Reducing a supply chain's carbon output is like cleaning roof gutters in the springtime: You know it should be done and you'll benefit from doing it, yet you just haven't gotten around to it. If that pretty much describes your operation's carbon-reduction efforts to date, you've got plenty of company, if the results of a recent survey by the consulting firm Accenture are any indication.
The survey of 245 supply chain executives in Europe, Asia, and the Americas conducted from May to July 2008 found that 86 percent of respondents had undertaken at least one green initiative in their warehouses, and 38 percent said they had implemented at least one such program for their truck fleets. Yet only 10 percent were measuring their overall carbon footprints. This lack of hard data made it almost impossible to gauge the effect of their carbon-reduction programs, and more than one-third—37 percent—said they had no idea of the emissions levels across their supply chains.
Jonathan Wright, managing director in Accenture's supply chain management practice, says the results indicate progress in launching carbon-reduction programs within specific operational silos. But they also show that companies have had less success in creating programs to measure emissions across complex supply chains involving multiple partners and often stretching thousands of miles, he says. "The industry is still on the learning curve," Wright says.
In Wright's view, companies are hamstrung by inadequate scientific expertise, a lack of data on environmental best practices, and the inability to allocate the needed human and financial resources to tackle such a broad initiative. In addition, many lack the support of a corporate champion. The companies that have made the most strides typically have someone either in the executive suite or on the board of directors actively supporting their carbon-reduction efforts, according to Wright.
Double win
Since the survey's completion, progress has been slowed by a dramatically weakening world economy and a sharp drop in energy prices. Though supply chain executives remain aware of the importance of reducing emissions, Wright says, they feel less of a sense of urgency about their carbon-reduction initiatives.
Maybe they should reconsider: Companies that simultaneously work to cut their carbon footprint and streamline their supply chains can reduce their carbon output by 5 to 10 percent while achieving supply chain cost savings of between 10 and 15 percent, Wright says.
For some companies, the results can be even more dramatic. In 2008, Chinese steamship and logistics giant COSCO asked IBM Corp. to suggest measurable ways the carrier could cut carbon emissions in its domestic Chinese supply chain. IBM analyzed COSCO's carbon footprint and its supply chain operation using a mathematical tool known as the "Supply Chain Network Optimization Workbench," or SNOW. The resulting analysis allowed COSCO to cut the number of distribution centers in China from 100 to 40, slash logistics costs by 23 percent, and reduce CO2 emissions by 100,000 tons a year, or 15 percent, according to IBM.
"Making your operations 'greener' and making them more economical are complementary, not contradictory," Eric Riddleberger, global leader for IBM's business strategy consulting practice, said in a statement. "When you improve the overall efficiency of a system, you can almost automatically lower cost, waste, and environmental impact."
Wright emphasizes that while the supply chain is the most "addressable area" for companies reducing their carbon footprint, the bulk of greenhouse gas emissions occur during the extraction of raw materials from the ground and the subsequent initial manufacturing process. IBM spokesman Jay Cadmus admits that most of the company's efforts on SNOW have been focused on "back-end logistics."
Gartner, Inc.
