BUILDING A SUSTAINABLE SYSTEM TO EFFECTIVELY REDUCE

CARBON EMISSION: A REVIEW OF AN EFFECTIVE FRAMEWORK FOR

CARBON REDUCTION MANAGEMENT

THESIS

Submitted to International Program in Partial Fulfillment of

Requirements for the Degree of Industrial Engineering at
Universitas Islam Indonesia

Name

: M. Shibghotullah Robbaniy

Student Number

: 11522093

INTERNATIONAL PROGRAM
INDUSTRIAL ENGINEERING DEPARTMENT
FACULTY OF INDUSTRIAL TECHNOLOGY
UNIVERSITAS ISLAM INDONESIA
2015

CHAPTER I

INTRODUCTION

1.1.

Background

In the last decades since the beginning of industrial era, the increase of CO 2 and other
greenhouse gases in the atmosphere becomes worrisome. Current greenhouse gases
level are becomes higher than before especially for carbon dioxide. Based on the data
from Intergovernmental Panel on Climate Change (IPCC) in the past period 2000
2010 report that CO2 contribute 78% of total greenhouse gases (IPCC, 2014). It shows
the amount of greenhouse gases emitted are continuously increasing. The detailed data
shows the increase of CO2 and other GHGs from 1970 2010 presented in figure 1.1
as follows.

Figure 1.1. Total Annual Anthropogenic GHG Emissions by Groups of

Gases 1970 2010 (IPCC, 2014)

Greenhouse gases are the main cause of climate change in the world. There are
many negative impacts of climate change, some of them is dangerous such as: seasons
are shifting, higher temperature, sea level is rising, changing landscape, wildlife at risk,
increased risk of drought in accordance with fire and flood, more heat-related illness
and disease, and economic losses.

Generally, GHGs contributed to the atmosphere is the result from human

activities and oil combustion. Human activities are often dealt with industry, electricity
and heat, and residential. While oil combustion often dealt with transportation and
some of industrial process. Industrial process have an excessive role as one of the
biggest contributor of GHGs. This was confirmed that industry often uses electricity,
heat, transport and others processes that inflict towards the increase of GHGs. Figure
1.2 below shows the world CO2 emission by sector.

Figure 1.2. World CO2 emissions by sector in 2012 (IEA, 2012)

In accordance with continuous increase of greenhouse gases, many effort has

been done in order to reduce carbon emissions especially in industrial sector. Recently,
the awareness of carbon reduction process has applied with rapid development in

industrial firm application. So that, the issue how to reduce CO2 has becomes a crucial
factor among industrial firms in today competitive environment. Huisingh et al. (2015)
state that Industrial firms are the leading effort in seek and achieve carbon emissions
reduction due to the large material flows they process.

Industrial firms are now facing the pressure from all business aspects such as:
governments, investors, and customers to measure, manage, and reduce their carbon
emission. They are having variety of interest towards firms, for instance: governments
are often pressing by their regulations, especially with new environmental legislation
such as WEEE (Waste from Electronic and Electrical Equipment), RoHS (Restriction
of Hazardous Substances), and EuP (Energy using Products). While resources as
socially concerned investors are may be able to be attracted by the firm who sensitive
with environmental issues (Chin et al., 2015). In other hand, customer not only
concerning price and quality but also looking at long term product-effect to
environment. Kuei et al. (2015) conduct a research regarding the adoption of GSCM
practices in Chinese firms, the result show that customer pressures, regulatory
pressures, government support, and environmental uncertainty were the most important
criteria in adopting GSCM practices.

Industrial firm has a deeply rooted relationship with supply chain commonly
for managing their supplier and customer. Supply chain universally famous as the
global network uses to deliver products and services encompassing all chain activities
from upstream to downstream. Managing supply chain has becomes vital part in
industrial firm. The study shows that in order to survive, remain competitive, meet
increasing customer expectations, and as response to pressures from government and
stakeholders, companies are now increasingly shifting the attention of their
environmental strategy from the firm to supply chain level (Foerstl et al., 2010)
(Sundarakani et al., 2010) (Seuring & Muller, 2008).

Supply chain management (SCM) well-known as a crucial process for many

industrial firms. Through SCM, many companies has proven that are able to manage
their supply-and-demand effectively. In the recent decade as a result of increase
environmental awareness and carbon emission, concentration of supply chain activities
has moved to green practices. The World Business Council for Sustainable
Development and the World Resources Institute (WRI, 2009) report that supply chain
activities produce at least 80% of carbon emission (Hsu et al., 2011). Therefore, most
firms are willing to allocate their money for carbon emission reduction project. Using
international data consist of 89 firms from 21 countries, Gallego-lvarez et al. (2015)
argue that carbon emission reduction could enhance firms reputation, attract investors,
and positively impact their financial performance. Similarly, concerning carbon
reduction and managing its emission has positive impact towards firms performance
(Ar, 2012) (Zhang et al., 2015).

The concept of supply chain has evolved not only to green supply chain but
also evolved into sustainable concept. Green supply chain management (GSCM)
encompassing the environmental implication of supply chain. While the concept of
sustainability is more-encompassing than GSCM and must encompassed triple bottom
line which known as economic dimension, environmental dimension, and social impact
(Silvestre, 2015) (Seuring & Muller, 2008).

