The three factors driving green supply chains

Andrew Pring
11 November 2014

Growing public concern for the environment and the potential to increase profits are driving companies to pay more attention to their ‘green’ footprint – not just in the products they manufacture, but also in the supply chain that carries them, says a report commissioned by DHL.

Closing the loop – building the environmental supply chain describes how what was first started as an image improvement effort has evolved into a business imperative and, in the most advanced companies, a competitive advantage.

Author of the report, Lisa Harrington, president of the lharrington group and associate director at the supply chain management center, Robert H. Smith School of Business, University of Maryland wrote: “The environmentally sustainable supply chain can not only deliver cost savings and efficiencies, but can also generate new sources of revenue by capturing residual value from products at end of life. Companies with the foresight to transform their view of environmental sustainability – from meeting obligations to seizing opportunities – can capitalise on this strategic approach”.

The report identifies three major forces driving the shift toward the green supply chain: escalating consumer pressure; the need to improve efficiency and reduce costs; and the 'compliance squeeze'.

Additionally, Harrington said: “Companies are starting to realise that there is a direct link between a green supply chain and profitability improvement. This improvement stems from either direct revenues from capturing value from the recycling waste stream, or indirect savings stemming from elimination of waste throughout the supply chain”.

The report quotes Deloitte Consulting’s remark that “leading companies create value by modifying their supply chains to manage the key inputs and outputs: energy, carbon, water, materials and waste,”

Notes Deloitte: “These are ubiquitous throughout the supply chain and thus offer vast potential for improved efficiency and cost reduction. Energy is expensive to use; carbon, in the form of emissions, represents dollars gone up in smoke; scarcity and commodity inflation are driving up the price of water and materials; and waste is potential profit thrown away.”

Harrington said adopting a more sustainable approach to managing all of these supply chain inputs and outputs frequently uncovers opportunities to reduce costs while at the same time improving a company’s environmental footprint. “For example, reconfiguring the transportation network to either use more efficient modes or reduce empty miles conserves energy and improves the supply chain’s carbon output, while at the same time saves money.”

Increasingly, regulatory regimes round the world are also playing their part in encouraging corporations to commit more deeply to sustainability in areas such as waste stream control, packaging, greenhouse gas emissions and extended producer responsibility.

Simon Potter, business director, Envirosolutions Europe at DHL, said: “Legislative and cost imperatives are pushing companies to think about waste and recycling. It’s only going in one direction: reduce waste as much as possible.”

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