Maersk Literature review:

2.1 Introduction:....................................................................................................................................1
2.2 sustainability:...................................................................................................................................2
2.3 Green and transportation:................................................................................................................4
2.4 Value chain and Legislation:...........................................................................................................6
2.5 Supplier management and our sourcing:........................................................................................11
2.5.1Decision to go green:...............................................................................................................12
2.5 Carbon footprint:...........................................................................................................................14
2.6 Environmental Management System ISO 14001:..........................................................................15
Bibliography........................................................................................................................................16

2.1 Introduction:
“Responsible business is sustainable development at the organisation level”[ CITATION LRo04 \l
2057 ]. A new trend has developed within business management both in literature and its
practical application. Businesses in search of sustainability in their business practices have
turn to more efficient ways of operating. One way of reaching efficiency has been through the
application or creation of new green-oriented business models. This research was then
undertaken on behalf A.P. Moller Maersk and its shipping division in order to develop a
methodology for calculating carbon footprint for the base year 2008. The objectives are to
compare current carbon emissions and evaluate the various cargo routing options for the
multimodal (Road, Rail and Inland) for the UK operations. Furthermore an analysis of value
chain of both the inbound and outbound logistics of Maersk will be undertaken in order to
have a better understanding of supplier’s management.

As such the following literature review will cover studies and journal articles on
sustainability and carbon footprint, transportation and suppliers management and finally on
value chain. This review will be performed in order to understand the possible strategies for
going green and its contribution to the current management tools. As global warming
becomes more prevalent and resources become more scare regulatory body worldwide will
push for more efficiency from businesses, as this a green strategy will become more and more
important for any organisation.

2.2 Sustainability:
Sustainability is defined by the Brundtland Comission [ CITATION Bru87 \n \t \l 2057 ] as
“development that meets the needs of the present without compromising the ability of future
generations to meet their needs” and by Shrivastava [ CITATION Shr95 \n \t \l 1033 ] as “The
potential for reducing long-term risks associated with resource depletion, fluctuations in
energy costs, product liabilities, and pollution and waste management.”

Sustainability is an important factor where companies are integrating social, economical and
environmental responsibilities. Among the global 250 companies 68 % used to generate
sustainability report in 2004 when compared with the environmental reporting in 1999 and 80
% of these reports discuses supply chain related issues[ CITATION KPM05 \l 2057 ] which shows
that corporations are concentrating on adopting environmental issues as their corporate social
responsibility strategy.

In the other hand sustainability in supply chain management is defined by Mentzer et al

(2002)as “the systemic, strategic coordination of the traditional business functions and the
tactics across these business functions within a particular company and across businesses
within the supply chain, for the purposes of improving the long-term performance of the
individual companies and the supply chain as a whole.”

According to Carter et al (2008) the development of a framework that helps explains

sustainability depends on the environmental, economic and social performance of the
company as seen through the context of supply chain. Carter et al analysed the importance of
the environmental performance as a strategy in the supply chain as leading to competitive
advantage and product differentiation (See figure 1).
Figure 1: Sustainability Model. Source: Carter et al 2008

According to Walley and Whitehead [ CITATION Wal94 \n \t \l 2057 ] “responding to

environmental challenges has always been a costly and complicated proposition for managers
and,” as it is expensive to comply with the government regulations and Colby et al (1995)
argued that “easy problems have mostly been fixed –the remaining obstinate challenges are
becoming increasingly expensive to resolve.” Walley and Whitehead (1994) again, state that
it is difficult to get a win-win situation as environmental programmes are very expensive.
This is further supporter by Carter et al (2008) who argued that the win-win situation will
arise if the fuel price start to escalate and customer become aware and demand transparency
in the supply chain. This will then enable organisations to concentrate their strategies on the
environment and thus more sustainable business practices. However, business are finding it
hard to do this as sustainability has been inconsistently defined. As such a detailed analysis of
what sustainability is is required. One example of this is #M successes in implementing an
environmental strategy to differentiate their products as this success questions the analysis of
Walley and Whitehead .
Although customers have been found to be willing to pay a premium for green products
(REFRENCE) it is also true that the price should not exceed that of the competitors, specially
during economic downturns (Schulze & Li 2009) . This then leads us to point out that
companies should be first aware of the economic environment in which they are performing
prior to implementing a green strategy. Most company fail to look deeper into the context in
which they are operating and understand the capacity or willingness of its customer to pay a
premium. These companies only take into consideration their feeling that “right things to do”
and implement green strategy due to the ethical reasons[ CITATION pBa00 \l 2057 ]

2.3 Green and transportation:

Rohweder (2008) developed a framework as shown in figure 2 for a climate responsible

operating mode which combines sustainable strategy, responsible leadership and
environmental management system which help the organisation to operate in all three
hierachial levels.

