Emotional
Suppliers and Manufacturers • Greater ease of manufacturing (e.g.
less waste) and improved quality (more consistent)
Customer • Higher levels of convenience and
satisfaction (e.g. detergent that cleans in cold water)
Environment • Overcome cynicism over
environmental concerns
Society • Greater care and attention to
environmental issues in non-work context
Intangible
Source: Global Intelligence Alliance research & analysis
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
To green or not to green
Source: Carbon Disclosure Project
Carbon Disclosure Project (CDP4) - 2006 Carbon Disclosure Project (CDP5) - 2007 Carbon Disclosure Project (CDP6) - 2008
90
80
70
60
50
40
30
20
10
0
Per
cen
t R
esp
on
din
g (
%)
More companies in every economic sector are taking the first step towards managing carbon emissions
Carb
on D
iscl
osur
e Pr
ojec
t re
spon
se r
ate
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
To green or not to green
Greener supply chains being enabled by current VC investment in green technologies for future use
• According to Greentech Media, VC investment in green energy technologies in US, EU, Israel and Australia exceeded US$2.8 billion in Q3 2008, continuing the growth momentum from previous quarters (1Q 2008=US$998 million, 2Q 2008=US$1.3 billion).
• VC investment and interest in green energy technologies is expected to continue.
• Every niche in green technology is being explored, especially solar energy.
• Strong investment is expected to lead to commercialization and wider adoption of technology within a short time period.
Source: Greentech Media, 2008
Venture capital investment in green energy technologies by industry, Q3 2008
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
Downstream product “specifiers” have major roles to play in driving greener supply chains
To green or not to green
Components manufacturer
Raw materials provider
Industrial equipment manufacturer
Transportation &
logistics services
Major influencer for greener supply chains
76 % of procurement survey source from China
50 % of procurement survey source from
India
‘Other Asia’ (49%): Thailand, Taiwan, Korea, Singapore, Malaysia, Vietnam, Burma and the
Philippines
• Eyeforprocurement conducted a ‘Sourcing in Low Cost Countries Survey’ in March and April 2008. • Sourcing practices of 200 procurement professionals, senior executives from manufacturers, retailers and 3PLs operating in various verticals in
North America, Europe, Asia and Africa were surveyed. • 59% of respondents were based in North America, 23% in Europe and 13% were from Asia and Africa.
Source: Global Intelligence Alliance analyses with survey data from eyeforprocurement, 2008.
Product ‘Specifiers’
Pharmaceuticals
CPG Automotive & Transportation
Other Industrial
ICT
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
As a key source for components, equipment & raw materials, Asia’s role in green supply chains is crucial
To green or not to green
• Asia, especially China and India, continues to be the top region for low cost sourcing.
• Components and raw materials sourcing from Asia shows strong growth, becoming prime targets for green SCM efforts.
• Green SCM requires high levels of cooperation with suppliers, implying better management of supply chains at supplier companies.
• Walmart started greening its supply chain in 2005
• First, it reorganised its internal supply chain.
• Second, it put pressure on 1000s of its Chinese suppliers in 2008 to “green” their supply chains also, e.g. reducing packaging used and improving product energy efficiency.
• Regulations such as RoHS/WEEE and REACH are especially relevant for pollution control of all components and raw materials.
! ‘Other Asia’ includes Thailand, Taiwan, Korea, Singapore, Malaysia, Vietnam, Burma and the Philippines
Low-cost source country (% respondents)
Products / services sourced in low cost countries (% respondents)
Sources: (1) eyeforprocurement survey, 2008; (2) news articles
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
Survey of APAC countries indicates consumers are prepared to pay a higher price for going green
To green or not to green
Source: TNS
How much more would consumers be willing to pay for green products?
• According to a TNS survey of 17 countries and 13,000+ respondents, consumers are willing to pay the higher price required to go green.
• In Japan, consumers were the most enthusiastic with 70% accepting a 5% price premium.
• In Singapore 38% would pay 10% more, in Australia this was 33%, followed by 26% in Japan.
• Consumers most likely to think green for food, with the majority believing it is 'right' or 'fair' for retailers to adopt choice editing, or the practice by which they remove unsustainable products from the shelves, leaving only environmentally-friendly options.
Willingness to pay more for eco-friendly products
Thailand 94%
Malaysia 82%
Korea 81%
Singapore 70%
Consumers willing to shoulder part of the cost for going green
Hong Kong 55%
Australia 54%
Japan 50%
Source: TNS
% consumers accepting a 5% price premium Japan 70%
Australia 57% Singapore 55% Thailand 49%
South Korea 41% Malaysia 40%
Hong Kong 35%
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These slides are excerpts from the GIA White Paper: “Green Supply Chain Management in Asia-Pacific”.
Download the entire White Paper for Free
The report has been published under the GIA White Paper series at www.globalintelligence.com.
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Outlook for green supply chain in Asia Pacific | Aug 2009 www.globalintelligence.com www.globalintelligence.com
About GIA
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com
Global Intelligence Alliance (GIA) was formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.
Today, we are the preferred partner for organizations seeking to understand, compete and grow in international markets. Our industry expertise and coverage of over 100 countries enables our customers to make better informed decisions worldwide.
GIA is a strategic market Intelligence and advisory group
Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com - page 18
GIA Group has 12 offices on 4 continents. Together with affiliated GIA Member companies, certified GIA Research Partners and consultants, GIA provides access to local knowledge in over 100 countries.
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