25-Nov-09 0:00 AM AWST

Supply Chain Management Readies for a Green Explosion in China

The implications of Green SCM for companies in the Asia Pacific region are wide reaching. CHaINA Magazine spoke with Nicolas Pechet, Vice President, China of GIA Group in regard to new research they have done into sustainable practices in the manufacturing and logistics industries in the Asia-Pacific region.

Why is green SCM so important to international purchasing or production directors?

Nicolas Pechet (NP): Ultimately, "green" supply chain management offers an expanded way to think about cost reduction and profit enhancement. We have seen how a dip in Western consumption creates severe problems for Asian suppliers, amongst both direct manufacturers and subcontractors. This creates a great deal of operating leverage between Asian manufacturers and Western markets today.

Western businesses can use this leverage to push for more environmentally sustainable manufacturing, sourcing and logistics practices in the Asia Pacific region. However, pushing better green practices will require Purchasing, Supply Chain or Production directors to have a keen understanding of the local practices and unique regulatory landscape of each Asian country they operate in.

We are now seeing that countries worldwide are starting to harmonize their environmental regulatory regime with each other. It’s becoming a global phenomenon. It started in the major market economies and the emerging economies and less developed countries are following suit.

Can you give an example of different Asian environmental regulations, and their implications?

NP: China for example, has passed its own RoHSequivalent regulations and has enacted a comprehensive set of laws on air, water, & waste. However, enforcement continues to be an issue and comprehensive producer responsibility legislation is still being developed.

India, on the other hand, has bundled many laws into the broader Environment (Protection) Act, with less liability seen along the supply chain. Material mandates deal largely with direct health impacts and have not moved to clearly encompass a broader range of materials beyond those that are directly related to health. These issues have far reaching implications for a broad spectrum of international businesses.

What advice would you offer SCM executives working on "greening" their companies' supply chain?

NP: Companies need to look at successful cases where green practices have been implemented in the supply chain. While Green SCM is a relatively new phenomenon in China, there are cases of successful implementations and not just from foreign companies. More effort needs to be made to write these cases and bring them into the broader community to set a benchmark of best practices. One such case is that of Guitang Group, a Chinese state owned sugar refinery.