Green Productivity as an Approach to Address the Environmental Problem of Leather Tanning SMEs in Yogyakarta, Indonesia
GREEN PRODUCTIVITY AS AN APPROACH TO ADDRESS
THE ENVIRONMENTAL PROBLEM OF LEATHER TANNING SMEs
IN YOGYAKARTA, INDONESIA
DWI NINGSIH
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
DECLARATION
I hereby declare that the thesis entitled “Green Productivity as an Approach to
Address the Environmental Problem of Leather Tanning SMEs in Yogyakarta,
Indonesia” is my original work produced through the guidance of my academic advisors and
have not been submitted to any tertiary institution. This thesis also presented for the award of
a degree in The University of Adelaide as a double degree program between Bogor Agricultural
University and The University of Adelaide. All of the incorporated material originated from
other published or unpublished papers are stated clearly in the text as well as in the
bibliography.
I hereby delegate the copyright of my paper to the Bogor Agricultural University.
Bogor, July 2015
Dwi Ningsih
NRP F351137071
SUMMARY
DWI NINGSIH, 2015. Green Productivity as an Approach to Address the Environmental
Problem of Leather Tanning SMEs in Yogyakarta, Indonesia. Supervised by ONO SUPARNO
and SUPRIHATIN.
The leather tanning industry is a most promising industry in Yogyakarta. However, the
industry faces environmental problems due to poor environmental management practices. This
study develops strategies to address the environmental issues of the impact of leather tanning
SMEs in Yogyakarta. It identifies opportunities for improvement based on Green Productivity
(GP) approach, and obstacles to formulating strategies for enhancing environmental
performance.
This study uses a Case Study approach using field observations and interviews with a
number of leather tanning SMEs and industry experts. The results show that the SMEs in this
sector adopt only a limited level of environmental practices. A set of GP options is proposed
based on the observational evidence and expert judgements. Using an Analytic Hierarchy
Process (AHP), a priority selected is to optimize the production processes of leather tanning
SMEs.
This study found that internal obstacles to green adoption included insufficient
resources and infrastructure, low-skilled human resources, poor financial capability, lack of
awareness, and poor organizational strategies. The external obstacles are significant and
include inadequate law enforcement and government support, a small and limited market
segment, and the lack of available green chemicals. These contribute toward poor
environmental practices.
To deal with these problems, this research proposes eight strategies for tackling the
obstacles that prevent the implementation of leather tanning green practices. The strategies are
divided into internal and collaborative. The internal strategies include encouraging enhanced
product development processes and promote proactive and innovative strategies. Regarding
their limitations, SMEs need stakeholder assistance to help solve their issues. A collaborative
approach is crucial. Developing low-cost green technologies through R&D activities,
developing best practice guidance and promoting its implementation, providing adequate
facilities and machinery, identifying suitable suppliers to supply green chemicals, intensifying
knowledge transfer of good environmental management, and establish a punishment and
reward system are proposed for addressing the issues.
Keywords: green productivity, leather SMEs, AHP, SWOT
RINGKASAN
DWI NINGSIH, 2015. Green Productivity as an Approach to Address the Environmental
Problem of Leather Tanning SMEs in Yogyakarta, Indonesia. Dibimbing oleh ONO
SUPARNO dan SUPRIHATIN.
Industri penyamakan kulit adalah industri yang menjanjikan di wilayah Yogyakarta.
Namun, industri ini menghadapi permasalahan lingkungan dikarenakan praktek manajemen
lingkungan yang rendah. Studi ini bertujuan untuk menyusun strategi dalam rangka
penyelesaian permasalahan lingkungan yang timbul sebagai dampak dari proses penyamakan
kulit oleh IKM di Yogyakarta. Penelitian ini mengidentifikasi peluang perbaikan berdasarkan
pendekatan Produktivitas Hijau, dan hambatan yang dihadapi untuk selanjutnya menyusun
strategi untuk meningkatkan kinerja lingkungan IKM.
Studi ini menggunakan studi kasus dengan tinjauan lapangan dan wawancara dengan
sejumlah IKM dan ahli industri penyamakan kulit. Hasil studi menunjukkan bahwa IKM pada
sektor industri ini masih terbatas dalam pengimplementasian praktek perlindungan lingkungan.
Serangkaian opsi produktivitas hijau diusulkan berdasarkan dengan bukti observasi di lapangan
dan pendapat ahli. Selanjutnya, menggunakan Analytic Hierarchy Process (AHP), prioritas
yang terpilih adalah untuk mengoptimasi proses produksi penyamakan kulit.
Studi ini mengungkapkan bahwa hambatan internal dalam mengadopsi praktek hijau
adalah terkait dengan sumber daya dan infrastruktur yang tidak memadai, sumber daya manusia
yang kurang terampil, kemampuan keuangan yang rendah, kesadaran yang rendah, dan strategi
organisasi yang rendah. Sedangkan hambatan eksternal adalah penegakan hukum dan
dukungan pemerintah yang masih redah, segmentasi pasar yang masih terbatas dan
keterbatasan ketersediaan bahan kimia ramah lingkungan. Hambatan ini yang menyebabkan
rendahnya tingkat praktek lingkungan di lingkungan IKM.
Untuk menanggulangi permasalahan ini, studi ini mengusulkan delapan strategi untuk
mengatasi hambatan yang menghalangi penerapan praktek hijau di IKM penyamakan kulit.
Strategi ini dibagi menjadi internal dan kolaboratif strategi. Internal strategi yaitu mendorong
peningkatan proses pengembangan produk dan mempromosikan strategi yang proaktif dan
inovatif. Terkait dengan limitasi yang ada, IKM membutuhkan bantuan dari stakeholder lain
untuk menyelesaikan permasalahan yang mereka hadapi. Sebuah kolaborasi diperlukan seperti
mengembangkan teknologi hijau yang terjangkai melalui kegiatan R&D yang memadai,
mengembangkan petunjuk praktek terbaik dan mempromosikan penerapannya, menyediakan
fasilitas dan mesin yang memadai, mengidentifikasi ketersediaan supplier untuk menyediakan
bahan kimia ramah lingkungan, mengintensifkan kegiatan transfer pengetahuan tentang
managemen lingkungan yang baik dan menyediakan sistem hukuman dan penghargaan.
Kata kunci: produktivitas hijau, IKM kulit, AHP, SWOT
Copyright ©2015, by Bogor Agricultural University
All Right Reserved
1. No part or all of this thesis excerpted without inclusion or mentioning the sources
a. Excerption only for research and education use, writing for scientific papers, reporting,
critical writing or reviewing of a problem
b. Excerption does not inflict a financial loss in the proper interest of Bogor Agricultural
University
2. No part or all of this thesis may be transmitted and reproduced in any form without a written
permission from Bogor Agricultural University
GREEN PRODUCTIVITY AS AN APPROACH TO ADDRESS
THE ENVIRONMENTAL PROBLEM OF LEATHER TANNING SMEs
IN YOGYAKARTA, INDONESIA
DWI NINGSIH
Thesis
submitted as one of the requirements
for achieving title Magister Science
In Department of Agroindustrial Technology
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
External Examiner: Prof. Dr. Ir. M. Syamsul Maarif, M.Eng
Thesis Title
Name
NRP
Study Program
: Green Productivity as an Approach to Address the Environmental
Problem of Leather Tanning SMEs in Yogyakarta, Indonesia
: Dwi Ningsih
: F351137071
: Agroindustrial Technology
Approved by
Advisory Committee
Prof Dr Ono Suparno, STP, MT
Coordinator
Prof Dr Ir Suprihatin
Co-supervisor
Acknowledged by
Head of Study Program of Agroindustrial
Technology, IPB
Dean of Graduate School
of Magister Program, IPB
Prof Dr Ir Machfud, MS
Dr Ir Dahrul Syah, MScAgr
Examination Date: 11 June 2015
Submission Date:
ACKNOWLEDGEMENTS
I must start by thanking to Allah SWT, the Almighty, the most beneficent and the most
merciful. I also want to express my gratitude to so many people for the supports, so that this
thesis could be well completed as a requirement to get a Master Degree in Bogor Agricultural
University (IPB). The title of the thesis is Green Productivity as an Approach to Address the
Environmental Problem of Leather tanning SMEs in Yogyakarta, Indonesia.
In particular, many thanks to my amazing advisory committee, both in IPB and UoA,
Prof. Dr. Ono Suparno, S.TP., MT, Prof. Dr. Ir. Suprihatin and Prof Noel Lindsay, for their
guidance, support and encouragement in every stage of my study.
I would like also thanks to Dr. Barry Elsey and Amina Omarova for the guidance and
supports during the long workshops in the University of Adelaide. Thank you so much. Many
thanks for the helps from the editor, Charles Clennell and Isabella Slevin.
Many thanks are also devoted to my brother, Sulistyanto, my sister-in-law, Eli Karlina
Azis and my little niece, Shofia Nurul Izzati Al-Quds, and my other-mother in Adelaide, Joyce
Hassan, for their supports. Many thanks to my fellow Double Degree program students, namely
Nuni, Anin, Yani, Syarifa, Nur Aini, Karim, Tri, Benny, Andar, Farda, Iwan, Danang, Aditya,
Dickie, Ahmad Rudh, and Koko. Finally we get to the end of this journey.
Finally, I must thank to my parents, this thesis I dedicated for both of you, my beloved
mother, Waginah and father, Tasrip. Thanks for supporting me so far. Thanks so much, I feel
nothing without your amazing supports.
