Electronics has become an integral part of modern life. Demand for electronic products�computers and telecommunications, semiconductors, electrical equipment, and consumer electronics�is growing, particularly in less developed countries, where the electronics industry has been a force for modernization. Much of the industry�s new growth has been in labor-intensive segments of Asian production, whereas capital- and research-intensive stages of production remain concentrated in the United States, Japan, and Europe.

The ubiquitous nature of electronics in the Asian and global economy has prompted the US-Asia Environmental Partnership (US-AEP) to examine the environmental issues surrounding the electronics sector. The Clean Technology and Environmental Management (CTEM) component of US-AEP is focused on promoting market-based initiatives in the pursuit of cleaner technologies and sustainable economic growth. Accordingly, US-AEP/CTEM commissioned a study to identify major environmental issues related to the electronics industry and bring to light the latest trends in addressing environmental concerns. The study is based on a survey of seven international electronics firms and draws on other available industry-wide studies and data.

It is hoped that this report will contribute to the growing body of knowledge on clean technologies and sustainable economic development. It is intended to inform leaders and interested parties in industry, public sector and civil society, both in Asia and the U.S., whose destinies are woven together in an increasingly interdependent world.

The trend toward supply chain management. The electronics industry, like all industry, has realized that the quality and cost of their products depend on their suppliers throughout the world and has become increasingly concerned with supply chain management (SCM). This has resulted in two related trends in the industry:

Increasing involvement of procurement in design engineering. Procurement has the potential to cost-effectively deliver considerable value and play a significant role in business development, while establishing supplier relationships that ensure high quality and environmental standards. A trend toward involving suppliers at the design phase is clearly benefiting the electronics industry.

Rationalization of suppliers. Electronics companies are relying on fewer but larger suppliers for incoming products. As small suppliers lose contracts, they may alternatively seek to occupy highly specialized niche markets or sell to intermediate customers. Increasing supplier-to-supplier sales would extend and redistribute risk through the supply chain. As a result, legal and environmental health and safety (EHS) departments in companies are increasingly involved in evaluating contracts for potential risk.

Environmental issues in the electronics industry. The electronics industry has typically been considered relatively "clean," compared with other industry sectors. Nevertheless, manufacturing wastes in the industry and disposition of electronic products are raising important technical, financial, and environmental issues. Domestic and international air, water, ground, and disposition regulations and standards now affect every step in product life cycle and are becoming an important cost consideration in electronics manufacturing. Electronics companies have taken both manufacturing wastes and product environmental impact seriously and are increasingly concerned about the many associated impacts of electronic products, in some cases, even taking responsibility for the full life cycle of a product. Environmental concerns are often addressed along with contractor and employee health and safety issues, primarily through integrated EHS programs. Because supplier policies and practices can improve the EHS performance of a company�s products, some EHS programs are being extended to a company�s suppliers through supply chain environmental management (SCEM).

Driving forces for supply chain environmental management. SCEM merges a firm�s environmental management policies and goals with its SCM programs. SCEM is receiving increased attention in many sectors, particularly electronics, and holds strong implications for suppliers. Firms in the electronics industry are subject to both external and internal forces that are driving them towards SCEM. External forces include regulations, commercial customers, and advocacy groups, while internal forces are integrally linked to management issues, such as risk management, company benefits, societal concerns and corporate image.

Industry�s response to SCEM forces. To gain a deeper understanding of industry approaches to SCEM, case studies were carried out with seven major firms in the electronics industry: Advanced Micro Devices (ADM), Xerox Corporation, Intel Corporation, Quantum Corporation, Applied Materials, Hewlett Packard and United Technologies Corporation (UTC). These case studies exhibit how some American firms with global operations are using various SCEM tools in Asia and the United States to achieve cleaner technology, enhanced EHS records, and business benefits through stronger supplier relationships. Some of the common SCEM tools employed by these firms are be summarized below:

Prequalification of suppliers(AMD, Intel and Xerox)

