Green Supply Chain Management in Asia-Pacific · Green Supply Chain Management in Asia-Pacific | Aug 2009 Green supply chain adoption driven by management, organizational learning,

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GIA Industry White Paper 2/2009

Green Supply Chain

Management in Asia-Pacific

August 2009

Global Intelligence Alliance ©2009. All rights reserved.

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Green Supply Chain Management in Asia-Pacific | Aug 2009 www.globalintelligence.com

Executive summary 3

To green or not to green? 6

Asia-Pacific’s stance on green practices 14

Green supply chain management tools 18

Asia-Pacific green SCM case studies 21

Appendix 29

About Global Intelligence Alliance 37

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.

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Content

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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


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.


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.


To green or not to green?


Green supply chain adoption driven by management, organizational learning, market pressures and government regulations

To green or not to green

Now

Future

Dri

vers

Inhib

itors

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/managementMarket Government

Company/management Government

Source: Global Intelligence Alliance research & analysis



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: Carbon Disclosure Project

Carbon Disclosure Project (CDP4) - 2006



90

80

70

60

50

40

30

20

10

0

Pe

rce

nt

Re

sp

on

din

g (

%)

More companies in every economic sector are taking the first step towards managing carbon emissions

Carb

on D

isclo

sure

Pro

ject

resp

onse

rate



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

Solar 55%

EE, DR and Smart Grid 9%

Geothermal 8%

Automotive, Transport

7%

Water Technology 6%

Ethanol and Biofuels 5%

Wind Energy 5%

Batteries & Fuel Cells 2%

Carbon & Energy Storage

1%

Others2%


Downstream product “specifiers” have major roles to play in driving greener supply chains


Components

manufacturer

Raw materials

provider

Industrial equipment

manufacturer

Tra

nsp

orta

tion &

logistic

s serv

ices

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

OtherIndustrial

ICT


70

76

76

48

33

50

47

53

49

36

24

42

20

18

34

22

14

20

2006

2007

2008

Other Latin America

Mexico

Eastern Europe

Other Asia

India

China

As a key source for components, equipment & raw materials, Asia‟s role in green supply chains is crucial


• Asia, especially China and India,continues to be the top region for low cost sourcing.

• Components and raw materialssourcing 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.

¹ „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

35

57

27

35

26

27

17

22

20

29

11

15

35

14

6

13

2007

2008Automotive components/spares

Transportation/logistics services

Chemicals

Industrial equipment

IT services

Electrical or electronic products

Raw materials

Components


Survey of APAC countries indicates consumers are prepared to pay a higher price for going 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%


Asia-Pacific’s stance on green practices


EU green regulations have consequences for global supply chain players, majority of which are in APAC


EU Environmental Directives affecting Asia Pacific companies

Reduction Of Hazardous Substances (RoHS) 2002/95/EC, Jul 2006 Sets maximum concentration limits on hazardous materials used in electrical and electronic equipment. The substances are lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBB) and polybrominated diphenyl ethers (PBDE).

Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) (Jun 2007) Requires manufacturers across multiple industries and their chemical suppliers to research and disclose the characteristics of the substances they use, with some hazardous chemicals restricted from use and others encouraged to be phased out.

Waste Electrical and Electronic Equipment (WEEE) 2002/96/EC, Feb 2003 Sets collection, recycling and recovery targets for electrical goods. Responsibility is imposed on electrical and electronic equipment manufacturers for the waste disposal of their products. Producers are compelled to use the collected waste in an ecologically-friendly manner. Most electronic equipment is included, but some exemptions exist.

Affects all companies in APAC exporting to EU, especially

ODMs of electronic equipment as they also play a role in

designing the final product and sourcing the components used

in assembly.

Affects all Asia Pacific chemical producers

and manufacturers –downstream users such

as cosmetics and personal care companies.



In APAC, New Zealand, Japan, Singapore rank highest for regulation stringency; Indonesia and China lowest

The Global Competitiveness Report, 2007-08

• Rating indicates level of stringency of environmental regulations in each country.

