Green Productivity as an Approach to Address the Environmental Problem of Leather Tanning SMEs in Yogyakarta, Indonesia

Abstract

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.