• Require or encourage environmental criteria for approved suppliers
• Require or encourage suppliers to undertake independent environmental certification

Environmental requirements at the purchasing phase (AMD, Hewlett Packard and UTC)

• Build environmental criteria into supplier contract conditions
• Incorporate EHS staff on sourcing teams

Supply base environmental performance management (AMD and Hewlett Packard)

• Supplier environmental questionnaires
• Supplier environmental audits and assessments

Build environmental considerations into product design (Xerox, Quantum and Intel)

• Jointly develop cleaner technology with suppliers
• Conduct life cycle analysis in cooperation with suppliers
• Engage suppliers in design for environment (DFE) product innovation
• Coordinate minimization of environmental impact in the extended supply chain
• Develop tools that assist in the DFE effort

Cooperate with suppliers to deal with end-of-pipe environmental issues (Applied Materials and Xerox)

• Reduce packaging waste at the customer/supplier interface
• Reuse/recycle materials in cooperation with the supplier
• Launch reuse initiatives (including buy backs and leasing)

Reverse logistics (Nortel � not included in this study)

• Give supplier an incentive to reduce the customer�s environmental load

Influence legislation to facilitate better SCEM policies (Intel)

• In cooperation with suppliers, lobby to strengthen environmental regulation
• Lobby on behalf of SCEM initiatives

Work with industry peers to standardize requirements (Hewlett Packard)

• Create interfirm procurement group to collaborate on environmental issues
• Standardize supplier questionnaires

Inform suppliers of corporate environmental concerns (AMD, Xerox and UTC)

• Issue statements of EHS priorities to suppliers
• Draft and distribute comprehensive SCEM policy

Promote exchange of information and ideas (UTC and Intel)

• Sponsor events to facilitate discussions between customers and suppliers on environmental issues
• Host training and mentoring programs

American firms included in this report�s case studies have generally started their SCEM efforts with local (U.S.) suppliers. This experience is, however, already being exported to Asia, and more will be in the future. For example, the UTC case study exhibits an Asian supplier outreach pilot; Hewlett Packard and Xerox have global SCEM programs in place; and AMD�s Bangkok facility performs waste audits. The Asian programs already in place indicate great potential for widespread extension of SCEM in the region.

Ten emerging themes: challenges and opportunities. The seven case studies have revealed ten emerging themes in SCEM, which present both challenges and opportunities for all firms�customers and suppliers�in the electronics sector. These themes are summarized below.

1. Companies are experiencing external and internal pressures for SCEM. As noted, external and internal pressures are driving firms towards SCEM. Among the companies represented in this report, European take-back regulation is a particularly important external driver. It has helped companies to see the issue of product responsibility in a new way and prompted companies to work proactively. Advocacy groups�NGOs and shareholders�are also becoming increasingly interested in SCEM and are working harder to encourage companies to implement SCEM programs. Fundamental advantages to a firm�s internal efficiency, profitability and image have driven firms to engage in supplier environmental programs. Individually, these and other issues are important; cumulatively, they are an important driver for change.

2. Customer firms are applying SCEM by forming cross-functional procurement teams and by seconding environmental staff to design and procurement departments. Several companies included in the report meet supply chain management needs by using cross-functional design and/ or procurement teams. With the shift beyond SCM to SCEM, EHS staff are being included on these teams to ensure that the company�s environmental needs are met. The case studies in this report reveal that environmental objectives are consistently favored when effective mechanisms bring procurement and environmental staff together, when risk is sufficient to lend environmental staff credibility in purchasing decisions, or when the company has made environmental considerations a high priority or has made a strong commitment to SCEM programs.

