Background and Context

Environmental issues are increasingly becoming important in managing any business today. While there are environmental regulations domestically, there are also growing demands by the overseas buyers for more and more environment-friendly products. At times, the environment issues are becoming non-tariff trade barriers for the exports. Hence, industries - especially in Europe and Japan - are shifting to environment-friendly products or eco-products as the business strategy for future sustainability and competitiveness.

Though presently there is a limited market for the eco-products, there are definite signs that this trend would eventually pick-up in a big way. In many countries the governments, industries and civil society organizations are working together to promote eco-products which would ultimately benefit the environment and thus the society. For this, Green Purchasing and Greening Supply Chain are the two popular approaches adopted around the world.

What is Green Purchasing and Public Procurement?

Public and corporate purchasers spend billions every year across the world. Government procurement budgets alone amounts to a significant percent of GDP. 'Greening' these purchases could contribute substantially to the promotion of environment-friendly products and thus the environmental protection. Many public and corporate purchasers around the world are therefore including environmental factors in their purchasing criteria, and thus procuring environment-friendly products and services.

Internationally, Germany undertook structured green public procurement activity in the 1980s followed by other European countries like Denmark (1994), France (1995), UK, Austria (1997) and Sweden (1998). The US EPA developed Guidance on Environmentally Preferable Purchasing, while Japan enacted the Green Purchasing Law in May 2000 to promote green purchasing as national policy. The law requires all governmental bodies including local governments to practice green purchasing and report the summarized purchasing records to the public.

What is Green Supply Chain?

In order to produce environment friendly products, manufacturers need to work with their suppliers of raw materials and components. Using their purchasing power, the industries can set up environmental criteria for their suppliers upstream in their supply chain. In addition to setting up the requirements, the big buyers can also provide assistance to the SME suppliers in meeting these requirements. The supplies and eventually the end product thus become environment-friendly. As this phenomenon percolates along the supply chain, ultimately it can result in the “greening” of the entire supply chain.

How does it affect Indian industries?

While these issues are currently far more relevant for the exporting industries, eventually they are expected to influence the entire Indian industry in a big way. Moreover, eco-products can provide industries with great marketing advantages and also a good corporate image. Besides, by promoting the eco-products, industries can make its own contribution to environmental protection for the benefit of the society at large. The Indian industries, therefore, need to adopt a proactive approach to address the issues of green supply chain / green purchasing for future competitiveness.