1.

The Greening of Supply Chains

Green shipping and supply chain management (GSCM) has gained increased attention
within the maritime industry with a growing need for integrating environmental
strategies into supply chain management (SCM) practices. The growing importance of
GSCM goes hand in hand with environmental concerns such as the scarcity of some
resources, the footprint of human activities on ecosystems, waste disposal, and the
emission of pollutants, including carbon emissions. Adding green components to
supply chain management involves addressing the externalities it generates.
During the 1960s and 1970s, both economists and environmentalists started to
underline the role of industrial activities, their outputs, and their implications on the
environment. This led to the first environmental regulations, mainly addressing
emission standards. In the 1980s, industrial ecology and life cycle
assessment concepts were conceived to better assess and quantify environmental
impacts. The pursuit of environmental standards in product development, process
design, operations, logistics, regulatory compliance, and waste management
increasingly became part of corporate policy. This led to a multitude of uncoordinated
mitigation attempts, which started to change with the SCM revolution of the 1990s as
environmental management became more integrated with operations. Still, this
approach was mainly seen as a cost center since compliance usually results in higher
production and distribution costs.
Environmental practices for gaining competitive advantage and economic
benefits became a formal field of investigation with the formalization of strategies.
Investments in greening can be resource-saving, waste-eliminating, and improving
productivity. Thus, the greening of supply chains does not have to be just a cost center
but could constitute a potential source of competitive advantage. These ideas further
developed in the early 2000s with a shift from environmentally friendly approaches to
integrating green initiatives to achieve good business sense and higher profits. The
industry started to show a growing awareness that GSCM could constitute a business
value driver, not just a cost center.
The main idea behind GSCM is to strive for a reduction in environmental impacts by
focusing on a series of strategies throughout the supply chain. They include Reduce,
Re-use, Recycle, and Remanufacture, also known as the four “Rs” that
comprise reverse logistics. GSCM is often linked to life-cycle assessment (LCA), a
process for assessing and evaluating the environmental, occupational health, and
resource-related consequences of a product or service through all the phases of its life
cycle. This includes extracting and processing raw materials, production,
transportation and distribution, use, remanufacturing, recycling, and final disposal.
The scope of LCA involves tracking all the material and energy flows of a product,
from the extraction of its raw materials to its disposal. The fields of action in GSCM
include product design, process design and engineering, procurement and purchasing,
production, energy use and mix, and logistics (including distribution and
transportation).
Functional Model of an Organizational Green Supply Chain
2. Green Design, Procurement and Manufacturing
A. Eco-design and green process engineering
A significant part of the environmental impact of a resource, good, or even service is
determined in its design phase when materials and processes are selected. This can go
beyond the choice of materials, and encompasses the entire procurement and
distribution process. For example, effective reverse logistics practices largely depend
on an eco-design focused on design for disassembly, design for recycling, and design
for other reverse logistics practices.
Eco-design, also called design for environment (DfE) or environmentally conscious
design (ECD), helps improve environmental performance by addressing product
functionality while simultaneously minimizing the life-cycle environmental impacts of
their supply chains. It is an important GSCM practice aimed at combining product or
service functionality to minimize environmental impacts. One of the key aspects of
eco-design is facilitating reuse, recycling, and recovery through designs such as
easy disassembly of used products. Eco-design also involves other fields of action,
such as the design of products for reduced consumption of material or energy, or the
design of products to avoid or reduce the use of hazardous goods and their
manufacturing process. For example, a company might decide to replace a potentially
hazardous material or process with one that appears less harmful, thereby taking into
account potential impacts on resource use or increased extraction of other materials.
The roles of eco-design and environmental processes change with the stage in
the product life cycle. When a new product is introduced, the eco-design of the
product is a crucial aspect. In the more mature and declining stages of the product life
cycle, more focus will be on improving processes and having an efficient reverse
logistics system in place. Successful eco-design typically requires internal cooperation
within the main corporation involved in the design and procurement of a product, and
external cooperation with other partners throughout the supply chain. This leads to a
lower environmental footprint but requires coordination, standardization, and
compliance.