3. Design for the Environment (DFE) constitutes a fundamental shift in the supplier/customer relationship. The design stage is the place in the life cycle of a product that has the most potential to shape the product itself and the processes that are used to create it. As long as companies continue to emphasize the development of green products and reduction of downstream risks and wastes, DFE will gain importance. For suppliers, this trend is likely to result in increasingly common environmental product specifications and the opportunity to work with companies on developing products that use cleaner production processes and materials. Suppliers are also being asked to collaborate on finding solutions to environmental problems. This represents both an opportunity and an obligation for suppliers. Suppliers who demonstrate skill and ingenuity in their involvement with environmental solutions will likely receive customer loyalty. They will also save effort and expense for their customers by eliminating problems early in the supply chain.

4. SCEM proposes a new model for the relationship between companies and their suppliers. The importance of customer-supplier partnerships was most directly illustrated in the case studies on promoting the exchange of information and ideas, but it is an aspect of nearly all the case studies. These partnerships represent a shift from the old business model of communicating with suppliers primarily through purchase orders to one of shared problem solving. In its most advanced form, the supplier is encouraged to become a consultant to the customer. The case studies in this report give examples of ways in which suppliers are going beyond merely providing products, services, and materials to actively meeting the needs of companies and participating in forming solutions. In the long term, successful suppliers are likely to be those who anticipate customers� needs�including EHS needs�and provide solutions.

5. The implementation of SCEM is still in its infancy. The use of audits, questionnaires, and product specifications is central to SCEM and was evidenced in most of the case studies. Firms are now refining these processes and making them more effective and user friendly for both company and supplier. However, these initiatives are not being used in a systematic way. This is likely to change as firms mature in their use of SCEM and see opportunities for adding value and rationalizing costs.

6. The trend is to reduce the number of "Tier 1 suppliers" and lengthen the supply chain. Rationalization of the supplier base, evidenced in statistical surveys and in the case studies, is becoming a trend. Although this may not necessarily mean that many supplier companies lose business, some will. Niche providers and specialist providers will be best insulated. The real impact of the reduction in the number of suppliers may be to lengthen, rather than shorten the supply chain. In the electronics industry, many of the parts required in production are niche or highly specialized products. These will still have a market, but not necessarily with multinational customers. Global companies will reduce the number of Tier 1 suppliers, but this may simply reorganize the supplier structure so that their enduring Tier 1 suppliers contract with old Tier 1 suppliers, making them Tier 2 suppliers, and so forth. This shift will restructure supplier relationships but may not mean a loss in business for smaller suppliers.

7. SCEM can be a means of environmental risk management. Risk management was emphasized by both EHS professionals and procurement officers in the course of interviews for this report. SCEM programs, the concentration of suppliers, and the lengthening of the supply chain will mean that financial and environmental risk is pushed back down the supply chain, onto suppliers. Inventive SCEM programs, however, will help suppliers minimize their own risk as well.

8. The benefits of SCEM may be uneven. SCEM has the potential to benefit both suppliers and customers. Among suppliers in developing countries, however, concern exists on whether the benefits to suppliers of SCEM will be evenly distributed. In the semiconductor sector, for example, companies in developed countries often export the lower-tech, labor-intensive phases of production to developing countries. These segments of the supply chain may not have the same opportunities to benefit from SCEM initiatives as those associated with the design phase. This suggests that in some segments of the semiconductor industry, suppliers may face environmental requirements without receiving the benefits of collaboration. This may or may not be applicable elsewhere in the electronics sector, and suppliers may often be able to participate actively in shaping SCEM programs.

9. The marketplace will start to reward environmentally sound products and processes. Savvy suppliers and regions will recognize the competitive advantage that green products and processes are likely to present in coming years and will position themselves accordingly. As more companies begin to implement sophisticated, comprehensive SCEM programs, it will be a key advantage to suppliers to have clean technologies already in place. Companies that take steps now to begin the process of greening their operations�eliminating or minimizing hazardous material use, favoring cleaner technology, adopting DFE processes, and minimizing environmental risks�will find that they are well positioned to answer rising concerns about environmental management.