In accordance with GHGs emitted by industrial firms and awareness of GSCM

practices, Industrial development should accompanying with GSCM practices as well.
Thus, currently many efforts, concepts and modelling framework have been developed
in order to improve supply chain performance as well as techniques, evaluation model,
and research being developed to reduce carbon and manage its emission. For example,
In supply chain operation Persson & Araldi (2009) assessing SCOR methodology and
a discrete event simulation tool using software ARENA. The result indicate for the

company who already working with SCOR will have no problem to model and simulate
its operation. Scholtens & Kleinsmann (2011) investigate the reasons of a transport
and logistics company in implementing their CO2 reduction technology and report. Hsu
et al. (2011) develop a carbon management model for supplier selection in GSCM
using Decision-Making Trial and Evaluation Laboratory (DEMATEL). Govindan,
Khodaverdi et al. (2013) Examine the problem of identifying an effective model based
on sustainable criteria Triple Bottom Line (TBL) approach for supplier selection
operations by presenting a fuzzy multi criteria. Orji & Wei (2015) presents a modelling
approach of integrate fuzzy-logic environment and system dynamic simulation
technique for sustainable supplier selection. In recent study, Liou (2015) build a
conceptual model to effectively reduce carbon emission using green supplier criteria.
The result of His study is very beneficial for the firms who want to reduce their carbon
emission. He uses green criteria for selecting supplier as the main source to build a
framework. However, how to make the proposed conceptual model into sustainable
one is a critical question that must be answered. With the best of our knowledge,
research combining green performance and SCOR model has remained rare and limited
(Hwang et al., 2010). Other study conducted by Ntabe et al. (2015) review papers
related SCOR model application published between 2000 and 2012 with special
attention to environmental criteria. The result show that only 11.1% discuss
environment related criteria. Thats why current research become important on account
of previous conceptual model development combining with SCOR and simulation
model with respects to green supplier criteria and sustainable factors.

The above explanation tells that building a sustainable system to effectively

reduce carbon emission is beneficial. Combining the concept of Sustainable Supply
Chain (SSCM), Green SCOR, and simulation model to build a carbon reduction system
is a good idea to overcome threats, uncertainty, and making system more sustainable.
All above explanations is the reasons why current research is worth for Industrial firms.

1.2.

Research Question

The questions that should be answer in current research are stated as follows:
a. Whether Lious framework can be embedded with sustainable criteria or not?
b. What is the suitable criteria that can be embedded for the next framework?
c. What is the right method to find interrelation between criteria?
d. What is the relation of one dimension towards another dimension?
e. What is the relation of one criteria towards another criteria?
f. How process flow through a new framework?
g. How to examine proposed framework?
h. What method used to examine proposed framework?
i. What is the parameter to measure framework performance?

1.3.

Scope of the Research

The scope of this research explained as follows:

a. This research proposed to build a framework to effectively reduce carbon.

b. This research only conducted in batik factory, sugar factory, and electric
factory.
c. The research restricted to find criteria related green supplier selection and
sustainable criteria.
d. The research discuss framework transformation to sustainable system.
e. This research try to examine proposed framework using simulation model.

1.4.

Research Objectives

The objective of this research is mentioned as follows:

a. This research aims to transform previous framework to become sustainable one.

b. This research try find out interrelation between dimensions.
c. This research try find out interrelation between criteria.
d. This research try find out the flow process of proposed framework.
e. This research purposed to build a sustainable system to reduce carbon emission
for Industrial firms.
f. This research aims to examine proposed framework using scenario / simulation.
g. This research aims to find the effectiveness of proposed framework,

1.5.

Research Benefit

The benefit of the research is:

a. The result of this research can beneficial for future researches, practitioners,
and Industrial firms as reference in systemic advancement to reduce carbon
emission.
b. The proposed framework with 5 dimensions and 19 criteria could be the first
compared with the newest one thats Lious framework which consist of 4
dimensions and 12 criteria for the company that wants to build effective system
for carbon reduction management.
c. The result of this research can measures the effectiveness of proposed
framework regarding management system to reduce carbon emission.
d. To give contribution in novelty method to measure effectiveness of proposed
framework compared with previous research.

1.6.

Systematic Writing

The research writings is organized as follows:

CHAPTER II

LITERATURE REVIEW
This chapter will explain inductive study and deductive study
uses as supporting tools to answer research problem

CHAPTER III

RESEARCH METHODOLOGY
This chapter describes the methods about the study focus and
object, its location, tools, data required so that the research is
become more focused.

CHAPTER IV

DATA COLLECTING AND PROCESSING

This chapter describes the steps in collecting data and data
process.

CHAPTER V

DISCUSSION
This chapter discussing the result of data processing

CHAPTER VI

CONCLUSSION AND SUGGESTION

This chapter contained conclusion and recommendation

REFERENCES

APPENDICES

CHAPTER II

LITERATURE REVIEW
This chapter will discuss theories, information and references used as supporting tools
to answer and solve research problems. Generally all sources can be grouped into two
main sources, inductive study and deductive study. Inductive study derived from
manuscripts, journals and proceeding. While deductive study derived from books
reference that often uses as basic theories. Intentionally, literature study purposely
aimed to seek state-of-the-art.

2.1.

Inductive Study

The objective of current research is try to evaluate, develop, and examine previous
research by Liou (2015) that is systematic evaluation model to build an effective CO2
reduction management. During investigation there are three learning points found.
First, to provide more accurate method in weighting managers opinion. Second, to
seek another criterion related to carbon management reduction and building new
framework. Third, conducting survey to evaluate performance gaps respectively to
each criterion. Due to extensive problems, so that the current research only focus to
develop previous framework. The author confident that results of this research are be
able to give contribution to knowledge regard as complement and improvement of
previous framework. Moreover, could be used as reference in systemic advancement
to reduce CO2 emission for industrial firm.

2.1.1. Literature from Previous Research

In the extent scope of GSCM literature, many researchers has been examine carbon
reduction management. However, still very little discussed about systematic evaluation
model to build an effective CO2 reduction management as well as the usage of SCOR
model to assess environmental criteria. After review papers related SCOR model
application published between 2000 and 2012 Ntabe et al. (2015) found that only 5
(11.1%) papers attempted the environmental dimension while 11 (24%) papers
attempted return process.

