A definition of green management according to is the process within an organisation of applying innovation in order to achieve sustainability, waste reduction, social responsibility and a competitive advantage by the aids of continuous learning and development. Organisations shall be doing such developments, by implementing environmental goals and strategies which match the goals and strategies of the organization. This will therefore help the organization to stay focused to its mission and vision.
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Nowadays, it is found that companies advertise their products by promoting their environmentally – friendly behaviour. It does not matter whether it is on TV or on banner; the message of “go green” is almost always used. But why green? Green is not simply a color. Going green is a way of making changes in the lifestyle of some organizations as well as the society also. This implies bringing in some changes which are friendlier towards the environment. It is to note that the mere truth while doing every simple thing impacting on the planet – good or bad, an individual has all the right to make choices, thus the later can control the impact generated. (Team Treehugger, HTGG, 2007)
2.1.1 Importance of going green
Moreover, another main thing is the importance of going green. Not many organisations have realized the importance that going green can have on their business.
Firstly, adopting green management system means that it will be here forever. Other forms of energy are all finite, but green system will never be depleted. The renewable source of energy will always be here to keep the human needs ongoing.
Secondly, by using green materials and workmanship it helps to keep the environment safe as compared to the energy imports which is quite costly. It has been therefore proved that in the United States, green technologies have been able to provide a boost to the economy`s trade deficit.
Thirdly, going green will surely benefits the company in terms of its savings. Paying bills online means less money when companies go paperless, it is also a form of savings in terms of postages and paper costs. Hence both the individual and the businesses benefit from the green initiative. Similarly, if you use compact fluorescent light (CFLs) bulbs, you are like to save money on each bulb you purchase. According to Energy Star, replacing a fluorescent bulb you with an incandescent bulb consumes 75 percent less energy. Thus, if you replace a 100-watt incandescent bulb with a 25-watt CFL, you will save over $100 per year, based on U.S. Department of Energy figures. (Chris Dinesen Rogers, 2010)
According to (Chris Dinesen Rogers 2010) going green can be beneficial to economic growth. Following the National Recycling Coalition, the recycling industry employing over 1 million people and generating approximately $200 billion in annual revenues is extremely good for the economy. It is also stated that that “When you recycle, you are contributing to the sustained growth of the economy.”
In addition to the above, while using recyclable or organic products implies that toxic materials are removed from the production process hence it can be considered as an environmentally-friendly activity. This explains why organisations must reduce their disposal rates, because the more they dispose of, the more valuable and costly materials are being wasted, as well as producing more greenhouse gases as these landfills decompose. (Green Energy Choice 2013)
Going green also means a more sustainable world. According to an article published on (All-recycling-facts.com 2009-2012) the rate at which we are utilizing the world`s resources and deteriorating the globe with several kind of pollution could be very disastrous. A result of these dreadful action is leading to the destruction of the earth`s ecosystem which implies that, we will soon be left with no clean air, water, land and food. It is also stated that the day we reach such a stage, there would be nothing which will be able to save us or even nothing to talk about. Our very lives would be threatened since there will be an atmosphere of impure air, undrinkable water, unhygienic food and probably nothing to save us from the ruthless climate change. Hence, it is primordial that each and every one of us contributes equally as a human community towards a greener environment and promotes green behaviour as something which others must follow.
Following the competitive market in companies operates; organisations found it necessary to go divert their production towards greener products since consumers are becoming far more aware of green products are ready to move to competitors. The fact that a company uses a product which has already been used simply reduces the cost of production while at the same time reducing the needs for power as the company is consuming less energy. (Madhurjya Bhattacharyya 2011) also pointed out the fact that the Bank of America now uses much less paper as a result of which has lead to an increase in its customers. The bank also recycles paper internally and gives cash back offer facilities to employees up to a certain limit if ever they decide to buy hybrid vehicles in other words ecological vehicles. Few are those who moved from being traditional, but successful are those who took the risk and implemented the new green management system.