Bogor, July 2015
Dwi Ningsih
TABLE OF CONTENTS
LIST OF TABLES ................................................................................................................................. vi
LIST OF FIGURES ............................................................................................................................... vi
LIST OF APPENDIXES........................................................................................................................ vi
1 INTRODUCTION .......................................................................................................................... 1
Research Background ..................................................................................................................... 1
Problem Statement .......................................................................................................................... 3
Research Questions ......................................................................................................................... 3
Research Objective ......................................................................................................................... 3
Research Benefits ........................................................................................................................... 3
Significance of Research ................................................................................................................ 3
2
LITERATURE REVIEW ............................................................................................................... 4
Introduction..................................................................................................................................... 4
A glimpse of the Yogyakarta Leather Tanning Industry ................................................................ 4
Green Productivity (GP) ................................................................................................................. 4
Barriers of SMEs in Green Practice Implementation ..................................................................... 6
Strategy Formulation ...................................................................................................................... 7
Summary ......................................................................................................................................... 8
3
METHODS ..................................................................................................................................... 9
Introduction..................................................................................................................................... 9
Setting ............................................................................................................................................. 9
Participants ................................................................................................................................... 10
Data Collection ............................................................................................................................. 10
Procedures..................................................................................................................................... 11
Data Analysis ................................................................................................................................ 11
4
RESULTS AND FINDINGS ........................................................................................................ 12
Characteristics of Yogyakarta Leather SMEs ............................................................................... 12
The Opportunities Identified to Achieve Better Environmental Performance (RQ1) .................. 13
Prioritization of the Green Productivity Options using AHP (Analytical Hierarchy Process) ..... 17
Obstacle Identification (RQ2) ....................................................................................................... 17
Strategy Process Development (RQ3) .......................................................................................... 20
5
CONCLUSION ............................................................................................................................. 22
Summary ....................................................................................................................................... 22
Implications of the research .......................................................................................................... 22
Limitations of the research and future research directions ........................................................... 22
Recommendations......................................................................................................................... 22
REFERENCES ..................................................................................................................................... 23
APPENDIXES ...................................................................................................................................... 26
AUTOBIOGRAPHY ............................................................................................................................ 45
LIST OF TABLES
Table 1. Export value of leather products from 2009-2013 .................................................................... 1
Table 2. GP projects in the leather industry ............................................................................................ 5
Table 3. Proposition 1 details.................................................................................................................. 6
Table 4. Identified internal barriers......................................................................................................... 7
Table 5. Identified external barriers ........................................................................................................ 7
Table 6. Proposition 2 details.................................................................................................................. 7
Table 7. Proposition 3 details.................................................................................................................. 8
Table 8. Research procedures ............................................................................................................... 11
Table 9. SWOT analysis ....................................................................................................................... 20
Table 10. Strategy Classification .......................................................................................................... 20
Table 11. More detailed discussion of strategies .................................................................................. 20
LIST OF FIGURES
Figure
Figure
Figure
Figure
Figure
Figure
Figure
1. Map of Yogyakarta Province .................................................................................................. 1
2. Leather processing waste ........................................................................................................ 2
3. Research framework ............................................................................................................... 9
4. Flow chart of tanning process in Yogyakarta ....................................................................... 13
5. Special recycling economy model ........................................................................................ 15
6. Recycle of wastewater tannery with circular economy model ............................................. 16
7. AHP structure ....................................................................................................................... 17
LIST OF APPENDIXES
Appendix 1. Glossary of Specific Terms .............................................................................................. 26
Appendix 2. Profile of the SMEs .......................................................................................................... 27
Appendix 3. Semi-Structure Questions and the analysis ...................................................................... 28
Appendix 4. AHP questionnaire (sample per level of the hierarchy) ................................................... 33
Appendix 5. AHP results ...................................................................................................................... 36
Appendix 6. The proposition GP options and the quotes...................................................................... 38
Appendix 7. Proposition of Internal Obstacles and the quotes ............................................................. 40
Appendix 8. Proposition of External Obstacles and the quotes ............................................................ 42
Appendix 9. Proposition Strategies and the quotes............................................................................... 43
Appendix 10. Formulated strategy ........................................................................................................ 44
1
1 INTRODUCTION
Research Background
Leather is a most promising Indonesian industry as evidenced by the upward trend of
international demand toward its leather products (Table 1). The industry is centralized in
several main areas; namely, West Java, East Java, Central Java, Bali, Yogyakarta, and Jakarta.
The main sourcing centres for the leather industry are in the East Java, West Java and Bali
provinces. However, Yogyakarta is also an important sourcing centre because it has a role as a
key supply zone that generates significant tourism sales.
Table 1. Export value of leather products from 2009-2013
Year
Export value (million USD)
Destination country
2009
178.4
2010
246.4
2011
292.1
US, Japan, Germany, Italy, Malaysia,
Belgium, UK, Russia Federation, Egypt,
Morocco, India, Taiwan, Canada, Australia,
Georgia, Singapore, Algeria, Ecuador,
France, South Africa
2012
324.7
2013
338.1
Yogyakarta is a provincial region in Indonesia located on Java Island (Figure 1). The
economic structure of Yogyakarta is dominated by trade (21%), services (18%) and agriculture
(16%). Yogyakarta’s development is significant and includes two leading industries: leather
manufacturing and textile processing. These two industries contribute significantly to the GDP,
employment, investment, and development potential of the Province with multiplier effects to
related industries in other provinces (Kemenperin, 2009). The focus of this research is on the
leather tanning industry. Although this industry is well developed in Yogyakarta, there are
significant waste management environmental problems such as the generation of significant
liquid and solid wastes, and the emission of repulsive smells (because of the degradation of
proteinous material of skin) and generation of gases such as NH3, H2S, and CO2 (Figure 2).
Figure 1. Map of Yogyakarta Province
2
According to the Indonesian Tannery Association, approximately 75% of the leather
industry firms are small and medium enterprises (SMEs). These SMEs have limitations which
hinder their waste management environmental protection efforts. Previous studies (e.g., Hobbs
2000) have found that SMEs tend to be more harmful to the environment compared to larger
corporations due to their poor production techniques. Other studies (e.g., Kanagaraj et al. 2006)
have found that leather tanning SMEs in developing countries face significant waste disposal
problems with many being closed for not meeting the required standards. This situation is
similar in Indonesia, particularly in Yogyakarta, where there is a low level of adoption of
leather tanning green practices (“Badan Lingkungan Hidup” (BLH)).1
Figure 2. Leather processing waste
Promoting sustainable strategy development is not an easy task; e.g. cleaner production,
eco-efficiency, pollution prevention, etc. Most SMEs focus on the end-of-pipe (EOP) treatment
which is less effective and disregard preventative management. In addition, the typical SME
view of environmental protection is merely about added costs that are inopportune for the
business. These perceptions prevent SMEs understanding the urgency in participating in the
environmental protection efforts.
Green practice (GP) is a new concept that was introduced by the Asian Productivity
Organization (APO) in 1992 which proposes a two-pronged approach that attempts to protect
the environment without sacrificing the economic performance of a business. A number of
scholars found benefits from GP implementation (Darmawan, Putra & Wiguna 2014; Mohan
Das Gandhi, Selladurai & Santhi 2006; Singgih, Suef & Putra 2010; Sittichinnawing &
Peerapattana 2012). A number of Indonesian studies was conducted but these were limited to
the phenol and rubber industries. There is no evidence of any investigations into the Indonesian
leather industry.
As stated by Al-Darrab (2000) cited in Logamuthu & Zailani S (2010), increasing
global consumer environmental awareness has begun to pressure manufacturers and service
providers to be more responsible regarding the impact of their processes on the environment.
A series of studies during 1985 showed that more than a third (37.6%) of consumers require
green products. They also were beginning to become concerned then as well about product
disposals. In this regard, the Indonesian Government is looking to clean up “dirty” industries
by introducing industry green policies (e.g., National Regulation 3, 2014).2 Consequently,
leather tanning SMEs need to upgrade their existing practices and find better ways to solve
1
The BLH is an environmental agency in Yogyakarta which has identified that most leather tanning SMEs have not met the required
environmental standards.
2
A green industry is defined as an industry which prioritizes efficiency and effectiveness in the resource utilization of its processes to align
industrial development with the preservation of the environment while providing benefits to the community.
3
their challenges while developing better competitive advantages. Many Yogyakarta SMEs,
however, claim that they are challenged in implementing green practices though there is no
empirical evidence to support these claims.
In response to this lack of empirical evidence, this research has three main purposes:
(1) Identify green practice improvement options using a GP approach in Yogyakarta leather
tanning SMEs
(2) highlight the obstacles that inhibit green practice implementation, and
(3) formulate strategies to tackle these obstacles for better implementation of green practices.
Problem Statement
Most Yogyakarta leather SMEs have inadequate green practices leading to low levels
of environmental performance. There are a number of factors that hinder the implementation
of those practices. Moreover, the urgency of implementing such practices is considered
insignificant by the SMEs because they tend to focus on their day-to-day activities while using
their limited resources for the purposes of their business’ core operations.
Research Questions
RQ1. What opportunities can be identified to achieve better environmental performance for
Yogyakarta leather tanning SMEs?
RQ2. What are the principal obstacles that hinder improving their environmental performance?
RQ3. What strategies can be proposed to overcome these obstacles?
Research Objective
This research aims to provide Green Practice recommendations and strategies for
overcoming the main obstacles faced by leather tanning SMEs in order to achieve better
environmental practices.
Research Benefits
The benefits of this study are:
a. Collection of empirical evidence of the existing green practices in the Indonesian leather
industry, especially in Yogyakarta province
b. Guidance for enhancing green practices in Yogyakarta leather tanning SMEs, and
c. The development of strategies to tackle the environmental issues associated with their
businesses.
In addition, identification of the principal barriers to implementing green practices in
Yogyakarta leather tanning SMEs is a prerequisite to formulating better public policies to
remove or mitigate environmental problems.
Significance of Research
SMEs, which have particular limitations, need to identify favorable practices that
effectively address their problems while looking to increase their productivity at the same time.
GP is a concept that provides both benefits. In the longer term, strategies proposed are expected
to enhance the competitive advantage of SMEs to better help them compete in broader market
segments.
4
2 LITERATURE REVIEW
Introduction
Since leather is Yogyakarta’s primary industry, the sustainability of this industry is
paramount. This can only be achieved through the development and implementation of
appropriate environmentally friendly strategies. Good environmental performance can improve
the poor corporate image of this industry; however, overcoming the low levels of green practice
implementation which affect the poor environmental performance of leather tanning businesses
is a huge challenge. In this Chapter, a number of topics are addressed. First, discussion occurs
about the Indonesia leather tanning industry, particularly in Yogyakarta province together with
its environmental problems. Second, a green practice (GP) approach to solving the problems is
discussed, followed by the barriers to SMEs implementing GP, and what is needed to formulate
appropriate GP strategies.