Liou (2015) could be the first make a framework in building an effective system
for carbon reduction management with 12 criteria and 4 dimensions. In His study more
than 40 manuscripts presenting carbon management problems has been reviewed (Kolk
& Pinkse, 2004) (Hsu et al., 2011) (Theien & Spinler, 2014) and some of literature
about GSCM studied (Govindan et al.,2013) (M.-L. Tseng, 2011) (Sarkis et al., 2011).
He use three methods in making a framework. DEMATEL method was used to explore
the complex relationship between criteria and identify the influential directions within
the network system. DEMATEL-based ANP (DANP) used to measure mutual
importance of each critical factor shows the weights of each criteria, and using INRM
the complex relationship among GSCM system were illustrated as shown in Figure 2.1.
Although the framework is good enough, but the development and extension of this
study still needed such as: finding an accurate method to measure various managers
opinions during interview and data collection, comparison and framework
development, and conducting performance survey regarding gaps on each criterion.
State-of-the-art in current research (thesis topic) was found during reading a paper. The
writer found that theres important points must be presented to polish up the
framework. Feedback system and additional criteria about suppliers carbon emission
reduction would be a good way. Feedback systems will support the successful

completion of policy, objectives and procedures (Joseph Sarkis, 1998). Seeing this
opportunity, current study will focus on those two points.

Manager
Commitment

Reduction Target

Carbon Policy

Planning

Assessment

Risk Management

Life cycle cost

analysis
Management

Implementation

Environmental

Accounting &

Management

Inventory

Training
Information

Supply Chain

Management

Management

Carbon

Disclosure &

verification

Report

Figure 2.1. Carbon management evaluation system (Liou, 2015)

Koo et al. (2014) make a framework to achieve the national carbon emission
reduction target (CERT) in 2020. Their study was focused on educational facilities,
simply to verify the feasibility. The purpose is to help facility managers or
policymakers establish the optimal retrofit strategy by considering two points (limited
budget from a short-term viewpoint and low-carbon scenario 2020) in order to achieve
the national CERT for long-term viewpoint. Koo point out that various kind of
assumptions are necessary in utilizing proposed framework because inevitable
uncertainty in future and initial condition. Some of uncertainty criterion such as: energy
simulation and calibration, future cost, and uncertain external condition.

Another research was done by Feijoo & Das (2015) analyze the impact of
policies in controlling carbon emission and increasing distributed renewable generation
in microgrids (market penetration) using economic model. In their study the impact
of policies are displayed in performance measures such as: emissions, electricity
prices, and electricity consumption. Economics aspect such low fix cost and variable
cost also included in good performance. Coincide as carbon emission reduction targets
developed, the system must aware towards cost efficiency as well. Some research
shows that there is a relationship between green supply management and economic
performance (Zhu et al., 2008) (Carter et al., 2000).

Cost efficiency tend to higher revenue. The concept to create process more
effective and efficient has applied in many sectors, one of them is in supplier selection.
Companies are commonly adopt economic aspect in determining supplier selection.
Trend in selecting supplier has moved from transactional relationship to sustainable
relationship and green consideration. Some companies who concern in green
sustainability tend to choose greener supplier.

Noci (1997) could be the first study in supplier selection based on

environmental consideration. He designing green vendor rating system such as green
competence, environmental efficiency, green image, and life cycle cost for assessing
suppliers environmental performance.

Kannan (2014) develop a framework using fuzzy TOPSIS in selecting green

supplier. Their study found that there are four dominant criteria in supplier selection
such as: (1) Senior managers commitment to GSCM; (2) green product design (reduce,
reuse, recycle, or reclaim materials, components, or energy); (3) compliance with legal
environmental requirements and auditing programs; and (4) product design that avoid
or reduce toxic or hazardous material use. GSCM has expanded its perspective on
environmental approach that considers inside and outside company.

Another study by Baskaran et al. (2012) analyze the presence of socioenvironmental sustainability criteria in the Indian textile and clothing industry.
Sustainability criteria (i.e. discrimination, abuse of human right, child labor, long
working hours, unfair competition, and pollution) were used to categorize the supplier
into three groups: good performer, moderate performer, and performance not up to
expectation. This study point out that working hours, pollution and unfair competition
were important criteria in evaluating suppliers of garment manufacturers. While
Govindan et al. (2013) study about sustainable supply chain using fuzzy multi criteria
approach for measuring suppliers performance based on TBL (social, environmental,
and economic benefit).

Sustainability criteria are extended to economic aspects, environmental aspects

and social aspects. Social aspects divided into some sub-criteria for instance labor
practices and decent work, human rights, society, and product responsibility (GRI,
2015). The detail aspect of each criteria and sub-criteria are shown in Table 2.1 below.

Table 2.1. Sustainability criteria (GRI, 2015)

Criteria / Sub-criteria

Aspects

Economic

Economic performance
Market Presence
Indirect Economic Impacts
Procurement Practices
Material
Energy
Water
Biodiversity
Emissions
Effluents and Waste
Products and Services
Compliance
Transport
Overall
Supplier environmental assessment
Environmental grievance mechanism
Employment
Labor/management relationship
Occupational health and safety
Labor practices grievance mechanisms
Training and education
Diversity and equal opportunity
Equal Remuneration for men and women
Supplier assessment for labor practices
Investment
Non discrimination
Freedom of association and collective bargaining
Child Labor
Forced or compulsory labor
Security Practices
Indigenous rights
Assessment
Supplier Human Rights Assessment
Human Rights Grievance Mechanisms
Local communities
Anti-corruption
Public Policy
Anti-competitive behavior
Compliance
Supplier Assessment for impacts on society
Grievance mechanisms for impacts on society
Customer health and safety
Product and service labelling
Marketing communications
Customer privacy
Compliance