Furthermore, with the evolution of the technologies, companies have begun to adopt the EMS approach. This can be referred to as Environmental Management System. This approach helps in gathering information, formulating goals, making the right choices while at the same time improving performance. In other words, EMS is a broader version of quality programs to managing the environment. Hence over the past decades, increasing number of companies has initiated new strategies to integrate the environment into their business strategy so as to improve both their environmental and business performance (Porter 1991; Smart 1992; Porter and van der Linde 1995a, 1955b; Hart and Ahuja 1994).
To set the ball rolling on, while some managers are investing in the environment and this is most welcomed by the society, others will have to derive ideas about how to identify circumstances which will be favoring both the public benefits and corporate benefits. Some may want just the ISO 14001 label on their product while simultaneously for some other firms better utilizing their resources may be beneficial to the environment as a whole. All this gave rise to competitive advantage between firms. In the 1990s there was a big debate in the field of Business and Environment about “whether it pays to be green.” According to the following strategies put forward; “free lunch”, “double dividend” and “win-win hypothesis”, chances for businesses to be profitable in the environmental investments is uprising. However on the other hand, Reinhardt (1998) argued that, the question is not whether companies will be able to do it, but it was about the time factor, that is, when the companies will be able to implement such strategies and when they will begin to benefit from such investments.
2.1.2 Porter`s Strategies
Similarly, Michael Porter identified two different types of competitive advantage generated by firms in 1980; Low cost and differentiation. According to Porter, selling products or services with the lowest costs in the industry would be beneficial to the company in terms of competitive advantage. Hence the firm will be selling its product either at the price prevailing in the industry in order to earn higher profits than that of rival or adopting a price which is below the average price in the industry so as to gain in terms of market share. Such a situation is called a price war among firms in the same industry. During such a situation, a firm can maintain its profitability level to the detriment of its competitive edge on the market. However, it is to note that even if there is no such price war, as the industry grows older, price will decline as a result of which; the firm producing at the lowest cost will remain profitable for a longer time period.
The differentiation strategy is when the organisation develops a particular product which offers unique attributes that are valued by consumers and the same product is seen differently from the products of the competitors. According to Porter (1985: 13), a cost leader cannot ignore differentiation. This means that differentiation is as important as lowering the cost of production. Similarly, Levitt (1980) pointed out that everything can be differentiated – even a commodity. He says this can be applied for industries dealing in primary metals, grains, chemicals, plastics, and money also. However, Peters and Austin (1985: 61) did not totally agree on this theory. They argued that if we put the label of commodity on a product it becomes a self-fulfilling prophecy. Buzzell and Gale (1987: 113) supported this idea with their argument: “if you think of your product/service offering as a commodity, that’s what it will be–a commodity.”
2.1.3 Spending Green
With regard to “green marketing” in practice, the health report are somewhat uncertain. A surge in products and services claiming more or less legitimate claims to environmental friendliness was noted in the 1990s, when a significant proportion of consumer advertising campaigns in many countries contained messages related to the environment (Banerjee et al., 1995; Carlson et al., 1993) Today, however, observation suggests a decline in green claims for mainstream products. In some developed countries, this has at least resulted in a correspondingly less widespread occurrence of vague claims related to doubtful green product attributes, meaning that consumers are now more aware about green products.
