Tuesday, May 20, 2008

Some thoughts on sustainability in the supply chain

As the sustainability technology market develops, it appears that there are a number of segments within (such as CSR reporting, supply chain mgt, etc) that are gaining traction, and may 'drive' general adoption of sustainability within organizations. I find it interesting that there are a number of different tech firms such as Aravo, Stakeware, CSRware, Credit360 and many others, that are coming at sustainability from different business processes. The recent Forrester report on sustainability technology (which I commented on in this post) details the general groups as well, but does not identify supply chain solutions as a specific segment. I think this may be an area that could drive faster adoption, and also be a platform that could integrate with other sustainability processes & metrics as they were developed in an organization.

Initiatives to ‘green’ the supply chain generally follow these key metrics:

  • Lower energy use and increase energy efficiency in storage and transportation
  • Minimize packaging via improved product design and use of recycleable materials
  • Lower carbon footprint and emissions via improved energy (above), use of alternative energy sources (where appropriate)
  • Substitution or elimination of toxic materials when possible
  • Effecient use of resources; i.e. "embedded water" costs
  • Optimize the supply chain as to minimize impacts on stakeholders

The market drivers for greening are:

  • Product - specific compliance, such as REACH
  • Sustainability reporting
  • GHG emission reductions and credits
  • Improved risk management (in light of recent supply chain incidents with Mattel, others)
  • Cost savings of shippers / suppliers; leading to better value pricing
  • Stronger relationships & transparency with key suppliers; strategic value

In discussions with many supply chain management solution providers, it appears that many end user clients are deploying 'green' solutions in the supply chain to achieve better energy efficiency, because it is the most visible and generally the easiest issue to solve with key suppliers and logistics partners. But it remains to be seen whether that issue will continue to drive the growth of this segment. There is a general feeling that any additional 'incidents' with global brands will increase awareness and urgency on the part of corporations to gain complete transparency in their supply chains and manage them beyond just energy efficiency gains. Along those lines, continued regulation enactment similar to REACH and RoHS in the EU will also force companies to align their supply chain (and product management) processes so as to be in compliance with product - centric regulations.

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