Environmental

Labor Practices and Decent work

Human right

Society

Product Responsibility

Company are often thinking through green supply chain criteria to determining
supplier selection strategy. Igarashi et al. (2015) Investigate supplier selection strategy
based on supplier selection behavior towards green public procurement (GPP). He
found that four approaches for simplifying the green supplier selection problem:
ignore, incorporate, insist and integrate. During His study, product-related criteria (i.e.
energy saving and recycling/reuse systems for end-of-life product) noticed were most
frequent used. The study also shows that environmental criteria were more frequently
appeared than deliver, service maintenance, and cost but environmental were the third
most frequent after price and quality. Supplier selection can be manage effectively by
linking it closely with purchasing function activities (Humphreys et al., 2003)

Conversely, Govindan et al. (2013) state that environmental management

system is the most widely considered for green supplier evaluation and selection. He
also analyze green criteria i.e. green products, green knowledge transfer, green image,
recycling, environmental management systems, environmental certificates, and other
criteria utilized in green supplier selection models. All of them were used clearly as
applicable tools in measuring performance.

Within the last decade, the process of supplier selection begins to integrate
various environmental dimension. Govindan et al.(2013) state that further decision
model will necessarily become more complex, thus more intangible dimension such as
reputation, supply chain risk, business continuity, and social impact will also include
in the decision. his research prove that environmental management system is most
considered criterion in green supplier selection followed by other major criterion i.e.
green image, environmental competencies, design for environment, green
competencies, corporate and social responsibilities, environmental efficiency,
environmental authentication, environmental improvement cost, green logistic
dimension, green organization activities, environmental certification, suppliers green

image, use of environmentally friendly material, use of environmentally friendly

technology, waste management, re-use, re-cycle, green process innovation, green
product, green purchasing, green project partnership and green design.

Sundarakani et al. (2010) state that is necessary to study carbon footprint

measurement across supply chain in order to get better understanding, quantifying, and
precise analyzing the impact of carbon emission in global supply chain network. Some
companies such as Walmart and Carrefour has started to point out regarding carbon
footprint.

Carbon footprint can be defined as a volume of the total amount of CO2 and
other greenhouse gases (GHGs) emitted in full life cycle of a product or services. K.H. Lee (2011) explain that carbon footprint inventory contains the volume of
greenhouse gases emitted from exploitation and manufacturing process. He added that
companies are starting using the result of carbon footprint to decrease manufacturing
costs and energy consumption. Additionally, companies are encouraged by the effect
of carbon footprints externally to manage the risk from climate change and to increase
market share.

Kuo et al. (2014) conducting research to select supplier based on carbon

footprint inventory. He uses secondary data as replacement from primary data and
develop decision method to find optimization route, efficiency maximization, and cost
minimization for carbon footprint inventory routing planning. Kuo determine
appropriate supplier by calculating carbon footprint inventory routing problem based
on vehicle routing problem (VRP). To conduct a life cycle inventory compilation, the
enterprise should measure inventory cost, route, time needed for compilation and other
unanticipated problems. Taking a note that only some supplier can provide the

necessary data. Because, carbon footprint calculation need various data such as raw
material input, product manufacture, transportation, product use, and end of life.

Palak et al. (2014) make a model that accounts carbon emission from
transportation and inventory storage activities. His research was motivated from their
observation regarding carbon transportation emission. He indicate that approximately
19% of the energy consumption and 25% of the energy-related CO2 emission in the
world arise from transportation. While transportation expected to continue growing so
that carbon emission need to be maintained.

Another research about green supplier selection was conducted by Dobos &
Vrsmarty (2014) they point out that management criteria and green criteria can be
generalized. The result show that in decision process is possible to build a quotient
efficiency measures where the input are managerial criteria and the output is green
criteria.

Green supplier selection process includes identifying, analyzing, and selection.

The process was not end on selection only but selected supplier becomes one chain
activity with a company. Therefore, supplier selection must considers many factors.
Dekker et al. (2012) state that the most important in GSCM practices is choosing
environmental consideration in selecting supplier, maintenance, and development.

M. L. Tseng & Chiu (2013) create a green supplier evaluation model using
environmental criteria such as design for the environment, life cycle analysis, total
quality environmental management, environment related certificates (ISO 14000),
cleaner production, internal green production plan, green purchasing, environmentally
preferable bidding, knowledge-based environmental management systems, degree of

innovativeness of R&D for green products, reduce to use of hazardous products in

production process.

Shen et al. (2013) used environmental criteria to evaluate green performance of

supplier such as pollution production, resource consumption, eco-design, green image,
environmental management system, manager commitment towards GSCM, usage of
environmentally friendly technology, usage of environmentally friendly materials, staff
environmental training.
Another research in evaluating supplier green performance was done by Yeh
& Chuang (2011) using green performance criteria such as green image, product
recycling, green design, green supply chain management, pollution treatment cost,
environmental supplier evaluation literature. Whereas, Scholtens & Kleinsmann (2011)
investigate disclosure and report of CO2 for subcontractor (couriers) of transport and
logistic company. Using difference incentives British and Deutsch subcontractors as
measurement such as energy cost, implementation cost, reputation building,
relationship building, environmental awareness, and regulatory compliance.

Similarly, Awasthi et al. (2010) developed a model for evaluation supplier

using criteria such as usage of environment friendly technology, use of environment
friendly materials, green market share, partnership with green organizations,
management commitment, adherence to environmental policies, green R&D projects,
staff training, lean process planning, design for environment, environmental
certification, and pollution control initiatives.