10. SCEM complements "just-in-time" management at many points. Many of the issues in SCEM have already been rehearsed with "just-in-time" management�the increased importance of customer-supplier partnerships, reduction in the number of suppliers, integration of suppliers at the design stage, and pushing risk downstream onto suppliers. The implication of this is that it is not an entirely new aspect in the customer-supplier relationship, but a strategic one and likely to endure.

The strategic and environmental advantages of SCEM ensure that it is a major issue�a different business model�for the next decade and beyond. SCEM may prove to be the most effective way that global firms can spread clean technologies and promote global voluntary environmental management. Companies have the power to effect enormous changes in the environmental performance of their suppliers worldwide without intervention or regulatory involvement. Governments, bilateral organizations like US-AEP, and multilateral aid agencies may also play a complementary and supportive role.

Overview of the Electronics Industry

The Importance of Supply Chain Management

Businesses in all sectors have come to realize that the quality and cost of their products depend on their suppliers, and supply chain management (SCM) has become an increasingly prominent business concern. This is equally true in the electronics industry. The Arizona-based Center for Advanced Purchasing Studies (CAPS) has been tracking procurement practices in various industrial sectors since 1996. The data in the table below is taken from that study and demonstrates the attention being paid to supply chain management. The data are excerpted from procurement analyses of the semiconductor, electrical equipment, electronic equipment, and computer and telecommunications sectors of the CAPS study. In each sector, between nine and eleven firms provided information, which were aggregated in the CAPS summaries.

*Represents direct material suppliers  /  Source: Center for Advanced Purchasing Studies, March 25, 1999.

Two major observations arise from Table 1, related to cost of procurement and the number of suppliers:

• Cost of operating procurement functions: The cost of operating the procurement function is generally only about 1 percent of the amount paid to suppliers in contracts. This suggests that procurement has the potential to deliver considerable value and influence a significant amount of business without high operating costs. While the cost savings that procurement provides are reported in the CAPS summaries, the service that purchasing departments provide in establishing supplier relationships that ensure high quality and environmental standards is also significant and has the potential to grow.

• Number of Suppliers. Perhaps the most significant revelation of Table 1 is the trend toward reduction of active suppliers. Three out of four sectors showed a significant drop in the number of active suppliers during the one-year reporting season (column 4); the fourth sector (semiconductors) showed only a marginal increase. Moreover, the figures in column 3, "Percent of active suppliers that received 90 percent of company purchases," indicate a concentration of purchasing spending among a small portion of suppliers. The lower the percentage, the more concentrated the companies� spending. On average, the firms surveyed spent 90 percent of their purchasing dollars on only 11 to 25 percent of their total suppliers. In all four cases, this demonstrates a concentrated purchasing program that relies heavily on a small proportion of suppliers for the bulk of incoming products. In the electrical equipment sector, nearly 80 percent of the firms included had goals in place to reduce the supplier base (other sectors did not report on this aspect).

In the semiconductor and computer and telecommunication sectors, which demonstrate the most concentrated purchasing efforts, 90 percent of the purchasing dollars went to just more than 10 percent of suppliers. Three key conclusions follow from this fact:

• Procurement dollars are not evenly distributed. A few large suppliers receive most of the firms� purchasing business.

• Most of the other small suppliers may risk losing their contracts if companies continue to attempt to reduce their number of suppliers. Because a noticeable trend already exists to reduce the supply base and the one sector reporting on the issue shows that most firms are intentionally trying to cut down on the number of suppliers, the potential exists for a dramatic continuation of this trend. The concentration of purchasing means that a large number of suppliers could be eliminated without a large loss to the company in terms of incoming supplies. Already in the semiconductor sector, only twenty-five firms receive more than 70 percent of the companies� purchase orders. These figures suggest that suppliers may need to explore ways of avoiding a loss in business. This should be possible by occupying highly specialized niche markets or selling to an intermediate customer rather than directly to the multinational�an option that may be more available in the electronics sector than elsewhere.

• The trend toward reduction of suppliers may result in extension of the supply chain. As the number of suppliers selling directly to the firm falls, supplier-to-supplier sales will increase. A redistribution of risk down the supply chain will accompany this trend.

