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The CEO & The Energy-Efficient Supply Chain
Greening strategies for the supply chain to save energy and costs
How to reduce energy consumption and carbon output in procurement, production, and distribution.
As concerns mount about fuel prices, long-term energy availability, and climate change, companies’ attention is finally turning toward one of the most pervasive places where energy can be conserved: the industrial supply chain. Simply put, the supply chain is the production and distribution network that encompasses the sourcing, manufacturing, transportation, commercialization, distribution, consumption, and disposal of goods, from the ore mine to the trash can.
The Energy Efficient Supply Chain
Four primary factors drive businesses’ interest in the energy-efficient supply chain.
First is the desire to cut energy costs.
Second is concern about regulation — through trading permits, mandated caps, and other means, governments will increasingly press businesses to limit the amount of carbon they release.
Third, a growing segment of customers favor companies that credibly demonstrate reduction of carbon impact.
- The fourth driver is productivity: The economies that a company like Wal-Mart or Tesco puts in place to reduce emissions can reduce other costs and improve operations as well.
Understanding the Supply Chain's Carbon Emission Contributions
When suppliers and customers understand one another’s contributions to carbon emissions, they can identify ecological and economic waste that would otherwise be hard to see. It requires efforts that build trust and transparency along the value chain.
Some of the innovations of the next five years will focus on reducing this type of inefficiency.
Transportation Efficiencies in the Supply Chain
Marks and Spencer, for example, has a specific initiative under way to reduce “food miles,” sourcing its wares from nearby locales and working with local farmers to increase the growing season.
Other initiatives will increase transportation efficiencies: A truck that once carried 150 items will now carry 300, or carry the same volume of goods with less fuel.
Other projects will reduce and simplify packaging, closely track the joules consumed, or switch to less carbon-intensive materials and energy sources (such as renewable energy and more efficient lighting sources.
Offer Climate Change Services for Customers
Already, some business-to-business producers and service providers, including gasoline retailers and airlines, are using government-mandated pollution credits to offer climate change–conscious services for customers ("buy our product and help offset your own greenhouse gas impact").
Operational Efficiencies That Reduce Energy Waste Across the Supply Chain
As businesses become more and more serious about this, managers will increasingly find themselves asking, What is it about the way we operate that causes our entire supply chain to waste energy? There will be many surprises.
It is likely to be a combination of three types of measures: reducing your footprint through demand reductions and energy efficiency in design, construction, and operation; replacing conventional energy sources and materials with low- or zero-carbon alternatives, including materials and equipment with low-embodied carbon; and offsetting unavoidable carbon emissions through a program of credit trading and other verified means.
The first step is thus understanding the specific carbon footprint of your business’s supply chain, in the context of overall strategy and operations.
The second step is discerning the extent to which emissions are related to your specific needs, versus those inherent in supply chain management.
The third is defining your approach.
by Peter Parry, Joseph Martha, and Georgina Grenon
Edited by Carolyn Allen