While many motivating factors may be in play, one thing is certain: corporations are increasingly looking at “green” initiatives to demonstrate their commitment to the environment and sustainability. The electronics industry is no exception to this trend. Electronics manufacturers are undertaking a variety of green initiatives. For example, HP reports it will reduce its carbon footprint by 20% by 2010. Lenovo has committed to phase out hazardous chemicals from all its products by 2009 and has begun a global hardware recycling program. Motorola is a member of the Chicago Climate Exchange, a voluntary initiative to reduce emissions, and has redesigned all its chargers to be Energy Star qualified thus meeting US Environmental Protection Agency and Department of Energy standards for energy efficiency.
These initiatives are striking in their ambition, breadth, and variety. They can be found at every stage in the product life cycle: design, manufacture, and service. For the sourcing executive, manufacturing-focused initiatives are most relevant. No such initiative is more on point than the increasingly pervasive Green Supply Chain initiatives.
Why Go Green?
Corporate green initiatives may be motivated by cost cutting, consumer pressure, competition, a desire to stay ahead of possible government regulation, or a sense of “global citizenship.” Any one or a mix of these motives may explain electronics manufacturers’ green initiatives but government regulation has played a major role in shaping the way these companies address environmentally sensitive manufacturing.
For the electronics manufacturing community and its suppliers, far-reaching environmental rules came in the form of the European Union’s (EU) Restriction of Hazardous Substances (RoHS), which took effect in July 2006. More recently, ‘China RoHS’ became effective in March of this year; and in April, Korea’s National Assembly passed its own RoHS-like legislation that will go into force on 1 January 2008. Japan, Taiwan, Canada, and several U.S. states are presently engaged with similar legislative proposals (California, Maine, Massachusetts, and Minnesota have adopted legislation and other states are pending - over 50 bills are pending in roughly 20 states). Essentially, RoHS restricts the use of six hazardous materials in the manufacture of various types of electronic and electrical equipment. China RoHS and other countries’ laws have similar effect. The result of this widespread legislation is the increasing number of products that must fall into compliance.
Europe’s RoHS rules are linked with its Waste from Electrical and Electronic Equipment (WEEE) directive that took effect in January 2003. WEEE sets collection, recycling, and recovery targets for electrical goods, and is part of a legislative initiative to solve the problem of huge amounts of non-biodegradable, potentially toxic waste. Again, other countries have taken similar steps to address recycling electronics: the United States Congress has considered an electronic waste bill called the National Computer Recycling Act and several US states have passed their own laws regarding electronic waste management. California was the first state to enact such legislation, followed by Maryland, Maine, Washington, and Minnesota. More recently, legislatures in Oregon and Texas passed their own laws.
Taken together, RoHS, WEEE and other such legislation has necessitated close consideration of the manufacture of electronics. Manufacturers exist in a world that requires them to monitor the content of their products, thus making “green supply chains” a natural solution. They are also increasingly responsible for the disposal of their products, further highlighting the importance of the products’ content.
Green Supply Chains
A green supply chain requires nothing more than introducing “green priorities” into a supply chain. Just as other non-price factors, like quality, have always influenced manufacturers’ choice of supply chain partners, green priorities can be factored into sourcing decisions.
A common way manufacturers have executed this is to include green criteria in Requests for Proposals (RFPs) and vendor certification questionnaires. In an article on creating a green supply chain, Kris Colby and David Fertal of Ariba advise organizations to be as detailed as possible, which means they should explicitly disallow harmful chemicals and specify approved and preferred materials. They also advise setting clear expectations of suppliers during the sourcing process and proactively monitoring compliance and progress. “Outline what suppliers will be expected to provide and how they will be measured to ensure that they are delivering and putting in place the processes and procedures to drive compliance. For example, since disposing old electronics is a potentially costly endeavor legally, financially, and environmentally, make it clear to suppliers [that] your company expects them to conserve materials; use chemicals and components that are less toxic and create products that can be easily disassembled for waste reduction, reuse and recycling purposes.” Increasingly, manufacturers are looking to independent codes or certifications to inform their supply chain decision. IBM, for example, accepts supplier compliance with the Electronic Industry Code of Conduct (EICC) as equivalent to its own internally developed Supplier Conduct Principles. The EICC is a code of best practices adopted and implemented by major electronics suppliers. The EICC seeks to improve conditions in the electronics supply chain by setting standards for five areas of cultural and social responsibility. “By consolidating and standardizing compliance, audit, and reporting efforts, suppliers can focus on achieving the high standards of performance set forth by the Code. This approach is also more conducive to fostering a culture of social responsibility throughout the global electronics supply chain.”