Figure 2: Climate Responsible Operations Model. Source: Rohweder 2008

Organisations can use sustainable strategy by targeting going green for “achieving
competitive advantage through reducing a company’s exposure to climate change and
through creating new opportunities for profit making strategic approaches which could
involve reconfiguring the entire activity of functional departments. And example is in
outbound logistics, firms might replace physical books or manuals with electronic versions;
and in after-sales service, they could supplant physical visits by service technicians with
remote diagnostics and treatment programs”[ CITATION MPo07 \l 2057 ]. They proposed the
dual strategy of the organisation which are “inside-out and outside-in”. Inside out is the
linkage where every operation of the company has an impact on the society during its normal
business cycle and where Michael E. Porter (2006) described every part of the value chain
has an direct impact on the society creating positive or negative consequences. The degree of
the impact depends on the places where the company is located, for example, UK will have
more regulations than china. In the study the inside out analysis is the correct accountability
of the companies carbon foot print and if they publish the data will be able to send a clear
message to the society about the climate responsiveness of the company for example see the
sustainability report provided by Walmart(2010) global sustainabilityreport.

Figure 3: Graph comparing calendar year GHG data to fiscal year sales data. Source: Walmart, 2010
The outside linkage as explained by Porter (2006) is not only the company activity affects
the society, but the external social conditions will either benefit or harm the company; hence
organisation can establish their position among its competitors in the society. Lash (2007)
ploted the climate competetiveness of car companies where the companies were plotted
against the decrease in the vulnerability of climate change and increase in climate
competitiveness (See figure 4).

Figure 4 Plotting the Climate Competitiveness[ CITATION JLa07 \l 2057 ]

The above analysis will help to understand its position with the competitors and can
formulate strategy how to move in to a position of competitive advantage. In the analysis
made by Lash & Wellington (2007) positioned Toyota as the least vulnerability to the climate
change as they have better fuel economy and the vehicles are designed to meet the emission
regulations using new technologies. The outside-in analysis forms a major part of the
discussion which includes governmental policies.

2.4 Value chain and Legislation:

Porter M ( 1985) developed the concept of value chain in “Competitive advantage” of the
firm for superior performance in where each activity within the organisation should be run at
optimal level to achieve advantage. Porter split activities into “Primary Activities” which
includes inbound logistics, operations, outbound logistics and services and “Secondary
Activities” include procurement, technology development, human resource management and
firm infrastructure. All work together in providing value to the customer. The secondary
activities aid the primary activities in achieving competitive advantage.

Figure 5 Porters Value chain[ CITATION Por85 \l 2057 ]

The comparison between value chain and supply chain is done to reduce the unclear concept
of the value chain by Andrew et. al (2008) where the importance of synchronisation of value
chain and suplain chain was discussed in order for business performnce to be optimized. The
comparison between value chain and supply chain is given below, where the customer
requirements which drive the value chain and the product requirement of the supply chain
flows in the opposite direction. A detail analysis of the value chain along with supply chain
can be found in Appendix:

Rabelo et al(2007) defines supply chain asthe “life cycle process to support the physical,
information, financial, and knowledge aspects for moving products ansd services from
suppliers to customers”. Hence it is used to integrate the suppliers and producers. For
example Walmart manages its supply chain by updating the data obtained during the point of
sale for the continuous replinishment of stock the information is passed on to the customers
by EDI(Electronic data interchange) to the suppliers who in turn manage JIT (just in time)
delivery to manage the inventory[ CITATION SAS05 \l 2057 ].