Other relevant results of the CAPS study, not consistently reported across the electronics sectors, include:

• Of firms included from the electrical equipment sector, 77.8 percent had goals in place for achieving supply base reduction.

• In the semiconductor sector, the top twenty-five suppliers to each firm accounted for 71.7 percent of the sector�s purchasing spending.

• Supplier personnel in the computer and telecommunications sector worked directly with design engineers in developing new products in 91 percent of all companies. On average, 10.6 percent of the supply base was involved with this effort.

• Of those firms in the electrical equipment sector incorporating suppliers into their business, integration occurred in design engineering in 87.5 percent of all firms.

• Of all firms in the computer and telecommunications sector, 64 percent had divisions, products, or services that were ISO 14001 certified; 63 percent had divisions, products, or services in the process of applying for ISO 14001 certification; 55 percent required their suppliers� operations to be ISO 9001 certified; and none of the firms required their suppliers� operations to be ISO 14001 certified.

• Of all firms in the computer and telecommunications sector, 64 percent required the legal department to approve and/or sign off on contracts.

• Small business suppliers received 22.4 percent of total U.S. procurement dollars in the semiconductor sector and 21.6 percent in the computer and telecommunications sector.

The CAPS study provides a useful framework for understanding purchasing trends for industry writ large and for the electronics sector in particular. Two overall trends stand out:

• A trend toward rationalization of suppliers.

• The increasing involvement of the procurement function in design engineering.

For sectors reporting on the incorporation of suppliers into business, the integration of suppliers at the design phase is a clear trend. In the computer and telecommunications sector, more than 90 percent of firms report cooperation between suppliers and design engineers in new product design. Among electrical equipment firms that integrate suppliers, nearly 90 percent do so at the design phase. The benefits of cooperation between suppliers and design engineers are obvious from these figures.

In the CAPS study, the sectors do not report consistently on ISO 9001 or 14001 certification or requirements, but the limited results reported indicate that ISO 9001 is a supplier requirement whereas ISO 14001 is not. Only the computer and telecommunications sector reports on both, but more than half of these firms require ISO 9001 certification of suppliers. None, however, require ISO 14001, although a majority of the computer and telecommunications firms are themselves ISO 14001 certified or in the process of achieving certification.

A final result of the CAPS study of interest is that over half of the computer and telecommunications firms require the legal department to sign off on contracts. This suggests that risk may play a significant role in the purchasing function. Law suits are being brought by consumers against mobile phone manufacturers are, for example, resolved in part through the records of purchasing contracts. Cognizant of the risk involved in purchasing, legal departments increasingly require involvement in the purchasing process. Likewise, some companies require that EHS departments evaluate contracts for potential risk.

The building blocks of this industry (semiconductors, electronics packaging, printed wiring boards, assemblies, and displays) have typically been considered relatively "clean" in terms of environmental impact, compared with other industry sectors. The electronics industry only emits 1.6 percent of total U.S. Toxic Release Inventory (TRI) emissions annually (Microelectronics and Computer Technology Corporation, 1994, page 5). Nevertheless, manufacturing by-products of the electronics industry and the disposition of electronic products are raising increasingly important technical, financial, and environmental issues. Domestic and international air, water, ground, and disposition regulations and standards now affect every step in the life cycle of electronic products and are becoming an important cost consideration in electronic systems manufacturing.

Manufacturing wastes and the environmental impact of products are issues the electronics industry takes seriously from both an environmental and a business perspective. Electronics manufacturing generates waste streams that are rigorously controlled and treated at a high cost to manufacturers, and the amount of waste that must be treated will increase if the current trend to expand the definition of hazardous waste continues.

The industry used chlorofluorocarbons (CFCs) quite intensively in the past but has worked to eliminate CFCs from the manufacturing process since the Montreal Protocol. This has required developing alternatives�a technologically intensive process. But most electronics companies now report that their manufacturing operations are CFC-free.

