Turning green certification pressures into process innovation

Turning green certification pressures into process innovation

An empirical study of 680 manufacturers in ten different countries showed that pressures on green certification triggered process innovation and eventually enhanced firms’ positioning and sustainable measures, shared RMIT experts.

In the first two quarters of 2023, Vietnam lost its dominant position and competitiveness in textile and garment to Bangladesh, partly due to its tardiness in green transition. Green supply chains are critical in enhancing exporters’ competitiveness and opportunities to secure orders.  

The green certification pressures (GCP) reflect requirements and expectations for a firm in the supply chain to comply with set standards for environmental management system (EMS) practices. GCP reflect usage of the environmental standards such as ISO 14000 in the manufacturing realm by customers, suppliers, and competitors.

Dr Nguyen Manh Hung, Senior Program Manager of the Logistics & Supply Chain Management program, RMIT Vietnam elaborated: “In the manufacturing industry, 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”.

Obtaining ISO 14001 certification can signal firms’ compliance with set standards for environmental performance. Obtaining ISO 14001 certification can signal firms’ compliance with set standards for environmental performance.

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, and improve their environmental image and reputation and sales volume”.

“Indeed, many of these environmental certifications have symbolic nature, rather than the actual implementation,” said Dr Hung.

Meanwhile, process innovation (PI) enables manufacturing firms to capture and apply new knowledge or know-how to their existing production processes. The main premises of this concept suggests that GCP promotes communication and collaboration, which eventually influence operating processes both within and outside an organisation. 

Dr Hung shared: “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 organisation uses both knowledge and ideas of external partners can lead to better diffusions of green certification”.

Competitive pressure plays a greater role to push manufacturers to adopt eco-innovation, followed by a market-based instrument, technological capabilities, customer green demand, and environmental organisation capabilities.

Dr Hung provided several instances: “In the automobile industry, car manufacturer Saab 2011–2012 leveraged supplier knowledge and resource mobilisation 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 emphasised: “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 foster social capital between external stakeholders (image: Freepik). Green certification practices foster social capital between external stakeholders (image: Freepik).

Green certification practices with external partners not only create pressures but also foster social capital between external stakeholders like customers, suppliers, competitors, and innovation developers. Many manufacturing firms might consider these opportunities as a push to modify their process innovations to the corresponding customer’s green requirements as these actions can guarantee a business's evolvement. 

Dr Hung said: “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. 

“These will, in turn, lead to better business performance and higher market share by the manufacturer,” Dr Hung summarised.  

The enhancement of business innovation in Vietnam

These findings about green certification pressures are included in a Springer book edited by RMIT Vietnam scholars titled “Business innovation for the post-pandemic era in Vietnam.”

The book consists of outcomes of the “2022 International Conference on Business Innovation” held at RMIT Vietnam. The book consists of outcomes of the “2022 International Conference on Business Innovation” held at RMIT Vietnam.

According to Dr Nguyen Hoang Thuan, RMIT Senior Program Manager of the Digital Business program and Business and Technology major, and the corresponding author of the edited book: “These chapters cover a wide range of topics in business innovation including entrepreneurship, digital supply chain transformation, e-government services, blockchain technology, chatbot marketing, personalisation-privacy paradox in marketing, supply chain, sustainable manufacturing, logistics and food safety management.” 

Download the book here.

Story: June Pham

27 June 2023

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