17 July 2009

Green supply chains will burst onto manufacturers within next year

Nearly 90% of supply chain professionals say that their managements subscribe to the principles of ECO-Operation – enhanced trading partner visibility, flexibility and new levels of verifiable sustainability across the demand and supply ecosystem.

That's among key findings of a survey by business-to-business web-based supply chain operations firm E2Open and the BPM (business process management) Forum.

Further, they understand the potential benefits of ECO-Operation in terms of CSR (corporate and social responsibility) compliance, cost efficiencies, and customer responsiveness.

However, only 38% currently link eco initiatives with operational efficiencies to a high degree, and just half to some extent. Also, 42% do not consider their carbon and energy footprint as including their extended supply chain, and only 55% say their customers would agree.

Worryingly for those who see the importance of supply chain-wide carbon emissions programmes, 60% of companies have none, very low or marginal visibility across all tiers and levels of their supply and value chains. Which means making anything sensible happen is going to be a challenge.

That said, the survey suggests that customers will eventually put green pressure on their providers. 76% said their customers have not yet asked them to measure or reveal carbon footprint, but two thirds expect them to do so in the next year.

Commenting on most respondents' blinkered ideas of green responsibility, Derek Kober, senior vice president with the BPM Forum, says: "We need to change people's considerations when looking at what carbon footprint entails because it's a whole lot more than trash and emissions inside the four walls of their buildings.

"Right now, three quarters of companies say customers are not pushing them to reveal their carbon footprint, but two thirds expect the tide to change quickly. Soon companies won't be able to charge a premium for environmentally sustainable production: it will have to become a standard way f doing business."

Rich Becks, senior vice president of demand and supply solutions at E2Open, believes the "whole eco initiative was gaining traction prior to financial crisis".

He contends that customers prefer to buy products that are made in an environmentally friendly and socially responsible manner, "but the crisis re-ordered the deck". His view: manufacturers will continue to go for the low hanging fruit – the marketing, packaging and logistics improvments.

"However, in terms of constrained resources and the supply chain, that's on the back burner for now and it will change, because people are recognising that environmental issues are inextricably linked with energy and that is linked to rising costs. Energy is a fingerprint for carbon. So when energy costs rise again – that's when it will get everybody's attention. And it will happen very rapidly."

And Becks contends that his company's systems are ready for when that day comes. "It's not a huge stretch for us. We already look after supply chains for brand owners who use contract manufacturers so are removed from day to day operations.

"We manage that network and give them visibility of product manufacturing so they can meet their commitments to customers. We have the B2B platform for all of the parties with applications on the web. Extending that to environmental issues – adding attributes such as embedded carbon, energy etc – is not a problem.

"We have a concept of a BOM that we track as value is being added along the supply chain.

"This problem is going to dwarf the issues that came to light with Europe's hazardous materials regulations. This will get ratcheted up really quickly."

Brian Tinham

Supporting Information

E2open Europe

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