23. Different Organizations’ Green Supply Chain Management and LEED

In recent years, public attitude and opinion have changed remarkably regarding the way in which the environment is viewed. Over the past decade, many studies have been conducted regarding how the earth’s environment is being destroyed due to the way in which people consume many of the earth’s natural resources without replacing them, along with the harmful pollution that is continually pumped into the environment.

This change in attitude has primarily been brought about due to increased awareness of the harm caused by everyday lifestyle choices. The resulting attitude shift has sparked campaigns focused on educating people on how to make a difference. This shift increases pressure on organizations to improve their operations to reduce the amount of harm they cause on the environment. Consumer awareness has resulted in different buying choices being made based on which companies are cognizant of environmental protection strategies. This has forced many organizations to change the way they operate and learn new ways to operate a sustainable organization.

Various initiatives have been put in place to build a healthier and more sustainable environment for the years to come. Many organizations are continuously developing new technologies that will make the world a more environmentally friendly place. One such initiative in place is Leadership in Energy and Environmental Design (LEED), which was created by the United States Green Building Council (USGBC). It provides a general set of standards in the development of green buildings and green renovations and leads the effort toward developing Green supply chain management.

Green supply chain management is certain to be around for years to come and will inevitably be the cornerstone of sustainable organizations concerned with manufacturing and production. Green supply chain management will be vital to customer relationship management’s success in providing consumers with proof of an organization’s Green manufacturing and supply chain management processes. Organizations today need to look into their own carbon footprint and try to reduce it as much as possible.

There are thousands of programs and initiatives worldwide that have been designed and implemented to not only help make the environment sustainable for the future but also ensure business sustainability. The first example of this is the LEED requirements. Another initiative discussed is the study conducted by the Supply Chain World Conference titled Best Practices in implementing Green Supply Chains.⁽¹⁾ This considers the field of construction and its many facets, such as building codes and what new materials have been produced to cause less of an impact on the environment than traditional materials.

The majority of large companies today have taken steps to reduce their organizational impact on the environment. This transformation has proven the link between improving environmental performances and financial gain. Supply chain management is a key area for implementing green improvements that result in increased financial strength. Organizations that have improved their supply chain and environmental performance have found that the organization incurs lower waste disposal and employee training costs, as well as a decrease in cost of materials. Combining these cost-saving activities with lower environmental permitting fees, organizations can experience enormous savings.

So what exactly is Green supply chain management? According to LMI Government Consulting, “Green Supply Chain Management recognizes the disproportionate environmental impact of supply chain processes in an organization.”⁽¹⁾ In an article published by the Harvard Business Review, Carter and Narasimhan state that Green supply chain management has the following advantages:

• Improves agility—Green supply chain management helps mitigate risks and speed innovations.

• Increases adaptability—Green supply chain analyses often lead to innovative processes and continuous improvements.

• Promotes alignment—Green supply chain management involves negotiating policies with suppliers and customers, which results in better alignment of business processes and principles.⁽²⁾

Traditionally, Green supply chain management programs were associated with assuring compliance, minimizing risk, maintaining health, and protecting the environment. However, organizations are starting to notice an emerging value creation that is being brought about through implementation, such as enhanced supplier and customer relations, rise in organizational productivity, increase in innovation, and growth. Organizations that successfully implement Green supply chain management strategies give themselves a much greater chance for long-term sustainability, regardless of external forces such as competition or economic health. The inability of an organization to change will result in the organization’s being susceptible to failure.⁽²⁾

In Strategic Management by Dess, Lumpkin, and Eisner (2006), it is written: “Environmental sustainability is now a value embraced by the most competitive and successful multinational companies. For many successful firms, environmental values are now becoming a central part of their cultures and management process...environmental impacts are being audited and accounted for as the third bottom line.”

According to one 2004 corporate report, “If we aren’t good corporate citizens as reflected in a Triple Bottom Line that takes into account social and environmental responsibilities along with financial ones—eventually our stock price, our profits, and our entire business could suffer.” Strategic Management also describes a report conducted by KPMG studying 350 firms: “More big multinational firms are seeing the benefits of improving their environmental performance.... Firms are saving money and boosting share performance by taking a close look at how their operations impact the environment.... Companies see that they can make money as well.”

Shaw Industries, a subsidiary of the Berkshire Hathaway Company, has managed to reinvent itself through taking drastic action and developing an environmentally stable business plan. Shaw Industries produces industrial carpet for offices. Traditionally, the company used a PVC plastic to produce their product, which was potentially toxic and harmful. Old, used carpet was dumped in landfills, with over 95% of the carpet being nonreusable. The carpet industry was also susceptible to increases in raw material prices because petroleum is one of the primary products used to produce carpet. These factors prompted Shaw Industries to rethink their business strategy and create a new way of producing carpet.

The company developed a brand-new way of manufacturing carpet that is not only nontoxic, but extremely eco-friendly. Shaw Industries was awarded by the Environmental Protection Agency (EPA) with the Presidential Green Chemistry Challenge Award for their ingenuity. As of 2008, Shaw Industries had 500 million square feet of their new carpet, EcoWorx, laid in offices throughout the world. This example shows how good strategic planning that takes into account the changing external environment helps organizations achieve sustainable growth.