Moreover, the electronics industry impacts the environment in numerous places besides the manufacturing waste stream. At the packaging and shipping phase, during use, and at the end of its usable life, a product affects energy use, the use of natural resources, and generation of pollution and solid waste. As companies move beyond the reactive stance of dealing only with regulatory threats, they are becoming increasingly concerned about the many associated impacts of their products. At the most sophisticated stage of environmental concern, companies assume product stewardship and take responsibility for the full life cycle of the product, including at the end of its useful life.

Contractor and employee health and safety issues are another important area of consideration that is often addressed in conjunction with environmental concerns because of the structure of companies� EHS departments and because of the health concerns associated with certain chemicals. Several categories of health and safety concerns exist: employee health and safety, contractor safety, and product safety. Accordingly, companies have a variety of processes in place to deal with these needs.

Companies that are concerned about their EHS practices are increasingly looking outside of their own facilities for improvements. They are also turning to their suppliers, cognizant of the role that suppliers� policies and practices play in the products that the firms ultimately deliver. Because much of the potential for improving the environmental performance of the products lies downstream in the supply chain, firms are beginning to consider how they can work with suppliers for environmental results.

From Supply Chain Management to Supply Chain Environmental Management

The shift to SCEM is a logical extension of SCM�a merging of a firm�s environmental management policies and goals with its SCM programs. This report, in many ways, is particularly prescient, because it represents the intersection of three emerging forces and issues in the global economy: environmental management, SCM, and the electronics industry. SCEM is a growing issue that is receiving increased attention in a variety of sectors, particularly electronics, and it holds strong implications for suppliers. The factors that are causing the development of SCEM are outlined below.

External Forces Towards Supply Chain Environmental Management

External forces for SCEM include regulations, commercial customers and advocacy groups.

Regulations: Product Take-Back and Waste Management

European legislation requiring electronics manufacturers to recycle their products at the end of their useful life has forced companies to reexamine their products, a process that has inevitably resulted in cooperation with suppliers. Some firms have moved aggressively to put in place product take-back schemes. In Europe, Alcatel, Ericsson, Motorola, Nokia, Panasonic, and Philips joined together under the umbrella of the European Telecommunications and Professional Electronics Industries Trade Association (ECTEL) to sponsor a program to induce consumers to return old mobile phones for dismantling and recycling and to determine the economics of recycling. The Xerox Corporation cites European legislation as one of the forces driving their remanufacturing program. To ensure that it could design products that are free of regulatory obstacles worldwide, Xerox compiled a list of the world�s most stringent environmental regulations.

Environmental considerations are increasingly being pushed forward into research and development and into design, because the success of a take-back program is linked directly to the product�s design. It is ironic that end-of-life regulations should impact supplier relationships at the beginning of the product life cycle, but the above example demonstrates the impact of design and the environmental connections among the different stages of a product�s life.

Take-back regulations have not been implemented outside of Europe, but firms in general are aware of the possibility of regulation and see the advantage in working proactively to prevent the need for regulatory involvement. Policy in the United States at the moment favors voluntary measures to achieve the goals of the European legislation. The President�s Council on Sustainable Development, for example, suggests that extended product responsibility is an important step toward corporate sustainability but one that is best achieved through voluntary measures and public-private partnerships.

Commercial Customers

Many companies are not only producers but suppliers as well, and the practice of SCEM is expanding beyond first-tier suppliers to reach second- and third-tier suppliers. The implication is that SCEM can beget SCEM: companies that are suppliers to other firms are sometimes encouraged to initiate environmental programs with their own suppliers for the sake of further extending SCEM.

Advocacy Groups

Advocacy groups for SCEM include nongovernmental organizations (NGOs) and investors and shareholders.