Consecutively, it is found that when it comes to green consumption, women are doing their part of responsibility when making purchases (i.e.) they are making much more green purchases than men do. While doing so, they also promote their products and services to be environmentally-friendly. Following a study on the purchasing habits of consumers, it was found that women are more environmentally-conscious when it comes to decision making in business that their male counterparts. Women clearly disagreed on the fact that some business owners still believe that promoting their products and services as being environmentally-friendly has little impact on consumer’s buying habits. It even goes further when Dr. Myra Hart, reported that “environmental friendliness” was ranked in the top three factors by women business owners, influencing consumer purchasing decision of consumers. It was ranked just below quality (98%) and price (85%) and finally cited environmental friendliness as a moderate influencer (76%). As a result of this study, it showed that consumers do take into consideration the “environmental” factor when making purchases either for them or their business (Lahle Wolfe 2013)
Likewise, it is quite obvious that cannot consume the same thing for a long period of time. Consumers always tend to move to other new products and sometimes their behaviour are affected by means of advertising or even their past experience they had with a particular product. By consuming more of less environmentally harmful products and services, consumers can bring in positive changes and therefore lessen the impacts on Earth. Consumers don`t realise, but they have enormous power to improve the world. While on one hand, consumers are advised to consume less in order to protect the environment, on the other hand the money saved can be utilized in order to advance the green economy. Green shopping can be termed as a situation where consumers normally spend money on products that are less harmful towards the environment which is likely to build a more sustainable world. Small changes in consumer behaviour like adopting products that comes with less packaging and those which are made with plastics can improve the green economy. Hence, the spending pattern of consumers will determine the type of world they will create in the future. (Richard Matthews 2012)
In addition to the above, according to (Debra Atlas 2013) 71% of consumer consider the welfare of the environment when they shop. He also claimed that “green” thinking has been increased among consumers’ minds. Environmental concerns are now becoming important to firms also since they have the opportunity to develop their green products demanded by consumers and therefore position their company on the market as a being a green company. This will also help the firm in terms of competitive advantage and increased performance. (Singh 2010) Following globalization, consumers now have access to information which raise their awareness about the manufacturing processes of the products and this made them seek green products. (Hailes 2007) For example; consumers may be interested in the green attributes (whether the product is recyclable, biodegradable, etc) of a product as well as the manufacturing process (whether environmental norms have been respected during the process). (Singh 2008)
Practically, with the new trend of green management, consumers are willing even more to spend greener. This means that consumers tend to behave more positive towards the sustainability of the environment than the green movement. In other words, the green products will gradually replace the traditional power products because of their environmental benefits. This is likely to be a successful venture because according to (Wiser 1998) consumers are willing to pay for green products. As a result of this, it will generate a new market for renewable energy products. Hence, this may help to put forward green marketing as a successful tool in the energy market.
However, sometimes it not about meeting the consumers’ expectation; businesses have to surpass the expectations to meet quality products demanded by consumers (Gupta & Lehman, 2002; Blackwell et al., 2001; Naumann et al., 2001; Foreman, 2000). Another option which may help the company to build a relationship with its customers` is to create a strong brand image so that it the purchaser decision will rely more on perceptions than on reality. (Vrontiss & Thrassou, 2007) This also helped organizations to realise the fact that they have to shape the perceptions of consumer in regard to their products by making use of every marketing communication tools at their disposal. This has therefore led to a situation where consumers were overflowed with adverts and became unresponsive over a period of time. As a result of this, the job of producers to influence the mind of the consumers became much harder and needed extra effort. (Blackwell et al., 2006) Hence it can be said that consumer decision making is therefore based on information processing (Johnson & Puto, 1987)
Also, when it comes to accountability, Robins (2008) points out that a company must be ready to accept its responsibility for its operations and their impact on society and natural environment. Companies should work for welfare of the society as a whole and therefore towards a greener world. Similarly, (Sirsly, 2008) recommended that Corporate Social Responsibility is not always generating the monetary and economic value for the firms, but it help firms to differentiate among themselves. When a third party endorsed its corporate efforts, the reputation of a firm is reinforced in the “eyes of both market and non-market stakeholders” Sirsly and Lametrz(2008).
Eventually, Karna et al. (2003) argued that environmental issues were all in the hands of the government. Hence marketing strategies along with government aids can help to build strong green marketing campaign and therefore helps to protect the environment in better and efficient way. If a firm is introducing a highly differentiated product, it is maximizing the stockholders returns and effectively using environmental strategy. A firm engaged in the cause related marketing because of its long term benefits i.e. to attract and retain consumer for longer period of time. In such type of marketing activity, consumers are emotionally motivate to take part and because they wanted to feel different from other members of society or in their groups Ottman (1993, p.91).
