In this edition of Expert’s Corner, Diamond Management & Technology Consultants Inc.’s Darin Yug addresses the biggest obstacles to sustainable supply chain efforts, and lays out ways to establish a robust business case for future “green” initiatives in the supply chain.

Even in today’s volatile economic environment, the global supply chain is moving toward a more sustainable and more responsible future. For businesses, the trick is to approach this inevitability as an opportunity rather than an obstacle, according to Darin Yug, the Managing Partner of Enterprise practice at Diamond Management & Technology Consultants, Inc.

As co-author of extensive reports on successful sustainability programs, including Staying Green While the Global Economy Sees Red and The Case for a Green Supply Chain: Turning Mandate into Opportunity, Yug has written that the idea of a “green” supply chain is about efficiency and cost containment as much as it is about the environment.

In this edition of Expert’s Corner, Yug addresses the biggest obstacles to sustainable supply chain efforts, and lays out how to establish a strong case for future “green” initiatives in the supply chain.

IMT: How do you go about establishing a robust business case for a sustainable supply-chain improvement plan? On a prioritized list of opportunities, what areas should you highlight to increase business value?

DY: Creating a business case for a sustainability program should follow the same process as any other investment decision. That’s essential in order to defend the likely downstream challenges and the pressures of portfolio investment trade-offs that occur in any organization. When a sustainability project is defensible on a return on investment (ROI) test, it stands a greater likelihood of launch success and also tends to garner more attention and ongoing support from the organization at large.

When prioritizing potential opportunities, companies should consider re-evaluating the ROI for some areas, keeping in mind that not every initiative will have a positive ROI. Think about all of your green initiatives together as a balanced portfolio, with some initiatives being done on an investment basis. For example, some companies are also adopting a more tolerant outlook toward areas such as alternative energy that may have lower ROI, but deliver other benefits. This balanced approach to sustainability involves looking at the green portfolio through two lenses: with a focus on ROI and on the seriousness of the requirements.

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IMT: In addition to establishing a case, it is also important for companies to gain strong sponsorship from key executives, management and stakeholders. When attempting to create and follow sustainable supply-chain efforts, what are some strategies to achieve buy-in from the right people?

DY: Alignment is essential, and it starts at the top. Keys to ensuring success and extracting business value from sustainability programs lies in establishing a long-term green strategy, with a solid business case, that is aligned with corporate strategy and approached top-down — with solid, consistent and visible executive sponsorship. Ultimately, of course, buy-in should come at various levels in and possibly outside the organization. However, as with any new approach and program, support from the top is essential in launching green initiatives. Success is more likely when both recognition and rewards are tied to the program’s outcomes. Reward in this case can mean accountability in terms of quarterly or annual metrics, just as with any project.

IMT: From your research, what have you determined to be industrial businesses’ foremost obstacles to incorporating more sustainable practices/processes or focusing more on green initiatives?

DY: The major challenges to sustainability initiatives we see stem from not having a sponsor, a defensible strategy, a rock-solid business case, a clear adoption roadmap, or a means of resolving the governance issues that inevitably occur throughout execution. Over the past 18 months in the industrial sector, as the global economy has suffered, we have all seen the de-prioritization of programs overall, including sustainability programs (in particular, those not tied to government regulation). Budget cuts for the day-to-day operations have been cut so dramatically that incremental investments beyond “staying in business” have often been eliminated.

While some slowdown might be necessary, particularly for initiatives that do not show positive ROI benefits, it would be wrong to de-prioritize sustainability programs across the board, as it is possible for companies to undertake green initiatives without incurring additional costs. Diamond’s recession research on 400 companies during this latest recession shows that the key principles common to leading companies that come out on top after a downturn are first, that they cut the right costs and, second, they invest when others cannot. Investing in the right kinds of innovation and initiatives will ensure that the company comes out a winner.

Darin Yug is the Managing Partner of the Enterprise practice at Diamond Management & Technology Consultants. Most recently, Yug has led the strategy and execution of multiple supply chain initiatives and the delivery of several M&A strategy, planning and integration efforts for Fortune 500 firms. He has written extensively on the issue of successful sustainability programs, including Staying Green While the Global Economy Sees Red and The Case for a Green Supply Chain: Turning Mandate into Opportunity.