Supply Chain Sustainability

Stephen DeAngelis

April 13, 2011

The editorial staff at the Green Supply Chain reminds us, “For most companies, Green supply chain strategies are driven by the opportunities to save money much more than serving the environmental good.” [“Sometimes, the Greenest Ideas are Just Common Sense – and Obvious Money Savers,” 24 March 2011]. In an earlier post on this subject [Going Green: Cradle to Cradle Supply Chain], I wrote, “Based on the increasing number of articles that focus on sustainability, I can only conclude that cleantech initiatives are here to stay and that people are beginning to believe that going ‘green and clean’ is the right thing to do for both environmental and business reasons.” I agree with the Green Supply Chain staff, however, that, in order to be sustainable, green strategies must support a business case. The article goes on to stress that some of the best ideas are also the simplest. It continues:

“What often emerges is the recognition that there are many simple ideas that can both reduce costs and be good for the environment at the same time. Case in point: Supervalu, the grocery retail and wholesale giant, has found it can save millions of dollars annually by reducing the number of plastic or traditional paper grocery bags it uses annually by simply putting more purchased products in each bag – or avoid using a bag at all.”

Although that may sound like one of those ideas that makes you slap yourself on the forehead, you must remember that grocery stores have had some compelling reasons for not filling bags to the brim in the past. For example, most grocery shoppers are women and, depending on age and health, some of them could have a difficult time dealing with heavy shopping bags. Another reason is that you don’t want to put toxic products into the same bag in which you place items for consumption. When special circumstances don’t dictate otherwise, however, filling bags to capacity makes a lot of sense. Using fewer bags is good for business and good for the environment. The article points out that Supervalu doesn’t just give lip service to this policy, it “has begun a rigorous training program that teaches it associates how to use fewer bags. … Supervisors keep a close eye on baggers to make sure they are following the rules.” Since implementing the strategy in mid-2009, the company has managed to reduce “bag costs by $4-6 million annually.”

Steve Minter reports that sustainability strategies are increasingly being designed from a business strategy perspective rather a public relations perspective. He writes, “Companies are increasingly embedding sustainability initiatives in their plans as they seek both to save money on rising energy costs and to find ways to profit from green technologies and products.” [“Sustaining a Green Strategy,” Industry Week, 16 March 2011]. Peter Capozucca, a sustainability strategy leader at Deloitte, told Minter, “If you consider sustainability broadly, inclusive of not just climate change but issues related to energy, materials, recycling, waste, the use of water, companies are extremely focused on that. They are not viewing it necessarily as a standalone sustainability initiative but more as linked with issues and strategic priorities they are dealing with anyway, whether on the cost or revenue side of the equation.” Minter continues:

“That’s certainly the case at Dow Chemical. Neil Hawkins, Dow’s vice president of sustainability, cites global issues such as renewable energy, clean drinking water and the rising consumerism that goes along with an expanding middle class in emerging markets, as the sustainability drivers in the world. They also, he says, are drivers of growth for business. … Dow is also continuing efforts to reduce its energy use. Last year, Dow CEO Andrew Liveris noted that Dow uses the equivalent of 850,000 barrels of oil every day. Over the last 15 years, Hawkins notes, the company has reduced its energy intensity by 20%. By spending $2 billion on energy efficiency, he adds, the company has saved $9 billion. As part of its 2015 sustainability goals, Dow has committed to reduce its energy intensity by 25%.”

Perhaps the most important assertion found in Minter’s article comes from Deloitte’s Capozucca, who claims “he has yet to see a successful sustainability effort that is bottom-up in nature. ‘Consistently, this is a CEO issue but in many cases it starts with the board of directors and what they are trying to do from a broader governance standpoint,’ he notes.” Capozucca agrees with the staff at Green Supply Chain that it is the business case for sustainability that matters.

“He says a consistent theme is that sustainability must be integrated into all the company’s strategic plans, including growth, innovation, cost and efficiency and how the company engages with its stakeholders. Dow’s Hawkins agrees with the need to establish sustainability as part of the company’s culture and develop strong organizational alignment with corporate goals and the roles of individual employees. He says companies also benefit from strong sustainability goal-setting and reporting processes.”

