Turning Green Certification Pressures into Process Innovation

An empirical study conducted by RMIT experts across ten different countries and involving 680 manufacturers revealed that green certification pressures (GCP) triggered process innovation and eventually enhanced firms’ positioning and sustainable measures.

Modifying process innovations to correspond with customer’s green requirements can guarantee a business’s evolution

Ihe study also found that Vietnam lost its dominant position and competitiveness in textile and garment to Bangladesh in the first two quarters of 2023, partly due to its tardiness in green transition. Green supply chains are critical in enhancing exporters’ competitiveness and opportunities to secure orders. GCP reflects the requirements and expectations for a firm in the supply chain to comply with set standards for environmental management system (EMS) practices. Customers, suppliers, and competitors use environmental standards such as ISO 14000 in the manufacturing realm. Dr. Nguyen Manh Hung, Senior Program Manager of Logistics and Supply Chain Management at RMIT Vietnam, explained that green certification is a set of standards to integrate environmental aspects into the design and manufacture of products. Obtaining ISO 14001 certification can signal firms’ compliance with set standards for environmental performance such as reducing emissions and the use of resources and raw materials in their processes and saving energy. According to Dr. Hung, “the implementation of EMS-certified processes can help firms improve market positioning in their industry and be perceived as environmental leaders, gain first-mover advantages, improve their environmental image and reputation, and increase sales volume.” However, Dr. Hung also noted that “many of these environmental certifications have symbolic nature rather than actual implementation.”

Process innovation (PI) enables manufacturing firms to capture and apply new knowledge or know-how to their existing production processes. The concept suggests that green certification pressures (GCP) promote communication and collaboration, which eventually influence operating processes both within and outside an organization. Dr. Nguyen Manh Hung explained that in the environmental context, a successful PI helps firms develop capabilities in capturing and applying internal and external knowledge to yield superior results. Thus, process innovations as the way that an organization uses both knowledge and ideas of external partners can lead to better diffusions of green certification. Competitive pressure plays a greater role in pushing manufacturers to adopt eco-innovation, followed by market-based instruments, technological capabilities, customer green demand, and environmental organization capabilities. Dr. Hung provided several instances: “In the automobile industry, car manufacturer Saab 2011-2012 leveraged supplier knowledge and resource mobilization to overcome a difficult period created by their rivals. IKEA launched its supplier-based environmental policy to comply with the minimum demands of IKEA’s environmental adaptation of products and materials and the protection of forestry.” He emphasized that “those manufacturers who can apply this knowledge and new processes first within the industry can gain rare values that few competitors can reach.” Green certification practices with external partners not only create pressure but also foster social capital between external stakeholders such as customers, suppliers, competitors, and innovation developers. Many manufacturing firms might consider these opportunities as a push to modify their process innovations to correspond with customer’s green requirements as these actions can guarantee a business’s evolution.

Dr. Nguyen Manh Hung suggested that scanning and learning new eco-processes and quickly adopting and applying cleaner processes could be a possible eco-solution. In return, manufacturing firms might benefit from these process improvements such as quality improvements and cost reductions, and eventually customers’ acceptance. The manufacturers tend to extend these relationships for the sake of return on their investment, thus enhancing the relationships further. Sharing green expectations and environmental collaboration would help manufacturers improve business operations such as market expectation and customer demand. These green activities can lead to more efficient operations (for instance, fewer defects and returns), better quality products at a lower cost, and more flexibility. Dr. Hung summarized that these will, in turn, lead to better business performance and higher market share by the manufacturer.

Source: Vietnam Business Forum