• Score 1 = lax environmental regulation compared with most other countries.

• Score 7 = environmental regulations among the world's most stringent.

• Rankings are based on average scores, rounded to one decimal place.

Source: The Global Competitiveness Report, 2007-08, World Economic Forum

CountryOverall stringency of environmental

regulations, 2007-08

Germany 6.4

New Zealand 5.8

Japan 5.7

Singapore 5.6

United Kingdom 5.5

France 5.5

Australia 5.5

Malaysia 5.2

Taiwan 5.1

United States 5.0

Korea 5.0

Hong Kong SAR 4.5

India 4.3

Thailand 4.3

Philippines 3.7

China 3.3

Indonesia 2.8



Trend across APAC is towards more stringent, product-focused and preventative regulations

Examples of

regulations in APAC

Japan has led the way, enacting a comprehensive set of laws covering domestic environmental policy, global climate change, air, water, waste & recycling. It was one of the first countries to pass extended producer responsibility laws for collection & disposal of end-of-life products, but unlike the EU‟s RoHS Directive, it does not mandate material restrictions.

South Korea has enacted a comprehensive set of laws covering environmental policy, air, water, waste and recycling.

Taiwan has comprehensive laws covering environmental policy, air, water, waste and recycling. It is now in the process of passing a RoHS-equivalent law.

China has passed its own RoHS-equivalent and has also enacted a comprehensive set of laws on air, water, & waste, but enforcement remains an issue and it is still developing extended producer responsibility legislation.

India has bundled many laws into the broader Environment (Protection) Act, with less liability seen along the supply chain. Material mandates are largely concerned with direct health impacts and have not moved clearly to encompass a broader range of materials beyond that directly related to health.

S-E Asia laws are broader and more all-encompassing termed as „environmental regulation‟. Some countries such as Thailand have deferred jurisdiction to local government agencies. The lack of clear accountability may have implications in terms of encouraging corruption by non-ethical stakeholders.

Singapore is the leading country in SE Asia with rigorous regulations from definitions to registration of materials, and licensing for various control points. It has passed its own RoHS-equivalent law and enforcement is stringent. Going a step further to promote sustainability, Singapore also launched the CDM Development Mechanism Documentation Grant to help businesses engage carbon consultancy services.


• Regulatory approaches changing from “end-of-pipe” pollution control to process & pollution prevention and more emphasis on products.• Three major instruments are used : (1) regulatory directives, (2) taxes & fees, and (3) liability.• Three regulatory directive types:

• Performance requirements, e.g. auto fuel economy, energy efficiency & emissions standards.• Material mandates - hazardous materials restrictions.• Extended producer responsibility - financial responsibility on manufacturers for the collection & disposal of end-of-life products.



Green supply chain management tools


Key green processes can be applied at each stage of supply chain managementEffective green supply chain management (SCM) processes are already widely used, but have been further expanded to

include consideration of environmental goals, costs, performance and impacts.

Well designed supply chains typically focus on a limited number of key business processes aligned with a balanced set of

operational metrics reflecting a firm‟s operating model and strategy.

Below are some environmental processes based on the Supply-Chain Operations Reference-model (SCOR), developed by

the global Supply-Chain Council as a cross-industry standard diagnostic tool for supply-chain management.

Sources: GIA analysis; Paquette, Julie (2005). The

Supply Chain Response to Environmental Pressures. MIT

Plan Source Make Deliver Return

• Environmental cost accounting

• Environmental life cycle analysis

• Design-for-environment principle for products

• Environmental auditing by 3rd

party or buyer

• Environmental certification, e.g. Green Seal, Blue Angel

• Pollution prevention, e.g. substitution, product modification, recycling

• Environmental management systems, e.g. ISO 14000

• Green logistics • Reverse logistics activities for post-sale products & materials

• Remanufacturing process to clean, repair & restore used durable products for resale

• Recycling to reuse materials

See case studies from p.25:

• Guitang Group

• Seshasayee Paper & Board

See case study

from p. 25:

• Fujitsu Group

Environmental processes based on SCOR Model (Supply Chain Council)

Green supply management tools


• Reverse Logistics is defined as “the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal”¹, covering “Reuse” (remanufacturing & refurbishing) and “Recycling” activities.