A glimpse of the Yogyakarta Leather Tanning Industry
Yogyakarta is one of the provinces on Java Island, Indonesia. It consists of one city
(Yogyakarta) and four districts (Sleman, Bantul, Kulonprogo, and Gunung Kidul). Leather is
the primary industry. It is a successful industry and it is spread across the Yogyakarta provincial
region. According to the regulation of the Indonesian Ministery of Industry No. 138/MIND/PER/10/2009, the Map Guide (Road Map) about “Industrial Development Yogyakarta
Province”, the other leading industry is textile processing (Kemenperin, 2009). Yogyakarta
SMEs generate significant export and local tourism sales.
Although the economic benefits of the leather industry are important, it has an adverse
environmental impact (Ozgunay et al. 2007). During the manufacturing process, pollution
occurs through the generation of toxic liquids and solid wastes which emit repulsive smells.
Only one-fifth of the raw hides/skins are converted into products; the rest are discharged as
waste or by-products. The tanning process produces 45-50m3 of waste water per ton of raw
hides/skins (Kanagaraj et al. 2006). Tanning wastewater is a serious threat to the environment
due to its content of strong alkalis, bio-waste, and heavy metals.
Most of the Indonesian leather industry is comprised of SMEs (small and medium
enterprises). These, unquestionably, are a significant component of the Indonesian economy.
They employ 97.16% of all workers and contribute toward 59.08% of Indonesia’s GDP
(KemenkopUKM 2012). SMEs, however, are recognized as the largest contributors toward
polluting the environment due to their substandard production techniques (Hobbs 2000).
Green Productivity (GP)
The Asian Productivity Organization (APO) defines GP as a strategy for enhancing
productivity and environmental performance for socio-economic development (APO 2002).
The APO proposed a concept that involves a customer focus (on quality) in achieving balance
between profitability and environmental performance. GP is the application of appropriate
productivity and environmental management tools, techniques, and technologies to reduce the
environmental impact of an organization’s activities.
A range of studies have identified the benefits of GP implementation (Darmawan, Putra
& Wiguna 2014; Mohan Das Gandhi, Selladurai & Santhi 2006; Singgih, Suef & Putra 2010;
Sittichinnawing & Peerapattana 2012). These studies were conducted in various industries
5
including rubber, foundry, phenol, and cayenne pepper. GP benefits include increased product
quality, reduced scrap, reduced pollution, and reduced risks for the enterprise (Logaa & Zailani
2013). Other benefits include cost savings in raw material purchases (Singgih, Suef & Putra
2010) and higher yields without compromising the environment (Sittichinnawing &
Peerapattana 2012). Similar benefits have been associated with some projects in the leather
industry which have been conducted by the APO. These projects identify various GP options
in each industry in different countries (Table 2). The options proposed are based on a cause
analysis, materials and component balance, literature survey, and brainstorming among team
members and experts.
A study of GP in the context of Indonesian industry, however, is still limited though
there are studies in two industry sectors: phenol and rubber (Darmawan, Putra & Wiguna 2014;
Singgih, Suef & Putra 2010). Both studies have identified GP benefits in reducing the impact
of industry processes upon the environment. In terms of the Indonesia leather industry, two
studies focused on cleaning up production in two different areas in Indonesia, Garut and Bogor.
They identified various improvement options (Alihniar 2011; Wardhana 2011). In Garut, the
industry needs to improve its water usage control. In Bogor, chromium recycling has been
identified as solving their environmental issues.
Table 2. GP projects in the leather industry
No
GP projects
Details data of the industry
1
TANCHEM
Industries
Location: Northern part of
India
Products: Nappa, oil pull
nappa and other varieties of
leather used by the garment and
shoe manufacturing industries.
Number of worker: 30
2
NASSAU
TANNERY
Company
Location: Southern part of
India
Products: suedes, nappa,
nubuck and other varieties of
leather for garment and golf
glove manufacture.
Number of worker: 175
3
SHUI-HUA
LEATHER
INDUSTRIAL Co.
Ltd.
Location: in Tainan Hsein,
Taiwan, ROC.
Products: all types of leathers
for shoe uppers, handbags,
cases and many other consumer
goods.
Number of worker: >200
GP options
The experts identified 45 GP options that
divided into:
1. Good housekeeping
2. Process modification
3. Material change
4. Elimination & reduction
5. Equipment modification
6. Technology change, and
7. Recycle, reuse and recovery (3R).
The experts identified 59 GP options that
divided into:
1. Good housekeeping
2. Process modification
3. Material change
4. Elimination & reduction
5. Equipment modification
6. Technology change
7. Recycle, reuse and recovery (3R)
The expert proposed 7 main GP options:
1. Process improvement
2. Improve housekeeping
3. Separation of waste water streams
4. Recovery of chrome
5. Desalination
6. Resource recovery
7. Rationalization of water usage
6
It can be argued that although in the same sector industry, the improvement options proposed
might be different depending on a process’ characteristics such as the raw materials used,
technology applied, production processes adopted, etc. There have, however, been no studies
in the context of the Yogyakarta leather industry. For this reason, we investigate the GP options
for the Yogyakarta leather tanning industry and generate the propositions appearing in Table
3.
Table 3. Proposition 1 details
RQ: What opportunities can be identified to achieve a better
environmental performance of leather SMEs in Yogyakarta?
Proposition
Proposition 1a: Good housekeeping
Proposition 1b: Process improvement
Proposition 1c: Material substitution
Proposition 1d: 3R (reduce, reuse, recycle)
Proposition 1e: Desalination
Proposition 1f: Water usage control
Proposition 1g: Equipment modification
Proposition 1h: Segregation of waste water streams
Barriers of SMEs in Green Practice Implementation
Definitions of SMEs vary in each country. The SMEs in Indonesia have been defined
based on the number of workers, income, and their amount of assets. Based on the Central
Bureau of Statistics (BPS) definition, a small business is an entity that has 5 to 19 workers, a
medium-sized business is an entity that has 20 to 99 people.
In general, SMEs are focused on generating profits to keep their businesses operating.
They are preoccupied with reducing resource use and waste in order to achieve short-term
goals; however, this is not a priority if they do not gain associated benefits (Esty & Winston
2009). Wilson, Williams & Kemp (2012) found, for example, that UK SMEs see environmental
innovation as a financial burden, and that they do not recognize the contributions toward the
performance of environmental best practice. Thus, poor environmental practices exist because
SMEs tend to focus on day-to-day activities ( Studer et al. 2008) with their resources restricted
to issues related to their business’ core (Biondi, Frey & Iraldo 2000) rather than on green
practices. Therefore, SMEs tend to be more reactive in tackling environmental problems. It is
the larger companies that tend to be more proactive (e.g., Bianchi & Noci 1998; Hobbs 2000).
SME reactive strategies focus more on compliance than sustainability (Hobbs 2000); they are
not willing to contribute voluntarily. However, SME non-compliance is acknowledged and
considered serious only if there is a threat of prosecution (Wilson, Williams & Kemp 2012).
A range of studies has examined the barriers to green practice implementation. Most of
these classify barriers into internal and external (refer Tables 4 and 5). There have been none
that focus on leather tanning in Yogyakarta. For this reason, we investigate the Yogyakarta
leather tanning industry and generate the propositions that appear in Table 6.
7
Table 4. Identified internal barriers
Internal barriers
Insufficient resources and
infrastructure
Inadequate technical
knowledge and skills (human
factor)
High cost of environmental
technologies (financial factor)
Lack of awareness
Lack of organizational strategy
Aversion to innovation
Authors
Rojsek (2001); Brammer, Hoejmose & Marchant (2012); Tilley (1999);
Murillo-Luna, Garcés-Ayerbe, & Rivera-Torres (2011)
Hillary (2004); Rojsek (2001); Zilahy (2004); Moors, Mulder & Vergragt
(2005); Murillo-Luna, Garcés-Ayerbe & Rivera-Torres (2011)
Hillary (2004); Rojsek (2001); Tilley (1999); Shi et al. (2008); Zilahy
(2004), Murillo-Luna, Garcés-Ayerbe & Rivera-Torres, (2007); Zutshi &
Sohal (2004); Moors, Mulder & Vergragt (2005); Massoud et al. (2010);
Murillo-Luna, Garcés-Ayerbe, & Rivera-Torres (2011)
Wilson, Williams & Kemp (2012); Tilley (1999); Zilahy, (2004).
Murillo-Luna, Garcés-Ayerbe, & Rivera-Torres (2007); Zilahy (2004),
Moors, Mulder, & Vergragt (2005); Massoud et al. (2010)
Murillo-Luna, Garcés-Ayerbe, & Rivera-Torres (2011)
Table 5. Identified external barriers
External barriers
Market segment for green product is
too small
The ‘green’ supplier support is
insufficient
Poor environmental legislation
Limited government support
Authors
Rojsek (2001); Zilahy (2004)
Rojsek (2001); Murillo-Luna, Garcés-Ayerbe, & Rivera-Torres
(2011)
Rojsek (2001); Wilson, Williams & Kemp (2012); Brammer,
Hoejmose & Marchant (2012); Shi et al. (2008); Revell &
Rutherfoord (2003); Moors, Mulder & Vergragt (2005)
Massoud et al. (2010)
Table 6. Proposition 2 details
RQ: What are the barriers that inhibit the implementation of the green practices Yogyakarta leather
tanning SMEs?
Proposition
Internal barriers:
External barriers:
Proposition 2a: Insufficient
resources
and Proposition 2g: Market segment is too small
infrastructure
Proposition 2h: Insufficient ‘green’ supplier support
Proposition 2b Human factors
Proposition 2i: Poor environmental legislation
Proposition 2c: Financial factors
Proposition 2j: Limited government support
Proposition 2d: Lack of awareness
Proposition 2e: Organizational strategy factors
Proposition 2f: Aversion to innovation
Strategy Formulation
A SWOT analysis is commonly used as a means to diagnose the internal and external
environments of an organization. It summarizes the most important factors in both
environments as a base for the strategic formulation for an organization’s future (Kangas et al.
