Malaysia has committed to a 40% reduction of carbon emissions by 2020. The government has encouraged industry, society, and non-government organizations to work together to achieve this objective. The government has provided incentives through several energy programmes such as energy efficiency, renewable energy, green technology, and green building. One key area that has been targeted is logistics and supply chain, which has been contributing to high carbon emissions in manufacturing industries. Scholars and practitioners have only recently begun to pay attention to creating a low carbon supply chain. Furthermore, Small Medium Enterprises (SMEs) have faced several challenges in adopting low carbon activities. SMEs are unable to take the advantage of energy initiatives because of a lack of knowledge, a shortage of funds, and inadequate facilities. Almost 90% of firms are in the service industry working with large manufacturing firms and some SMEs working in manufacturing industry are working closely with their supply chain networks; achieving low carbon targets is hampered by the readiness of the manufacturing itself. This chapter discusses the challenges and future agenda of creating low carbon supply chains in manufacturing in Malaysia. Possible solutions are provided at the end of the chapter.
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Malaysia is expecting to increase its gross domestic product, by concentrating on international trade. Many foreign investors have begun to set up production plants in the country due to favourable government support, political stability, and competitive labour costs, which help to lower the cost of production. With rich natural and talent resources, Malaysia is projected to produce a broad range of products to serve the international market. Yet, producing quality, low-cost products accounting for environmental aspects has become a serious challenge. In 2013 Malaysia recorded unusual climate phenomena such as cold weather during the normally hot tropic season, rainstorms, and floods. As climate change has risen to the top of the agenda around the world, manufacturing firms have begun undertaking initiatives to reduce their carbon footprint in production and supply chains.
The term carbon footprint derives from the language of Ecological Footprinting (Wackernagel & Rees, 1998) and stands for gas emissions contributing to climate change due to human production or consumption activities. Implicitly, the term “footprint” has become a unit measurement (Wiedmann & Minx, 2008). As global warming became an issue, international representatives under a United Nations programme introduced the Kyoto Protocol in 1997. This international treaty requires countries to reduce the emissions of six important greenhouse gasses (GHGs), namely, carbon dioxide (CO2), methane (CH4), nitrous Oxide (N2O), sulphur hexafluoride, perfluorocarbons and hydroflurocarbons (Pandey, Agrawal & Pandey, 2011). Stern (2006) stated that an annual loss of as much as 5% of world GDP could be expected if nations failed to take early preventive actions. As output of production for goods increases almost daily to cater to the seemingly insatiable needs and wants of consumers, manufacturing firms have been upon called to find solutions benefitting global society. A focus on emissions associated with physical processes or carbon reporting sometimes overlooked important factors emerging from the interaction among the multiple firms comprising elements of the supply chain. Nowadays, however, the supply chain has become a vital aspect contributing to carbon emission increases in the atmosphere. The argument has been made that production activities and logistics are using many resources and emitting high carbon dioxide. Thus, studying the carbon footprint from supply chain perspectives is a necessity.
Scholars have argued that the low carbon footprint could be achieved if the firms manage their supply chains. The lack of coordination among multiple firms within the supply chain has increased the overall carbon footprint (Benjaafar, Li & Daskin, 2013). Manufacturing firms should be able to design a supply chain focusing on aspects such as global sourcing and just-in-time deliveries (Halldórsson & Svanberg, 2013). From the logistics perspective, data about energy consumption is used to measure cost in transportation (Leonardi & Browne, 2010) and its helps to estimate carbon footprints (McKinnon, 2010). Although much has been written about the carbon footprint of supply chains, the research community in operations and supply chain management has only recently begun to pay attention to this area of study (Benjaafar et al., 2013).
This current work is written in response to Halldórsson and Kovacs’s (2010) idea that a need exists to rethink energy efficiency and operational design. Dey, LaGuardia & Srinivasan (2011) also found that little has been work done to understand the role of logistics in a low carbon supply chain. Logistics are main contributors to carbon emissions of a typical firm, producing up to 75% of a firm’s carbon footprint (The Council of Supply Chain Management Professionals, 2008). Moreover, in Malaysia, carbon emissions in the transport sector alone have increased from 35 billion kilograms in 2000 to 119 billion kilograms in 2010 according to the Malaysian Ministry of Energy, Green Technology and Water (KeTTHA) (2011).