Figure 4 A Comparison of a Value chain with a supply chain[ CITATION And08 \l 2057 ]

Value chain can be made profitable if there is an alignment with the demand of the customer
“demand chain” and things produced by the supply chain which give prime importance to
“cost reduction and attaining operational excellence” whereas value chain focus on product
development and marketing. “In order to generate maximum value in the supply chain in a
dynamic market it should synchronize the flow of supplies with the flows of values from
customer inters of rapidly shifting tastes, preference and demand”. [ CITATION And08 \l 2057 ].

Companies tend to outperform each other by trying to implement various sustainable

strategies along the value chain.

Jason Tan (2009) explained that the evaluation of green value chain (See Figure 5) started
with 1) business process reengineering, where businesses gave importance to value creation
by adopting TQM and JIT Tools[ CITATION MHa90 \l 2057 ]. 2) To core competency
movement, where the organizational and technology competence were not easily copied by
competeitors [ CITATION Ham94 \l 2057 ]. 3) to environmental responsible manufacturing
(ERM), which is based on the concept that all forms of pollution is concidered to be waste. It
also statesthat by reducing pollution organisations can “minimizing cost such as disposal cost
and permit costs and thus avoid environmetal fines while improving their bottom line and
paralleling improveming and protecting the environment” [ CITATION Cur03 \l 2057 ]. And 4)
finallyfollowed by green manufacturing, which seeks to reduce the impact on the
environement through the reduction of resource consumption during the entire product life
cycle. “When Green purchasing, green manufacturing, and reverse logistics are being
combined together they form the green supply chain management (GSCM)” [ CITATION
Jas09 \l 2057 ]

Figure 5 Evolution of Green Value chain [ CITATION Jas09 \l 2057 ]

The macro environment in which a firm operates should be continuously monitored as any
changes will adversely impact the functioning of the organisation. PESTEL is a framework
utilised to understand the macro environment including political, economical, social,
technological and legal factors. Jonhson & Scholes (2006) defined it is a tool to identify key
drivers of change which impacts the structure of the industry, sector or market. Thus it is
important to look at this model in order to better evaluate the political and environmental
factors both which influence the industry in terms of carbon footprint. Political factors are
most often associated to environmental factors which translate into regulations and laws to
which companies must abide in order to be able to operate within a country.

Even though there is an increased influence by customers, society, shareholders to go green

[ CITATION Ala93 \l 2057 ] research indicates the single most important factor which influence a
corporation to follow more environmentally responsible strategies is government
regulations. The advantage of a company to go green is discussed by [ CITATION Por5a \l 2057 ]
in which they explained that an organisation with good environmental policy will be lead to a
first mover advantage and to early adoption of new regulations which then leads to lower
production costs as less “innovation offsets”. This then helps them stay ahead of the
competition. But contrary to this others have argued that environmental programmes are
costly and tend to decrease the value of the shareholders hence there is no win-win situation
for anyone involved in the organisation [ CITATION Wal94 \l 2057 ].

Rugman et al (2007) discussed the classification of environmental regulations in to

multilateral which includes World Trade Organisation; regional regulations, which include
European Union and the North Atlantic Treaty Organisation; national regulations, which
includes individual countries like UK; and sub national regulations, which include counties
such as the West Midlands and municipal regulations, represented by local council e.g.
Birmingham Council. All these play an important role in the regulations which impact an
organisation.

Voluntary programs to reduce environmental impact are only successful because it benefits
companies for allocating resources to implement them. The organisation perceives that
customers are willing to pay a premium and they can post a positive image of being
environmentally consciousness [ CITATION Cai92 \l 2057 ]. For example, in US, the
Environmental Protection Agent (EPA) is more involved in voluntary regulations such as the
33/50 Program, The Green Light Programme andThe Golden Carrot Super Efficient
rrfrigerator Program[ CITATION Dan93 \l 2057 ]. “A voluntary approach avoids the costly
process of legislation and the substantial costs of monitoring and enforcement but is also cost
effective for making pollution reductions. The flexibility associated with voluntary measures
allows firms to make the most cost efficient reductions”[ CITATION See \l 2057 ]. The firms use
this voluntary program to inform their customers about their commitment in to the
environment.