• 3Rs (Reduce, Reuse, Recycle) is a waste management concept classifying each activity in order of importance.

• Examples of best practices include: (1) setting up a centralized return center, (2) incentive rebates to retailers if product registration handled at the point-of-sale, with electronic updates to a retailer-accessible database, (3) use of flexible & standardized computer information system together with and simple manual systems (e.g. color-coding); (4) alignment with accounting system policies.

• Following reverse logistics best practices will become more critical in Asia, especially for firms in ICT industries, as WEEE-type regulatory directives mandate recycling and reuse product designs with non-hazardous materials.

¹ Rogers, Dale S. and Ronald S. Tibben-Lebmke (1998). Going Backwards: Reverse Logistics Trends and Practices. Reverse Logistics Executive Council.

Process e.g.: Reverse logistics best practices include centralizing & standardizing physical & info systems

Sources: ERASMUS Research Institute of Management (ERIM), Rotterdam School of Management; Global Intelligence Alliance research & analyses

MARKET

Collection Inspecting / Selecting / Sorting

Re-processing Re-use / Re-sale

/ Re-distribution

Repair

Refurbishing

Re-manufacturing

Retrieval

Recycling / Landfill

Incineration

“Reverse Logistics” Processes

DISTRIBUTION

MANUFACTURING CUSTOMER

Recalls, Commercial Returns, Adjustments

Faulty products, LeftoversGuarantees,

Services, End of

lifetime

Long-term

ROI on initial

setup and

recovery

costs Transport packaging

Reusable transport

packaging

Direct recovery

Green supply management tools


Asia-Pacific green SCM case studies



Green manufacturing: Guitang Group has an internal GSC that allows re-use of by-products

Sources: (1) Access Asia (2008). (2) Zhu, Lowe, Wei & Barnes (2007).

(3) Zhu & Cote (2004).

Sugarcane farmers

Sugar crushed, ground & refined using carbonation process that yields higher quality refined sugar (prices that are higher by 30-35%) instead of sulfitation process used by majority of other plants due to ease of disposal of filter mud as direct fertilizer.

Carbonation filter mud residue harder to dispose of and normally needs treatment, but instead is used as raw material input for cement plant, thus earning extra revenues.

Alcohol plant takes used molasses from sugar refinery as raw material; alcohol residue is used by fertilizer plant to make compound fertilizer.

Bagasse residue used to make paper; alkali recycled from black liquor generated inpulp process; white sludge generated isused in cement process; white liquor waste from paper process recycled.

Fertilizer sold back to farmers, closing the loop.

Pith used as fuel by cogeneration power plant (50% SO2 emissions compared to coal) with alkaline wastewater used as input to “dry” & “wet” scrubbers and gypsum produced provided to farmers; cool ash used by cement plant and for road construction.

Company and Industry Background

• Established in 1956, Guitang Group (GG) is a state-owned enterprise operating one of China‟s largest sugar refineries.

• The company is involved in 4 other businesses using residue from the sugar process: alcohol plant using molasses, pulp & paper plants using bagasse, cement mill using carbonation filter mud, compound fertilizer plant using alcohol residue.

• The industry included >400 sugar firms pre-2001; many were non-competitive and loss-making due to small scale of most sugar refineries in the industry, and consequent high after-tax production costs; most plants‟ margins were very low and their costs were very close to the international price of sugar.

• Consolidation in the industry is ongoing; there were <200 sugar firms across 24 provinces in 2007.

Guitang Group‟s green manufacturing plan (3-steps)

1. Maintain close, long-term relationships with main suppliers (sugarcane farmers), to ensure sufficient supply of high-quality raw materials.

2. Produce high-quality products (sugar) using best technology.

3. Develop related industries that use sugar‟s co-products, by-products & residual products, leading to a “closed loop” system of material and energy flows.