An independent certification that can guide manufacturers in choosing environmentally conscious supply chain partners is the ISO 14000 environmental management standards certification. ISO 14000 standards exist to help organizations minimize their operations’ negative effects on the the environment, comply with applicable laws, regulations, and other environmentally oriented requirements, and continually improve on these goals. ISO 14000 is similar to ISO 9000 quality management standards in that both concern processes rather than the product itself. The overall idea is to establish an organized approach to systematically reducing the environmental impact of actions which an organization can control. For supply chain partners that may not be producing a product, such as distributors, ISO 14000 provides a reliable independent certification that the organization is using sound environmental management processes.
IBM’s Supplier Conduct Principles (and its equivalent EICC) is just one example of the programs that OEMs have adopted to guide their sourcing teams and supply chain partners toward meeting socially responsible goals, including environmental goals. Hewlett-Packard, through its Supply Chain Social and Environmental Responsibility (SER) program, includes some particularly environmentally focused initiatives aimed at greening its supply chain.
HP's "design for environment" program operates from the premise that the environmental performance of HP products is largely determined in the design stage. Under this program, engineering and sourcing teams partner to reach environmental goals. Examples of successes include designing printers with parts that snap together, avoiding the need for solvents and making products easier to dismantle for recycling. As to product content, like most other manufacturers, HP focuses on the reduction of hazardous materials. In a June 2004 Electronics Supply and Manufacturing (ESM) article, HP noted a strategic as well as environmental purpose to this: “Reducing hazardous materials use can also decrease costs for our customers and HP; meet demand for smaller and more efficient products, such as handheld devices, laptops and digital cameras; and cut recycling and disposal costs.” Further, HP requires its suppliers to sign a code of conduct and to provide information about their environmental practices, issues, and plans for improvement.
The strategic benefit that HP has seen from its green program is not unique. HP’s major competitors in the computer market like Lenovo, Dell and Apple are engaged in similar green programs. These companies have made their environmental programs a key part of their marketing campaigns. To gain or maintain market share they’ve found that it is critical to tell increasingly environmentally-conscious consumers about the efforts they are making to reduce hazardous substances in their products. So, while benefiting the environment, these companies are also benefiting their business.
The models for a Green Supply Chain are as varied as the companies implementing them. Regardless of size, geographic footprint, or resources, the fundamentals for creating a Green Supply Chain are the same for all. Injecting “green priorities” into the supply chain and choosing resources and supply partners with similar priorities ensures a Green Supply Chain. The “green priorities”, whether considered through RFPs, vendor certifications, or individual transactional terms, help to assure compliance with environmental and hazardous-substance laws and regulations, as well as further social responsibility goals: Goals that have become common to all electronics manufacturers.
Colby, Kris and Fertal, David, October 30, 2007, “Ten steps to a green supply chain”, in ESM online, http://www.my-esm.com/supplychain/showArticle.jhtml?articleID=202800289.
IBM Web Site, Environment Section, http://www.ibm.com/ibm/environment/supply/.
Electronic Industry Code of Conduct (EICC) Web site http://www.eicc.info/.
Conrad, Dick, June 1, 2004, “Creating a green supply chain”, in ESM online, http://www.my-esm.com/showArticle.jhtml?articleID=21400480