(Seema Arora S. G., 1995) in their model due to the competeitve incentive decide to
overcomply then the regulations due to customers preference or to stay ahead of the
competetion by anticipating strict regulation to be implemented in the future. Firms also
vercomply because the firms can guide the regulation bodies to tight thier standards so that it
would become difficult for the compititors to comply as it will be expensive and hence
reduce competetion[ CITATION Sal83 \l 2057 ].
Klassen & McLaughlin (1996) found in their research that companies listed in the New York
Stock Exchange present an immediate increase in the market value of the company once the
announcement of adoption of environmental polices is made. The opposite is also true as any
environmental crisis will lead to negative impact on the value of the company. For example,
BP recent oil spill crisis in the Gulf of Mexico significantly reduced its market value by one
third. Government regulations are becoming stricter as the topics of green efficiency and
conservation of environment is increasing in priority.

But the porters three generic strategies of cost leadership, differentiation, and focus which are
important to any organisation. [ CITATION Shr95 \l 2057 ] Argued that these generic strategies
can be made sustainable by following environmental codes available in countries like US,
UK. For example it is EPA(Environment Protection Agency) in US and British Standard(BS)
as a Public Available Specification(PAS).

2.5 Supplier management and outsourcing:

Companies benefit from closer relation with the suppliers. Christopher (2000) underlined the
basic philosophy of relationship marketing as “the goal of all marketing activity should be the
establishement of mutual beneficial partnership with the customers”. Hence working close to
the suppliers can help to find ways to reduce cost in the supply chain by using JIT systems
and using EDI for order processing and eliminating . The competetion of the suppliers can be
reduce if there is greater relationship with the suppliers and customers. For example,
Suppliers of Marks & Spencers have had a good relationship for many years in where they
meet the strict requirements of Marks and Spencers and where both parties have invested
substancially in improving their products by continuos improvement. Hence the suppliers will
be confident as it is not easy for any new comer to enter the market and capture it.

According to Christopher (2000) the old model of buyer supplier were they kept distance
from each other and interacted only when during negotiationscan be easily broken by the
competitors by exploting the needs of different motivation of the buyer to maximize margin
and the supplier to maximize volume cannot be sustained. Hence Christopher (2000) in his
relationship based approach states that there is stronger interface between the vendor and
customer as there are multiple place where the interaction takes place in all the departments
as shown in the figure ###. The benefit to the supplier is that the if the customer core
capabilities are increased then they will be treated as preffered supplier and the cost of
serving the customer will be reduced .

Figure 6 The Transition to Relationship Marketing[ CITATION Chr00 \l 2057 ]

L.Schulze & Li( 2009) identified different decison making models towards green supply
chain management where they use third-party logistics (3PL) as the best methadology to
improve speed and reliability of supply chains. 3PL started in the 1900 to build networks
around the word and add value to the service provided. Schulze and Li (2009) explained how
the relationship between a company and 3PL can be improved so that the company can use
outsource to go green. The companies can meet the challenges of going green by
implementing green supply chain and further the third party logistic providers can be used to
improve the transport efficiency and thus help in the reduction of carbon footprint.

The main reason to outsource the logistics eenthough it can be performed internally is that
companies can get faster, reliable, high quality service at cheaper price as the the 3PL can
improve their business as they are more efficient. As such the work then is done internally
which can be used by the company to improve their business processes [ CITATION PSc07 \l
2057 ]. Thus enabling them to be have a competetive advantage by allowing organisations to
concentrate on their core competencies and getting expertise from outside.
2.5.1 Decision to go Green:

L.Schulze & Li( 2009) model to go green where the outsourcer consider to select a third party
logistic provider is given below in figure ## where the as a first step the outsourcer uses RFI
and RFP to establish relationships. Later the parties work together to improve the supply
chain which includes various internal and external drivers such as internal-ethical motives,
top management, cost reduction and external – stakeholders, customers, Legislative
regulations. Top management and legislation regulation are a important driving factors for an
organisation to go green.

