Sustainability & Social Responsibility
Patrick C. Penfield
July/August 2008, eSide Supply Management Vol. 1, No. 4
Today, organizations are overwhelmingly focused on the development of sustainable supply chains that are robust enough to not only support themselves, but also actually improve the environment.
A Sustainable Green Supply Chain (SGSC) model aims to make sure the materials and processes being used are environmentally friendly and to eliminate any waste within the supply chain to become as sustainable as possible. By moving toward an SGSC, organizations can uncover new opportunities to reduce costs.
Another focus for many organizations will be "entire system" thinking versus "component-level" thinking, the concept of getting the lowest price on a component and disregarding the costs to the system generated by this component —a mind set many organizations are still employing. Often, component-level thinking is the default because it denotes a goal or objective determined by an organization. If you look at the overall costs being produced by a component, however, it might have made more sense to spend more money upfront on a more expensive component that would reduce the entire system cost.
"Single components are usually considered in isolation. Designing a window without the building, a light without the room or a motor without the machine it drives works as badly as designing a pelican without the fish," write Paul Hawken, Amory Lovins and L. Hunter Lovins, authors of Natural Capitalism. "Optimizing components in isolation tends to pessimize the whole system and hence, the bottom line."
Many organizations struggle with this issue because they do not effectively measure the cost of each component within the entire system. Some companies are employing a two-pronged approach to green their processes: 1) move existing processes to the sustainable green supply chain model and 2) take new processes and design them for sustainability.
For example, U.S. global conglomerate 3M employs a program called Pollution Prevention Pays, or 3P. The company's policy, as described by Daniel Esty and Andrew Winston in their book Green to Gold, is that anything not in a product is considered a cost. "As 3M execs see it, everything coming out of a plant is either product, byproduct (which can be reused or sold) or waste," the duo writes. "Why, they ask, should there be any waste?"
These days, energy is a major concern for most organizations. With oil trading well over $130 per barrel, quite a few companies are having difficulties absorbing this cost. The challenge is to figure out how to use less energy, or to come up with an alternative energy option to offset the increased expense. In the United States, ethanol, biomass, fuel cells, wind, solar, nuclear and other energy options are all being evaluated.
The other big energy initiative is conservation. Retail giant Wal-Mart has become a major sustainability player and now dedicates space on its Web site to showcase its environmental efforts. Specifically, Wal-Mart has focused largely on reducing the amount of fuel used by its trucks and stores through alternative energy and conservation.
"We have a goal to be supplied by 100-percent renewable energy, to create zero waste and to sell products that sustain our resources and environment," the site states. To make this happen, Wal-Mart is using compact fluorescent bulbs in many of its stores, employing hydrogen fuel cells for its lift trucks, placing doors on refrigeration units, replacing fluorescent lighting with LED (light-emitting diode) lighting and conserving the power used when trucks in its fleet are idling. Wal-Mart executives expect to save millions of dollars.
Other organizations have also focused on sustainability and reduced their costs. As Green to Gold authors Esty and Winston explain, chip-maker AMD modified a "wet processing" tool to use fewer chemicals and less water to clean silicon wafers. The process, which once used 18 gallons of water per minute, now uses fewer than six.
Additionally, they point out, shoe manufacturer Timberland redesigned its boxes to eliminate 15 percent of the material used in them —a dramatic savings considering more than 25 million pairs of its shoes are shipped every year.
For U.S. organizations, the biggest advantages of becoming sustainable are reducing costs and helping the environment. In the U.S., many pieces of environmental legislation await Congressional approval.
In the meantime, organizations are being proactive and focusing on sustainability. Many citizens throughout the world are demanding environmentally friendly products. This year and beyond, every organization can expect increasingly stringent environmental standards.
Patrick C. Penfield is assistant professor of supply chain practice at the Whitman School of Management at Syracuse University in Syracuse, New York. To contact the author, send an e-mail to firstname.lastname@example.org.
For more information on sustainability and social responsibility, visit the ISM articles database.
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