Government's Role in Setting Optimal Policies for Green Supply Chain

Introduction

In every year since 1993 has been in the top 20 warmest years on record¹. Environmental degradation and increasing resource depletion has compelled the governments across the globe to set policies on green practices such as Green design, Green procurement, Green manufacturing, Green packaging, Green distribution and Green disposal for all the manufacturing companies. Furthermore, with a global concern to environmental issues, various countries have framed stringent laws on disposal of goods, and are imposing green barriers while importing commodities from the global markets.

Fullerton and Wu (1998) in the paper “Policies for green design” initiated the discussion on how the government can use different mix of policy instruments to deal with various organizational and market failures in managing household waste. They suggested in the absence of a market for recycled goods, the mix of consumption tax, packaging tax and recyclability subsidy on producers of different industrial and household products can lead to minimizing the amount of waste generated and maximization of reuse and recycling of material. Similarly, if household and industrial waste is collected free of charge, then the combined effect of consumption tax, packaging tax and recyclability subsidy on producers may lead to optimize the amount of waste in the entire product-life-cycle starting from design, to production, packaging, sales, use and disposal. Figure-1 shows how the government policies can target different stages in the product life cycle. Policies that affect product design will also affect product disposal and vice versa.

Figure 1.

Government policies for manufacturers and consumers at different stages of supply chain

Background

The concept of Green Supply chain Management was first put forward in US Michigan State University in 1996 (Zhou, 2009). Since then the scholarly interest in the area of Green Supply chain Management has rapidly developed across the world. Benita M. Beamon, (1999), in her Paper “Designing the green supply chain, Logistics Information Management”, gave a new aspect to the Supply chain management by taking environmental challenges to production and manufacturing into thought. She insisted on reducing waste and minimizing the use of resources at each stage of the supply chain. Also to lower the environmental damage all the supply chain members should examine their “ecological footprint” and make Green supply chain as a practice for lowering the ecologic footprint of supply chains (van Hoek, 1999).

Organizations have started viewing many of these environmental programs like technological and organizational development projects, as possible alternatives for gaining a competitive advantage (Sarkis, 2002). Subhajit Mazumder and Anand Chatterjee in the paper “Green Supply Chain as a competitive advantage enabler in the FMCG sector” have said that cost strategy (low cost) and Evolving strategy (focus) are now out dated and for sustaining in the aggressive market they need to improve the supply chain efficiency and should become more environmentally conscious. A number of green practices were suggested by Srivastava (2007) likes green design, reverse logistics, product recovery, logistic design, solid waste management and so on. Sanjeev Swami and Janat Shah (2011) in the paper “Channel Coordination in Green Supply Chain Management: The Case of Package Size and Shelf-Space Allocation” addressed the benefits of vertical coordination in a green supply chain between the players at the upstream and downstream levels of the chain and to reduce the pack size of products that helps in saving environmentally costly transportation cost.