5. Multi-criteria Decision Aid (MCDA)
7.8 Product and Market Diversification and Vertical Partnerships
Achieving low-carbon objectives along a whole supply chain is complex due to global business management (Welford & Frost, 2006) trends such as global sourcing and offshoring. Tongaat Hulett mentioned the case where some of their customers are demanding greater environmental responsibility through genetically-modified organism free (non-GMO) products.
This requirement meant that Tongaat Hulett is imposing non-GMO input requirements from its own suppliers (the farmers), who in turn are demanding non-GMO seed and manures from their own suppliers further down the supply chain. For ATNS, regional collaboration opportunities are being enhanced by technological advances, where surveillance and navigation technology has advanced from local station to regional or intercontinental coverage. The push and pull of greener standards along the supply chain is necessitating collaboration along the chain. The argument is that companies should move away from demand-driven compliance (Cheung et al., 2009) to a more proactive stance, where they actively engage both their suppliers and customers in order to create value along the whole supply chain (Luetkenhorst, 2004).
Proactive collaboration will result in integrated climate change response from inputs sourcing, raw material selection, product design for recycling, disassembly, extended life cycles and future innovations (van Hoek, 2001); development; production; packaging, marketing; logistics and distribution; and end-of-life recycling (Cheung et al. 2009) to create competitive advantages.
There are several areas and benefits to green supply chain partnerships for South African businesses, including shared responsibility of the burden of reducing greenhouse gas emissions, enhanced customer and supplier relationships filtering to other areas of business through increased stakeholder engagement, and opportunities for learning and capacity building (through information, knowledge and technology transfers) which can drive efficiencies up in product, process, and supply quality, and raise productivity. This is especially relevant given the fact that climate change response is still in its infancy in South Africa with limited skills and case studies to learn from. Reinhardt (1998) showed that supply chain partnerships among companies aimed at cost savings or cost containment are viable where costs are distributed along the supply chain, or when there are economies of scope to be realised (van Hoek, 2001).
This finding is summed up in the eleventh proposition:
Proposition 11:
Adopting a proactive stance by actively engaging both upstream and downstream supply chain partners in climate change response can be an effective means of lowering greenhouse gases and generating value.
Conditional Cooperation and Reciprocity
Thaler and Sunstein (2003) and Camerer et al. (2003) proposed a concept called ‗soft paternalism‘, in which it is possible to help people make their own decisions without compromising their freedom of choice. At a micro level, people have been shown to be willing to cooperate when others do (Gachter, 2007), a phenomenon which Brekke and Johansson- Stenman (2008) termed ‗conditional cooperation‘. ATNS, although not calling it by the same terminology is pursuing opportunities of conditional cooperation particularly with other African ANSPs. They are assuming a role of big brother in this drive, particularly in the use of shared navigation and surveillance equipment. The sentiment was shared by almost all the executives interviewed within ATNS. Other activities engendering soft paternalism within the aviation industry are being driven by the governing body ICAO. These include some regional and transcontinental collaborative efforts such as the ASIA and South Pacific‘s ASPIRE green flight demonstrations, or the Single European Sky (SESEAR) and Atlantic‘s INSPIRE green flight trials of which ATNS is a major participant. Tongaat Hulett is both experiencing pushes for conditional cooperation from its major customers and is also exerting forces of conditional cooperation to
its supplier chain partners along the agro-processing supply chain. Brekke and Johansson- Stenman (2008) argued that soft paternalism is applicable to recycling, eco-labelling and environmental labelling, concepts that are easily applicable to supply chain and industry collaborative efforts. The argument was extended to macro levels, where countries and regions have been found to be more cooperative and willing to portray social responsibility rather than pure self-concern in climate change negotiations (Brekke & Johansson-Stenman, 2008;
Dannenberg et al., 2007). While it is not as straightforward to generalise from multi-country negotiation settings to inter-company collaboration, the insights are transferable. This is summarised in the following proposition:
Proposition 12:
Supply chain collaborations are an effective way of using reciprocity, conditional cooperation and soft paternalism to advance the corporate climate change response agenda.
7.8.2 Green Marketing
Green marketing is a viable market development strategy in which a company attempts to adopt its present product line (with some modifications of product characteristics and/or sometimes highlighting of ―green‖ characteristics to environmentally friendly missions. It involves developing and promoting products and/or services that dramatically increase the productivity of natural resource flows (Polonsky, 1994), biological or cyclical production models, encourage dematerialisation and reinvest in and contribute to the planet‘s natural capital (Ottman et al., 2006). ATNS‘ green marketing strategy is being driven by the need to build a stronger reputation within the aviation industry as evidenced by extensive communications and publicity of the INSPIRE project during the COP17 in Durban in December 2011 and several white papers and other publications. As a leading ANSP in Africa, ATNS is aiming to maintain its dominance by being a pace-setter in climate change response.
The Marketing Director of Tongaat Hulett said that they had not taken deliberate steps to get green marketing mileage in their Starch Division largely due to the market share dominance they enjoy in that sector - implying that the marketing spend would rather be used elsewhere in
their budgets. Another major reason advanced was the fact that green consumerism in South Africa is not yet at levels where customers were willing to pay a premium for such products or services. This in support of Orsato (2006), van Hoek (2001) and Polonsky (1994) assertions that customers should be willing to pay for the differentiated value for green marketing campaigns to make business sense. This is also in line with Reyers (2011) and colleagues‘ finding that companies are responding to climate change only where the business case prevails, unless there are other strategic decisions such as regulatory or social justifications. In such cases heuristically-determined hurdle-rates (Magni, 2009; Gigerenzer, 2006; Jagannathan & Meier, 2002, McDonald, 2000; Simon, 1955) and not the opportunity cost of capital are used to make such investment decisions.
Proposition 13:
Where it makes strategic business sense, companies that offer products and services with differentiated “green” value propositions can gain significant competitive advantage.