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How green is your supply chain?

“You need to understand the environmental impact of your processing and the energy that you use so that you can understand what you are passing on farther downstream."



Carly Chynoweth

The Times

11 July 2012


Controlling office energy use, minimising packaging and encouraging staff to walk or ride pushbikes to work can all make a difference to a business’s green credentials.

But understanding what is happening right along the supply chain is the only way to get a true grasp of your company’s environmental impact, says Alex Davison, a supply chain specialist at PA Consulting. That means getting to grips with where your raw materials come from, how they are processed, what energy and packaging is used to get them to you, and how your suppliers manage their own environmental commitments, he says. It also means looking at what happens to your products when customers are finished with them. For example, do they biodegrade quickly, or can they be returned to you for recycling?

Being able to give a true picture of your environmental impact will add credibility to any green marketing aimed at consumers and can play a part in winning contracts with other organisations, many of which now expect their suppliers to be able to measure and keep track of these factors. “Companies are required to provide life-cycle analysis and evidence of their carbon footprint, including the method used to calculate it,” Davison says. “That will cover a whole host of inputs.”

Another benefit is improved risk-management. “For example, if the company is reliant on a particular raw material that will either run out or become so expensive that you cannot use it any more. If you understand that, you are in a position to respond to that potential danger,” he says.

Getting the systems in place will take effort. “There is a definite learning curve to get up to speed but, once it becomes part of everyday management and these measures are integrated into other parts of the business, it becomes routine.”

And, while there will be an initial outlay, the results should allow you to generate savings to at least cover those costs, says Alan Braithwaite, the chairman of LCP Consulting. “Do not think of this as a cost. When things are greener they are almost certainly cheaper. When you take the end-to-end cost into consideration it is worth it.”

The first step is understanding the environmental impact of your business inputs – the things that the business buys. “Then you need to understand the environmental impact of your processing and the energy that you use so that you can understand what you are passing on farther downstream,” Davison says.

This, he adds, should be followed by external benchmarking, which gives the business’s environmental statements more credibility: “It is much better to have a clear benchmarks and endorsement by an independent organisation so that they can overcome criticisms that it [the statement] is being self-generated.”

Once businesses have all these costs mapped right across their supply chain, they can start looking at ways to improve things, Braithwaite says. That does not mean trying to fix everything at once, however. “You can look at where energy use and costs are building up and then go out and find ways to cut them,” he says. “It is not an easy thing to do. Do not try to be perfect; try to be good. Take it a step at a time. Find out where you think the big issues are and then figure out the improvements you can make. Don’t get carried away with a huge vision when you can start with the basics.”

And what if a business discovers that its cheapest supplier is not meeting the standards it expects? The company has to decide how principled it wants to be, Davison says: “Keep in mind that you are thinking about this because we are going to run out of planet in 50 or 60 years.” Companies that do decide to change to a greener but more expensive supplier should make sure customers know what they have done and why the price has risen.

Contact the energy and utilities team

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