2.1.4 The Cost Factor
While going green, several factors influencing the financial aspect of the project should be taken into consideration; one of the most important one is the energy cost. It is found that over time, energy costs usually change and thus it becomes difficult to reap profit from the investment. It is assumed that if the energy costs are low, then the cost benefit of implementing the green system will be low too, but on the contrary assuming fluctuations in the economy, the energy costs might increase which will result in striking payback in the future. For example; the cost of buying a hybrid car may be as the same as a normal car for a long term basis assuming a constant price of gas, but suppose the price of gas experience an increase in the future, then the hybrid car will help one to save much more money than expected. (Gregory Hamel, 1999; 2013)
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Besides, (Rebecca Lake, 2010) pointed out the fact that several practices and behaviours of “going green” slogan are all motives of saving money, but still there are still ways while adopting green living can be from moderate to very expensive. It is found that, the technology associated with green living is not beneficial to the environment but often at a much higher cost than their traditional counterparts. For instance: let`s consider the installation of solar panel. It can be very useful in saving money on a long term basis, but at the same time it may cost thousands of dollars to install the equipment. Energy saving appliances is normally to be used so as to save water and energy, but they usually come in a high priced package which sometimes is very costly to organisations. Similarly, eating organic food is another to go green, but in order to get these; one has to pay a significant price unless you decide to grow your own food.
Basically, (Chris Joseph, 2013) put forward the fact that when companies implement environmental norms within the organisation, it always ends in costlier products. This implies the switch from the traditional way of production to producing green products which can lead to expensive products to the consumers. It can affect the organisation`s source of revenue if it is operating in developing country, since consumers in developing country have less buying power compared to those in developed country. Similarly, according to Jon Kaplan who owns a Greenworks Cabinetry in Florida manufactures eco-friendly furniture products. Since he has to get most of his materials from the West-Coast and Asian countries too, his products cost much more on the market. This means that he has to sell his products at higher prices which may lead to a situation where consumers will obviously shift to competitors.
As a whole, while companies decide to go green, many consumers would like to see the organisation actively doing things so as to prevent the depletion of natural resources. Going green does not happens in a matter of minutes, it is a whole process and it involves huge costs which is not always effective for the company. (Admin, 2013), stated that deciding on whether being environmentally responsible or the level of spending is more will be crucial. If ever the spending out way the desire to be eco-friendly, then it will not be a successful project. Problems may pop up on the side of suppliers also. The company will now need to find new suppliers who will be providing materials on time; else significant losses will be incurred by the company. Producing the same quality of finish product will be primordial for the organisation in order to maintain its image on the market – failure to do so will be disastrous. Similarly, implementing the green system within the company will mean; training the employees. Employees will have to be trained to deal with the new approach and different method of work. Training may be costly and at the same time lowering productivity while employees are at their training session.
2.2 Supply Chain Management
Supply chain management was views years ago, as the process of converting raw materials to finished products and finally delivered to the end-user (Bearmon, 1999). This process can therefore be defined as the extraction and exploitation of the natural resources gifted by the nature (Srivastava, 2007). It is hence very important to note that environmental sustainability has been something primordial since the last decades in business practice. Since the early 1990`s companies were faced with the dilemma of implementing Environmental Management in their supply chains (Wu & Dann, 1995) which is however not an easy task. Therefore the ‘green concept’ to the supply chain of business increases the level of competitiveness among firms which will have a direct relation to the environment. This therefore gave rise to the Green Supply Chain Management. (GrSCM)
2.2.1 Green Supply Chain Management
Green Supply Chain Management is the revolutionized version of the traditional supply chain. This involves a direction relationship with the environment. The “quality revolution in the late 1980’s and the supply chain revolution in the early 1990’s” has awaken several business conscience to become environmental friendly (Srivastava, 2007, p. 53). Green Supply Chain Management became not just a simple fad, as it aimed at both practionners and academics in waste-reduction programs as well as preserving the quality of the products` life and the natural resource. In order to achieve excellence in business, Eco-Efficiency and renewably processes became something most businesses shall be adopting (Ashley, 1993; Srivastava, 2007). Businesses are bearing the pressure of both governmental and global market demands to become more sustainable (Guide & Srivastava, 1998; Gungor & Gupta, 1999).