B. Green procurement and purchasing
Organizations have established global networks of suppliers that take advantage of
country-specific characteristics in their endowment of labor and resources. Key
factors for green purchasing include providing design specifications to suppliers that
include environmental requirements for purchased items, cooperation with suppliers
concerning environmental objectives, environmental audits, internal management, and
ISO 14001 certification (concerning Environmental Management Systems).
Companies can encourage or even require their suppliers to develop environmental
management systems in compliance with ISO 14001, or their suppliers to be certified
with ISO 14001. Procurement or purchasing decisions will impact the green supply
chain through the purchase of materials that are either recyclable or reusable or have
already been recycled.
Many large customers, such as multinational enterprises, have exerted pressure on
their suppliers for better environmental performance, which results in greater
incentives for suppliers to cooperate with customers for environmental objectives.
Also, the pressure of the final customer is a primary driver for enterprises to improve
their environmental image and practices.
Green procurement strategies are typically supported by national or supranational
regulations. For example, the European Community Directives on Waste Electrical
and Electronic Equipment (WEEE) and Registration, Evaluation and Authorization of
Chemicals (REACH) have led many European and non-European suppliers to increase
organizational efforts for product recovery. Environmental compliance is increasingly
becoming a criterion for accessing a specific market.
C. Green production and remanufacturing
Green production complements eco-design, green purchasing, and green logistics.
Cooperation with suppliers and customers is indispensable for moving towards cleaner
and greener production processes. Green production has often been associated with
the concept of industrial ecology, which views manufacturing as a system that is part
of local ecosystems and the global biosphere. Conceptually, the term is ambiguous and
confusing, but in practice, green production mainly focuses on:
 Resources. Techniques for minimum resource consumption in order to
reduce the use of new materials.
 Energy input. A shift towards a more sustainable energy with fewer
environmental and carbon emissions.
 Product recovery. Techniques for product recovery, often considered within
a circular economy where parts and value can be reclaimed within a supply
chain.
 Waste management. Minimize the environmental footprint of waste disposal.
Green Production
Product recovery refers to the broad set of activities designed to reclaim value from a
product at the end of its life cycle in order to reuse products and materials. This can be
achieved through recycling, remanufacturing, repair, or refurbishment. Recycling is
performed to retrieve the material content of used and non-functioning products and is
often driven by regulatory and economic factors. Remanufacturing is recycling-
integrated manufacturing that implies a thorough rethinking of traditional production
planning and scheduling methods. Industries that apply remanufacturing typically
include automobiles, electronics, and tires. The purpose of repair is to return used
products to working order. The purpose of refurbishing is to bring used products up to
a specified quality standard allowing their sale on second-hand markets.
Remanufacturing and the associated recycling activities typically involve disassembly
to separate a product into its constituent parts, components, subassemblies, or other
groupings.
Cleaner production requires effective waste management for products and materials
that cannot be reused. The supply chains of non-reusable waste involve waste
collection, transportation, incineration, composting, and disposal. The general idea of
cleaner production is to prevent pollution derived from manufacturing and across a
product’s life cycle. Thus, cleaner production initiatives are also focused on
preventing waste creation rather than post-generation management.
D. Green logistics, distribution and transportation
The implementation of GSCM has a large impact on how goods move across supply
chains, which implies a green logistics approach to reconciling environmental
concerns with transportation, warehousing, and distribution activities. It ties
environmental and economic efficiency into logistics by reducing the impact of the
sector on the environment. Logistics service providers are challenged to be eco-
conscious, comply with existing environmental regulations, and anticipate potential
technological changes and regulations while providing their services at a competitive
price. This represents a complex paradox to navigate.
Logistics service providers have to focus on supply networks in which forms of
transport meet carriers, shippers, and cargo owners’ expectations regarding cost and
efficiency, with additional expectations that this is done in a sustainable manner. To
this extent, shippers expect coordination from service providers in which operational
efficiency preconized by green logistics is supported by obtaining a greater
convergence between physical and information processes. The most common realms
of application of green logistics involve:
 Packaging. Lowering the material requirements to support the transport of
goods while maintaining their integrity.
 Modal choice. Selecting transportation modes having a lower environmental
footprint and synchronizing these modes along a sequence.
 Distribution. Organizing a distribution system where conveyances carry an
optimal load over the shortest distance possible.