Lee et al. (2009) identify green supplier in high-tech industry using criteria such
as quality, technology capability, pollution control, environment management, green
products and green competencies. Green supplier need to be managed using

information system. Hsu & Hu (2009) state that effectively managing green supply
chain using information system.

2.1.2. Conclusion

This section will presenting state-of-the art as result of inductive study that has been
reviewed. The objective of studying previous literature was to find new criteria so that
the existing framework could be developed into more sustainable system. Sustainable
system are be able to meets the present need, adaptation to present problems and future
problems may occurred.

Previously, Liou (2015) in His research has review 40 manuscripts regarding

carbon management problem. After reviewing the literature, a framework with 4
dimensions (Planning, assessment, management, and implementation) with each of
dimension has three to four criteria has been created. The framework is good enough,
it can represent the ideal thinking to effectively reduce CO2 emission. But to make
previous framework into sustainable one is another story. The framework should be
reviewed, then rebuild and added by sustainable criteria

After reviewing more than 40 literature, 19 important criteria is chosen. A table

that represent Lious dimension and criteria that already added by proposed dimension
and new criteria is shown in table 2.2 below. The mark with bold ones indicate
proposed dimension and new criteria added.

Table 2.2. Green supplier selection system

Dimension
Planning

Criteria
Manager commitment
Carbon Policy
Carbon reduction target
Business continuity

Assessment

Assumption of uncertainty condition in

the future
Carbon risk assessment
Life cycle cost analysis
Carbon footprint measurement
Green performance

Management

Implementation

Price, quality, and carbon reduction

amount
Environmental management system
Training related carbon management
Carbon Information system
Supply chain management
Carbon accounting & Inventory
Carbon verification
Carbon disclosure & report

Evaluation

TBL (social, economic, environmental)

Feedback system
Audit

Sources
(M. L. Tseng & Chiu, 2013);
(Humphreys et al., 2003)
(Hsu et al., 2011)
(Theien & Spinler, 2014); (Hsu et
al., 2011); (Joseph Sarkis, 1998)
(Govindan, Rajendran, et al.,
2013)
(Koo et al., 2014)
(Okereke, 2007)
(Theien & Spinler, 2014); (Hsu et
al., 2011); (Joseph Sarkis, 1998)
(Sundarakani et al., 2010)
(Shen et al., 2013); (Yeh &
Chuang, 2011)
(Igarashi et al., 2015)
(Humphreys et al., 2003)
(Hsu et al., 2011)
(Hsu & Hu, 2009)
(M. L. Tseng & Chiu, 2013); (Hsu &
Hu, 2009)
(Theien & Spinler, 2014); (Hsu et
al., 2011)
(Hsu et al., 2011)
(Theien
&
Spinler,
2014);
(Scholtens & Kleinsmann, 2011)
(Govindan, Khodaverdi, et al.,
2013)
(Joseph Sarkis, 1998)
(Kannan et al., 2014)

2.1.3. Causal Loop Diagram

Causal loop diagram was purposely used to simplify the understanding of

interrelationship among one dimension to another dimensions and interrelationship
criteria to another criteria within a dimension. Simply, CLD connected by an arrow
with positive polarity (+) or negative polarity () sign and delay (||). Positive polarity
means that two variable are moving in the same direction, negative polarity is the
opposite. CLD shows interrelation between dimensions are shown in figure 2.2 below.

Planning

Assessment

+
+

R
R

+
R
Implementation

+
Management

R
Evaluation

Figure 2.2. Causal loop diagram for interrelation among dimension

Planning and assessment

The initial process before everything started is making a good plan. Assessment is the
process for assessing supplier. Supplier selection is based on planning target stated by
the firm or company. The relation from planning to assessment, if many things planned
then the assessment that must be done also increase. While relation from assessment to
planning have similar relationship as well.

Assessment and management

Assessment and management has feedback loop. It means as the number of assessment
increase, the number things that must be manage also increase as well as from
management to assessment.

Assessment to implementation
Assessment and implementation has feedback loop. It means as the number of
assessment increase, the number things that must be implemented also increase as well
as from implementation to assessment.

Management and implementation

Management and implementation has feedback loop. It means as the number of things
has to be manage increase, the number things that must be implemented also increase
as well as from implementation to management.

Evaluation to Planning, assessment, management, and implementation

Evaluation

to

other

dimensions

(planning,

assessment,

management,

and

implementation) has feedback loop. It means as the number of others dimensions

increase, the number things that must be evaluate also increase as well.

Causal loop diagram only describes brief relationship between two dimensions.
The limitation of this method that its node only represent whether two dimension
moves in the same directions or not. Even though CLD method is only represent brief
relationship but its sufficient enough to figure out what we are going to do on the
methodology chapter. Further examination to gathering information regarding the
relations of each dimension are still required.

The next step is using CLD to identify interrelation among criteria in each
dimension. CLD that represents the relations among criteria in planning, assessment,
and evaluation dimension was presented in figure 2.3; figure 2.4; and figure 2.5
respectively. While CLD for implementation dimension and management dimension is
not presented because there is no criteria added on those two dimensions. The writer

assume that both dimension still similar as presented in previous framework. Even so,
its still not escaped from examination in methodology chapter.