2003). It is an effective tool to analyze current problems and to create future action plans
(Terrados, J., Almonacid, G., & Hontoria, L 2007). The SWOT analysis originates from the
business management discipline and has been widely applied to a broad context of analyses. In
an environmental context, some scholars have used this analysis to identify sets of concrete
strategic action plans (Nikolau and Evangelinos 2010; Srivastava et al. 2005; Terrados, J.,
Almonacid, G., & Hontoria, L 2007; Yuan, H, 2013). In this study, a SWOT analysis was
8
undertaken. It was informed by previous research and was the key tool for developing strategic
plans for improving the environmental performance of Yogyakarta leather SMEs.
A variety of studies have identified various recommendations for better environmental
practice implementation. For example, Tilley, F (1999), in his study of manufacturing and
services small firms in the UK, found that better environmental practices can be achieved
through more extensive environmental education and training, stronger regulatory frameworks,
financial assistance, and better management guidance from stakeholders. The study undertaken
by Zutshi & Sohal (2004), addressing several industrial sectors in Australia and New Zealand,
also proposed training and communication as being key to addressing green management
practice barriers. Government and policy makers also need to play a role in policing
environmental regulatory breaches (Revell & Rutherfoord, 2003). For example, Rojsek (2001),
in his study in Slovenia, found that enhancing technical progress and applying stricter
environmental regulations are crucial. In addition, Lee (2009) argued that SMEs are capable of
making themselves greener by making strategic and organizational changes. Based on these
studies, additional propositions were developed (refer Table 7).
Table 7. Proposition 3 details
RQ3: What strategies can be proposed to tackle the existing barriers?
Proposition
Proposition 3a: Intensifying education and training programs
Proposition 3b: Providing financial assistance
Proposition 3c: Providing environmental management guidance
Proposition 3d: Stricter environmental regulation
Proposition 3e: Encouraging the organizational change process
Summary
This research explores the factors that hinder the efforts of SMEs in greening their
businesses. A set of GP options and strategies is intended to help these SMEs identify and
address the key environmental issues. In examining the literature, there appears to be
inadequate empirical evidence relating to environmental practices in the Yogyakarta leather
SMEs. This study explores the evidence to provide evidence-based knowledge which is
relevant for this context.
9
3 METHODS
Introduction
The research approach is an exploratory case study based on interviews with
representatives from the academia, business, and government, supplemented by observational
evidence. According to Yin (2003), case study is used to explain, describe or explore
phenomena or events. In addition, Crowe (2011) stated that it captures in-depth multifaceted
understanding of an issue in the real-life context. This research attempts to develop strategies
for tackling environmental issues associated with the Yogyakarta leather tanning industry. This
study identifies a green practice (GP) approach for identifying opportunity improvements in
the existing environmental practices, an Analytical Hierarchy Process (AHP) to prioritize the
GP alternatives, and a SWOT analysis to formulate strategies. The research framework
activities can be seen in Figure 3.
Start
Data Collection:
Literature review
Interview with the Leather SMEs
Field observation
Interview with the experts
Data Analysis:
Descriptive analysis
SWOT analysis and matrix
AHP
Outcomes:
Identification of existing practices
Identification of the obstacles
Green
productivity
options
improvement
Strategy formulation
for
Finish
Figure 3. Research framework
Setting
This research was conducted in Yogyakarta leather tanning SMEs. The study explores
the opportunities for improvement and investigates the main obstacles based on the interviews
and field observations. This study observes a number of critical elements such as the processing
sites, waste water treatment facilities, warehousing, solid waste management practices.
10
Participants
The participants were purposively sampled based on their experience and knowledge:
a. Participant A (RA): The owner of AA enterprise, Yogyakarta leather SME
b. Participant B (RB): The owner of BB enterprise, Yogyakarta leather SME
c. Participant C (RC): Head of Division, Centre for Leather, Rubber and Plastics (CLRP),
Yogyakarta
d. Participant D (RD): Head of the Indonesian Tanneries Association
e. Participant E (RE): Lecturer at the Academy of Leather Technology, Yogyakarta
The details of the SME participants can be seen in Appendix 2. Participant C was
chosen due to his experience in leather processing and waste management. Participant D was
chosen due to his experience and knowledge as Head of the Association and as owner of a
larger Yogyakarta leather SME. Participant E was selected because of her expertise as a lecturer
in the leather-based institution.
Data Collection
This research collected both primary and secondary data. The primary data was collected
through field observations and interview with the respondents. The secondary data was based
on the literature review of prior studies, government reports, and government statistical data.
The tools used in collecting the primary data were:
a. Interview Questions (Appendix 3)
Interview durations ranged between 45-90 minutes per respondent. These were conducted
using semi-structure interview scripts. All interviews were recorded with additional notetaking during the interview. All recordings were transcribed for analysis.
b. Questionnaire from the AHP (Appendix 4)
A questionnaire was sent to the experts via e-mail. Responses were analyzed using expert
choice 2000 software.
11
Procedures
The stages of research, objectives and methods of data collection and analysis in this study
appear in Table 8:
Table 8. Research procedures
RQs
Stage
Data Collection
What opportunities can be
identified to achieve better
environmental
performance
for
Yogyakarta leather tanning
SMEs?
Identification of existing
applied practices
Identification of green
productivity options
Literature review
Descriptive
analysis
Interviews
and
field
observations with the AHP
leather SMEs
Interviews
with
the
experts
What are the principal
obstacles
that
hinder
improving
their
environmental
performance?
Identification
of
the
obstacles that inhibit the
industry in implementing
green practices
Interviews with the leather
SMEs and the experts
Descriptive and
interpretive
analyses
What strategies can be
proposed to tackle the
obstacles?
Strategy formulation
tackling the obstacles
Interviews
experts
SWOT
analysis
Interpretive
analysis
in
with
Data Analysis
the
Data Analysis
The interviews were transcribed and organized according to the research questions
(RQs). Data was analysed using descriptive and interpretive analyses (Appendix 3). Using the
GP approach, the experts identified a number of improvement opportunities which consider
both economic and environmental performance. AHP ranks and prioritizes the GP alternatives.
According to Taylor (2004), AHP is a method for ranking decision alternatives and selecting
the best one when the decision maker has multiple criteria. Tuzmen and Sipahi (2011) defined
AHP as an effective decision making method especially when subjectivity exists and that it is
suitable for solving problems where the decision criteria can be organized hierarchically into
sub-criteria.
Subsequently, the obstacles were identified during the interviews with representatives
from a number of leather tanning SMEs and industry experts. SWOT is a useful tool for
analyzing current problems and to create future action plans (Terrados, Almonacid & Hontoria
2007). Therefore, answering RQ3 was based on identification of the Strengths, Weaknesses,
Opportunities and Threats which formed the basis for strategy formulation. This was
complemented by respondent comments from the interviews (RQ3).
12
4 RESULTS AND FINDINGS
Characteristics of Yogyakarta Leather SMEs
Typically, the Yogyakarta SME leather tanning process starts with “pickling” and not
from treating the rawhides/skins (Figure 4). The industry argues that commencing the process
with pickling is more efficient and can reduce waste, odours and sludge. For example,
participant B said,“The reason (for starting with pickling) is environmental. This location is
already configured as a leather factory site but it is still close to population centers. And their
focus is the smell of the waste”. Also, in the words of participant A, “If you do not want to
have a longer process, and do not wish to have a problem with the community, do not start the
process from processing the raw hides/skins”. However, while there is a realization that
environmental considerations will be a challenge in the future, these are not a priority for the
SMEs because there is little pressure from regulatory bodies or customers to comply. For
example participant A said, “It will affect the environment if the effluent is not treated.”
However, participant A also said, “As long as there are no complaints …. I think that is okay.
But, a consequence of the industry is to generate waste. I have tried to minimize the waste but
as long as the cost is reasonable”.
These types of comments suggest that the Yogyakarta SME environmental leather
problems are unresolved. These SMEs have no special treatments for solid and gas waste, nor
for waste-water. Critically, they do not regularly monitor and/or evaluate treatment results.
Regulatory enforcement is an issue because of customer apathy toward green practices since
most customers are local and focus on quality and price - not environmental issues. Thus, SMEs
do not focus on preventive pollution management.
In terms of the generated waste, most of the respondents agreed that solid waste appears
to be the biggest problem which needs to be tackled. In the words of participant C, “The hardest
problem is chrome. Chrome content causes the waste to be classified as hazardous and toxic
waste. Because its handling cost is quite high, it is impossible for SMEs to manage their solid
waste individually. The government sees that their wastewater effluent has not met the
requirements, but at least they have tried. While there is no alternative choices available for
the solid waste”.
These responses indicate that the industry, particularly the SMEs, feel burdened with
solid waste management due to the considerable costs involved. Chrome content in solid waste
and sludge requires the industry to pay for the particular treatment associated with dealing with
this. Based on Regulation 101 Year 2014 regarding the Handling of Hazardous Materials and
Toxic Waste, SMEs need to pay for the treatment which is costly even for larger companies.
In the words of participant D, “The range of costs for one truck of solid waste took 30 million
rupiahs. It is already a heavy burden for the industry”. This evidence explains the reluctance
of SMEs to manage their waste due to their resource constraints which are restricted to issues
related to their business’ core operations, not to green practices (Biondi, Frey & Iraldo 2000).