3. Drivers of GSCM and Corporate Strategy
A. Green supply chains and Environmental Management Systems
An Environmental Management System (EMS ISO 14001) consists of a collection
of internal policies, assessments, plans, metrics, and implementation actions affecting
the entire organization. In practice, an EMS is a strategic management approach that
defines how an organization will address its environmental impacts. It typically
includes establishing an environmental policy or plan and performing internal
assessments of the organization’s environmental impacts. This includes the
quantification of environmental impacts, how they change over time, and how to
create mitigation strategies, provide resources, train workers, monitor implementation
progress, and undertake corrective actions if goals are not met. An EMS can be
regarded as a valuable element in improving environmental and business performance.
Once an organization implements an EMS, it may elect for its certification to the ISO
14001 standard. Organizations that develop an EMS typically show higher regulatory
compliance, enhancing their corporate image, which can lead to stock market
valuations and better lending terms.
There are different views on the relations between EMS and GSCM. One of the
limitations of an EMS is that it mainly focuses on enhancing the environmental
performance of an individual organization and not on extending this strategy
throughout the supply chain. A corporation with an EMS may have little incentive to
green its supply chains since it can market itself as being environmentally focused
without undertaking additional efforts. However, by developing an EMS, a company
develops skills and insights, helping develop more comprehensive GSCM initiatives.
Therefore, organizations that adopt an EMS may have a stronger focus on
implementing GSCM practices as well.
B. GSCM and corporate profitability
Sustainability principles are increasingly integrated into supply chain management.
Pressures to consider environmental issues when pursuing portability within supply
chains exist. Simultaneously, government regulations increasingly incite corporations
to lessen their environmental footprint. Thus, organizations might initiate several
environmental practices due to drivers such as sales to customers and legislative and
stakeholder institutional pressures. Even though GSCM has significant environmental
motivations, regulatory, competitive, and economic pressures also play roles in its
adoption across economic sectors.
When focusing on the corporate context, there are clear signs that not opting for green
supply chains can negatively affect cost base and profitability. A focus on GSCM
may help secure revenue growth, achieve cost reductions, develop brand value, and
mitigate risks. However, corporations cannot roll out initiatives as part of GSCM
without due consideration of their costs, benefits and impact on profitability. There is
a lack of key evidence of successful practices across economic sectors as success
stories (often circumstantial) are publicized while failures are barely mentioned.
Logistics and supply chain managers have to balance efforts to reduce costs, improve
service quality, increase flexibility, and innovate while maintaining environmental
performance. When deciding on green initiatives, corporations consider strategic
performance requirements, which may not be environmentally based, such as cost,
return on investment (ROI), service quality, and flexibility. Initiatives should not only
support green supply chains but also make business sense. Otherwise, the competitive
and financial position of the organization may be negatively affected.
Investment recovery is often cited as a critical aspect of GSCM, typically at the back
end of the supply chain cycle. Financial incentives or penalties are available from
public authorities, such as subsidies and tax breaks for green investments or penalties
for non-compliance. They are also available by private service providers, such as
commercial banks providing favorable loan conditions for green investments, which
are often very important in investment or divestment decisions and in achieving
investment recovery.
C. Incentives for GSCM
Financial incentives and penalties are one way for governments and public entities
to support the greening of supply chains. Whatever governments and public entities do
in terms of environmental policy development, the business world is very sensitive to
coherence and continuity in existing policies, the legal coherence of implemented
policies, and the enforcement of policies through inspection and control. As many
investment decisions have a medium to long-term amortization, any changes in
government policy, such as abolishing subsidy schemes for certain investment classes,
can have large ramifications on the soundness of the initial corporate decision related
to a green initiative. Thus, government policies and regulations typically impact green
strategies, investments, and GSCM initiatives pursued by corporations, but should
provide legal and investment stability to the affected sectors.
There is a growing awareness that GSCM can be an important business value driver
and a source of competitive advantage. However, this does not imply that all
organizations follow the same approach when dealing with GSCM challenges.
Corporate attitudes towards GSCM can range from reactive monitoring of the
general environment management programs to more proactive
practices implemented through the various Rs (Reduce, Reuse, Recycle,
Remanufacture, Reverse logistics).