Guitang Group‟s “closed-loop” manufacturing processes extends across different industries

Source: Zhu, Qinghua, E. Lowe, Y.-A. Wei & D. Barnes (2007). Journal of Industrial Ecology. MIT & Yale University

Farmers sugarcane plantation

Sugar mill

Boiler House

Sugar Refinery

Cement mill CaCO3

Pulp and Paper Mills

Scrubber

Lagoon

White liquid treatment

Alcohol plant

Compound fertilizer plantExternal

sugar

refineries

Sugarcane

COMPOUND FERTILIZER

Sugarcane

Juice Molasses

Alcohol residue

Filter mud Used CO2

CEMENT

ALCOHOL

PAPER

SUGAR

White sludge

White liquorRecovered fiber

Recovered water

Alkali Black liquor

Bagasse

Mid-stream waste water

Flue gas (with SO2)Clean air emissions

Cool ash

Other cement plantsRoad construction

Clean water effluent

Pith

Hot bottom ash

Alkali recovery plant




Suppliers, government, customers and competitors all play a part in making Guitang Group’s GSCM a success

• Higher quality carbonation-refined sugar (lower sulfur content, better color, fewer impurities) has enabled GG to win contracts with major beverage firms (Pepsi-Cola, Coca-Cola and Wahaha) despite higher prices.

• High quality office and toilet paper products have been successful; paper manufacturing has become GG‟s biggest profit center.

Customers

• Long-term contracts signed with local sugarcane farmers, consistent with external green SCM practices.

• Seeds, organic fertilizer, pesticide use and technical support provided to assist farmers convert to organic production, improve competitiveness and increase profit margins.

Suppliers

• 2/3 of GG‟s bagasse for its paper production is sourced from local competitors; this bagasse had previously been discarded or incinerated.

• Competitors are less technologically sophisticated and cannot compete with GG on technical leadership.

Competitors

• Guigang city is heavily dependent (~1/3 of employment & GDP) on the sugar industry, and has stake in its prosperity.

• To increase farmers‟ incomes and incentivize them to plant enough sugarcane, city govt. establishes a floor price for GG to pay to farmers (50% higher than world average in 2004-05).

• Smaller sugar producers are required to send their bagasse & molasses to GG, but GG required to meet utilization targets.

• Local banks encouraged to offer no- or low-interest loans to farmers planting on larger scale and employment opportunities for bought-out farmers.

Government

Guitang Group

(GG)

Sources: (1) Zhu, Lowe, Wei & Barnes (2007). (2) Zhu & Cote (2004)


Green manufacturing: Seshasayee provides treated water to farmers in exchange for sugarcane supplySeshasayee Paper & Board (SPB) in Tamil Nadu, India, is a paper company established in 1962; it set up a sugar mill to ensure a steady supply of raw material; waste molasses is delivered to nearby distillery to produce ethyl alcohol.

SPB struck long-term agreements with local sugarcane farmers to buy their produce, and in turn, supplied them with treated water from the paper plant; bagasse pith is also used as an energy source in their power plant.

Source: Ramaswamy, Ramesh (2004). Governance for Industrial Transformation. 2003 Berlin Conference.

FIELDS

PAPER

SUGAR PRODUCTION

DISTILLERY

HAND MADE PAPER

TREATMENT

METHANEGENERATOR

ENERGY

MOLASSES

CA

NE

HAND MADE PAPER MARKET

SUGAR MARKET

ETHANOL MARKET

PAPER MARKET

EFFLUENT

EFFLUENT

SLUDGE

PAPER

BAGASSE RECYCLED WATER

SLUDGE

EFFLU

EN

T

EFFLUENT



• Captures increased customer value for the shortest delivery option.

• Imposes a lower environmental burden, via the shift from truck transportation (higher greenhouse gas emissions) to railway transportation (lower greenhouse gas emissions), to fill extended delivery period orders.