Nongovernmental Organizations

In 1982 the Silicon Valley Toxics Coalition was formed in response to discovery of substantial groundwater contamination in Silicon Valley caused by a leaking underground storage tank at a semiconductor plant. In June 1996, the coalition published its draft "Silicon Principles" dealing with global EHS management and asked the high-tech electronics industry to endorse them. The principles are part of a campaign intended to increase grassroots participation in national and international technology policy development. Included in the principles is a requirement that firms:

• Establish corporate policies requiring equal standards for subcontractors and suppliers

• Establish technical assistance and technology transfer to encourage pollution prevention at all stages of production, rather than shift the pollution down the production chain to smaller contractors

• Hire contractors who adhere to good labor and environmental policies, and in particular, hire union contractors where they exist. (Salazar 1998: 23�24)

This is not the only example of advocacy groups seeking to influence SCEM. On February 11, 1998, Mitsubishi Motors and Mitsubishi Electric of America signed a memorandum of understanding with the Rainforest Action Network concerning Mitsubishi�s environmental procurement policies. As part of the memorandum of understanding, Mitsubishi announced that it intended to end the use of old-growth forest products and phase out the use of tree-based paper and packaging products by the year 2002 in favor of alternative fibers.

These examples demonstrate that NGOs are looking beyond companies� own environmental policies to consider the impacts of supply chain issues on the environment. The Mitsubishi example also shows that NGOs are looking beyond domestic operations at what companies are doing in other parts of the world, because many of the forestry operations of concern to the Rainforest Action Network are located in Asia.

Investors and Shareholders

Investors are paying increasing attention to companies� environmental records. Socially and environmentally screened portfolios are gaining popularity, and fund managers are beginning to take environmental efforts with suppliers into consideration. Messages of investor concern reach companies most directly, however, through shareholder resolutions. The New York�based Interfaith Center for Corporate Responsibility has filed shareholder resolutions concerning SCEM with Hewlett-Packard and Intel. The center�s shareholder resolution requests that the company "report, at reasonable cost and omitting proprietary information, on the company�s contract supplier standards and compliance mechanisms for all manufacturing and waste management vendors, subcontractors, [and] suppliers with contracts in excess of $1,000,000 annually." The resolution goes on to detail the elements of the report. This effort demonstrates that investors have real concern about companies� SCEM practices, stemming from a suspicion that competition may encourage contracting of suppliers that have low EHS standards and that operations in countries with weaker environmental regulations may be environmentally unsound.

Internal Forces Towards Supply Chain Environmental Management

Not all of the forces for SCEM are external; many are common-sense responses to corporate needs. Among them are some of the biggest forces behind the shift to SCEM. These include:

• Risk management. One of the most compelling factors promoting corporate SCEM is the threat of liability and risk issues regarding suppliers� environmental practices. With twenty-nine Superfund sites in Silicon Valley, the electronics industry understands the benefits of cleaner production and knows that suppliers need to be involved in that process. Furthermore, the potential of an interruption of service or a liability issue concerning a supplier prompts companies to assess and minimize risk.
• Benefits of SCEM. Many companies are finding fundamental advantages to being involved with their suppliers� environmental programs. These basic benefits to business include cost reduction through pollution prevention programs, benefits of cooperation at the design phase, and feedback that companies may receive from suppliers on their own environmental programs.
• Concern for environmental impacts. As companies attempt to enhance their own environmental records, many realize that their success is incomplete without improvements on the part of their suppliers as well.
• Corporate image. Closely related to many of the factors above, one of the forces for SCEM is concern about protecting brand-name reputation. This is of special concern for a company when it is the target of a media campaign, but a majority of companies recognize the advantage of presenting strong environmental images and the necessity of incorporating SCEM. The corporate image motive is enhanced by the practice of ecolabeling, which is already an important market motivation in Europe.

Industry Response

The various forces driving SCEM forward have increased interest in the issue among companies, but the implementation of SCEM programs has not been uniform. Various tools for SCEM have developed in the past few years. This has resulted in a collection of methods available to managers wishing to implement SCEM programs. Table 2 summarizes these various initiatives and their components.