Companies must wear the time and costs of greening the supply chain to enjoy a sustainable, competitive future, expert panel says
By Anna Game-Lopata | May 4, 2012
Companies must wear the time, effort and costs of greening the supply chain to enjoy a sustainable, competitive future, an NG Supply Chain Summit panel said on Wednesday.
The
panel of top level supply chain executives at the invitation-only Summit in Cairns told participants Dow Jones Sustainability Index companies are significantly more profitable than those that aren’t.
However the panel also observed there is a fine line between compliance with legislative requirements, funding environmental initiatives and what stacks up economically.
The Body Shop (TBS) panellist National Supply Chain Manager Mark Schroder says while actioning sustainability was hardwired into
his company’s system of values from its inception, managing a commercially viable supply chain at the same time is highly challenging.
He says every six months,The Body Shop International flies design teams from all over the world to work with over 200 suppliers with the goal
of continually minimising impacts
to the environment, especially when new products are developed.
“Its’ quite amazing the lengths we go to from manufacture to packaging, every thought around producing a product is about protecting the environment, but it’s a massive cost from a supply chain perspective,” Schroder says.
“It is very difficult to minimise landed cost when you’re protecting the companies you work with from a labour and design perspective- all the components that go in to producing products.
Schroder says cost is TBS’s main challenge in Australia, with considerable supply chain investment made.
“We spend a lot of money on the logistics of moving products, not only to minimise the expense of moving it from point A to point B but also on reverse logistics.
PET bottles can now be recycled back through the stores but it’s a huge cost.
“Being green is TBS’s core value and we need to celebrate that, but our challenge is to actually manage a supply chain commercially to make sure we are a profitable business.
“In saying that, we are very profitable but at the same time competition and the current retail slump
is putting
more pressure on us to mitigate those costs.”
Panellist Yum International Restaurants (KFC) Chief supply Chain Officer Michael Clark says he faces similar issues.
In Australia, where KFC is at the forefront of environmental initiatives such as recycling and green supplier audits, Clark says the significant investment and effort involved does save money in the long run.
“Rolling out the recycling of bottles and cans to over 600 stores has been a long and tedious process,” Clark told the Summit.
“You wouldn’t think it would be, but getting it working with 16-year old kids and millions of consumers was a big initiative. Essentially, it’s less waste, so it saves us money.
Clark says while the green incentive is important, with the release of new products every six weeks, functionality, marketing and cost are still first on the agenda.
“Typically, in terms of packaging (low hanging fruit for green initiatives), the best and most creative solutions our suppliers come up with are the cheaper and greener ones as well. Not always but often.
“For us the packaging has to sell the product first and foremost. Then we’ll look at the green aspects. If the product’s falling apart or not being well represented that’s not acceptable. So first functionality and marketing and then the green credentials.”
However Clark adds his strong belief that in the end, environmental sustainability is a product of efficiency.
He says the struggle to manage the rising prices of utilities and oil will define the future of sustainability as being about reducing energy costs that impact on bottom lines.
As such Yum International supplier environmental audits, held at least once a year, look at water savings, electricity usage and waste management among other initiatives.
“We’re giving suppliers an environmental program to audit against for a very small cost,” he explains.
“Typically we get good feedback because they realise they are saving money from changing processes they wouldn’t have thought of changing. We’ve given them a framework to understand their environmental impacts.
“If a supplier is greener long term, they’re probably going to be more sustainable from a cost and supply point of view,” he says.
“If you’re running inefficient processes there’s more waste; your operation is probably going to cost a lot more. Using the wrong technology or a large amount of fuel becomes uncompetitive over time.
“So for us being green is about making sure our supply chain is sustainably low cost and we can supply into the future. It’s what you’ve got to do otherwise you’re not going to have a sustainable business.”
Other issues raised were the value of good corporate citizenship, the need to drive internal culture with proper communication about the benefits of initiatives and support from the top.
Panellists advised companies to approach environmental strategy gradually, through one small project at a time that deliver sa return on investment rather than taking on the whole supply chain
at once.