Supply Chain Sustainability: The Recession, a New Administration, and Two Shades of Green
By Tim Brown, Principal, Supply Chain Strategy Practice, Chainalytics LLC.
The intersection of the grass-roots push for green-friendly industry action and the installation of the green-regulation-friendly Obama Administration could be viewed as the catalyst to greenhouse gas (GHG) reduction nirvana. But the global economic recession has led the other shade of green -- profitability -- to become the primary threat to destabilization of the world as we know it.
Given the global recession, how quickly will green regulations advance? There are several possibilities:
There are many operational enhancements that can reduce emissions. You can reduce packaging, use alternative fuels, or simply change light bulbs. Incorporating emissions reduction into strategic operations planning and supply chain design is more challenging, but holds more opportunity. After all, why worry about changing light bulbs in a warehouse, if you can eliminate the warehouse all together?
So how can you take GHG emissions into consideration? While there are established Key Performance Indicators (KPI's) for most elements of business, managers must load a new KPI into their thinking to address green – Metric Tonnes of Carbon Emission Equivalents (MT Co2e). With this metric in mind, companies need to devise a realistic scope and the associated measurement. It’s best to focus on what you can reasonably control and influence, than to take on the daunting task of carbon footprinting every input into supply chain. There are a number of tools, techniques, and data sources available to assist in defining a carbon footprint baseline. Experienced practitioners know when to apply bottoms-up versus top-down approaches to emissions calculations.
With the pain of scoping, data collection, and baselining out of the way – firms can focus attention on more value-added scenario planning and strategy formulation activities. Effective scenario planning requires both “out of the box” thinking and quantitative rigor. Thus, firms can evaluate alternative supply chain structures as well as calculate, constrain, and optimize given considerations by modeling cost, service, or carbon output. Testing and reviewing scenarios in an apples-to-apples manner can help you formulate preferred operating strategies.
Most companies reduced their carbon footprint this year -- it just so happens that recessionary declines in output have that effect. But progressive supply chain managers won’t claim victory yet and will begin incorporating green considerations in all elements of strategic planning. Whether it’s because you want to make the world a better place for your children or because you want to be prepared for the inevitable avalanche of GHG regulations, you’d better do more than change the light bulbs.
The intersection of the grass-roots push for green-friendly industry action and the installation of the green-regulation-friendly Obama Administration could be viewed as the catalyst to greenhouse gas (GHG) reduction nirvana. But the global economic recession has led the other shade of green -- profitability -- to become the primary threat to destabilization of the world as we know it.
Given the global recession, how quickly will green regulations advance? There are several possibilities:
- Stagnation – Economics overwhelms the political agenda;
- Controlled Growth – Integration of green techniques, regulations, and investments at a slow enough level to avoid an economic impact;
- Explosive Growth – GHG reduction as a driver of new government and industry expansion without consideration for economic impact.
There are many operational enhancements that can reduce emissions. You can reduce packaging, use alternative fuels, or simply change light bulbs. Incorporating emissions reduction into strategic operations planning and supply chain design is more challenging, but holds more opportunity. After all, why worry about changing light bulbs in a warehouse, if you can eliminate the warehouse all together?
So how can you take GHG emissions into consideration? While there are established Key Performance Indicators (KPI's) for most elements of business, managers must load a new KPI into their thinking to address green – Metric Tonnes of Carbon Emission Equivalents (MT Co2e). With this metric in mind, companies need to devise a realistic scope and the associated measurement. It’s best to focus on what you can reasonably control and influence, than to take on the daunting task of carbon footprinting every input into supply chain. There are a number of tools, techniques, and data sources available to assist in defining a carbon footprint baseline. Experienced practitioners know when to apply bottoms-up versus top-down approaches to emissions calculations.
With the pain of scoping, data collection, and baselining out of the way – firms can focus attention on more value-added scenario planning and strategy formulation activities. Effective scenario planning requires both “out of the box” thinking and quantitative rigor. Thus, firms can evaluate alternative supply chain structures as well as calculate, constrain, and optimize given considerations by modeling cost, service, or carbon output. Testing and reviewing scenarios in an apples-to-apples manner can help you formulate preferred operating strategies.
Most companies reduced their carbon footprint this year -- it just so happens that recessionary declines in output have that effect. But progressive supply chain managers won’t claim victory yet and will begin incorporating green considerations in all elements of strategic planning. Whether it’s because you want to make the world a better place for your children or because you want to be prepared for the inevitable avalanche of GHG regulations, you’d better do more than change the light bulbs.
Labels: Tim Brown - Supply Chain Sustainability
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