Implementation of the Theoretical Concept of Green Procurement and Supplier Selection in Estonian Shipbuilding Industry

Abstract

Industrial companies are to an increasing extent faced with requirements for better sustainability performance. Green market expands and green purchasing is regarded as a contribution to sustainable development. This paper examines impacts of implementing environmental management systems on enterprises' competitiveness in international supply chains at the example of Estonian ship- building enterprises. The theoretical concept of supplier selection process is used. The alignment problems of green procurement requirements and conditions are considered. The paper focuses on the relationships in the chain affecting the procurement and selection processes. The ship's chain and life cycle of the product specifics are also provided. Management of sustainability in ship design requires a methodology targeted towards physically large and complex systems with long life spans and multiple stakeholders. For the purpose of this paper, only the environmental aspects of sustainability are considered. This paper introduces and discusses the green supplier selection and green purchasing as environmental management tools and how in general they can be used to improve a system's environmental performance, corporate social responsibility to be environmentally friendly, ensure sustainable development and pure environment. A question is raised about Estonian possibilities to participate in the global competitive chains through the green supplier selection process. The paper analyses effects of implementing environmental management systems on enterprises' competitiveness in international supply chains and problems involved in alignment of green procurement requirements and conditions. An objective is to map the implementation of an environmental management system in ship-building enterprises, and based on that, their participation in international supply chains. The paper focuses on the relationships in the chain that affect the procurement and selection processes. It represents an analytical-conceptual approach as well as a pilot study on green procurement based on Estonian ship-building enterprises. The theoretical concept of supplier selection process developed by Igarashi et al. (2013) in the Norwegian University of Science and Technology (NTNU) is used. The author explores the possibilities of and obstacles to implementing this concept. An in-depth empirical research, i.e. interviews with representatives of ship-building enterprises, is intended in next stages of the research. Another aim is to explore how the green outsourcing companies could contribute to strengthening their competitiveness in the supply chain. What are the benefits of the green business strategy process for enterprises in the supply chains? Estonian companies are mostly young, during the privatization process large enterprises were split up, new firms and foreign investments were small. In most cases they are outsourcing firms and produce intermediate goods (not high-value-added end- products) in value chains. Therefore, they do not have sufficient power to influence the product chains. Environmental regulations may be inhibiting the development of relatively small businesses. Estonian companies are only part of the chain, even if the end product is made here (e.g., log homes, furniture and other wood products), these are sold through the Nordic countries. In contrast, the shipbuilding industry is a relatively independent branch. Providers participating in important segments of a product's life cycle are represented locally. There are also a small number of focal final product companies. The first section of this paper opens the background of green procurement and supplier selection. The second section focuses on the relationships that exist in the chain affecting the procurement and selection processes. The third section covers the environmental requirements in the supply chain. The fourth section provides an overview of the ship's chain and life cycle of the product specifics. The main part uses and supports Igarashi, de Boer and Fet's (2013) theoretical concept of green supplier selection process, which is based on 60 articles containing the keywordsgreen procurement´, ´supplier selectionandgreen purchasing´. Finally, utilisation sample of the GSS concept in Estonian shipbuilding industry is given. Data for the research were taken from the Estonian Quality Association database. The shipbuilding and repair activities are sorted out from among the metal and engineering industries, based on the most commonly used environmental management standard ISO 14001. Additionally, for example, ABB, E-Profiil, Toci, and other known suppliers of important offshore installations and large