More Corporations Are “Greening” Supply Chains
Savvy business sometimes requires only a flip of a lid.
When Stonyfield Farm switched from plastic to foil lids six years ago, the organic yogurt company avoided 16 percent of the energy costs associated with producing its containers.
Similar savings have been discovered throughout Stonyfield's manufacturing, transportation, and packaging divisions since the company began measuring its carbon footprint in the early 1990s, according to Chairman Gary Hirshberg.
"Our carbon footprint is everywhere we look. It's our transportation. It's our waste," Hirshberg told a conference of business executives in Boston, Massachusetts, earlier this month. "We're sending our money into the dark sky. That's clearly dollars to be reclaimed."
For many companies, sustainability improvements such as energy and water efficiency were at first reactions to public criticism. Nowadays, as rising energy costs, water scarcity, and climate change threaten the affordability and availability of global inputs, corporations are recognizing that a more sustainable product has a better chance of remaining competitive in a resource-constrained world.
But a product's environmental or economic sustainability rarely depends on the actions of a single company. As a result, many corporations are pressuring their suppliers to become more efficient as well.
"Everyone is scrutinizing for higher sustainability efforts because companies are asking for it," said Paul Baier, a vice president with the consulting firm Groom Energy. "Clearly, it's become mainstream business."
Walmart represents the most dramatic example of efforts to "green" corporate supply chains. The world's largest retailer announced in July that many of its suppliers would need to assess and report on the environmental and social sustainability of their products. The responses may eventually be combined into an index of a product's lifecycle impact, the company said.Since Walmart notified its suppliers about the request - asking whether the companies had evaluated environmental impacts such as greenhouse gas emissions, water use, and product recyclability - several suppliers have increased their investments in measuring carbon emissions and energy efficiency, Baier said.
The motivation for corporations like Walmart to improve the efficiency of supplier industries is in part financial. Improved efficiency can be an important component of business deals between suppliers and retailers. Depending on the agreement, the avoided energy costs are shared between the two companies. Both supplier and buyer increase profits while the overall supply chain becomes more efficient.
"When you're speaking sustainability with business people, you have to speak the language," said Richard Goode, head of climate change programs for Alcatel-Lucent, a global telecommunications company. "The language has always been profitability."
David Newman, a sustainability director for Millipore Corporation, said the Massachusetts-based bioscience manufacturer has reduced its energy consumption 12 percent since it started measuring emissions in 2006. Still, Newman questions whether the additional sustainability push from outside businesses and organizations will boost profits for his company.
"The vision...can't just be to reduce the environmental cost of our supply chain," Newman said. "That's an admirable goal, but it's not the best goal from a business perspective."
Corporations are also pushing sustainability to mitigate the environmental risks associated with their products. The growing scarcity of arable land, clean water, and cheap energy may threaten the availability of products ranging from t-shirts to soft drinks, especially as climate change shifts agricultural patterns.
"If climate change takes place as many scientists are projecting and parts of the supply chain will no longer be available, companies want to know whether suppliers are recognizing this and taking action to ensure for the survival of their products 30 years from now," said Dan Kreeger, executive director of the Association of Climate Change Officers, an organization for corporate sustainability officers.
"Cadbury's is worried about where it'll get its chocolate and Coca-Cola is worried about where it'll get its water," said Gwen Ruta, vice president of corporate programs at the Environmental Defense Fund.Peer pressure has also led more companies to volunteer emissions data through the independent Carbon Disclosure Project, which reports corporate emissions from electricity usage as well as the direct burning of fossil fuels. The group announced last week that a record 409 of the world's 500 largest companies responded to its latest request-an increase from 383 last year.
"If you're not doing CDP, I strongly recommend it," Hirshberg told the conference. "If today [reporting emissions] is not mandated, tomorrow I guarantee it will be."
Beginning this year, the Carbon Disclosure Project has attempted to expand its inventory to smaller companies that supply many of the world's largest corporations. While many of these companies remain unsure of how to analyze their emissions, the quality of responses is improving, said Chrystina Gastelum, U.S. account manager for the group's supply chain inventory.
"It requires a lot of technical data," Gastelum said. "There is not a lot of expertise [among the companies]."
Corporations are also instructing suppliers to validate all sustainability improvements through outside auditors. Large companies are increasingly sensitive to being perceived as "greenwashing," the notion that environmental improvements are advertised disproportionately to distract from other, polluting, activities.
"If we are going to communicate to the public, you need to have someone standing behind you, saying you did it the right way," said David Walker, director of environmental sustainability for PepsiCo.
Ben Block is a staff writer with the Worldwatch
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