Planning
Dimension

Business
continuity

+
Manager
commitment

+
Carbon
Policy

Uncertainty
condition

+
R

Reduction
target

Figure 2.3. Causal loop diagram of planning dimension

Business continuity and managers commitment
In this case the business continuity have a role as input for managers commitment.
Business continuity and managers commitment has feedback loop. It means as the
number of business continuity increase, the commitment of manager should be tougher
as well.
Uncertainty condition and managers commitment
In this case uncertainty condition have a role as input for managers commitment.
Uncertainty condition and managers commitment has feedback loop. It means as the

number of business continuity increase, the commitment of manager should be tougher

as well.
Managers commitment and carbon policy
In this case managers commitment have a role to determine carbon policy. As the
tougher commitment by manager, then the carbon policy will tighter as well. And also
same for carbon policy to managers commitment
Managers commitment and reduction target
In this case managers commitment have a role to determine reduction target. As the
tougher commitment by manager, then the reduction target will tighter as well. And
also same for reduction target to managers commitment

Carbon policy to reduction target

In this case carbon policy have a role to determine reduction target. As the tighter
carbon policy, then the reduction target will tighter as well and also same for reduction
target to carbon policy.

Assessment
Dimension

Green
performance

Carbon
footprint
measurement

+
R

Risk
management

Price, quality,
and carbon
reduction
amount

+
R

Life cycle
cost analysis

Figure 2.4. Causal loop diagram of assessment dimension

Green performance and risk management

In this case the green performance have a role as a criteria should be considered in
deciding supplier. Green performance then measured its risk using risk management.
CLD shows that green performance and risk management has feedback loop. It means
as the number of green performance criteria increase, the risk management that must
be assessed is also increase.

Price, quality, and carbon reduction amount to risk management

In this case price, quality, and the amount of carbon reduced have a role as a criteria
should be considered in deciding supplier. Price, quality, and the amount of carbon
reduced then measured its risk using risk management. CLD shows that price, quality,
and the amount of carbon reduced and risk management has feedback loop. It means
as the number price, quality, and the amount of carbon reduced criteria increase, the
risk management that must be assessed is also increase.

Life cycle cost analysis and risk management

In this case, life cycle cost analysis have a role as a criteria should be considered in
deciding supplier. Life cycle cost analysis then measured its risk using risk
management. CLD shows that Life cycle cost analysis and risk management has
feedback loop. It means as the number of life cycle cost analysis criteria increase, the
risk management that must be assessed is also increase.

Carbon footprint measurement

In this case, carbon footprint measurement have a role as a criteria should be considered
in deciding supplier. Carbon footprint measurement then measured its risk using risk
management. CLD shows that carbon footprint measurement and risk management has
feedback loop. It means as the number of carbon footprint criteria increase, the risk
management that must be assessed is also increase.

Implementation
dimension

Planning
dimension

Management
dimension

Assessment
dimension

Feedback

+
+

Feedback

TBL

Audit

Feedback

+
Feedback

Figure 2.5. Causal loop diagram of evaluation dimension

Evaluation
Dimension

Implementation dimension and audit

In this case implementation dimension having a role as input for auditing. Data input
was in the form of economic aspect, fund, and money spend in the actual reality. CLD
shows feedback loop means as implementation dimension increase, the audit also
increase. Its similar with relation from audit to implementation dimension.

Implementation dimension and TBL (social, environmental, economic)

In this case implementation dimension having a role as input for TBL evaluation. Data
input was in the form of problems occurred in environmental and social aspect in the
reality. CLD shows feedback loop means as implementation dimension increase, the
TBL evaluation also increase. Its similar with relation from TBL to implementation
dimension.

Audit and TBL

In this case audit having a role as input for TBL evaluation. Data input was in the form
of economic aspect, fund, and money spend in the actual reality. CLD shows feedback
loop means as the number of auditing increase, the TBL evaluation also increase. Its
similar with relation from TBL to audit.

Planning dimension to TBL

In this case planning dimension having a role as input for TBL evaluation. CLD shows
feedback loop means as the number of things in planning dimension increase, the TBL
evaluation also increase. Its similar with relation from TBL to planning dimension.

Assessment dimension to TBL

In this case assessment dimension having a role as input for TBL evaluation. CLD
shows feedback loop means as the number of things in assessment dimension increase,

the TBL evaluation also increase. Its similar with relation from TBL to assessment
dimension.

Management dimension to TBL

In this case management dimension having a role as input for TBL evaluation. CLD
shows feedback loop means as the number of things in management dimension
increase, the TBL evaluation also increase. Its similar with relation from TBL to
management dimension.

The important thing that should be giving an attention that causal loop diagram
(CLD) only describe brief relationship between two criteria. The limitation of this
method that its node only represent whether two dimension moves in the same
directions or not. Even though only brief relationship has been presented by this
method but its sufficient enough to figure out what we are going to do on the
methodology chapter. Further examination to gathering information regarding the
relations of each criteria are still required.

2.2.

Deductive Study

This section will discuss deductive study used to solve research problems. Generally,
there are 7 references used for current research there are: climate change, supply chain
management, green supply chain management, sustainable supply chain, Supply chain
operational reference 11 (SCOR 11.0), Internal Audit based on ISO 9001: 2015, and
System dynamic. The detail knowledge regarding deductive reference and their use
will be presented below. The understanding of these knowledge is still in general state,
the detailed understanding will added during chapter IV in accordance with practical.

2.2.1. Climate change

Climate change is shifting a weather patterns on the earth with large scale and longterm shift. It caused due to the increase of temperature around the world as contribution
of greenhouse gases in atmosphere.

Studying climate change as the root cause why all the awareness to reduce total
GHGs in the world is very important. Understand climate change is a compulsory due
to the close-relation with environmental issue.

2.2.2. Supply Chain Management

Supply chain management is how to manage entire chain activity effectively and
efficiently from upstream until downstream. The basic understanding about supply
chain management is needed such as input, process, and output.

Understanding SCM concept is used in supplier relationship, purchasing, and

balancing between the need of a company towards raw materials. So that the evolution
of SCM can be derived.

2.2.3. Green Supply Chain Management

Green supply chain is a supply chain that considers environmental impact on its
operations. Usually the company who focused on reduce, reuse, and recycle waste
claim themselves as green. Knowledge regarding GSCM is used to understand green
supplier criteria. So that the criteria-related carbon reduction can be found.

