For Supply Chains, "Green Is Good." | IMT Green & Clean Journal

For Supply Chains, Green Is Good — If It Makes Business Sense

July 13th, 2012 |

Too often, when commentators pontificate about “green business,” they unduly emphasize the first word at the expense of the second.

Sustainable food is food first: It must be edible and tasty or it doesn’t matter how sustainable it is. Responsble development is development: It must provide comfortable, safe and appealing living space for people. And green business is business. It must be profitable, efficient and innovative, because there’s another word for unprofitable, inefficient and stodgy green business: bankruptcy.

But far too often, probably because relatively few green activists have solid business experience or knowledge, the business part of green business is treated as almost irrelevant, while growing green ivy over every part of the enterprise is the goal.

Providing a refreshingly clear-eyed voice is Martin Murray, who writes for Corporate Climate, a site billing itself as “the green media ROI experts.”

Murray wrote a year and a half ago about how developing a green supply chain “is now gaining popularity, but most companies are still coming to terms with how this can be achieved and where do they start.”

Of course, you don’t just turn over your supply chain to Greenpeace, but you know that you need to start somewhere. And what’s a reasonable price to pay?

When it comes to the supply chain, as Murray acknowledged, the goal is to improve visibility, refine efficiency and minimize cost. Moving toward a greener supply chain, Murray contended, can be done without sacrificing the core qualities of a good supply chain.

Don’t Trash Business Fundamentals

Now, when asked the question, “How do we green our supply chain?” a disturbingly high percentage of green activists start with the green ideals: “Render your supply chain carbon-neutral. Start there, then we’ll talk about improving on that.”

Sorry. That doesn’t fly in business class. Murray recommends a far more helpful approach: “Align your green chain goals with business goals.”

We’re running a business, not building a college project. Murray drilled the point home: “Creating a green supply chain that has little to do with your business will not help your company to achieve its business objectives.” It’s possible to use biodegradable packaging for all your needs, but it will be more expensive than traditional packaging — that’s a given. If it were less expensive, every business would already be using it and it would be called traditional packaging that simply happens to be biodegradable.

You could go to all-sustainable packaging. Green activists would applaud you, but you’d be violating a prime business principle of reducing costs. Maybe if it’s a 0.5 percent cost increase, you can take a small hit for the good that you’re doing. But you simply can’t take a punch to the business jewels; it would be like a restaurant serving bullhead for the fish special instead of salmon on the grounds that it’s a lot greener to pull from a local river than to import from Alaska. That restaurant would be out of business in a week.

“If a business has an overall goal to reduce costs, then the move to a green supply chain should dovetail with the business goal,” Murray observed. He’s absolutely correct. Instead of changing business processes for the sole reason of greening, a company can sit down and look at its overall business goals and, as Murray said, “identify how a transition to a green supply chain can help achieve those goals.” Instead of just looking for greener energy sources, see if there’s a way to lower your overall energy costs, which is a sound business principle, by using green approaches or equipment.

When you look at green elements, bear in mind that you can be improving your business at the same time. Treat greening as an excuse to sit down with a clean sheet of paper and review all existing processes. It requires creativity, work and time, but if you’re committed to genuinely greening operations, instead of just greenwashing existing processes, you’ll do it.

Remember the millions and millions of dollars spent on the whole Y2K bug nonsense? It didn’t have to save the world, ultimately, but it did turn up a lot of wonky code that got corrected. Any excuse to blow the dust off existing “just because we’ve always done it that way” processes is good.Murray gives the example of the U.S. automotive industry getting its clock cleaned in the 1970s and 1980s by Japanese automakers. Detroit had gotten lazy. To stay in business, American carmakers had to find efficiencies, no matter how difficult United Auto Workers was going to make it for them. Would they have improved without the threat of the Japanese? Would we still be buying Corvairs, Gremlins, Pacers and Vegases?

Two words: Domo arigato, Japan.

Make Greening an Efficiency Initiative

When sitting down to green your supply chain, then, as Murray advised, “review each process along the supply chain to identify if a more environmentally sound approach will help cure the inefficiencies that occur.” You’ll find where raw materials are wasted, resources underused and energy wasted on either unnecessary effort or inefficient equipment.

Note that in rectifying the supply chain, you don’t need to do a single thing that’s identifiably “green.” Cutting your energy use or reducing your raw material intake is green, but it’s plain sensible business practice in anyone’s book. In fact, efficiency equals green a great many times.

The underlying appeal of greening business processes — the irreducible truth that prevents green activists from being dismissed by hard-nosed CEOs in the business world — is that a greener process is a more profitable one in many cases.

I’m convinced that if green consultants simply changed their business cards to read “Efficiency Consultants,” they could keep 95 percent of their current methods, recommendations and practices unchanged.

Green consultants can get you more of this green.

Automating supply chain transactions is a great way to achieve efficiency, and with it a greener supply chain. According to a recent case study on sportswear and adventure-sports equipment maker Burton by GreenSupplyChain.com, about four years ago the company started using GXS Managed Services to automate B2B transactions with its supply chain partners. “In doing so,” GreenSupplyChain.com reported, “the company made a significant dent in reducing its paper usage for electronic transactions.” Burton found that postage, paper and envelope costs dropped.

Sustainability supporters like that. Bean counters like that.

In fact, the case study noted that Burton saved approximately 4 tons of wood, 30 million BTUs of energy, 5,882 pounds of carbon dioxide, 22,219 gallons of wastewater and 1,909 pounds of solid waste from July 2008 through June 2009 through its use of electronic data interchange with customers.

And it isn’t just for smaller companies. In 2007, Marks & Spencer, one of the world’s foremost retailers, outlined a goal of being the world’s greenest retailer.

According to an analysis of the company’s ambitious goals, food packaging has been reduced by 18 percent and the fuel efficiency of the company’s transportation fleet has been increased by over 20 percent. Any business would appreciate the extra green in profits resulting from greater efficiency.

And as for the recycling component of Marks and Sparks’ plan, the analysis found that 120 million clothes hangers were being reused each year and the number of plastic carrier bags given out has been lowered by an eyebrow-raising 400 million per year.

Retailer Marks & Spencer went green in a big way.

Now, frankly, Marks and Sparks was willing to take a hit on the bottom line for the social “currency” of being perceived as a green company. But to its pleasant surprise, it found that by 2010 it actually ended up with a £50 million surplus, according to the analysis.

The retailer continues to look for opportunities to green its operations, including reducing more energy usage, bringing its refrigeration carbon footprint down, rendering logistics and transportation 35 percent more efficient and “reducing clothing warehouses from 100 to 4 and making those four at least 35 percent more efficient,” according to the analysis.

It’s enough to make Gordon Gekko say, “Green Is Good.”