Waste management is another topic that pop up from the GrSCM literature. This proved its importance with the work of Roy and Whelan (1992). It therefore gave rise to a standardized model for reducing electronic waste without harming the environment. As a result of this, different waste management issues came into context which emphasized mainly on recycling and remanufacturing. Owen (1930), Hannah and Newman (1995); Sarkis and Cordeiro (2001) and Nagorney and Toyasaki (2005) are all examples of trends of waste management becoming an issue.
2.2.2 Green Design
Green design is an important sub-part in the Green Supply Chain Management. It states that each product or service should be design in such a way that it encourages environmental awareness. Beamon (1999) developed ISO14000 which was introduced as a result of the Rio Summit on the Environment in 1992. Tremendous pressure groups were for the fact that firms should encourage ‘greening’ in their respective supply chain.
In 1991, the first green design literature came to existence. NavinChandra’s (1991) pointed out the first literature in order to reduce the number of wastage that is more businesses going green. Works of Ashley (1993); Allenby and Richards (1994) and Zhang, Kuo, Lu and Huang (1997) came into context and expanded the framework of green design. Life-cycle analysis was an example of a framework that came out of green design. Works of Arena, Mastellone and Perugini (2003), Beamon (1999) and De Ron Penev (1995) all discussed life-cycle analysis as a framework.
2.2.3 Reverse Logistics
Reverse Logistics (RL) is the complete reversal of the traditional or forward logistics (Beamon, 1999). Reverse logistics was defined as a process where manufacturers accept products which were shipped from the previous point for consumption which will be possibly use for recycling and re-manufacturing Dowlatshahi (2000) and Carter and Ellram (1998). Fiksel (1996) argues that becoming eco-friendly towards products re-manufacturing had a chance to emerge in some firms. Heavy industries having complex supply chains should see that they benefit from the reverse logistics (RL). Thierry, Wassenhove, Van Nunen and Salomon (1995) supported the fact that automobile industries were making full use of reverse logistics; examples would be: BMW and General Motors. The trend does not end only with those companies, Hewlett Packard, Storage Tek and TRW were also using reverse logistics as a supply chain process. All this were done in the simple main aim to remain competitive in their respective industries (Srivastava, 2007).
(Srivastava, 2007) stated that collection is the first stage in every recovery process. Products are then selected, assembled and transported to facilities for re-manufacturing. Used products came from various sources, but then had to be transferred to one particular place so that the converging process can begin (Thierry et al., 1995). It was also claimed that sorting and recycling are very essential mechanism in the process of sorting reusable products. The collection schemes were done on the basis of whether the materials were separated by the consumer (separation at source) or centralized (mixed waste) Cairncross (1992) and Srivastava (2007). Hence the main aim was to sort products so that it can be reused to reduce costs of making new products which is diagrammatically represented on the next page:
Source: – Jamal Fortes. (2009). Green Supply Chain Management: A Literature Review, Otago Management Graduate Review
2.3 Empirical Literature Review
According to the empirical studies carried on in order to test the relationship between the firm`s performance and environmental concerns it was found that the results varied. Some results delivered positive results (Judge and Douglas, 1998; King and Lenox, 2002; Melnyk et al., 2003) while on the contrary some did not identified positive outcomes of environmental proactivity on businesses` performance (Cordeiro and Sarkis, 1997; Gilley et al., 2000; Link and Naveh, 2006).