2.2.4. Sustainable Supply Chain Management

Sustainable supply chain is how to make supply chain become sustainable. Usually
there are 3 points in creating sustainable known as triple bottom line. Triple bottom
line such as: economic, environment, and social aspect. Integrate all three point and
embedded in into a system is a key point to make sustainable system.

2.2.5. Internal Audit Based on ISO 9001 (2015)

The knowledge regarding audit are use intentionally in current research for toughen the
concept of audit while embedded in evaluation dimension. Audit is defines by ISO DIS
9001 (2015) as Systematic, independent and documented process for obtaining audit
evidence and evaluating it objectively to determine the extent to which audit criteria
are fulfilled.

Audits are a report organized and structured formally uses for management
review or internal purposes on behalf of an organization. Along with the importance of
audit according to ISO 9001: 2015 the organization must plan, establish, and maintain
an audit program. The implementation uses to evaluate performance of the organization
whether the quality management system is appropriate to the organization requirement
or not. Therefore internal audit should encompassing the conformity of ISO 9001
standard, conformity to organizational requirements, be able to determine whether
QMS has been effectively implemented and well-maintained in an organization or not,
and be able to determine whether the process and product or services is already
appropriate with customer need and government regulation or not.

One of the methodology often uses in quality management system is Plan-DoCheck-Act (PDCA). This method often uses because it can be applied to all QMS

process. The figure 2.6 below presenting single process within the system that QMS
are be able to be managed using PDCA cycle.

Figure 2.6. Schematic representation of a single process within the system (ISO DIS
9001: 2015)

PCDA method consist of 4 steps that would be explained below:

a. Plan
Establish the general objective of the system through component needed for
processes, resources needed that generated from the information of customer
requirements, organizational policies, and other necessary restriction such as
government regulation.
b. Do
Execution part from the result of planning

c. Check
Monitoring to make sure the system is still in the right path its encompass
measuring processes and result againts policies, objective and requirement, and
reporting the result.
d. Act
Is a action if there is any necessary problems needed to be resolved or processes
to be improved.

2.2.6. SCOR 11.0

Supply Chain Operational Reference 11.0 (SCOR 11.0) describes business activity
associated with satisfying customers demand. The understanding of SCOR is used to
find the relationship between criteria. And also to gain broad understanding about
current state of the companys processes and goals. Comparing company performance
to benchmarking data.

2.2.7. System dynamic

System dynamic is a step of system modelling where the procedure is observation of

the systems, system simulation, and test validation towards the output before it actually
applied in the real world. System dynamic is used to make a simulation of the proposed
framework and measure its effectiveness. The input in methodology of system dynamic
is presented in picture 2.7 below.

Figure 2.7. The foundation of System Dynamics Approach

CHAPTER III

RESEARCH METHODOLOGY
This chapter will discuss about the research methodology. The steps and general
thinking of study focus and research object, development of model, K-Chart,
conceptual model, data requirement, data collection method, and tools used for analysis
were explained in this section. The scope of this section are encompassing and
transform the thinking of how to complete the research from beginning until finish with
systematic thoughts.

3.1.

Study Focus and Research Location

Literature study and knowledge discusses on supply chain are very comprehensive.
Therefore, the study should be focused on partial part of practice. The focus for current
research was generated after reviewing many literature with keywords green supply
chain, GSCM, green supplier selection, sustainable supply chain, and carbon footprint.
The research focus narrowed in transformation of effective system to reduce carbon
emission into how to build a sustainable system to effectively reduce carbon emission.
There are 5 points that must be passed after this research has finished. Firstly, Current
research expected to find new criteria as complement to polish up previous framework.
The criteria focuses on green supplier selection in accordance with sustainable criteria.
Secondly, building new framework based on assumption and correlation of relations
between dimension to dimension and criteria to criteria. Thirdly, proposed framework
validation confirmation based on reality in the field by questionnaire and interviewing
the expert. Fourth, fixing the proposed framework if necessary. And the last fifth,
making scenario using simulation to find the effectiveness of proposed framework. The
study focus is presented in a flowchart form as shown in figure 3.1 below:

Start

Looking for new criteria

Literature
study

Building new framework

Questionnaire
and interview

Framework validation

No
Valid?
Yes
Framework simulation

Finish

Figure 3.1. Study focus flowchart

The location of the research will be conducted on the firm which fulfill the following
criteria:
1. Company which emitted huge amount of CO2 as a result of entire supply chain
encompasses on their processes.
2. Company which have various supplier choice and selection.

Those two requirements was a consideration to fulfil sufficiency data respectively to

each criteria.

3.2.

Development of Model

This section will explain a hypothesis of a developed model. The developed model is
generated from literature study that transformed into Causal-Loop-Diagram and
combined with previous framework. The detailed of developed model is shown in
figure 3.2 as follows:

Planning Dimension
Business continuity

Manager
Commitment

Uncertainty
condition

Reduction target

Carbon policy

Assessment Dimension
Green performance

Carbon footprint
measurement

Risk management

Price quality and

carbon reduction
amount

Life cycle cost

analysis

Management Dimension

Implementation Dimension

Environmental
management

Accounting and
inventory

Training

Carbon verification
Information
management

Feedback

Disclosure & report

Supply chain
management

Feedback

Feedback

Managers decission
Audit

TBL evaluation
Evaluation Dimension

Figure 3.2. Proposed Model Development hypothesis

3.2.1. Conceptual Model

This section will explain a conceptual model. Conceptual model will discussing the
theory to generate a hypothesis. Overall theory in generating proposed model
hypothesis was a result from inductive study that well-known from previous research.
The conceptual model provide a novelty within a new proposed model as follows.