Internal environmental management is central to improving corporate
environmental performance. A supporting managerial structure is necessary and often
a key driver for successfully adopting and implementing most innovations,
technology, programs, and activities in GSCM. Successful GSCM initiatives often
involve several departments (at times several corporations), and such cooperation and
communication are essential to successful environmental practices. Sharing
responsibility inter-organizationally for various aspects of environmental performance
is the key to successful GSCM.
Individual corporations cannot solely opt for cooperation on a bilateral or multilateral
basis. Industry and branch organizations often play an essential role in coordinating
several organizations to take joint initiatives in GSCM. In other cases, private
companies, sometimes with different backgrounds, and organizations such as public
entities form coalitions to advance the design and implementation of GSCM solutions.
4. GSCM and Ports
Seaports are active environments for multiplying the scale and scope of initiatives to
improve green supply chain management, particularly since they are nexuses where
international and regional supply chains interact. Five fields of action can be
distinguished; green shipping, green port development and operations, green
inland logistics, circular economy, and knowledge exchange and development. A
broad array of market players and public entities have a role to play in each of these
fields.
Range of actions for Green Supply Chain Management in Ports
A. Green shipping
Ships are major contributors to emissions in ports, even when they are idling or
berthed. Next to shipowners, ship operators, and supranational organizations such as
the International Maritime Organization (IMO), ports play a role in reducing ship
emissions. The main fields of action include:
 Reduce operational ship emissions in ports by decreasing waiting times and
vessel turnaround times, such as by synchronizing and integrating the nautical
chain through optimized vessel traffic management systems.
 Implement green port dues and voluntary green shipping schemes to
incentivize operators to improve the environmental performance of their ships.
The Environmental Ship Index (ESI) initiated by the International Association
of Ports and Harbours (IAPH), is a certification scheme that ranks a ship’s
environmental performance, which is correlated with port dues. Shipping
companies can register their ships for this index. Based on the data provided,
such as fuel consumption and emissions, each ship has a given score ranging
from 0 to 100 (from highly polluting to emission-free). Ports decide what
advantages to offer participating ships, but they mostly involve a rebate in port
dues. While ports or other public authorities could, in principle, also decide to
implement strict regulation on emission criteria for ships entering the port (i.e.
low score ships are not granted access), such access restrictions have only been
implemented in a few ports around the world. The concern is that such a system
could undermine the competitiveness of a port if competing ports do not follow.
  Implement Cold Ironing, Shore Power Supply, or Alternate Marine Power
(AMP) whereby seagoing vessels and barges at berth use shore power for
auxiliary engines instead of bunker fuel. At present, cold ironing is most
widespread in the cruise shipping market and ferry business, particularly since
these ships consume more electricity and spend more time at the terminal.
There are challenges related to the investment cost, the division of these costs
between different stakeholders, and the break-even cost compared to bunker
fuel.
 The transition to LNG as a ship fuel. In recent years, investments in port LNG
bunkering infrastructure have taken off. Several public port authorities play a
proactive role in facilitating LNG as a marine fuel, often in close partnership
with industrial actors.
B. Green port development and operations
Green port development is about actions to reduce its environmental footprint and
implement sustainability goals. Multiple instruments and concepts of green port
development and operations exist, including:
 Develop a green concession and lease policy by implementing green
clauses in terminal concession, lease procedures, and contracts. This
particularly involves setting standards for emissions and waste management
across port users.
 Maximize the ecologies of scale and industrial symbiosis in industrial clusters
or ecosystems. The goal is to find and promote related industrial,
manufacturing, and distribution activities. Environmental zoning and co-
location can help to achieve these effects.
 Develop green zones and buffers in the port area, with nature forming a shield
between heavy port industry and residential areas. A common form is the
setting of linear parks. This can also involve restoring marine ecosystems.
 Develop wind and solar parks and wave energy, combined with port energy
management and the port as a procurement and maintenance platform.
 Implement Carbon Capture and Storage (CCS) and fume return systems.
Carbon can also be used as an input for other products, such as Carbon Capture
and Utilization (CCU).
 Support the production of biofuels and bio-based chemicals, which are
particularly used for drayage.
 Facilitate the use of low-emission or zero-emission quay and yard
equipment on terminals, particularly through electrification.
