Pressure Mounting for Supply Chain to Reduce Eco-Footprint

Bruce Rayner, Contributing Editor, Enterprise Efficiency OEM | 2/10/2012 | 5 comments

Bruce Rayner
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!

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Anand   Pressure Mounting for Supply Chain to Reduce Eco-Footprint   2/13/2012 11:30:57 PM
Re : Pressure Mounting for Supply Chain to Reduce Eco-Footprint
Wal-Mart is a leader in this movement.

@Bruce, thanks for the post. Good to see big companies like wal-mart taking such initiatives to reduce green-house gas emissions. Smaller companies should also start participating in such programmes.  Companies should focus on 3 R's reduce, reuse, recycle. Cut paper use by setting printers to the two-sided default, separate waste and recycling (place small recycling bins at each desk), and conserve energy by turning off lights and computers when not in use. Success here will help staff become more confident to tackle more ambitious initiatives.
Bruce Rayner   Pressure Mounting for Supply Chain to Reduce Eco-Footprint   2/13/2012 5:58:03 AM
Re: Sustainability standard
@Hospce_Houngbo - In the US, there are no federal government standards for sustainability. In Europe there are EU directives regarding material use (RoHS), recycling (WEEE) and chemical use (REACH) for electronics. And these are being adopted by other countries such as Australia, Korea, and others. Then there are countires that are requiring some form of carbon accounting, plus organizations that are creating standards for companies to follow voluntarily like the Carbon Disclosue Project and others  But nothing that emcompasses the broad set of 'sustainability' factors. Corporations are creating their own framework for what sustainability means and how to measure it that are converging on things like WalMart's sustainability index, but we're a long way froma universal sustainability standard.
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Hospice_Houngbo   Pressure Mounting for Supply Chain to Reduce Eco-Footprint   2/12/2012 2:44:41 PM
Sustainability standard
 "companies need a standard, consistent way to measure supply performance."

It is important for companies to be able to measure the impact of their sustainability effort. That will help them "to make progress over the long haul." The question is who defines this standard? Is it a gevernment body or the companies themselves?
Dave Sasson   Pressure Mounting for Supply Chain to Reduce Eco-Footprint   2/10/2012 6:58:31 PM
Wal-Mart and the "7 R's of Packaging"

Wal-Mart has been at the forefront of driving sustainability initiatives for quite some time.  In 2006, Wal-Mart released a packaging scorecard for its suppliers to reduce packaging across its global supply chain.  The goal when it was announced in 2006 was to reduce packaging by 5% by 2013.   This famously became known in the industry as the "7 R's of Packaging": Remove, Reduce, Reuse, Recycle, Renew, Revenue, and Read.  My previous company was involved in this initiative and helped Wal-Mart's suppliers achieve a better scorecard.  It definitely has had a positive impact on the environment.  Thanks for writing about an important topic.

David Wagner   Pressure Mounting for Supply Chain to Reduce Eco-Footprint   2/10/2012 6:44:00 PM
How Does Walmart Measure?
Thanks for the article Bruce. So i see you say that 70% of Walmart's carbon footprint comes form suppliers. Does this include the supply chain itself? Because it seems to me that there is only so much they can do about the carbon footprint of all those trucks rolling everywhere until someone events an electric semi-truck.

Does that footprint go to the supplier column or to Walmart's column?

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