After reviewing more than 40 literature about GSCM, carbon footprint,

supplier, selection according to GSCM practices, and previous framework about
carbon reduction emission, many criteria and knowledge regarding carbon reduction
implementations has gathered. The writer found that Lious framework are need to be
develop into more sustainable system so that evaluation dimension should be added.
Evaluation dimension expected to provide the feedback to each other dimensions
respectively. Sustainable criteria such as Triple Bottom Line. It can be a good
complement in future framework. TBL approach for supplier selection considers
economic, environmental, and social aspects (Govindan, Khodaverdi, et al., 2013). To
evaluate and making decision correctly related with fund, the evaluation dimension
need audit.

The writer realize that besides providing evaluation dimension, still another
important thing should be consider is that in reality not all company truly concentrate
their effort to reduce carbon emitted on their supply chain level. Igarashi et al. (2015)
Investigate supplier selection strategy based on supplier selection behavior towards
green public procurement, the result shows that in behavioral decision making, there
are 4 approach uses for simplifying GSCM problems they are: ignore, incorporate,
insist, and integrate. The companies which adopt Ignore means they ignore green
dimension; Incorporate means incorporating environmental performance; Insist means

using environmental criteria only as mandatory requirement; Integrate means trading

off environmental performance for other criteria.

Basically, a system adapted by the company was aimed to business continuity.

For instance in supplier selection, the company are having variety of approach in
selecting supplier. Some of them are well aware of environmental issues such as carbon
reduction program. Due to government policies and future condition which state that
customer are not only concern in price and quality but also concerning environmental
aspect. Then the company which concern to overcome environmental issues will put
themself at an advantage state. In other hand, there are another company which do not
concern in environmental consideration in selecting supplier. This often happen
because the cost to reduce environmental problems is cost consumed or when the
company felt that their market segmentation did not require environmental advantages.
All of the reasons was choose because the company sees what they feel is the best for
their business continuity (Govindan, Rajendran, et al., 2013). In foreseeing business on
the future, assumption are need to be built due to uncertainty condition in the future.
Thus, the next framework should consider assumption of uncertainty (Koo et al., 2014).

Adding business continuity into planning dimension could be one of good

complement for the next proposed framework. The company which want to put
themself at advantages needs giving efforts in green performance as well as carbon
footprint measurement in assessing their supplier. Carbon footprint measurement such
as deciding transportation route to assess optimization route, efficiency maximum, and
cost minimum (Kuo et al., 2014). In recent study Kuo show deciding supplier from its
carbon footprint inventory, but there are another things must be consider besides the
amount of carbon footprint inventory that is price, quality, and their carbon reduction
amount.

The above explanation conclude that there is interdependence relationship

among criteria. One criteria can support another criteria so that cant be separated or
erased

3.2.1. Planning and Tool Research (K-Chart)

K-Chart will describe the position of current research. The detailed of K-Chart shown
on picture 3.3 below.

General Tittle:

BUILDING A SUSTAINABLE SYSTEM TO EFFECTIVELY REDUCE CARBON EMISSION:

A REVIEW OF AN EFFECTIVE FRAMEWORK FOR CARBON REDUCTION MANAGEMENT

General issue 1:
Decission level

Supply Cain
management

Sub issue 2:
Decission level

Green supply chain

(GSCM)

Sub issue 3:
Location of decission

Sustainable Supply
Chan (SSCM)

Operational

Strategic

Tactical

Sub issue 3:
Organizational function

Procurement

Production

Distribution

Sub issue 4:
Characteristic of the system

Purchasing

Supplier selection

E-commerce

Carbon reduction
management

Sub issue 5:
general objective

Sub issue 6:
Sub objective

Build an effective
carbon reduction
framework

Supplier based on the

best performance

Build a sustainable
system to effectively
reduce carbon

Figure 3.3. K-Chart of Building a sustainable system to effectively reduce carbon emission

Sub issue 7:
Elements of the system

Methodology:
Decission type level

Methodology:
Approach

Sustainable criteria

green criteria

Quantitative method

Basic

Phenomenology

Qualitative method

Mixd method

Grouded theory

Narrative analysis and

critical quantitative
research

Methodology:
Data collection

Inductive study

Interview

Observation to
documentary materials

Methodology:
Data processing

DEMATEL

SCOR 11.0

Delphi

Thypologies

Tentative particular
theories

Result:
Result type

Concept

Themes

Figure 3.3. K-Chart of Building a sustainable system to effectively reduce carbon emission (continue)

Result:
Result form

Validated Framework

Methodology:
Decission type level

Methodology:
Approach

Quantitative method

Qualitative method

Mixed method

Surveys

Experiments

Obs ervational s tudies

Methodology:
Technical approach

Sys tem dynamic

Methodology:
Model type

Methodology:
data type

Methodology:
Type of model

Methodology:
Model validation

Result:
Parameter

Modeling s imulation

Primary datas et

Engineering prototype

Lab experiment

s econdary datas et

Commercial prototype

Lab s cale model

Simulation

Real world
implementation

Effectivenes s in
reducing carbon

Level of gap on the

s ys tem

Figure 3.3. K-Chart of Building a sustainable system to effectively reduce carbon emission (continue)

3.3.

Data requirement

The data required are primary data. Primary data taken during interview, direct
observation, and questionnaire. The interview purposely to direct asking and answer
regarding the proposed framework. Questionnaire as supporting tool as hard data if
necessary. While observation is to find out current process

The data required are secondary data. Data about carbon consumption from supplier
activities.

3.4.

Tools

Current research is using several tools such as:

1. Microsoft excel

Used to examine a data distribution to assist as input for Powersim software

2. Powersim Studio 9

Used to simulating the framework.