Green logistics: Fujitsu re-engineered delivery; creating better customer value & lower environmental burden

Promotion of Green Logistics Activity

Steering group comprising distribution divisions of each business

group enhances efficiency and cooperation of each divisions‟

environmental activity:

• Corporate

• Sales

Development of Transportation Mode Selection System

• Customer questionnaire indicates delivery preference time for each customer.

• Customers split into three tiers: 30% of customers expect earlier delivery, 30% satisfied with usual delivery period, 40% amenable to four-day delivery period.

• Improved system responds by permitting selection of a shortest (two-day) or extended (four-day delivery period) in addition to usual period.

A new delivery

system that:

Source: Fujitsu Corp.

• Software services

• Products

• Electronic devices

• Fujitsu is a global provider of IT-based business solutions with offices in 70 countries; it offers both systems and services together with computing and communications products and advanced microelectronics devices.

• Fujitsu HQ is in Tokyo; consolidated revenues of 5.3 trillion yen (US$53 billion) for the fiscal year ended March 31, 2008.

1st day 2nd day 3rd day 4th day 5th day

Shortest(3rd day

delivery)

Usual *same

as current

situation

Extended(5th day

delivery)

Post

-revie

w

Order reception

Order reception

Order reception

Plant (assembly)

Plant (assembly)

Plant (assembly)

Delivery

Delivery

Delivery

Term

inal

Railway, ferry (modal shift) T

erm

inal


Asia –Pacific green SCM case studies

Fujitsu Company AHonshu Island

Products from different

companies go into shared

distribution centre

Distribution Center

Fujitsu introduced joint delivery of PCs to retailers with other companies in Chiba and Hokkaido

Hokkaido Island

Toward Sapporo

Customer

Company A

customerCustomer

Company A

customerCustomer

Company A

customerCustomer

Company A

customer

Toward Otaru

• Fujitsu developed a system to share common distribution centers with other companies; each company selects rational routes for delivery to

customers and is responsible for all deliveries of products from the centre to that region, regardless of producing company; the result is

reduced total distances and increased loading rate.

• By introducing model shift in transportation & reducing the total distance, CO2 emissions were reduced by about 30 tons.

• Fujitsu also changed from wooden transportation pallets to paper pallets to reduce the volume of wood used, lightened the weight of materials

employed in distribution, improved efficiency and reduced the volume of chemical substances employed by eliminating the need for fumigation

when exporting.


Fujitsu‟s joint delivery system

Each company takes

responsibility for all

deliveries on a

specific route

Each company

takes responsibility

for all deliveries on

a specific route


• Fujitsu‟s electronics devices group integrated three transport companies into one; it improved transportation efficiency by employing a

distribution center.

• Charter service operation routes were re-examined between delivery centers and customers, and changed from single-destination to circular

delivery, improving transportation and delivery efficiency; this resulted in costs savings and increased environmental accountability.

• Regular mail service from nationwide parts centers was re-examined to improve efficiency; use of mail service promoted, reducing on-the-spot

service to partner companies by approximately 200 deliveries a month compared to previous fiscal year; effect of emissions reduced by 0.8 tons-

CO2 per month.

Asia –Pacific green SCM case studies

Single destination Circular

Re-examination

Customers

Customers

Customers

CustomersCustomers CustomersCustomers

Customers

Customers

Customers

Distribution Center

Distribution Center

Fujitsu reduced route overlaps in electronic devices group by changing from single to circular delivery



Appendix


Japan‟s environmental regulations are among the most rigorous in the world

Regulatory type Key legislation Brief description and coverage

Performance requirements

• Air Pollution Control Law (1996)

• The Law Concerning Special Measures for Total Emission Reduction of Nitrogen Oxides from Automobiles in Specified Areas (1992)

• Japan emissions standards are among the most rigorous in the world, for both motor vehicles and stationary sources, covering sulfur dioxide, carbon monoxide, hydrocarbons, nitrogen oxides, suspended particulate matter and photochemical oxidants.

Material mandates • Japan Green Procurement Survey Standardization Initiative (2006)

• Basic Environmental Law (1993)

• Japan‟s Ministry of the Environment (MOE) and other Ministries have proposed and already implemented in some areas, amendments to various existing laws and systems to match the EU‟s RoHS directive.