Gabrielle M. Blue asserts, “Incorporating sustainability into any company’s operations is a hefty issue. But it’s also an increasingly popular shift to make.” [“How to Build Sustainability Into Your Supply Chain,” Inc., 23 March 2011] Summer Rayne Oakes, co-founder and CEO of Source4Style, told Blue, “It’s an increasing liability to not do it.” Blue continues:

“Today’s global marketplace is forcing many companies to reevaluate, reconstruct, and even collaborate their efforts just to keep up with demands of the industry. While many leading supply chains have already dedicated years of research and figures to develop data, initiatives and solutions to the movement that seems to be steering the industry, some are still trying to decide why they should. ‘The best way to understand the imperativeness of sustainability is to consider the alternative,’ says Paul Anastas, assistant administrator for Environmental Protection Agency’s Office of Research and Development. ‘The opposite of sustainability is being unsustainable, vulnerable. Too often companies have fallen, or been greatly damaged, because of events that have taken place in other parts of their supply chain, not necessarily things in their traditional sphere of control. These events have run the range of environmental (products or materials tainted with toxic chemicals), economic (cost spikes of a feedstock), or social (poor or illegal labor practices by a supplier). Without designing sustainability into the supply chain of the company, the risk of significant adverse impact is high.'”

Blue believes that executives who oversee the majority of large supply chains no longer question sustainability efforts and programs; what they are looking for are “more efficient ways to successfully execute those initiatives.” When it comes to smaller companies and smaller supply chains, Blue believes that they can “make gradual steps” toward becoming “more socially, economically, and environmentally responsible.” She continues:

“Building a sustainable company is a task that must be taken on from all sides. The collective and collaborative efforts of the supply chain industry, with the support from the government, is crucial. Combining the innovative alternatives from chains taking a grassroots approach with the advanced research collected by leaders in the field can help you better understand what you can do to improve your company.”

Although learning about innovative, alternative grassroots approaches might inspire some new company programs, keep in mind that Deloitte’s Peter Capozucca claims that he has never seen a successful grassroots approach. Blue cautions, “Decreasing your company’s global [carbon] footprint won’t happen overnight—so don’t fret if your company doesn’t show great improvement the next day.” Generally, the lowest hanging fruit involves tackling transportation and sourcing efficiency. She continues:

“The way to identify what your smaller issues might be is to take an inventory of everything that you produce. From product design to costs to recycling, in most cases there’s always room for your company to be quicker, cleaner, and better. … Really holding a microscope to your company’s infrastructure will force you to identify and address some nuance problems that perhaps you’ve been too busy to correct. It’s common for companies to hire an outside consulting company to do this task for them, because it’s easier for an outsider to take a critical eye to your business than you and pinpoint problem areas.”

Blue suggests that once you have determined where your business needs the greatest attention, you should prioritize the order in which you are going to tackle them. You need not feel alone if you are just getting started. The EPA’s Paul Anastas says, “The EPA has state-of-the-art analytical tools that are useful in integrating sustainability into corporate operations. In addition, there is now a growing industry of technical and strategy-based companies devoted to helping businesses, large and small, adopt sustainability into their business operations.” Blue concludes:

“All the ideas in the world won’t mean a thing without someone there to implement them. Moreover, when you’ve reached this step, you’re now in the same boat as many leading supply chains. … This is the perfect opportunity for you to see which of your employees are ready to take on a more prominent position within the company. But be careful! Make sure that you’re green team is comprised from varying departments of the company, so as not to leave any department short-staffed.”

Sustainable green programs that have lasting value and effect are not going to come from a “team” that operates separately from and outside of day-to-day business processes. Such a team may develop ideas and help senior executives see that recommendations are implemented into business strategies; but its members must not perceive themselves as being outside of the main line of business. In another post on this subject, I concluded, “It is clear that discussions about green or sustainable supply chains are not going to go away. It’s also clear that sustainability strategies are going to be driven primarily by good business sense rather than idealism. That’s a good thing because it means that the bulk of sustainability practices that are implemented are going to have lasting consequences.” I believe that conclusion remains valid.