I hear from many colleagues in the supply chain industry who believe that it is not possible to have both a green supply chain and a fast, low cost supply chain. But it is simply not the case.
More than ever, adopting green, socially responsible practices can help increase efficiencies and cut costs. In fact, corporate responsibility and green initiatives are becoming the standard of the most competitive global companies.
Why go with a green supply chain?
Forbes contributor, Paul Martyn’s prediction is that in 2018 sustainability will be the new lean. He believes that more than half of the top 100 multinationals will be doubling down on their sustainability commitments relying on their supply chain professionals as primary drivers.
The advantages of going green are numerous including:
- Reductions in shipping costs and burning less fossil fuels
- Consolidating and optimizing material and packaging usage means fewer products are consumed
- When waste is minimized, so too are the costs associated with purchasing and disposal
- Improved public image for companies as customers are increasingly interested in spending their money with companies that emphasize environmental and social responsibility
According to Harvard Business Review, companies with a sustainability agenda are better positioned to anticipate and react to economic, social, environmental, and regulatory changes as they arise\Investing in sustainability is not only a risk management tool, it can drive innovation.
Redesigning products to meet environmental standards or social needs offers new businesses opportunities. 3M, for example, integrates sustainability into its innovation pipeline through its “Pollution Prevention Pays” program which aims to proactively minimize waste and avoid pollution through product reformulations, equipment redesign, process modification, and waste recycling.
In addition to the financial benefits that accrue from increased competitive advantage and innovation, companies are realizing significant cost savings through environmental sustainability-related efficiencies.
WalMart, for example, aimed to double fleet efficiency between 2005 and 2015 through better routing, truck loading, driver training, and advanced technologies. By the end of 2014, they had improved fuel efficiency approximately 87% compared to 2005 baseline. These improvements resulted in 15,000 metric tons of CO2 emissions avoided and savings of nearly $11 million.
In one study, between 2006 and 2010, the top 100 sustainable global companies experienced significantly higher mean sales growth, return on assets, profit before taxation, and cash flows from operations in some sectors compared to control companies.
Finally, increasingly sustainability is important for building customer loyalty. Today’s consumers expect more transparency, honesty and tangible global impact from companies — and they have more options from which to choose.
Nearly two-thirds of consumers across six international markets believe they “have a responsibility to purchase products that are good for the environment and society.”
And it’s not only customers but also governments that are increasingly paying attention to environmental concerns. According to the World Economic Forum, logistics companies will need to consider ways to use greener methods of transportation, reduce their overall CO2 emissions and cut down on waste from packaging to ensure that they can offer sustainable logistics operations—and remain competitive.
The green supply chain: who is already leading?
Citing a McKinsey report, the Harvard Business Review, reports that the value at stake (i.e., the sustainability imperative) may be as high as 70% of earnings before interest, taxes, depreciation and amortization. Of the 8,000 supplier companies surveyed that sell to the largest multinationals, 70% said that sustainability is as much a top of mind issue as climate change which another 72% believed could significantly impact their operations, revenue or expenditures. https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability
Unilever, P&G and 3M are leading the market. Ikea Group just committed 1 billion euros to sustainability sourcing on top of more than 2 billion already earmarked for sustainable energy. Other global players in sustainability include Whole Foods, Target, General Electric, Tesla, Chipotle, Nike, Toyota and Natura.
As green and sustainable practices transform the supply chain and logistics industry we are beginning to see new powerful entrants into the market. EcoVadis, a 10-year-old company that provides environmental, social and ethical performance ratings for global supply chains, recently accepted a 30 million euro investment from Partech Ventures. And the company recently began expanding into the US market. Currently, EcoVadis counts 150 of the world’s largest buyers including DuPont, Johnson & Johnson, Nestle and Subway, and 30,000 suppliers, as its base.
Green supply chain: it’s the future
The World Economic Forum notes that many companies fail to realize that profit and socio-environmental outcomes are complementary not contradictory. WEF in collaboration with
Accenture found that by initiating projects where social, environmental and economic benefits overlap, costs can be reduced by 9-16%; revenue can actually be increased by 5-20%; band value increases by 15-30%; labor standards rise and GHG emissions fall by 13-22%.
The good news is that advancements in technology are paving the way to a greener, more sustainable supply chain future.
John Moore – Founder
Packaging & Logistics Solutions (PLS)