DIvIDEnD - Stephen M. Ross School of Business - University of ...

a legitimate concern. another concern: how is the firm going
to measure a footprint? currently there is no universal
standard on measuring scope 3 emissions. if it’s left to the
suppliers, company one might use Protocol a, company
two might use Protocol B, so what is the comparison?
finally, some buyers are asking suppliers to report their
footprint at a component or product level, an onerous task
for a supplier to estimate.
But having said that, the forward-looking suppliers already
are doing what they can to reduce their environmental footprint.
the issue that comes up is reporting that to the buyer,
and at what level.
DIvIDEND: Would one solution be to get the industry
groups or trade associations to set standards, as long
as there’s no collusion under the law?
ANUPINDI: it has to come from that level. otherwise
it’s not going to move. getting consensus is not going to
be easy.
DIvIDEND: What companies have been leaders in
promoting a green supply chain, and what can we learn
from them?
ANUPINDI: Rei, starbucks, hP, cisco, walmart, and Dow
are some names that come to mind. there are many others
— large and small. in terms of lessons learned so far: first,
there has to be a clear internal alignment between economic
and sustainability concerns; this has to come from the top.
sustainability should not be the sole responsibility of a
sustainability group. sustainability thinking should permeate
the entire organization. we learned from the quality movement
that quality is not solely the responsibility of the
quality control group; it is every employee’s responsibility.
second, since sustainability is impacted by the entire supply
chain, firms across the supply chain need to develop better
coordination mechanisms and move away from arm’s-length
to longer-term relationships. third, firms need to develop
the capability to work with different types of organizations,
including nonprofits, environmental action groups, academia,
etc. finally, sustainability could be a source of innovation —
in both process and product — and hence a source of
competitive advantage.
DIvIDEND: What kinds of issues are being researched
in the field along those lines?
ANUPINDI: within the supply chain field this is new and
old. there has been a lot of work in the last decade on the
reuse and recycle process. how does a firm structure this?
how does it even think about collecting the products from
the consumer and recycling? what is the best way to collect
and move them through the system? what is the reuse
potential? now companies have to think about product
returns: Does it affect how they design their forward
distribution to get products to consumers? that is one area
of research: the shift toward recyclable conveyances to move
a product across the supply chain, e.g., moving products in
cardboard boxes versus moving them in recyclable plastic
containers. consider watermelons, which move in these big,
cardboard containers. the box is bought by the farmer. it is
sent to the retailer, and it is up to the retailer to dispose of
that cardboard. But if the company uses a recycled plastic
container, the container has to go back to the beginning of
the supply chain from the retailer. what was an open-loop
supply chain has become a closed-loop supply chain. instead
of the product being recycled, an asset is recycled. that
opens up new questions: who
owns the asset? how should the
asset be deployed? is it ownership
transfer or is it a lease
model? if so, who’s going to lease
it? who owns it — the manufacturer,
the retailer, or the farmer?
how many assets need to be
deployed, and who’s going to
track them? who is responsible
if the asset gets damaged? these
are issues people never thought
about. there are solutions and
models out there, but it’s a big
challenge to get everyone on
board to agree to a solution.
measuring an environmental
footprint accurately is a big
issue. it is relatively easier to
> sustainability can be a
source of innovation and
competitive advantage, says
professor ravi Anupindi.
measure a footprint at a firm/facility level. But most buyers
are requesting that footprint information be provided at
a components or product level. estimating this is not a
trivial task. it has parallels in accounting. in accounting the
challenge is, “i have this big overhead cost. how do i allocate
it?” maybe there are different allocation systems that have
better or worse efficiencies. we can follow a similar approach;
however, this is an open area of research.
then there is the issue of how regulation impacts operations.
Product take-back regulations have been passed in europe.
how does it affect the design of the product? if there is
product reuse or remanufacturing, there are going to be
two versions of a product, new and remanufactured. how
does a company price these? how much capacity should
be allocated between those two? all those issues are coming
to the forefront of research. —Terry Kosdrosky
spring 2010 DIvIDEnD 23