There’s no question that the environment is playing an increasingly important role in the average OEM’s ability to manage its supply chain. Just last year, the floods in Thailand wreaked havoc on the supply of disk drives and solid-state memory. Also, China’s worst drought in 50 years caused power cuts, manufacturing disruptions, and problems transporting goods along the Yangtze River and its tributaries.
According to a recent report by the Climate Disclosure Project and Accenture, more large global corporations worldwide are reducing their environmental footprint, and their efforts increasingly include requiring supply chain partners to do the same. The report says that 90 percent of these companies are making procurement and supply chain decisions based in part on their suppliers’ environmental footprint, including their greenhouse gas emissions.
The corporations are using both carrots and sticks to foster change. The report says 62 percent of them reward their suppliers for good carbon management practices, versus just 19 percent two years ago. And 39 percent said they will soon begin deselecting suppliers that do not adopt such measures, up from 17 percent in 2009. Thirty percent factor climate change into their evaluation of suppliers. The fact that all these figures have increased significantly shows that momentum is building for the greening of the world’s supply chains.
Wal-Mart is a leader in this movement. According to the report, it has set a goal of eliminating 20 million metric tons of greenhouse gas emissions from its supply chain by the end of 2015. The largest part of that effort targets energy efficiency improvements among its supply base. That’s because over more than 70 percent of Wal-Mart’s emissions are generated by its suppliers.
One of those suppliers is Intex. With Wal-Mart’s help, the company reduced its coal consumption by nearly 12,000 tons. This keeps about 30 million metric tons of CO2 emissions out of the atmosphere. Intex also invested about $12 million in an additional 16 energy-saving projects.
But OEMs and other customer companies need to step up and give their suppliers more concrete help in making these changes. Fewer than a quarter of the customers surveyed for the CDP report help suppliers quantify the return on low-carbon investments. They need to step it up if they expect to see results.
The report recommends three ways to encourage efforts among the supply chain. First, companies need a standard, consistent way to measure supply performance. A big problem for suppliers is that each of their customers has a different expectation and a different reporting document they are required to complete. It’s just plain inefficient. Without consistency, nothing meaningful will get accomplished.
Second, customers and suppliers alike need to publish information about climate strategy. Being transparent by reporting results and setting targets is the only way to make progress over the long haul.
Third -- and perhaps most importantly to the E2 community -- companies need to use better metrics and more sophisticated information management platforms in the calculation of their environmental footprint. The CDP provides a standardized platform that reduces redundancy and provides improved risk management. But it’ll take internal IT departments to make sure the data collection and reporting happens.
Now’s the chance for IT to make a difference. Seize the day!