In contrary there are some barriers which reduces the impact of the organisation ability to go
green which incude the extra cost in going green or there is no customer demand in enabling
the organisation to go green. The interaction between the parties enables important decisions
concerning green logistcs and find a better solution where each can discuss their expectation
from each other. The important decison is to ask ISO 14001 from the customer where the
provider has the capability to provide green service due to the implementation of
Environmental Management Service(EMS) and the quality of the service provided is of high
quality. _Once the drivers, barriers are considered then both the parties can use each other to
implement green supply chan through green tranportation, green warehousing and packaging
and reverse logistics.
Figure 7 Selection of 3PL[ CITATION LSc09 \l 2057 ]

2.5 Carbon footprint:

Haven (2007) analysed the assessment of the carbon footprint of a chair as a “life-cycle
assessment which took into account materials, manufacture, transport, use and disposal at
every stage of development." The carbon footprint has been described as a measure of the
exclusive total amount of carbon dioxide emissions that is directly and indirectly caused by
an activity or is accumulated over the life stages of a product [ CITATION Wie08 \l 2057 ]. From
these definitions it is not clear what the boundaries and indication units are hence
organisations tent to define their own boundaries, which tend to be those that are more
convenient to them. As an example BP defines carbon footprint as the amount of carbon
dioxide emitted due to daily activities – from washing a load of laundry to driving a carload
of kids to school." There is no single universal standard which enable an organisation to
follow and calculate the carbon footprint of their product. Thus the data obtained from each
methodology could be biased for the benefit of the organisation.

The carbon footprint could be an important indicator of the environmental impact of the
organisation as it directly linked with global warming. Many websites are available to
calculate the carbon foot print. For example ecotransit.org provides carbon footprint for the
entire logistic operation performed by a product.

2.6 Environmental Management System ISO 14001:

The ISO 14001 is an Environmental Management System (EMS) which has been forced by
EU through the enactment of regulations[ CITATION Qua01 \l 2057 ]. These standards are used
by companies in order to implement sustainable system in their practices and to increase
progressively the environment management and to establish environment protection. The ISO
14001 system uses model of “Plan, Do, and Check Develop” [ CITATION Wei06 \l 2057 ].
Steger( 2000) explained the importance of EMS in creating new “WIN-WIN” potential by
allowing smoother information flow leading to effective organisations but in the contrary
Rohweder (2004) argued that ISO 14001 has not increased commitments throughout the
organisation to achieve targets but is used by few specialist in the organisation. Handfield
et.al( 1997) analysed that the transaction of industries driven by implementation of ISO
14001 where environmental friendly practices were considered as an optional business
practice rather it is an competetive necessity for the survival.

ISO 14025 inclusion of all the life cycle stages in the environmental declaration . But the
standars are misinterepted and the data available to the assement are limited.

ADD CONCLUSION TO TIE UP ALL THE TOPICS AND TO SERVE AS A INTRO TO

THE KIND OF RESERACH YOU WILL BE PERFORMING.

Bibliography
Andrew, F., Dan, S., & Tom, C. (2008). Value chain vs Supply chain. BP Trends.

Anne, D. (1993). The Effectiveness of EPA vountary Programs. Environment law institute.

Bansal, P., & Roth, K. (2000). Why companies go green: A Model of Ecological
Responsivesness. the Academy of management journal , 717-736.

Brundtland Commission. (1987). World Commission on Environment and Development. 8.

Cairncross, F. (1992). Costing the Earth. Cambridge: Harvard University Press.

Carter, C. R., & Rogers, D. S. (2008). A framework of sustainable supply chain

management:moving toward new theory. International Journal of Physical Distribution &
Logistics Management , Vol. 38 No. 5, pp. 360-387.

Christopher, M. (2000). Marketing Logistics. Oxford: Butterworth Heinemann.

Colby, S., Kingsley, T., & Whitehead, B. (1995). The real green issue. McKinsey Quarterly ,
No. 2, pp. 132-43.

Curkovic, S. (2003). Environmental Responsible Manufacturing: The development and

validation of a measurement model. European J. Operational Res , 146: 130-155.

Hamel, G. C. (1994). Competing for the future: Breakthrough strategies for seizing control
of your industry and creating the markets of tomorrow. boston: Harvard Business School
Press.

Hammer, M. (1990). Re-engineering work: Don't automate, obliterate. Harvard Business

Review , 104-112.

Handfield, R. S. (1997). Greening value chain practices in the furniture industry. Journal of
Operations Management , 15: 293-315.

Haven, J. 1. (2007). Environment Business. 129: 27.

J Lash, F. W. (2007). competetive advantage in a warming Planet. Harvard Business review ,

95-102.