Extended producer responsibility

• Law for Promotion of Effective Utilization of Resources (2003a, 2001a)*

• Home Appliance Recycling Law (2001)

• Law for the Recycling of End-of-Life Vehicles (2005)

• Requires industries to reduce, reuse & recycle (3Rs); added PCs in 2001/03 for firms & households, end-of-life fees incl. in sales price, used products collected by Japan Post.

• Manufacturers collect, finance & recycle own appliances with recycling rate requirements of 50-60% for air conditioners, refrigerators, televisions & washing machines; “old-for-new” obligation for retailers; financed by end-of-life fees paid by consumers at drop-off.

• Automakers required to remove fluorocarbons, airbags & auto shredder residue (ASR) from their vehicles, and recycle (or destroy) when their vehicles returned for disposal with ASR recycling targets set for 2005, 2010 & 70% in 2015, but targets mostly exceeded.

Taxes & fees • TAXES: Automobile acquisition; Automobile; Aviation fuel; Gasoline; Light oil delivery; Local road; Motor vehicle tonnage; Light motor vehicle; Liquefied petroleum gas; Petroleum & coal; Promotion of power resources development.

• SUBSIDIES: Accelerated depreciation for investment in pollution control equipment; Grant/loans for pollution control; Grant support for pollution control equipment; Grants for low emission trucks & transport operators‟ automobiles; Grants for low emission vehicles; Grants for pollution reduction.

• Japan utilizes an extensive variety of taxes and subsidies as policy instruments to control air pollution and limit driving.

* Year of amendment Source: Global Intelligence Alliance research



China has enacted RoHS-equivalent and is adding more stringent environmental laws

Regulatory type Key legislation Description and coverage


• Cleaner Production Promotion Law (2003)

• Air Pollution Prevention & Control Law (2000)

• Law on Energy Saving (1998)

• Solid Waste Prevention & Control Law (1996)

• Environmental Protection Law (1989)

• Mostly voluntary requirements with tax & funding incentives.

• Requires that firms prioritize clean production technology.

• Upper limits set for energy consumption per unit production in each industry sector, and established energy-saving label system and outdated products phase-out system.

• Declares state support for clean production technologies to reduce waste.

• Requires firms to use higher-efficiency and less waste-generating equipment when buying a new production line or upgrading.

Material mandates • Regulation for Pollution Control of Electronic Products (2007)

• Smaller list covering electronic info products & parts, but no group exemptions, unlike the EU‟s RoHS.


• Regulation on the Recycling and Treatment of Waste Household Electrical and Electronic Appliances (under development)

• Draft regulations by the National Development and Reform Commission (NDRC) are currently being finalized and proposes coverage of: Televisions, Refrigerators, Washing Machines, Air Conditioners and Computers.

• Recycling and treatment burdens would fall on manufacturers and other entities that handle used electrical & electronic equipment.

Taxes & fees • Pollutant discharge fee

• Motor vehicle tax

• Environment or emissions tax (under consideration)

• Fees paid by polluters.

• Tax paid by owners of motor vehicles.

• Under consideration are new taxes charged to polluting companies.

Source: Global Intelligence Alliance research



South Korea has been very progressive in its environmental legislation



• Clean Air Conservation Act (2007a)*

• Others

• Amendments made to strengthen the oversight of systems & standards relating to automobiles and fuel.

• Korea Eco-label established, new agency set up, facilities expanded targets set, funding provided, national plan published for private industry to follow.

Material mandates • Voluntary compliance program

• Persistent Organic Pollutants (POPs) Control Act (2007)

• Act on the Promotion of Saving and Recycling of Resources (2007a)*

• Waste Control Act (2007a)*

• Toxic Chemicals Control Act (2007a)*

• Phase-out of lead & 5 other substances named in the EU‟s RoHS with most companies voluntarily phasing out RoHS-banned chemicals.

• Standards, restrictions and guidelines on POPs.