Most of the participant responses suggest that the critical parts of the process that
generate hazardous waste are in the tanning process. As stated by participant C, “In the tanning
process, the critical part that affects the environment is the tanning agent”. Most of the
Indonesian leather industry including Yogyakarta still use chrome as an important tanning
agent which has toxic and hazardous characteristics for the environment. This process
generates an abundance of sludge and waste water which contains hazardous materials. Some
of the respondents considered beam house processing as another critical part of the tanning
process that causes environmental problems. This also generates significant waste that becomes
a main
THE ENVIRONMENTAL PROBLEM OF LEATHER TANNING SMEs
IN YOGYAKARTA, INDONESIA
DWI NINGSIH
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
DECLARATION
I hereby declare that the thesis entitled “Green Productivity as an Approach to
Address the Environmental Problem of Leather Tanning SMEs in Yogyakarta,
Indonesia” is my original work produced through the guidance of my academic advisors and
have not been submitted to any tertiary institution. This thesis also presented for the award of
a degree in The University of Adelaide as a double degree program between Bogor Agricultural
University and The University of Adelaide. All of the incorporated material originated from
other published or unpublished papers are stated clearly in the text as well as in the
bibliography.
I hereby delegate the copyright of my paper to the Bogor Agricultural University.
Bogor, July 2015
Dwi Ningsih
NRP F351137071
SUMMARY
DWI NINGSIH, 2015. Green Productivity as an Approach to Address the Environmental
Problem of Leather Tanning SMEs in Yogyakarta, Indonesia. Supervised by ONO SUPARNO
and SUPRIHATIN.
The leather tanning industry is a most promising industry in Yogyakarta. However, the
industry faces environmental problems due to poor environmental management practices. This
study develops strategies to address the environmental issues of the impact of leather tanning
SMEs in Yogyakarta. It identifies opportunities for improvement based on Green Productivity
(GP) approach, and obstacles to formulating strategies for enhancing environmental
performance.
This study uses a Case Study approach using field observations and interviews with a
number of leather tanning SMEs and industry experts. The results show that the SMEs in this
sector adopt only a limited level of environmental practices. A set of GP options is proposed
based on the observational evidence and expert judgements. Using an Analytic Hierarchy
Process (AHP), a priority selected is to optimize the production processes of leather tanning
SMEs.
This study found that internal obstacles to green adoption included insufficient
resources and infrastructure, low-skilled human resources, poor financial capability, lack of
awareness, and poor organizational strategies. The external obstacles are significant and
include inadequate law enforcement and government support, a small and limited market
segment, and the lack of available green chemicals. These contribute toward poor
environmental practices.
To deal with these problems, this research proposes eight strategies for tackling the
obstacles that prevent the implementation of leather tanning green practices. The strategies are
divided into internal and collaborative. The internal strategies include encouraging enhanced
product development processes and promote proactive and innovative strategies. Regarding
their limitations, SMEs need stakeholder assistance to help solve their issues. A collaborative
approach is crucial. Developing low-cost green technologies through R&D activities,
developing best practice guidance and promoting its implementation, providing adequate
facilities and machinery, identifying suitable suppliers to supply green chemicals, intensifying
knowledge transfer of good environmental management, and establish a punishment and
reward system are proposed for addressing the issues.
Keywords: green productivity, leather SMEs, AHP, SWOT
RINGKASAN
DWI NINGSIH, 2015. Green Productivity as an Approach to Address the Environmental
Problem of Leather Tanning SMEs in Yogyakarta, Indonesia. Dibimbing oleh ONO
SUPARNO dan SUPRIHATIN.
Industri penyamakan kulit adalah industri yang menjanjikan di wilayah Yogyakarta.
Namun, industri ini menghadapi permasalahan lingkungan dikarenakan praktek manajemen
lingkungan yang rendah. Studi ini bertujuan untuk menyusun strategi dalam rangka
penyelesaian permasalahan lingkungan yang timbul sebagai dampak dari proses penyamakan
kulit oleh IKM di Yogyakarta. Penelitian ini mengidentifikasi peluang perbaikan berdasarkan
pendekatan Produktivitas Hijau, dan hambatan yang dihadapi untuk selanjutnya menyusun
strategi untuk meningkatkan kinerja lingkungan IKM.
Studi ini menggunakan studi kasus dengan tinjauan lapangan dan wawancara dengan
sejumlah IKM dan ahli industri penyamakan kulit. Hasil studi menunjukkan bahwa IKM pada
sektor industri ini masih terbatas dalam pengimplementasian praktek perlindungan lingkungan.
Serangkaian opsi produktivitas hijau diusulkan berdasarkan dengan bukti observasi di lapangan
dan pendapat ahli. Selanjutnya, menggunakan Analytic Hierarchy Process (AHP), prioritas
yang terpilih adalah untuk mengoptimasi proses produksi penyamakan kulit.
Studi ini mengungkapkan bahwa hambatan internal dalam mengadopsi praktek hijau
adalah terkait dengan sumber daya dan infrastruktur yang tidak memadai, sumber daya manusia
yang kurang terampil, kemampuan keuangan yang rendah, kesadaran yang rendah, dan strategi
organisasi yang rendah. Sedangkan hambatan eksternal adalah penegakan hukum dan
dukungan pemerintah yang masih redah, segmentasi pasar yang masih terbatas dan
keterbatasan ketersediaan bahan kimia ramah lingkungan. Hambatan ini yang menyebabkan
rendahnya tingkat praktek lingkungan di lingkungan IKM.
Untuk menanggulangi permasalahan ini, studi ini mengusulkan delapan strategi untuk
mengatasi hambatan yang menghalangi penerapan praktek hijau di IKM penyamakan kulit.
Strategi ini dibagi menjadi internal dan kolaboratif strategi. Internal strategi yaitu mendorong
peningkatan proses pengembangan produk dan mempromosikan strategi yang proaktif dan
inovatif. Terkait dengan limitasi yang ada, IKM membutuhkan bantuan dari stakeholder lain
untuk menyelesaikan permasalahan yang mereka hadapi. Sebuah kolaborasi diperlukan seperti
mengembangkan teknologi hijau yang terjangkai melalui kegiatan R&D yang memadai,
mengembangkan petunjuk praktek terbaik dan mempromosikan penerapannya, menyediakan
fasilitas dan mesin yang memadai, mengidentifikasi ketersediaan supplier untuk menyediakan
bahan kimia ramah lingkungan, mengintensifkan kegiatan transfer pengetahuan tentang
managemen lingkungan yang baik dan menyediakan sistem hukuman dan penghargaan.
Kata kunci: produktivitas hijau, IKM kulit, AHP, SWOT
Copyright ©2015, by Bogor Agricultural University
All Right Reserved
1. No part or all of this thesis excerpted without inclusion or mentioning the sources
a. Excerption only for research and education use, writing for scientific papers, reporting,
critical writing or reviewing of a problem
b. Excerption does not inflict a financial loss in the proper interest of Bogor Agricultural
University
2. No part or all of this thesis may be transmitted and reproduced in any form without a written
permission from Bogor Agricultural University
GREEN PRODUCTIVITY AS AN APPROACH TO ADDRESS
THE ENVIRONMENTAL PROBLEM OF LEATHER TANNING SMEs
IN YOGYAKARTA, INDONESIA
DWI NINGSIH
Thesis
submitted as one of the requirements
for achieving title Magister Science
In Department of Agroindustrial Technology
GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015
External Examiner: Prof. Dr. Ir. M. Syamsul Maarif, M.Eng
Thesis Title
Name
NRP
Study Program
: Green Productivity as an Approach to Address the Environmental
Problem of Leather Tanning SMEs in Yogyakarta, Indonesia
: Dwi Ningsih
: F351137071
: Agroindustrial Technology
Approved by
Advisory Committee
Prof Dr Ono Suparno, STP, MT
Coordinator
Prof Dr Ir Suprihatin
Co-supervisor
Acknowledged by
Head of Study Program of Agroindustrial
Technology, IPB
Dean of Graduate School
of Magister Program, IPB
Prof Dr Ir Machfud, MS
Dr Ir Dahrul Syah, MScAgr
Examination Date: 11 June 2015
Submission Date:
ACKNOWLEDGEMENTS
I must start by thanking to Allah SWT, the Almighty, the most beneficent and the most
merciful. I also want to express my gratitude to so many people for the supports, so that this
thesis could be well completed as a requirement to get a Master Degree in Bogor Agricultural
University (IPB). The title of the thesis is Green Productivity as an Approach to Address the
Environmental Problem of Leather tanning SMEs in Yogyakarta, Indonesia.
In particular, many thanks to my amazing advisory committee, both in IPB and UoA,
Prof. Dr. Ono Suparno, S.TP., MT, Prof. Dr. Ir. Suprihatin and Prof Noel Lindsay, for their
guidance, support and encouragement in every stage of my study.
I would like also thanks to Dr. Barry Elsey and Amina Omarova for the guidance and
supports during the long workshops in the University of Adelaide. Thank you so much. Many
thanks for the helps from the editor, Charles Clennell and Isabella Slevin.
Many thanks are also devoted to my brother, Sulistyanto, my sister-in-law, Eli Karlina
Azis and my little niece, Shofia Nurul Izzati Al-Quds, and my other-mother in Adelaide, Joyce
Hassan, for their supports. Many thanks to my fellow Double Degree program students, namely
Nuni, Anin, Yani, Syarifa, Nur Aini, Karim, Tri, Benny, Andar, Farda, Iwan, Danang, Aditya,
Dickie, Ahmad Rudh, and Koko. Finally we get to the end of this journey.
Finally, I must thank to my parents, this thesis I dedicated for both of you, my beloved
mother, Waginah and father, Tasrip. Thanks for supporting me so far. Thanks so much, I feel
nothing without your amazing supports.