In addition to the above, it was found that firms are facing various pressures from both within the company and governmental parties to become more responsible and at the same time greener. Those pressures have as main aim to reduce the level of impact of firms on the natural environment and the society as a whole. As a matter of fact, social responsibility and being conscious about the environment are being integral among nowadays firms. Hence, the most important issue is about these aspects and the financial performance of the business. That is, in other words, are firms being able to protect the environment as well as being profitable? Bowen (1953) supported the fact that corporate social responsibility is not the remedy and thus it will not cure the society of all its ills immediately, but he thinks that it a new venture that should be supported and implemented by each organization who wants to survive in the industry. He also argued that the social responsibilities of businessmen also known as the obligations of firms must follow the policies which will be beneficial to the society as a whole. – José F. Molina-Azorín, Enrique Claver-Cortés, Maria D. López-Gamero, Juan J. Tarí, (2009),”Green management and financial performance: a literature review”, Management Decision, Vol. 47 Iss: 7 pp. 1080 – 1100
Moreover, it is found that, the pressure exerted by environmental management on firm performance, this influence can really help firms to cut down on their costs while at the same time respecting the environment. Reducing or if possible prevent pollution will allow the firm to save on control costs, input, and energy consumption, and to recycle used materials (Hart, 1997; Taylor, 1992). Thus, producing and delivering goods while simultaneously reducing the ecological impact and use of resources will surely help the firm to attain eco-efficiency (Schmidheiny, 1992; Starik and Marcus, 2000). However, on the contrary, those firms which continue to pollute the environment are therefore regarded as a sign of inefficiency (Porter and Van der Linde, 1995). Companies must learn to view environmental improvement in terms of resource productivity. Managers should not only focus on the costs of eliminating or treating pollution, they should review their approach, and thus pay more attention to the cost they have forgone while polluting the environment, in other words, the opportunity of pollution. (wasted resources, wasted effort, and diminished product value to the customer).
In addition to the above, it is found that by using practical environmental strategies, firms can eliminate wastages, redesign existing product systems to reduce life cycle impacts, and therefore develop new products with lower life cycle costs (Hart, 1995). If ever organizations go deeper to extend their strategies, this will surely help them to achieve organizational efficiency. In fact, by responding to market pressures firms may save costs so as to achieve greater production efficiency and gathering gains which are easily obtained associated with reducing excessive wastes, material, and energy use. (Hart and Ahuja, 1996)
Therefore, it should be noted that green management can provide opportunities to lessen costs while simultaneously increase revenues. Ambec and Lanoie (2008) argued the fact that there are four possible opportunities for companies to use in order to reduce costs (risk management and relations with external stakeholders; cost of material, energy, and services; cost of capital; and cost of labor) and three opportunities to increase revenues (better access to certain markets; differentiating products; and selling pollution-control technology).
Furthermore, environmental management can help to maintain and improve relationships between the different stakeholders as well as reducing the level of conflicts between them which can sometimes prove to be costly (Hull and Rothenberg, 2008). Organizations maintaining good relationships with their stakeholders are likely to achieve success much more effectively than competitors (Donaldson and Preston, 1995). Similarly, while creating, developing and maintaining ties with the stakeholders it will surely help to better financial performance of the companies (Jones, 1995; Brammer and Millington, 2008).
In the case of the influence of green management impacting on corporate environmental performance, did not generate a clear result. While some studies showed positive impacts. For example, Dasgupta et al. (2000) found positive effects of green management measures on self-assessed compliance with environmental regulations. Anton et al. (2004) found that the Environment Management System helps to reduce the level of toxic emission, and Potoski & Prakash (2005) found that companies which have been already certified ISO 14001 reduce their level of pollution more than non-certified ones. Hence, these studies point out to possible problems with regard to their measures of green management and therefore try to develop approaches which shall be useful to such problems. However, their instruments based on cross-sectional data are not fully convincing. In the sense that, Dahlström et al. (2003) did not find that the ISO 14001 certification improves the compliance with environmental regulations and Lenox and Nash (2003) even showed that firms which are less environmental friendly are more attracted to public voluntary environmental programs.
Besides, it should be noted that the measures for corporate environmental performance such as toxic emissions or the compliance with environmental regulations are mostly one-dimensional indicators, meaning they look at one facet of the coin. There is more technological environmental performance whi
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