• Promotes recycling of electrical/electronic equipment & motor vehicles, restrict the use of hazardous substances, and encourages firms to provide recycling info.

• Adds and clarifies on hazardous wastes included & their control systems.

• Covers control of toxic chemicals.


• Act on Resource Recycling of Electrical and Electronic Equipment and Vehicles (2007)

• Requires electronics producers & importers to take back & recycle both products & packaging. Required recycling rate targets of 55-70% for PCs, televisions, mobile phones and audio equipment.

Taxes & fees • Volume-Based Waste Fee System

• Treatment charges levied on toxic waste

• Waste fees charged by volume.




Taiwan has experimented and been successful with a variety of environmental legislative approaches



• Air Pollution Control Act (2006) • Command-and-control approach initially with environmental quality and emissions standards with attendant monitoring & enforcement systems. Tax-allowance subsidies later added for low-polluting machinery. Latest amendment has added a cap-and-trade emission system, with credit and allowance trading.

Material mandates • RoHS/WEEE-like law (under development) • Ministry of Economic Affairs (MOEA) took administrative measures to get Taiwanese firms RoHS-compliant in 2005 & 2006, but is still working on drafting a law.


• Waste Disposal Act (2006a)* • Requires that retailers collect waste brought back by consumers and producers fund the recycling scheme. This is done via a fee based on per unit output with the recycling centers operated by Taiwan's Environmental Protection Administration (EPA); fees collected from manufacturers and transferred to a government-managed fund. Consumers are paid >NT$100 to deliver their used products to the recycling centers.

Taxes & fees • Air Pollution Control Act (2006)

• Waste Disposal Act (2006a)*

• Air pollutant emission fees.

• Combined product tax and recycling subsidy with a recycling fee collected from firms to subsidize recycling and fund recycling programs.




India has a number of different rules bundled into Acts, such as the Environment (Protection) Act



• Air (Prevention and Control of Pollution) Act, 1981

• The Environment (Protection) Act 1986, amended 1991

• Includes: Rules for the Prevention, Control and Abatement of Environmental Pollution; Rules To Regulate Environmental Pollution

• The Air Act provides for the prevention, control and abatement of air pollution.

Under Environment Act:

• Persons carrying on industry operation etc. not to allow emission or discharge of environmental pollutants in excess of the standards.

• Rules governing standards of quality of air, water or soil for various areas and purposes; maximum allowable limits of concentration of various environmental pollutants (including noise) for different areas; procedures and safeguards for the handling of hazardous substances; prohibition and restriction on the location of industries and the carrying on process and operations in different areas etc.

Material mandates • The Prevention of Food Adulteration Act

• The Water (Prevention and Control of Pollution) Cess (Amendment) Act, 2003

The two acts include:

• Various laws including specific label related laws that are applicable to the food sector including nature and quantity of preservatives to be noted on the label, labeling of irradiated food, labeling of edible oils and fats, imitations not the be marked „pure‟, usage of different classes of preservatives, various laws governing the usage and definition of different food ingredients.

• Amendment of Water (Prevention and Control of Pollution) Cess Act, 1977 (providing for levy and collection of a cess on water consumed by persons carrying on certain industries and by local authorities). Application to any industry that operates or processes, treatment and disposal system, which consumes water or gives rise to sewage or trade effluent.


• Hazardous Material (Management, Handling and Transboundary Movement) Rules 2007

• Rules applying to the handling of hazardous wastes and includes various procedures for handling hazardous wastes including an outline of procedures for occupiers handling hazardous wastes, grant of authorization for handling hazardous wastes, power to suspend or cancel authorizations for the State Pollution Control Board, storing hazardous wastes, procedures for recycling, reprocessing, reusing, import and export, treatment, storage, disposal, packaging, labeling and transportation of hazardous wastes.




