Sustainable Sourcing with a “Green” Supply Chain Brings Competitive Advantages

There is an increasing emphasis of supply chain management in creating the proper ingredients of a successful business strategy. The concept of a green supply chain is gaining interest among operations practitioners as a sustainable and profitable undertaking. A green supply chain can be thought of as a supply chain that has integrated environmental thinking into core operations from material sourcing through product design, manufacturing, distribution, delivery, and end-of-life recycling.

by Dave Meyer, Sustainable Economic and Environmental Development Solutions (SEEDS) Global Alliance (Northwest Operations) and SVP of Greenbridge International, LLC. Follow Dave on Twitter @DRMeyer1 and LinkedIn.

Well, can the economic tides be turning?  In my former home base of San Diego, they had a saying: “It takes a long time to carefully turn an aircraft carrier around”.  Capgemini Consulting’s new study of 300 leading companies across Europe, US, Asia-pacific and Latin America states that economic recovery has surpassed economic downturn in the list of business drivers for 2010.

Some key findings of note from a supply chain perspective:

• Over 58 percent of the supply chain managers say their main business driver for 2010 is “Meeting (changing) customer requirements”.  (Well, I guess that is a no-brainer, as a successful business should be nimble and always responsive to customers’ needs to succeed in the marketplace)
• More than 50 percent of the participating companies indicate they will start up or continue with operational excellence / LEAN.  Another obvious direction – reduces waste, optimize resources.  This should translate into bigger profits and competitive position.
• Sustainability is the second most important business driver for 2010 — up 16 percent over last year. However, the survey results suggest that this has not yet directly translated into a significant increase in supply chain sustainability projects.  Well, remember that aircraft carrier quote that I just mentioned?

These findings really suggest that while the road to recovery is long, that much foundational work remains.  But the trend from survival to revival is in play now.

Perhaps the biggest take-away from this report is the increasing emphasis of supply chain management in creating the proper ingredients of a successful business strategy. And coincidentally, the concept of a Green Supply Chain is gaining interest among operations practitioners as a sustainable and profitable undertaking. A Green Supply Chain can be thought of as a supply chain that has integrated environmental thinking into core operations from material sourcing through product design, manufacturing, distribution, delivery, and end-of-life recycling.

The implementation of Green Supply Chain initiatives has evolved from strictly a compliance issue into a means of generating value. Traditionally, companies incorporating green projects have focused solely on cost avoidance by assuring compliance, minimizing risk, maintaining health, and protecting the environment. In the emerging value-creation model, implementing green initiatives along a company’s supply chain can raise productivity, enhance customer and supplier relations, support innovation, and enable growth. The Green Supply Chain is no longer exclusively about green issues, but also about generating efficiencies and cost containment. As organizations restructure to reduce their company’s environmental footprint, supply chains have increasingly become a key area of focus. Improvements in transportation efficiency, operations, raw material selection and packaging are all topping the list of “green” supply chain initiatives.

Green Supply Chains enable organizations to:

• specialize and concentrate manufacturing efforts in a way that manages environmental risks and costs of compliance with existing or new regulations;
• improve product, process, and supply quality and productivity.
• make innovative decisions that respond to “green economy” requirements;
• gain access to key markets through ISO 14001 registration or other certifications;
• improve or create brand differentiation and customer loyalty by offering unique capabilities to address environmental related requirements and expectations;
• reduce customer pressure and even gain preferred status; and

The ISO 14001 Certification / Supply Chain Nexus

Over the past several years, studies have been performed worldwide comparing ISO 14001-2004 and its value in development of green supply chains.

• One recent study found that more than 75% of manufacturing executives surveyed had ISO 14001 certification or were in process in order to enhance their competitive supply chain position,
• Companies that are already ISO 14001 certified are 40% more likely to assess their suppliers’ environmental performance and 50% more likely to require that their suppliers undertake specific environmental practices,
• Preference in market share is often given to suppliers that have attained ISO 14001-certification,
• Consumer preferences are increasingly important drivers for many companies to improve their supply chain environmental activities,
• Procurement officers increasingly use ISO 14001 certification as a required vendor qualification,
• Suppliers without an environmental management system will feel increasing pressure to modify their practices or risk losing customers, and will be subject to higher costs for licenses, inspections and insurance.

Questions and issues to consider when developing your Supply Chain/Value Network:

• Will the service provider enhance the cause of sustainability both upstream (i.e., primary customer/end customer) and downstream (i.e., all tiers of supply base, including logistics service providers)?
• Will some relationships drive significant redesign of the supply chain, including product innovations and modifications (e.g., collaborative development of decomposable packaging material?
• Is your supply chain implementing progressive environmental management systems to manage their environmental footprint?
• Establish a more cohesive collaborative model in transport, warehousing and distribution that will drive efficiencies up and incremental costs down, while reducing environmental impacts throughout the supply chain.

The Green Economy Post assembled a number of Green Supply Chain studies to assist you in your efforts to understand and address these issues in your business (15 Green Supply Chain Studies You Should Know About).

Environmentally responsible procurement, in alignment with your company’s environmental sustainability values, is critical for organizations that desire to manage their environmental risk and maintain a competitive advantage.

Not only does this mean that businesses must choose their suppliers well, they also have to ensure that suppliers comply with the standards they claim to meet.

© 2010, Dave Meyer. All rights reserved. Do not republish.

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