By Chet Chaffee
July 18, 2013
There’s simply no question that companies must assess, evaluate and optimize their supply chain operations in order to reduce their carbon footprint. In fact, government and industry are strongly urging the issue; today’s customers like green business; and optimized supply chains with smaller carbon footprints are more efficient, less costly and less likely to experience sudden changes in energy and fuel prices.
Identifying, tracking and managing supply chain emissions is essential to optimization efforts, with the primary goal of detecting inefficiencies in fuel, electricity and water consumption and then correcting those inefficiencies to help eliminate waste and reduce costs. In addition, companies need to be aware of various reporting requirements, identify opportunities for improvement and reducing costs.
Monitoring and reducing carbon footprints also makes good business sense. Not only does it help eliminate waste and reduce costs internally, it also can help companies choose more efficient business partners and better mitigate risks caused by sudden changes in energy and fuel prices. In addition, lower carbon footprints can improve corporate brands, and companies can gain an advantage over competitors by providing comprehensive emissions information.
During supply chain optimization efforts, it’s important for executives to be mindful that when improving one benchmark, it may adversely impact another.
Companies need to look holistically at the supply chain to balance any tradeoffs that will have to be made. Successful companies often find incremental solutions that gradually improve environmental performance while minimizing burden in other areas.
To fully understand the tradeoffs inherent in their choices, executives must be able to analyze the entire value chain of a product or service in terms of cost and environmental impact. In doing so, they can make certain that various components in that chain interact in ways that benefit the whole system. Ultimately, no green initiative will succeed unless it has a proven value: better economics for the company, improved benefits to the customer, and a marketing advantage for the products and services.
Companies can often rely on internal management controls to assess and document their supply chain optimization efforts and better understand the trade-offs they make. External controls - such as the reporting requirements from government entities and industry - do not often require companies to delineate the trade-offs made as they work to reduce their environmental footprints.
The heightened public awareness of the relationship between business and the environment in recent years has a direct impact on supply chain management and creates opportunities for companies. It has raised questions that many executives are now trying to answer: How will we incorporate green, sustainable practices into supply chain operations? How can we assess the tradeoffs between sustainability and cost control? And how do we value long-term sustainability in the same equations as growth and profitability? And it has created marketing opportunities to communicate objectives and accomplishments for the company as well as products and services.
Industry initiatives also are providing companies with a platform on which to devise and build their greenhouse gas emissions reporting initiatives. For example, the Global Reporting Initiative (GRI), is providing companies and organizations with a comprehensive sustainability-reporting framework aimed at promoting economic, environmental and social sustainability.
It is expected, that the future of public reporting will have an even greater focus on transparency. The continued push for corporate social responsibility (CSR) reporting is one such indicator. The Dow Jones Sustainability Index defines CSR as a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments. The GRI’s sustainability reporting framework, too, looks more broadly at an organization’s economic, environmental, social and governance performance and organization’s ability to maintain that performance. Establishing a sustainability reporting process, according to the GRI, helps organizations set goals, measure performance, and manage change, and is a key platform for communicating positive and negative sustainability impacts, including trade-offs.
What’s critical is that companies determine the best supply chain measures that meet their specific requirements and strategic goals, and then analyze and compare those measures to understand if - and where - any tradeoffs might occur. Through life cycle assessments that leverage what-if scenarios, and modeling and risk/opportunity matrices, companies can strike the right balance as they optimize supply chain operations and reduce their supply chain’s environmental footprint.
Companies today can and should be a force for good, blazing the trail on how to care for the environment. By adopting cutting-edge tools and services to help better understand a companies’ environmental challenges and opportunities, executives can indeed adapt to the inevitable trade-offs while still achieving environmental and financial success together.
Dr. Chet Chaffee is vice president, Life Cycle Assessment, at FirstCarbon Solution. Previously, Chaffee was an executive vice president at Scientific Certification Systems where he directed over 200 lifecycle and sustainability initiatives for General Motors Corp., Home Depot, Unilever, and more. He can be reached at www.firstcarbonsolutions.com.