Jason Tan, S. Z. (2009). Green Value Chain in the Context of Sustainability Development
and Sustainable Competitive Advantage. Global Journal of Environmental Research , 234-
245.
Johnson, G., & Scholes, K. (2006). Exploring Corporate Strategy – Text and Cases. Harlow:
Pearson education.

Klassen, R. D., & McLaughlin, C. P. (1996). The impact of environmental management on

firm performance. Management Science , 42(8), pp. 1199-1214.

KPMG. (2005). KPMG International Survey of Corporate Responsibility Reporting 2005.

Amsterdam: University of Amsterdam.

L.Rohweder. (2004). Yritysvastuu. porvoo: Kestavaa Kehitysta organisaatiotasollla. WSOY.

L.Schulze, & Li, L. (2009). Identification of Decision Making Modes towards Green supply
chain. DET2009proceedings (pp. 1421-1433). springer-verag berlin.

Langley, J. (2008). Third-Party Logistics. LLC: Capgemini US.

M Porter, L. R. (2007). A Strategic approach to climate. Harvard business review , 22-26.

Mentzer, J., DeWitt, W., Keebler, J., Min, S., Nix, N., Smith, C., et al. (2002). Defining
supply chain management. Journal of Business Logistics , vol 22 no 2 pp.1-25.

Michael E. Porter, M. R. (2006). Strategy and Society: The Link Between Competitive
Advantage and Corporate Social Responsibility. Harvard Business Review , December.

Porter, M. (1985). Competitive advantage, creating and sustaining suoerior performance.

Newyork: The Free Press.

Porter, M. E., & Linde, C. v. (1995a). Green and competitive: Ending the stalemate. Harvard
Business review , 73(5), pp. 120–134.

Quazi, H. (2001). Motivation for ISO 14000 certification: DEvelopment of a predective

model. Omega , 525-542.

Rabelo, L. H. (2007). Value chain analysis using hybrid simulation and AHP. Int. J.
Production Economics , 105: 536-547.

Rohweder, L. (2008). Climate change - A Business Challenge. HAAGA-Helica university of

applied science.
Rugman, A. M., & VERBEKE, A. (1993). CORPORATE STRATEGIES AND
ENVIRONMENTAL REGULATIONS: AN ORGANIZING FRAMEWORK. Strategic
Management Journal , Vol. 19, 363–375,.

Rugman, A. M., Kirton, J., & Soloway, J. A. (1997). NAFTA, environmental regulations and
Canadian competitiveness. Journal of World Trade , 31(4),pp. 129–144.

Salop, S. a. (1983). Raising Rivals Cost. American economic review(Paper and Procedings) ,
267-71.

Schonsleben, P. (2007). Internal Logistics Management. Boca Raton: Auerbach Publications.

Seema Arora, S. G. (1995). Toward a theoretical model of voluntary overcompliance.

Journal of Economic Behavior & Organization , 289-309.

Seema Arora, T. N. (1996). Why do firms volunteer to exceed Environmental regulations?

Understanding Participation in EPA's. Land Economics , 413-32.

Sherer, S. (2005). From supply-chain management to value network advocacy: implications

for e-supply chains. Supply Chain Management , vol. 10, pp. 77, 2005.

Shrivastava. (1995a). The role of corporations in achieving ecological sustainability.

Academy of Management review , vol 20.no 4 936-60.

Shrivastava, P. (1995). The role of corporations in achieving ecological sustainability.

Academy of Management Review , 20(4), pp. 936–960.

U.Steger. (2000). Environmental management system. Empirical evidence and further

perspective. European Management Journal , 23-37.

Walley, N., & Whitehead, B. (1994). It’s not easy being green. Harvard Business Review ,
Vol. 72 No. 3, pp. 46-52.

Weiss, P., & Bentlage, J. (2006). Environmental Management Systems and Certification.
Uppsala: The Baltic University Press.

Wiedmann, T., & Minx, J. (2008). A Definition of 'Carbon Footprint. Durham: ISAUK
Research & Consulting.
Appendix: 1 Logistics services out sourced by Customers[ CITATION Lan08 \l 2057 ]
Appendix: 2 List of Third party logistics providers (3PL) outsourced by
Customers[ CITATION LSc09 \l 2057 ]