Bogor, July 2015
Dwi Ningsih
TABLE OF CONTENTS
LIST OF TABLES ................................................................................................................................. vi
LIST OF FIGURES ............................................................................................................................... vi
LIST OF APPENDIXES........................................................................................................................ vi
1 INTRODUCTION .......................................................................................................................... 1
Research Background ..................................................................................................................... 1
Problem Statement .......................................................................................................................... 3
Research Questions ......................................................................................................................... 3
Research Objective ......................................................................................................................... 3
Research Benefits ........................................................................................................................... 3
Significance of Research ................................................................................................................ 3
2
LITERATURE REVIEW ............................................................................................................... 4
Introduction..................................................................................................................................... 4
A glimpse of the Yogyakarta Leather Tanning Industry ................................................................ 4
Green Productivity (GP) ................................................................................................................. 4
Barriers of SMEs in Green Practice Implementation ..................................................................... 6
Strategy Formulation ...................................................................................................................... 7
Summary ......................................................................................................................................... 8
3
METHODS ..................................................................................................................................... 9
Introduction..................................................................................................................................... 9
Setting ............................................................................................................................................. 9
Participants ................................................................................................................................... 10
Data Collection ............................................................................................................................. 10
Procedures..................................................................................................................................... 11
Data Analysis ................................................................................................................................ 11
4
RESULTS AND FINDINGS ........................................................................................................ 12
Characteristics of Yogyakarta Leather SMEs ............................................................................... 12
The Opportunities Identified to Achieve Better Environmental Performance (RQ1) .................. 13
Prioritization of the Green Productivity Options using AHP (Analytical Hierarchy Process) ..... 17
Obstacle Identification (RQ2) ....................................................................................................... 17
Strategy Process Development (RQ3) .......................................................................................... 20
5
CONCLUSION ............................................................................................................................. 22
Summary ....................................................................................................................................... 22
Implications of the research .......................................................................................................... 22
Limitations of the research and future research directions ........................................................... 22
Recommendations......................................................................................................................... 22
REFERENCES ..................................................................................................................................... 23
APPENDIXES ...................................................................................................................................... 26
AUTOBIOGRAPHY ............................................................................................................................ 45
LIST OF TABLES
Table 1. Export value of leather products from 2009-2013 .................................................................... 1
Table 2. GP projects in the leather industry ............................................................................................ 5
Table 3. Proposition 1 details.................................................................................................................. 6
Table 4. Identified internal barriers......................................................................................................... 7
Table 5. Identified external barriers ........................................................................................................ 7
Table 6. Proposition 2 details.................................................................................................................. 7
Table 7. Proposition 3 details.................................................................................................................. 8
Table 8. Research procedures ............................................................................................................... 11
Table 9. SWOT analysis ....................................................................................................................... 20
Table 10. Strategy Classification .......................................................................................................... 20
Table 11. More detailed discussion of strategies .................................................................................. 20
LIST OF FIGURES
Figure
Figure
Figure
Figure
Figure
Figure
Figure
1. Map of Yogyakarta Province .................................................................................................. 1
2. Leather processing waste ........................................................................................................ 2
3. Research framework ............................................................................................................... 9
4. Flow chart of tanning process in Yogyakarta ....................................................................... 13
5. Special recycling economy model ........................................................................................ 15
6. Recycle of wastewater tannery with circular economy model ............................................. 16
7. AHP structure ....................................................................................................................... 17
LIST OF APPENDIXES
Appendix 1. Glossary of Specific Terms .............................................................................................. 26
Appendix 2. Profile of the SMEs .......................................................................................................... 27
Appendix 3. Semi-Structure Questions and the analysis ...................................................................... 28
Appendix 4. AHP questionnaire (sample per level of the hierarchy) ................................................... 33
Appendix 5. AHP results ...................................................................................................................... 36
Appendix 6. The proposition GP options and the quotes...................................................................... 38
Appendix 7. Proposition of Internal Obstacles and the quotes ............................................................. 40
Appendix 8. Proposition of External Obstacles and the quotes ............................................................ 42
Appendix 9. Proposition Strategies and the quotes............................................................................... 43
Appendix 10. Formulated strategy ........................................................................................................ 44
1
1 INTRODUCTION
Research Background
Leather is a most promising Indonesian industry as evidenced by the upward trend of
international demand toward its leather products (Table 1). The industry is centralized in
several main areas; namely, West Java, East Java, Central Java, Bali, Yogyakarta, and Jakarta.
The main sourcing centres for the leather industry are in the East Java, West Java and Bali
provinces. However, Yogyakarta is also an important sourcing centre because it has a role as a
key supply zone that generates significant tourism sales.
Table 1. Export value of leather products from 2009-2013
Year
Export value (million USD)
Destination country
2009
178.4
2010
246.4
2011
292.1
US, Japan, Germany, Italy, Malaysia,
Belgium, UK, Russia Federation, Egypt,
Morocco, India, Taiwan, Canada, Australia,
Georgia, Singapore, Algeria, Ecuador,
France, South Africa
2012
324.7
2013
338.1
Yogyakarta is a provincial region in Indonesia located on Java Island (Figure 1). The
economic structure of Yogyakarta is dominated by trade (21%), services (18%) and agriculture
(16%). Yogyakarta’s development is significant and includes two leading industries: leather
manufacturing and textile processing. These two industries contribute significantly to the GDP,
employment, investment, and development potential of the Province with multiplier effects to
related industries in other provinces (Kemenperin, 2009). The focus of this research is on the
leather tanning industry. Although this industry is well developed in Yogyakarta, there are
significant waste management environmental problems such as the generation of significant
liquid and solid wastes, and the emission of repulsive smells (because of the degradation of
proteinous material of skin) and generation of gases such as NH3, H2S, and CO2 (Figure 2).
Figure 1. Map of Yogyakarta Province
2
According to the Indonesian Tannery Association, approximately 75% of the leather
industry firms are small and medium enterprises (SMEs). These SMEs have limitations which
hinder their waste management environmental protection efforts. Previous studies (e.g., Hobbs
2000) have found that SMEs tend to be more harmful to the environment compared to larger
corporations due to their poor production techniques. Other studies (e.g., Kanagaraj et al. 2006)
have found that leather tanning SMEs in developing countries face significant waste disposal
problems with many being closed for not meeting the required standards. This situation is
similar in Indonesia, particularly in Yogyakarta, where there is a low level of adoption of
leather tanning green practices (“Badan Lingkungan Hidup” (BLH)).1
Figure 2. Leather processing waste
Promoting sustainable strategy development is not an easy task; e.g. cleaner production,
eco-efficiency, pollution prevention, etc. Most SMEs focus on the end-of-pipe (EOP) treatment
which is less effective and disregard preventative management. In addition, the typical SME
view of environmental protection is merely about added costs that are inopportune for the
business. These perceptions prevent SMEs understanding the urgency in participating in the
environmental protection efforts.
Green practice (GP) is a new concept that was introduced by the Asian Productivity
Organization (APO) in 1992 which proposes a two-pronged approach that attempts to protect
the environment without sacrificing the economic performance of a business. A number of
scholars found benefits from GP implementation (Darmawan, Putra & Wiguna 2014; Mohan
Das Gandhi, Selladurai & Santhi 2006; Singgih, Suef & Putra 2010; Sittichinnawing &
Peerapattana 2012). A number of Indonesian studies was conducted but these were limited to
the phenol and rubber industries. There is no evidence of any investigations into the Indonesian
leather industry.
As stated by Al-Darrab (2000) cited in Logamuthu & Zailani S (2010), increasing
global consumer environmental awareness has begun to pressure manufacturers and service
providers to be more responsible regarding the impact of their processes on the environment.
A series of studies during 1985 showed that more than a third (37.6%) of consumers require
green products. They also were beginning to become concerned then as well about product
disposals. In this regard, the Indonesian Government is looking to clean up “dirty” industries
by introducing industry green policies (e.g., National Regulation 3, 2014).2 Consequently,
leather tanning SMEs need to upgrade their existing practices and find better ways to solve
1
The BLH is an environmental agency in Yogyakarta which has identified that most leather tanning SMEs have not met the required
environmental standards.
2
A green industry is defined as an industry which prioritizes efficiency and effectiveness in the resource utilization of its processes to align
industrial development with the preservation of the environment while providing benefits to the community.
3
their challenges while developing better competitive advantages. Many Yogyakarta SMEs,
however, claim that they are challenged in implementing green practices though there is no
empirical evidence to support these claims.
In response to this lack of empirical evidence, this research has three main purposes:
(1) Identify green practice improvement options using a GP approach in Yogyakarta leather
tanning SMEs
(2) highlight the obstacles that inhibit green practice implementation, and
(3) formulate strategies to tackle these obstacles for better implementation of green practices.
Problem Statement
Most Yogyakarta leather SMEs have inadequate green practices leading to low levels
of environmental performance. There are a number of factors that hinder the implementation
of those practices. Moreover, the urgency of implementing such practices is considered
insignificant by the SMEs because they tend to focus on their day-to-day activities while using
their limited resources for the purposes of their business’ core operations.
Research Questions
RQ1. What opportunities can be identified to achieve better environmental performance for
Yogyakarta leather tanning SMEs?
RQ2. What are the principal obstacles that hinder improving their environmental performance?
RQ3. What strategies can be proposed to overcome these obstacles?
Research Objective
This research aims to provide Green Practice recommendations and strategies for
overcoming the main obstacles faced by leather tanning SMEs in order to achieve better
environmental practices.
Research Benefits
The benefits of this study are:
a. Collection of empirical evidence of the existing green practices in the Indonesian leather
industry, especially in Yogyakarta province
b. Guidance for enhancing green practices in Yogyakarta leather tanning SMEs, and
c. The development of strategies to tackle the environmental issues associated with their
businesses.
In addition, identification of the principal barriers to implementing green practices in
Yogyakarta leather tanning SMEs is a prerequisite to formulating better public policies to
remove or mitigate environmental problems.
Significance of Research
SMEs, which have particular limitations, need to identify favorable practices that
effectively address their problems while looking to increase their productivity at the same time.
GP is a concept that provides both benefits. In the longer term, strategies proposed are expected
to enhance the competitive advantage of SMEs to better help them compete in broader market
segments.
4
2 LITERATURE REVIEW
Introduction
Since leather is Yogyakarta’s primary industry, the sustainability of this industry is
paramount. This can only be achieved through the development and implementation of
appropriate environmentally friendly strategies. Good environmental performance can improve
the poor corporate image of this industry; however, overcoming the low levels of green practice
implementation which affect the poor environmental performance of leather tanning businesses
is a huge challenge. In this Chapter, a number of topics are addressed. First, discussion occurs
about the Indonesia leather tanning industry, particularly in Yogyakarta province together with
its environmental problems. Second, a green practice (GP) approach to solving the problems is
discussed, followed by the barriers to SMEs implementing GP, and what is needed to formulate
appropriate GP strategies.
