When the issue of sustainability and “green supply chains” first emerged, the topic didn’t resonate with me. I adopted a cynical attitude and thought the whole movement was more about public relations than about making a real impact. My perspective was simply that the goal of for-profit companies is to make a profit rather than spend money to save the world. In short, I believed that the only green that mattered was money.
Fast forward a number of years, and it turns out that I wasn’t completely off base. A primary mission of sustainability must be to promote profitability, according to both my academic colleagues and supply chain executives.
Dr. Craig Carter and Dr. Dale Rogers highlight multiple goals in their definition of sustainable supply chain management:
The strategic, transparent integration and achievement of an organization’s social, environmental, and economic goals in the systemic coordination of key inter-organizational business processes for improving the long-term economic performance of the individual company and its supply chains.
Practitioners suggest that sustainability cannot be a pure cost area. Done correctly, green initiatives contribute very effectively to the financial success of companies and their supply chains. In their study of SCM executives, Carter and Rogers found that approximately 70 percent of the respondents consider sustainability efforts essential to long-term profitability. In the 2010 State of the Retail Supply Chain report, we arrived at a similar conclusion:
Sustainability is not a new issue for SCM executives. They have already experienced the social discourse and “green” promotional aspects of sustainability. Today, their interest is moving to the business benefits of sustainable supply chains, particularly the financial savings.
Adding “more sustainable” to the original supply chain goals of being better, faster, and cheaper is the right way to go. Walmart has invested heavily in transportation equipment improvements to improve fuel efficiency and reduce carbon emissions. PepsiCo has undertaken initiatives to reduce product packaging, cut power consumption at plants, and shift parts of their fleet to alternative fuels. To make sure that suppliers are living up to their sustainability promises, McDonald’s has implemented a supplier scorecard system to track progress on a variety of sustainability issues related to water and energy use, production waste, and recycling.
These examples highlight the need for capital, time, and top-level commitment. Success doesn’t occur overnight, and many companies need the help of supply chain partners to move sustainability initiatives forward. In response, third-party logistics companies and consultancies have developed tools to help companies understand their supply chain sustainability performance and improve related business practices.
For example, DHL recently introduced its GoGreen carbon dashboard to assist companies with their efforts. The dashboard helps to map carbon emissions across a supply chain and provides a detailed breakdown of your carbon footprint. It also provides key performance indicators to help companies work toward carbon reduction targets and “what-if” tools to analyze the impact of supply chain modifications. The DHL diagram highlights some of the opportunities to cut emissions, reduce fuel consumption, and save money.
Ultimately, it is critical to quantify the impact of these business process improvements. Supply chain professionals must develop the ability to articulate the dual cost/sustainability benefits of packaging modification, nearshoring, empty miles reduction programs, and similar initiatives in the CEO’s language. That is, how do these sustainability efforts impact that scorecard known as the income statement?
As I said before, it seems as though the only green that matters is money! But, if supply chain experts can find additional ways to reduce natural resource consumption and pollution while making more money, then I really don’t see a problem. What about you? I welcome your insights and feedback.