Supply chain management and carbon accounting

Photo Credit phitar

I came across two fascinating surveys of supply chain execs attitudes to climate change today!

The first from environmentalleader.com says that:

The survey of over 500 North American supply chain executives shows that the vast majority of respondents, 90 percent, think that over the next three years green issues will remain or become more important to their transport and logistics processes…

This push towards green is reported to be driven by a number of factors, including financial ROI (61%), public relations payback (78%), improved customer relations (83%), decreased fuel bills
(70%), and improved supply chain efficiency (59%)….

The results revealed that 72 percent are or are planning to improve energy efficiency, 37 percent are redesigning warehousing and distribution center networks, and a dramatic 60 percent are measuring and/or reducing emissions.

Amidst the slew of supply chain carbon measurement tools and technologies that have come onto the market in the last year, only a handful of respondents are already using an external measurement tool. But while 16% have deployed an internal system for this purpose, another 30% are currently researching which software to use or purchase in the short term.

30% are researching software for measuring supply chain carbon footprint? I smell opportunity!!!

The other survey I came across came from McKinsey. The report is a survey of 2,000 global executives.

According to the McKinsey report:

for consumer goods makers, high-tech players, and other manufacturers, between 40 and 60 percent of a company’s carbon footprint resides upstream in its supply chain—from raw materials, transport, and packaging to the energy consumed in manufacturing processes. For retailers, the figure can be 80 percent…

Surprisingly perhaps, we find that many of the opportunities to reduce emissions carry no net life-cycle costs—the upfront investment more than pays for itself through lower energy or material usage. Others, however, will require tradeoffs between emissions and profitability, in areas such as logistics and product design (including product specification and functionality). Forward-looking companies are using such discussions as opportunities for supplier development, for example by transferring best practices in manufacturing, purchasing, and R&D—as well as energy efficiency—to key suppliers. This opens the possibility of still lower costs and improved operational performance, in addition to helping suppliers remove more carbon from their supply chains.

Reading between the lines there are a few important messages here:

1. Good carbon accounting software is becoming more and more of a requirement
2. Attacking energy efficiency aggressively can significantly reduce a company’s carbon footprint
3. Companies are increasingly looking at reducing supplier’s carbon footprints as a means to reduce their own. This can be either through working with suppliers or by choosing suppliers based on their carbon footprints.