A glimpse of the Yogyakarta Leather Tanning Industry
Yogyakarta is one of the provinces on Java Island, Indonesia. It consists of one city
(Yogyakarta) and four districts (Sleman, Bantul, Kulonprogo, and Gunung Kidul). Leather is
the primary industry. It is a successful industry and it is spread across the Yogyakarta provincial
region. According to the regulation of the Indonesian Ministery of Industry No. 138/MIND/PER/10/2009, the Map Guide (Road Map) about “Industrial Development Yogyakarta
Province”, the other leading industry is textile processing (Kemenperin, 2009). Yogyakarta
SMEs generate significant export and local tourism sales.
Although the economic benefits of the leather industry are important, it has an adverse
environmental impact (Ozgunay et al. 2007). During the manufacturing process, pollution
occurs through the generation of toxic liquids and solid wastes which emit repulsive smells.
Only one-fifth of the raw hides/skins are converted into products; the rest are discharged as
waste or by-products. The tanning process produces 45-50m3 of waste water per ton of raw
hides/skins (Kanagaraj et al. 2006). Tanning wastewater is a serious threat to the environment
due to its content of strong alkalis, bio-waste, and heavy metals.
Most of the Indonesian leather industry is comprised of SMEs (small and medium
enterprises). These, unquestionably, are a significant component of the Indonesian economy.
They employ 97.16% of all workers and contribute toward 59.08% of Indonesia’s GDP
(KemenkopUKM 2012). SMEs, however, are recognized as the largest contributors toward
polluting the environment due to their substandard production techniques (Hobbs 2000).
Green Productivity (GP)
The Asian Productivity Organization (APO) defines GP as a strategy for enhancing
productivity and environmental performance for socio-economic development (APO 2002).
The APO proposed a concept that involves a customer focus (on quality) in achieving balance
between profitability and environmental performance. GP is the application of appropriate
productivity and environmental management tools, techniques, and technologies to reduce the
environmental impact of an organization’s activities.
A range of studies have identified the benefits of GP implementation (Darmawan, Putra
& Wiguna 2014; Mohan Das Gandhi, Selladurai & Santhi 2006; Singgih, Suef & Putra 2010;
Sittichinnawing & Peerapattana 2012). These studies were conducted in various industries
5
including rubber, foundry, phenol, and cayenne pepper. GP benefits include increased product
quality, reduced scrap, reduced pollution, and reduced risks for the enterprise (Logaa & Zailani
2013). Other benefits include cost savings in raw material purchases (Singgih, Suef & Putra
2010) and higher yields without compromising the environment (Sittichinnawing &
Peerapattana 2012). Similar benefits have been associated with some projects in the leather
industry which have been conducted by the APO. These projects identify various GP options
in each industry in different countries (Table 2). The options proposed are based on a cause
analysis, materials and component balance, literature survey, and brainstorming among team
members and experts.
A study of GP in the context of Indonesian industry, however, is still limited though
there are studies in two industry sectors: phenol and rubber (Darmawan, Putra & Wiguna 2014;
Singgih, Suef & Putra 2010). Both studies have identified GP benefits in reducing the impact
of industry processes upon the environment. In terms of the Indonesia leather industry, two
studies focused on cleaning up production in two different areas in Indonesia, Garut and Bogor.
They identified various improvement options (Alihniar 2011; Wardhana 2011). In Garut, the
industry needs to improve its water usage control. In Bogor, chromium recycling has been
identified as solving their environmental issues.
Table 2. GP projects in the leather industry
No
GP projects
Details data of the industry
1
TANCHEM
Industries
Location: Northern part of
India
Products: Nappa, oil pull
nappa and other varieties of
leather used by the garment and
shoe manufacturing industries.
Number of worker: 30
2
NASSAU
TANNERY
Company
Location: Southern part of
India
Products: suedes, nappa,
nubuck and other varieties of
leather for garment and golf
glove manufacture.
Number of worker: 175
3
SHUI-HUA
LEATHER
INDUSTRIAL Co.
Ltd.
Location: in Tainan Hsein,
Taiwan, ROC.
Products: all types of leathers
for shoe uppers, handbags,
cases and many other consumer
goods.
Number of worker: >200
GP options
The experts identified 45 GP options that
divided into:
1. Good housekeeping
2. Process modification
3. Material change
4. Elimination & reduction
5. Equipment modification
6. Technology change, and
7. Recycle, reuse and recovery (3R).
The experts identified 59 GP options that
divided into:
1. Good housekeeping
2. Process modification
3. Material change
4. Elimination & reduction
5. Equipment modification
6. Technology change
7. Recycle, reuse and recovery (3R)
The expert proposed 7 main GP options:
1. Process improvement
2. Improve housekeeping
3. Separation of waste water streams
4. Recovery of chrome
5. Desalination
6. Resource recovery
7. Rationalization of water usage
6
It can be argued that although in the same sector industry, the improvement options proposed
might be different depending on a process’ characteristics such as the raw materials used,
technology applied, production processes adopted, etc. There have, however, been no studies
in the context of the Yogyakarta leather industry. For this reason, we investigate the GP options
for the Yogyakarta leather tanning industry and generate the propositions appearing in Table
3.
Table 3. Proposition 1 details
RQ: What opportunities can be identified to achieve a better
environmental performance of leather SMEs in Yogyakarta?
Proposition
Proposition 1a: Good housekeeping
Proposition 1b: Process improvement
Proposition 1c: Material substitution
Proposition 1d: 3R (reduce, reuse, recycle)
Proposition 1e: Desalination
Proposition 1f: Water usage control
Proposition 1g: Equipment modification
Proposition 1h: Segregation of waste water streams
Barriers of SMEs in Green Practice Implementation
Definitions of SMEs vary in each country. The SMEs in Indonesia have been defined
based on the number of workers, income, and their amount of assets. Based on the Central
Bureau of Statistics (BPS) definition, a small business is an entity that has 5 to 19 workers, a
medium-sized business is an entity that has 20 to 99 people.
In general, SMEs are focused on generating profits to keep their businesses operating.
They are preoccupied with reducing resource use and waste in order to achieve short-term
goals; however, this is not a priority if they do not gain associated benefits (Esty & Winston
2009). Wilson, Williams & Kemp (2012) found, for example, that UK SMEs see environmental
innovation as a financial burden, and that they do not recognize the contributions toward the
performance of environmental best practice. Thus, poor environmental practices exist because
SMEs tend to focus on day-to-day activities ( Studer et al. 2008) with their resources restricted
to issues related to their business’ core (Biondi, Frey & Iraldo 2000) rather than on green
practices. Therefore, SMEs tend to be more reactive in tackling environmental problems. It is
the larger companies that tend to be more proactive (e.g., Bianchi & Noci 1998; Hobbs 2000).
SME reactive strategies focus more on compliance than sustainability (Hobbs 2000); they are
not willing to contribute voluntarily. However, SME non-compliance is acknowledged and
considered serious only if there is a threat of prosecution (Wilson, Williams & Kemp 2012).
A range of studies has examined the barriers to green practice implementation. Most of
these classify barriers into internal and external (refer Tables 4 and 5). There have been none
that focus on leather tanning in Yogyakarta. For this reason, we investigate the Yogyakarta
leather tanning industry and generate the propositions that appear in Table 6.
7
Table 4. Identified internal barriers
Internal barriers
Insufficient resources and
infrastructure
Inadequate technical
knowledge and skills (human
factor)
High cost of environmental
technologies (financial factor)
Lack of awareness
Lack of organizational strategy
Aversion to innovation
Authors
Rojsek (2001); Brammer, Hoejmose & Marchant (2012); Tilley (1999);
Murillo-Luna, Garcés-Ayerbe, & Rivera-Torres (2011)
Hillary (2004); Rojsek (2001); Zilahy (2004); Moors, Mulder & Vergragt
(2005); Murillo-Luna, Garcés-Ayerbe & Rivera-Torres (2011)
Hillary (2004); Rojsek (2001); Tilley (1999); Shi et al. (2008); Zilahy
(2004), Murillo-Luna, Garcés-Ayerbe & Rivera-Torres, (2007); Zutshi &
Sohal (2004); Moors, Mulder & Vergragt (2005); Massoud et al. (2010);
Murillo-Luna, Garcés-Ayerbe, & Rivera-Torres (2011)
Wilson, Williams & Kemp (2012); Tilley (1999); Zilahy, (2004).
Murillo-Luna, Garcés-Ayerbe, & Rivera-Torres (2007); Zilahy (2004),
Moors, Mulder, & Vergragt (2005); Massoud et al. (2010)
Murillo-Luna, Garcés-Ayerbe, & Rivera-Torres (2011)
Table 5. Identified external barriers
External barriers
Market segment for green product is
too small
The ‘green’ supplier support is
insufficient
Poor environmental legislation
Limited government support
Authors
Rojsek (2001); Zilahy (2004)
Rojsek (2001); Murillo-Luna, Garcés-Ayerbe, & Rivera-Torres
(2011)
Rojsek (2001); Wilson, Williams & Kemp (2012); Brammer,
Hoejmose & Marchant (2012); Shi et al. (2008); Revell &
Rutherfoord (2003); Moors, Mulder & Vergragt (2005)
Massoud et al. (2010)
Table 6. Proposition 2 details
RQ: What are the barriers that inhibit the implementation of the green practices Yogyakarta leather
tanning SMEs?
Proposition
Internal barriers:
External barriers:
Proposition 2a: Insufficient
resources
and Proposition 2g: Market segment is too small
infrastructure
Proposition 2h: Insufficient ‘green’ supplier support
Proposition 2b Human factors
Proposition 2i: Poor environmental legislation
Proposition 2c: Financial factors
Proposition 2j: Limited government support
Proposition 2d: Lack of awareness
Proposition 2e: Organizational strategy factors
Proposition 2f: Aversion to innovation
Strategy Formulation
A SWOT analysis is commonly used as a means to diagnose the internal and external
environments of an organization. It summarizes the most important factors in both
environments as a base for the strategic formulation for an organization’s future (Kangas et al.
