Prepare to be made to measure

27 August 2010

31 August 2010 | Lindsay Clark

If  buyers are to examine their supply chains for ways to cut carbon emissions they need clear targets and the means to measure them, finds Lindsay Clark

In July, the UK joined Germany and France in a call for European Union members to cut carbon emissions by 30 per cent before 2020, from 1990 levels, in an effort to reduce global warming. The current target is to cut emissions by 20 per cent.

The move, which followed a recommendation from the European Commission, has set a new challenge for procurement managers. With a large proportion of emissions coming from the supply chain, they will have their work cut out measuring and reducing the emissions of suppliers.

John Milne, procurement director at engineering consultants Hampco, is among 61 per cent of respondents to the SM100 survey who does not believe purchasing will be ready to measure and influence supply chain emissions within 12 months.

“The targets are fanciful in their conception and incredibly difficult to measure and execute,” he says. “Politicians sign up to these initiatives because it makes them look good but they have no clue as to how to achieve the targets. Businesses and public authorities are left with the headache of interpreting the complicated legislation and spend more time, effort and money discussing their progress towards these spurious targets than is worthwhile. In 10-15 years we will look back and laugh, or cry, at the wasted effort trying to achieve the unachievable. Are we mad? The simple answer is ‘Yes’.”

Martin Wakelin, a purchasing director in the manufacturing sector says although it was asking suppliers to sign up to core values in environmental policy and check compliance against audits, it would not be measuring emissions per se. “We will not be measuring performance in kilowatt-hours.

This would be an enormous undertaking. I hope that when and if we come to this level of measurement there is some clear steer from government on methodology and supporting systems.

“We all accept this needs to happen, and business needs to be challenged to reduce its impact on the environment, and in doing so we should generate leaner companies with lower overheads and competitive advantage,” he says.

One of the reasons for the EU plan is that the recession has helped reduce the cost of meeting the earlier targets. With fewer trucks on the road and factories mothballed, the general reduction in economic activity caused a slow-down in emissions growth. Since 2008 the absolute costs of meeting the 20 per cent target have decreased from €70 billion to €48 billion per year by 2020. The cost of reaching the 30 per cent target is now estimated at €81 billion per year by 2020. This is a difference of 0.2 per cent in GDP terms for the continent, which, the European Commission argues, is worthwhile in environmental terms.

In 2008, a study of the NHS in England showed that while energy use made up 22 per cent of total emissions, and travel 18 per cent, 59 per cent were generated by procurement, defined in this case as the purchase of goods and services through the supply chain.

In the SM100 poll, 37 per cent of procurement managers were optimistic that the further cuts to emissions are within reach.

William Moult, head of supply chain, utilities division, Enterprise, an infrastructure maintenance firm, says: “We are clearly in a position to influence all levels of the supply chain to deliver carbon emission targets and subsequently build reporting criteria into supplier service level agreements. The challenge is to develop a consistent way of targeting and reporting to make the data easier to collate and more meaningful.”

Last year, the failure to reach a binding agreement in the December’s Copenhagen Climate Change Conference, together with the “climate-gate” email scandal, dampened concerns about global warming. Yet in July, a report from US National Oceans and Atmospheric Administration claimed the case that global warming was man-made was undeniable.

As focus shifts from the recession, towards concern for the climate, business is likely to come under pressure to measure and cut emissions throughout the supply chain.

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