In recent years, LEED has looked at tackling how to reinvent previously harmful products so that they are eco-friendly. The goal is to set guidelines for the construction industry with the intent of improving performance in energy conservation, water efficiency, carbon dioxide emissions reductions, indoor environmental quality, and stewardship of resources and sensitivity to their impact. LEED was developed by the United States Green Building Council in 1998 and is continually becoming ever more present in the design of new buildings and communities and the redevelopment of existing structures. According to the United States Green Building Council, LEED is flexible enough to be applied to both commercial and residential structures. The USGBC states: “It works throughout the building lifecycle—design and construction, operations and maintenance, and significant retrofit. And LEED for Neighborhood Development extends the benefits of LEED beyond the building footprint into the neighborhood it serves.”

In a report titled Foundations of LEED, published by the USGBC, the mission of LEED is as stated: “LEED encourages and accelerates global adoption of sustainable and green building and neighborhood development practices through the creation and implementation of a universally understood and accepted benchmark encompassing existing and new standards, tools, and performance criteria.” The first LEED Pilot Project Program was launched in 1998 and is known as LEED Version 1.0. With the green building industry guidelines and initiatives constantly changing, new guidelines and initiatives are being introduced daily. Project teams must be aware of changes made in order to comply with the latest version of the LEED rating system so that all construction qualifies for LEED approved and certification. Currently, LEED Version 3 has been in use since its launch in April 2009.

LEED is focused on continuous improvement and is updated through regular development cycles. The Foundations of LEED report identifies three basic types of LEED development:

1. Implementation and Maintenance of Current Version includes the improvement of LEED through the correction and clarification of credit language. Credits refer to gaining credits for green rights. For example, a permit is required to allow the holder to emit one ton of carbon dioxide. Credits are awarded to countries or groups that have reduced their greenhouse gases below their emission quota. Carbon credits can be traded in the international market at their current market price. The carbon credit system was ratified by the Kyoto Protocol. Its goal is to stop the increase of carbon dioxide emissions. If an enterprise or a group plants enough trees to reduce emissions by one ton, the corporation will be awarded one credit. If emissions are produced above quota, a credit must be purchased from the environmental group.

2. Adaptations to the existing version include the ability for both specific space types and international projects to be addressed through the creation of credit adaptations. This allows new paths to be introduced in existing credits to meet the needs of projects that would otherwise be unable to utilize the requirements in LEED.

3. Next Version is the comprehensive improvement phase of LEED development through a periodic evaluation and revision process. This phase includes multiple avenues for stakeholder input and final approval by USGBC membership. The ideas generated during the development of next version LEED credits are often pilot tested by LEED project teams prior to ballot.

The LEED Green Building Rating System is voluntary and no developer is confined to follow the set guidelines. The rating system is also consensus-based and market-driven. The rating system is structured around existing and proven technologies, and evaluates the environmental performance of a whole building over the building’s or neighborhood’s life cycle, providing a benchmark standard for what is deemed a green building in not only design but also construction and operation.

The rating system is designed so that new or existing commercial, institutional, and residential buildings, along with new neighborhood developments, can be rated on the same standards. Accepted energy standards, along with environmental practices, serve as the base of the rating system, and it aims to strike a balance between known, established practices and emerging, innovative concepts. The USGBC sets Minimum Program Requirements (MPRs). All projects must follow these minimum requirements to be eligible for LEED certification. These MPRs are in place to clarify the types of buildings that the LEED Green Building Rating System was designed to measure, and taken together these serve three goals:

1. To give clear guidance to customers.

2. To protect the integrity of the LEED program.

3. To reduce complications that occur during the LEED Certification process.⁽³⁾

Developers must be aware that the LEED Certification can be revoked at any time if the project fails to uphold the MPRs. The reason the MPRs are in place is to ensure the understanding of the fundamentals of green building. The rating system designed by the USGBC covers the following various topics:

• Sustainable Sites

• Water Efficiency

• Energy and Atmosphere

• Materials and Resources

• Indoor Environmental Quality

• Awareness and Education (Homes)

• Smart Location and Linkages (ND*)

• Neighborhood Pattern and Design (ND*)

• Green Infrastructure and Building (ND*)

• Innovation in Design/Operations

• Regional Priority

* ND stands for neighborhood development. In the future, HUD may begin giving grants based on the LEED ND scores. The ratings are divided into five areas.

The rating system is designed around a 100-point scale, with an additional 10 bonus points granted for innovative design and exceptional performance. Additional credit is granted for achieving regional importance regarding a project’s location. The weighting of points is split between human benefit and environmental benefit, such as global warming, greenhouse gas emissions, fossil fuel use, toxins and carcinogens, air and water pollutants, and indoor quality. The USGBC awards different project certifications in accordance with the following scale, which is determined on the amount of points obtained:

⁽²⁾ “The Triple-A Supply Chain,” Lee, Harvard Business Review, October 2004 and “Environmental Supply Chain Management,” Carter and Narasimhan, CAPS Research, 1998.

⁽³⁾ U.S. Green Building Council Board of Directors, June 15, 2010.