2003). It is an effective tool to analyze current problems and to create future action plans
(Terrados, J., Almonacid, G., & Hontoria, L 2007). The SWOT analysis originates from the
business management discipline and has been widely applied to a broad context of analyses. In
an environmental context, some scholars have used this analysis to identify sets of concrete
strategic action plans (Nikolau and Evangelinos 2010; Srivastava et al. 2005; Terrados, J.,
Almonacid, G., & Hontoria, L 2007; Yuan, H, 2013). In this study, a SWOT analysis was
8
undertaken. It was informed by previous research and was the key tool for developing strategic
plans for improving the environmental performance of Yogyakarta leather SMEs.
A variety of studies have identified various recommendations for better environmental
practice implementation. For example, Tilley, F (1999), in his study of manufacturing and
services small firms in the UK, found that better environmental practices can be achieved
through more extensive environmental education and training, stronger regulatory frameworks,
financial assistance, and better management guidance from stakeholders. The study undertaken
by Zutshi & Sohal (2004), addressing several industrial sectors in Australia and New Zealand,
also proposed training and communication as being key to addressing green management
practice barriers. Government and policy makers also need to play a role in policing
environmental regulatory breaches (Revell & Rutherfoord, 2003). For example, Rojsek (2001),
in his study in Slovenia, found that enhancing technical progress and applying stricter
environmental regulations are crucial. In addition, Lee (2009) argued that SMEs are capable of
making themselves greener by making strategic and organizational changes. Based on these
studies, additional propositions were developed (refer Table 7).
Table 7. Proposition 3 details
RQ3: What strategies can be proposed to tackle the existing barriers?
Proposition
Proposition 3a: Intensifying education and training programs
Proposition 3b: Providing financial assistance
Proposition 3c: Providing environmental management guidance
Proposition 3d: Stricter environmental regulation
Proposition 3e: Encouraging the organizational change process
Summary
This research explores the factors that hinder the efforts of SMEs in greening their
businesses. A set of GP options and strategies is intended to help these SMEs identify and
address the key environmental issues. In examining the literature, there appears to be
inadequate empirical evidence relating to environmental practices in the Yogyakarta leather
SMEs. This study explores the evidence to provide evidence-based knowledge which is
relevant for this context.
9
3 METHODS
Introduction
The research approach is an exploratory case study based on interviews with
representatives from the academia, business, and government, supplemented by observational
evidence. According to Yin (2003), case study is used to explain, describe or explore
phenomena or events. In addition, Crowe (2011) stated that it captures in-depth multifaceted
understanding of an issue in the real-life context. This research attempts to develop strategies
for tackling environmental issues associated with the Yogyakarta leather tanning industry. This
study identifies a green practice (GP) approach for identifying opportunity improvements in
the existing environmental practices, an Analytical Hierarchy Process (AHP) to prioritize the
GP alternatives, and a SWOT analysis to formulate strategies. The research framework
activities can be seen in Figure 3.
Start
Data Collection:
Literature review
Interview with the Leather SMEs
Field observation
Interview with the experts
Data Analysis:
Descriptive analysis
SWOT analysis and matrix
AHP
Outcomes:
Identification of existing practices
Identification of the obstacles
Green
productivity
options
improvement
Strategy formulation
for
Finish
Figure 3. Research framework
Setting
This research was conducted in Yogyakarta leather tanning SMEs. The study explores
the opportunities for improvement and investigates the main obstacles based on the interviews
and field observations. This study observes a number of critical elements such as the processing
sites, waste water treatment facilities, warehousing, solid waste management practices.
10
Participants
The participants were purposively sampled based on their experience and knowledge:
a. Participant A (RA): The owner of AA enterprise, Yogyakarta leather SME
b. Participant B (RB): The owner of BB enterprise, Yogyakarta leather SME
c. Participant C (RC): Head of Division, Centre for Leather, Rubber and Plastics (CLRP),
Yogyakarta
d. Participant D (RD): Head of the Indonesian Tanneries Association
e. Participant E (RE): Lecturer at the Academy of Leather Technology, Yogyakarta
The details of the SME participants can be seen in Appendix 2. Participant C was
chosen due to his experience in leather processing and waste management. Participant D was
chosen due to his experience and knowledge as Head of the Association and as owner of a
larger Yogyakarta leather SME. Participant E was selected because of her expertise as a lecturer
in the leather-based institution.
Data Collection
This research collected both primary and secondary data. The primary data was collected
through field observations and interview with the respondents. The secondary data was based
on the literature review of prior studies, government reports, and government statistical data.
The tools used in collecting the primary data were:
a. Interview Questions (Appendix 3)
Interview durations ranged between 45-90 minutes per respondent. These were conducted
using semi-structure interview scripts. All interviews were recorded with additional notetaking during the interview. All recordings were transcribed for analysis.
b. Questionnaire from the AHP (Appendix 4)
A questionnaire was sent to the experts via e-mail. Responses were analyzed using expert
choice 2000 software.
11
Procedures
The stages of research, objectives and methods of data collection and analysis in this study
appear in Table 8:
Table 8. Research procedures
RQs
Stage
Data Collection
What opportunities can be
identified to achieve better
environmental
performance
for
Yogyakarta leather tanning
SMEs?
Identification of existing
applied practices
Identification of green
productivity options
Literature review
Descriptive
analysis
Interviews
and
field
observations with the AHP
leather SMEs
Interviews
with
the
experts
What are the principal
obstacles
that
hinder
improving
their
environmental
performance?
Identification
of
the
obstacles that inhibit the
industry in implementing
green practices
Interviews with the leather
SMEs and the experts
Descriptive and
interpretive
analyses
What strategies can be
proposed to tackle the
obstacles?
Strategy formulation
tackling the obstacles
Interviews
experts
SWOT
analysis
Interpretive
analysis
in
with
Data Analysis
the
Data Analysis
The interviews were transcribed and organized according to the research questions
(RQs). Data was analysed using descriptive and interpretive analyses (Appendix 3). Using the
GP approach, the experts identified a number of improvement opportunities which consider
both economic and environmental performance. AHP ranks and prioritizes the GP alternatives.
According to Taylor (2004), AHP is a method for ranking decision alternatives and selecting
the best one when the decision maker has multiple criteria. Tuzmen and Sipahi (2011) defined
AHP as an effective decision making method especially when subjectivity exists and that it is
suitable for solving problems where the decision criteria can be organized hierarchically into
sub-criteria.
Subsequently, the obstacles were identified during the interviews with representatives
from a number of leather tanning SMEs and industry experts. SWOT is a useful tool for
analyzing current problems and to create future action plans (Terrados, Almonacid & Hontoria
2007). Therefore, answering RQ3 was based on identification of the Strengths, Weaknesses,
Opportunities and Threats which formed the basis for strategy formulation. This was
complemented by respondent comments from the interviews (RQ3).
12
4 RESULTS AND FINDINGS
Characteristics of Yogyakarta Leather SMEs
Typically, the Yogyakarta SME leather tanning process starts with “pickling” and not
from treating the rawhides/skins (Figure 4). The industry argues that commencing the process
with pickling is more efficient and can reduce waste, odours and sludge. For example,
participant B said,“The reason (for starting with pickling) is environmental. This location is
already configured as a leather factory site but it is still close to population centers. And their
focus is the smell of the waste”. Also, in the words of participant A, “If you do not want to
have a longer process, and do not wish to have a problem with the community, do not start the
process from processing the raw hides/skins”. However, while there is a realization that
environmental considerations will be a challenge in the future, these are not a priority for the
SMEs because there is little pressure from regulatory bodies or customers to comply. For
example participant A said, “It will affect the environment if the effluent is not treated.”
However, participant A also said, “As long as there are no complaints …. I think that is okay.
But, a consequence of the industry is to generate waste. I have tried to minimize the waste but
as long as the cost is reasonable”.
These types of comments suggest that the Yogyakarta SME environmental leather
problems are unresolved. These SMEs have no special treatments for solid and gas waste, nor
for waste-water. Critically, they do not regularly monitor and/or evaluate treatment results.
Regulatory enforcement is an issue because of customer apathy toward green practices since
most customers are local and focus on quality and price - not environmental issues. Thus, SMEs
do not focus on preventive pollution management.
In terms of the generated waste, most of the respondents agreed that solid waste appears
to be the biggest problem which needs to be tackled. In the words of participant C, “The hardest
problem is chrome. Chrome content causes the waste to be classified as hazardous and toxic
waste. Because its handling cost is quite high, it is impossible for SMEs to manage their solid
waste individually. The government sees that their wastewater effluent has not met the
requirements, but at least they have tried. While there is no alternative choices available for
the solid waste”.
These responses indicate that the industry, particularly the SMEs, feel burdened with
solid waste management due to the considerable costs involved. Chrome content in solid waste
and sludge requires the industry to pay for the particular treatment associated with dealing with
this. Based on Regulation 101 Year 2014 regarding the Handling of Hazardous Materials and
Toxic Waste, SMEs need to pay for the treatment which is costly even for larger companies.
In the words of participant D, “The range of costs for one truck of solid waste took 30 million
rupiahs. It is already a heavy burden for the industry”. This evidence explains the reluctance
of SMEs to manage their waste due to their resource constraints which are restricted to issues
related to their business’ core operations, not to green practices (Biondi, Frey & Iraldo 2000).
Most of the participant responses suggest that the critical parts of the process that
generate hazardous waste are in the tanning process. As stated by participant C, “In the tanning
process, the critical part that affects the environment is the tanning agent”. Most of the
Indonesian leather industry including Yogyakarta still use chrome as an important tanning
agent which has toxic and hazardous characteristics for the environment. This process
generates an abundance of sludge and waste water which contains hazardous materials. Some
of the respondents considered beam house processing as another critical part of the tanning
process that causes environmental problems. This also generates significant waste that becomes
a main