  Reduce idling of ships and inland transport modes and waiting times at
terminals through information sharing and appointment systems via data
platforms.
 Develop green warehousing and distribution activities in ports through
optimal location choice, optimal distribution system design, sustainable
warehouse design (LED lighting and smart cooling and heating systems),
energy, and material recycling.
C. Green inland logistics, modal shift and inland terminals
Inland logistics comprises the transportation of goods from the hinterland to the port
or from the port to the hinterland via barge, rail, truck, or pipeline. Port authorities can
play a role in the following GSCM areas:
 Stimulate a modal shift and implement multimodal transport
solutions through pricing (taxes and incentives), regulation on emission
standards, information to users, a liberalization of freight markets, and
infrastructure investments to make specific transport modes more attractive.
 Optimize the use of each modality by reducing empty movements
(backhauls), improving vehicle utilization rates, and increasing the scale of
transport modes (vessel scale, train length and tonnage, truck platooning).
 Implement cargo bundling strategies where port users can combine cargo into
bigger loads.
 Support the transition to a greener energy input for transport by imposing
minimum emissions standards on vehicles entering the port area (e.g. the Clean
Truck Program, part of the San Pedro Bay Ports Clean Air Action Plan) and
giving incentives for the use of low-emission vehicles, including electric
vehicles.
 Promote the role of inland terminals, dry ports, and port-hinterland strategies
in GSCM, such as by incorporating inland terminals as extended gates to
seaport terminals.
 Develop advanced and integrated traffic management systems for rail, barge,
and truck.
 Implement pricing mechanisms and other instruments to make fleets greener
or to spread traffic in time and space. These include appointment systems, peak
pricing, or extended (night) opening hours of terminals.
 Develop pipeline networks (intra-port, inter-port, and port-hinterland) to
transport liquids over short and long distances.
The Extended Gate ConceptCargo Bundling Options in Hinterland Transportation
D. Seaports and the circular economy
There are three circular scales in which ports and maritime shipping are embedded. At
the largest scale, the circular economy is all about restructuring industrial
systems by adopting methods to maximize the efficient use of resources by recycling
and minimizing emissions and waste (circular economy issues are discussed in details
in chapter 2.7). In a port context, the main fields of action are:
 Promote industrial ecology clusters to optimize waste management through
interactions between stakeholders within the same geographical area, such as
exchanging materials, water, and by-products.
 Develop seaports as hubs for recycling flows where flows are delivered,
transformed into new products, and re-exported worldwide.
 Use renewable energy sources through hydro and offshore power
installations.
The second scale concerns the circular processes directly related to shipping and port
operations and their supply chains. The third is related to the specialized container
market with circular processes involving the repair, repositioning, and recycling of
discarded containers. By design, containers are circular goods that can be constantly
reused and exchanged on transport markets.
The Circular Economy in Ports and Maritime Shipping
A circular system is not necessarily sustainable as reusing or recycling costs may
exceed linear procurement costs. For instance, recycling goods such as waste paper
and some plastics is more expensive than sourcing from new resources. Under such
circumstances, circularity becomes a political or societal choice requiring regulations
and subsidies, which results in higher costs and potential disruptions related to the
availability of resources.
E. Knowledge development
The last possible field of action for GSCM in ports includes measures that facilitate
knowledge development, information sharing, and exchange of best practices. A non-
exhaustive list of some areas for initiatives include:
 Develop interactive environmental and energy information and
management systems that support business processes with new knowledge
about energy consumption and emissions. This can help set up benchmarks and
standards.
 Cooperate in the framework of port-related associations, such as WPSP
(World Port Sustainability Program) and Ecoports, that provide a forum to
discuss strategies and best practices.
 Develop sustainability and corporate social responsibility (CSR)
programs to improve the social and environmental performance of the port
cluster and to improve communication with a broad range of stakeholders.
 Implement sustainability reporting at the corporate, port authority, or port
industry level. Larger port authorities are the main actors that have started
producing sustainability reports.
 Develop the local knowledge base on GSCM in ports by setting up incubators
and labs for start-ups and scale-ups, hackathon events, and creating a good
business environment for R&D-focused firms, research centers, consultancy
firms, and start-ups.