Comprehensive legislation in Singapore and extended producer responsibility regulations

Regulatory type

Key legislation Description and coverage


• Biological Agents and Toxins Act (2005)

• Environmental Protection & Management (Air Impurities)

• Biological Act prohibits/regulates the possession, use, import, transshipment, transfer and transportation of biological agents, inactivated biological agents and toxins, to provide for safe practices in the handling of such biological agents and toxins, and makes a related amendment to the Infectious Diseases Act.

• 4 Environmental Protection and Management Regulations centered around Air Impurities cover standards of concentration of air impurities, methods of smoke indication, standards of concentration of air impurities, testing procedures and requirements and penalties.

Material mandates

• Health Products Act

• Environmental Public Health (Toxic Industrial Waste) Regulations

• Environmental Public Health (General Waste Collection) Regulations

• Environmental Protection and Management (Fees for Licences) Regulations

• Regulates the manufacture, import, supply, presentation and advertisement of health products and of active ingredients used in the manufacture of health products and provide for connected matters; makes related and consequential amendments to certain other written laws.

• Covers all toxic industrial waste for persons concerned (Generator, Toxic Industrial Waste Collector) terms of notification to the Director-General, registration of waste, usage/storage of toxic waste, licensing requirements for waste collectors, information and registration of toxic industrial waste, import/collection of toxic waste and transportation of toxic waste.

• Regulates industrial waste collection including licensing requirements for waste collectors, labeling and transportation of wastes and disposal of wastes.

• Regulations centering around fees for the grant or renewal of a license to import or sell hazardous substances, or to amend a license to import or sell hazardous substances.


• Environmental Protection & Management (Hazardous Substances)

• Env. Protection & Management (Trade Effluent) Regs.

• Hazardous Waste Act

• Env. Public Health Act

• Environmental Protection & Management (Ozone Depleting Substances) Regulations

Regulations covering:

• Transport and import of hazardous substances, storage and supply of hazardous substances.

• Waste or refuse to be treated with various application to trade, manufacturing, business or construction industries; control mechanism for and outlet for discharge of trade effluent, nature and type of trade effluent, methods of analysis and penalties.

• Import, export and transit of hazardous wastes.

• Various Provisions applying to industry that will affect the environment including removal of industrial wastes, maintenance of refuse lifts, chutes and chute chambers in buildings, various laws covering disposal and treatment of industrial wastes, laws controlling the purity of water supplies for consumption.

• Laws governing importation from and exportation to of ozone depleting substances.




Countries such as Malaysia and Thailand tend to have broad regulations grouped under one umbrella



• Environmental Quality (Amendment) Act 2007 • An Act relating to the prevention, abatement, control of pollution and enhancement of environment, incorporating various rules including restrictions of pollution of the atmosphere, noise, soil and inland waters.

Material mandates • In Malaysia, rather than industrial-related Acts, most material mandates are directly related to human health e.g.. Various Dangerous Drugs Acts, Poison (Pychotropic Substance) Regulations, Management of Hazardous Substances.


• Environmental Quality (Amendment) Act 2007: Prohibition of Wastes and Oil in to Malaysian Waters

• Restrictions on discharge of waste into Malaysian waters with associated penalties.



• National Environmental Quality Act B.E. 2325,1992

• Many of the laws within this Act are the direct responsibility of local government agencies, rather than business owners, such as management of emission or effluent standards, pollution control, air and noise pollution.

Material mandates • Most material mandates are directly related to human health and covered under the Broader Consumer Protection Acts.


• Hazardous Substances Act (1992)

• National Environmental Quality Act: Water Pollution

• The owner of hazardous substances must undertake to destroy or deal with his/her hazardous substances in such a manner as ordered by the authority within the period specified by the authority.

• The owner or possessor of the point source of pollution under Section 69 has the duty to construct, install or bring into operation an onsite facility for wastewater treatment or waste disposal as determined by the local pollution control official.



Outlook for green supply chain in Asia Pacific | Aug 2009 www.globalintelligence.comwww.globalintelligence.com

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Appendix

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Appendix

39

Green Supply Chain Management in Asia-Pacific · Green Supply Chain Management in Asia-Pacific | Aug 2009 Green supply chain adoption driven by management, organizational learning,

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