Not only is a green supply chain a corporately-responsible thing to do, companies find that sustainable business practices offer good public relations. But given mandates around the world to reduce carbon footprints, companies are aggressively introducing green supply chains into their logistics schemes.
Those efforts will step up considerably after representatives from 190 nations meet in Paris in December 2015 to negotiate a new global agreement on climate change to replace the Kyoto Protocol from 2020. Their goal is to cap global warming at 2 degrees Celsius.
A study by Climate Action Tracker indicates that achieving those reductions means developed countries will need to cut their total emissions by as much as 55% from 1990 to 2030. Limiting warming to below 2 degrees would require reducing total global emissions to zero sometime from 2060 to 2080. Emissions from industry and burning fossil fuels would have to be eliminated even sooner – between 2045 and 2065.
China is responsible for around a quarter of the world’s total annual greenhouse gas emissions. This is significant for manufacturers since many consolidate significant portions of their supply chains in China, given that China is the world’s largest exporter. Consequently, emissions in China’s supply chain are responsible for 70 to 80 percent of all lifecycle emissions for most manufacturing industries, reports BSR in its study, Managing Greenhouse Emissions in the Supply Chain: Opportunities in China.
The global nonprofit organization, which focuses on climate sustainability, released the report in April 2014.
The report points to Wal-Mart’s commitment in 2008 to improve the energy efficiency of 200 factories in China, and Hewlett-Packard’s (HP) goal in 2013 to reduce greenhouse gas intensity by 20 percent among its first-tier suppliers.
“They are finding that by re-evaluating their total supply chain, from purchasing, planning, and managing the use of materials to shipping and distributing final products, savings can be identified as well as benefits to emissions reductions,” the study states.
Wal-Mart, in particular, highlighted energy efficiency as both a key to sustainability and also a way to help make suppliers cut costs – something that has kept energy efficiency a priority even during the recession.
But, Wal-Mart vice president of global sourcing Ken Lanshe pointed out in another BSR study, entitled Unlocking Energy Efficiency in China: A Guide to Partnering with Suppliers, that “while the successes of Wal-Mart’s Supplier Energy-Efficiency Program (SEEP) in the United States provided us with an effective model, navigating energy efficiency in China required us to leverage local partners that possessed relevant knowledge, experience, and tools.”
The BSR report found that challenges standing in the way of reducing carbon emissions with suppliers in China include collaboration among buyers and suppliers that may be inhibited by a focus on short-term concerns and competing priorities; varying company standards related to carbon emissions management; a lack of incentive to reduce emissions due to insufficient economic and policy drivers; and nascent efficiency services and finance in many regions.
BSR findings suggest out that activities companies can purse to overcome these challenges include: demonstrating a commitment to long-term engagement on climate sustainability with suppliers, providing a direction toward practical business opportunities for suppliers that are receptive, rewarding suppliers for investment and performance in emissions reduction, and building the market for energy information, efficiency services and finance.
Companies such as Wal-Mart, HP and IKEA already dedicate staff to and provide training, assessment, and planning for modern energy management to suppliers. HP works through their China sourcing and sustainability teams to identify qualified energy auditing and training partners. The study points out that at IKEA, product category leaders design programmes in collaboration with the company’s supply chain sustainability team for specific suppliers.
Green supply chain practices are also available by examining efforts made by companies overseas. In the United States, General Motors reduced its carbon footprint by establishing a reusable container program with their suppliers, an effort that reduced disposal costs by US$12 million.
Interface, a US$1-billion Atlanta, Georgia-based company that is also the world’s largest designer and maker of modular carpet tile, implements sustainable programs from materials sourcing, plant locations, transportation providers and routings, to reverse logistics. In 2007, Interface became the first carpet manufacturer to implement a process for the “clean separation” of carpet fibre from backing, allowing for a maximum amount of post-consumer material to be recycled into new products with minimal contamination.
While many businesses may have not have in place a successful refurbishment or reverse logistics program, such a program can increase purchasing options to their customers and widen their customer base, while improving the environmental impact of their products.
Interface also works with transportation suppliers and forwarders to determine the most cost-effective, environmentally-friendly mode to move freight. Currently, Interface emphasizes the use of intermodal freight, which emits two-thirds less carbon than traditional over-the-road transport. Interface also has engaged UPS to determine how to improve outbound shipments and transit times to eliminate overnight air shipments and replace them with two-day ground service.
Interface also has operations in China, Australia, Thailand, Ireland and the Netherlands and is the only company that manufacturers carpet globally. The North America market accounts for half of Interface’s business; Europe, 25%; and Asia Pacific, 25%.
By Karen E Thuermer
Correspondent | Washington