Section 4. Circular Economy and Related Area Practices in Operations Management

Challenges in Implementing Green Supply Chain Management in SMEs: A Case Study of a South Korean Company

INTRODUCTION

Environmental management is a critical strategic area to maximise a firm’s performance. and its importance is increasing steadily (Zhu & Sarkis, 2006). As a result of the implementation of Environmental Management Systems (EMS) for businesses, an increase in the use of EMS tools has been noted. Apart from internal environmental improvement, it is often the case that organisations are employing EMS guidelines past the boundaries of their factories and these can be seen in their supply chain networks (Sarkis, 2003). Effects on the environment can be seen throughout a number of points in a product’s life cycle, including material sourcing and selection, manufacturing processes, reuse, product delivery and disposal (Ojo et al., 2012). Green supply chain management (GSCM), together with other connected standards, has turned into a crucial area for firms to create new profit and market advantages through reduction in environmental hazards and increased efficiency (Sarkis, 1995).

Nevertheless, there are certain parties that view' this topic differently, as it is in contrast with the idea that environmental and social integration are mutually exclusive to financial gain. This disparity is particularly notable w'hen comparing the view's of business academics and practice. It is suggested that there is an inherent clash between protecting the environment and economic prosperity. The idea is based on the notion that the increasing need for organisations to protect the environment w'ill cause a rise in their expenses, thus providing fewer resources to boost productivity and causing a drop in market competitiveness (Palmer et al., 1995). A McKinsey & Company (2008) reported that the vast majority (4 out of every 5) of 2192 executives contacted believed that there would be an environmental problem of some kind (most likely climate change-related, in their view) in the next five years in the regions where their firms work. Environmentally proactive firms attempt to structure these guidelines and even encourage stricter rulings, which could cause difficulty for their less environmentally conscious rivals. Moreover, 81% of the executives contacted state that businesses must be active in combating climate change, as this is seen as a societal trend with the highest chance of impacting shareholder value in the next 5 years, together with other environmental and social concerns. Lee, K. H. (2009) stated an important question for executives with regards to corporate EMS or GSCM is how to implement environmental decision making into their business practices, with profitable outcomes. However, it should be noted that business and management research into GSCM is severely lacking when it comes to small- and medium-sized enterprises (SMEs). The organisational management paper by Sharma (2000) requested that researchers give importance to environmental problems when conducting organisational studies. In the area of strategic management, Noci and Verganti (1999) noted that mainstream literature has focused on the examination of larger firms, and did not look into SMEs’ features. Hitchens et al. (2004) stated that the issue is noticeable for SMEs, as they are further hindered by limited information and funding for green management practices. As a result, it is necessary to comprehend the reasons behind SMEs employing GSCM in their operations, and how they can best go about this task.

The remaining part of this study is structured as follows. The background of the study and literature review is discussed in Section 2. Section 3 represents the methodology. The findings and discussions are presented in Section 4. The recommendations and conclusions are in Section 5.

LITERATURE REVIEW

Environmental Management

An EMS allows companies to conduct their business services and activities whilst minimising damage to the environment through a specific group of processes, values and management techniques (Feldman et al., 1997). To support companies achieving the desired sustainable development, the International Standardisation Organisation (ISO) created the list of standards known as the ISO 14001. Ofori (2000) explains that, under ISO 14001, EMS represents one element w'ithin the total management system of a company. The EMS entails considerations such as the monitoring and evaluation of firms’ environmental policies, the implementation and achievement of such policies, developmental resources and procedures, business practices, operational procedures, corporate duties, planning and organisational structure. The ISO 14001 is structured based on the ‘plan-do-check-review’ ideology and includes five cyclic stages of development and betterment. Ritchie and Hayes (1998) outline the various advantages of ISO 14001 as follows: environmental protection; cost reduction; improved market entry opportunities; proven regulatory compliance; more environmentally friendly performance; higher levels of customer satisfaction; stronger trust between consumers and the company; promotion of fair competition, influencing global trade; more knowledgeable and engaged employees; improved brand image; a better and more credible reputation for the firm.

 
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