Logistics can improve environmental sustainability while profitably benefitting the entire supply chain. In the 1994 California Management Review, J. Elkington cited sustainability's "Triple Bottom Line" critical variables which must be considered: social (people); environmental (planet); and economics (profits). The EPA suggests that rail and truck transport annually consume over 35 billion gallons of diesel fuel, spewing over 350 million metric tons of carbon dioxide. By 2012 this will increase by 25%.
A 2009 study by Accenture and the World Economic Forum suggests all logistics activities contribute over 2,500 megatons of carbon dioxide emissions annually. The most feasible abatement opportunities are in clean vehicle technologies, de-speeding the supply chain, packaging design initiatives, optimized networks, and energy efficient warehouses. The "Best-in-Class" supply chains (those in the top quartile in cost effectiveness and customer service) are more likely to model their carbon footprints and pursue sustainability projects than other supply chains (20% versus 9%).
A 2009 Business Performance Management (BPM) Forum study of executives found 89% of respondents subscribed to green mandates and 86% had green movements in their warehouses, generally in the areas of recycling, using natural light, lighting management, and energy-efficient bulbs. 38% reported at least one green initiative in their fleet, including streamlining vehicle design, green fuels, and hybrid engines.
The major barriers logistics and supply chain managers must overcome to further sustainability include:
1) Supply chain management is complex. In the BPM survey 57% of supply chain executives managed more than 100 trading partners and 35% had more than 1,000. 60% had no, or marginal, visibility across their supply and value chains.
2) Determining carbon footprints is expensive. When PepsiCo UK found the carbon footprint of its Walker's potato crisps the cost was over US$40,000. The company is anticipating average costs of US$10,000 to US$12,000 per SKU - and there are 20,000 to 25,000 SKUs per typical supermarket!
3) Lack of management focus. The BPM study sought to identify why management did not embrace sustainability. Only 38% linked eco initiatives with operational efficiency to a high degree. 42% did not consider their carbon and energy footprints as including their entire extended supply chain. 76% said customers had not asked them to measure or reveal their carbon footprint, but over two-thirds expected customers to demand it in 2010.
4) Expectations that sustainability should come at no cost. In a Transport Intelligence study, only 46% of respondents who award logistics contracts include sections on environmental compliance in the contract or provide for the extra costs involved.
5) Green accounting standards are still developing. A firm seeking to determine their supply chain carbon footprint needs assistance from their suppliers and carriers and must answer the question:, "Which calculator are you using?" because there are a variety of carbon calculators available. And green accounting must avoid double counting plus develop common measures of sustainability changes.
Companies serious about embracing sustainability have a strategic partner in their procurement organizations. They occupy critical positions as gatekeepers for the firm, keeping non-sustainable goods and services out of the supply chain. Typically 60% of corporate spend procures goods and services, giving the purchasing professional the clout to further the sustainability goals of the organization.
Many U.S. firms are starting to embrace the development of economic and environmental sustainability of their supply chains. These efforts will continue to improve the supply chain and reduce cost. But for this to succeed we must pursue Elkington's "Triple Bottom Line" of people, planet, and profits.
Dr. Martin Theodore (Ted) Farris II, Ph.D., CTL is a Professor at the University of North Texas Professional Program in Logistics and Supply Chain Management. He is presently a 2009-2010 Charn Uswachoke International Scholar and was a 2008 Austrian-American Fulbright Scholar at the Fachhochschul Studiengang Produktions-und-Managementtechnik in Steyr, Austria. Prior to joining academia, he worked for International Business Machines and INTEL Corporations in systems, new logistics development, international purchasing, inventory and production control, and traffic functions. Ted is also the First Vice Chair of ISM's Logistics & Transportation Group and can be reached atted.farris@unt.edu. Membership in the Group is open to all ISM members who are responsible for or have an interest in the Logistics & Transportation fields.
A 2009 study by Accenture and the World Economic Forum suggests all logistics activities contribute over 2,500 megatons of carbon dioxide emissions annually. The most feasible abatement opportunities are in clean vehicle technologies, de-speeding the supply chain, packaging design initiatives, optimized networks, and energy efficient warehouses. The "Best-in-Class" supply chains (those in the top quartile in cost effectiveness and customer service) are more likely to model their carbon footprints and pursue sustainability projects than other supply chains (20% versus 9%).
A 2009 Business Performance Management (BPM) Forum study of executives found 89% of respondents subscribed to green mandates and 86% had green movements in their warehouses, generally in the areas of recycling, using natural light, lighting management, and energy-efficient bulbs. 38% reported at least one green initiative in their fleet, including streamlining vehicle design, green fuels, and hybrid engines.
The major barriers logistics and supply chain managers must overcome to further sustainability include:
1) Supply chain management is complex. In the BPM survey 57% of supply chain executives managed more than 100 trading partners and 35% had more than 1,000. 60% had no, or marginal, visibility across their supply and value chains.
2) Determining carbon footprints is expensive. When PepsiCo UK found the carbon footprint of its Walker's potato crisps the cost was over US$40,000. The company is anticipating average costs of US$10,000 to US$12,000 per SKU - and there are 20,000 to 25,000 SKUs per typical supermarket!
3) Lack of management focus. The BPM study sought to identify why management did not embrace sustainability. Only 38% linked eco initiatives with operational efficiency to a high degree. 42% did not consider their carbon and energy footprints as including their entire extended supply chain. 76% said customers had not asked them to measure or reveal their carbon footprint, but over two-thirds expected customers to demand it in 2010.
4) Expectations that sustainability should come at no cost. In a Transport Intelligence study, only 46% of respondents who award logistics contracts include sections on environmental compliance in the contract or provide for the extra costs involved.
5) Green accounting standards are still developing. A firm seeking to determine their supply chain carbon footprint needs assistance from their suppliers and carriers and must answer the question:, "Which calculator are you using?" because there are a variety of carbon calculators available. And green accounting must avoid double counting plus develop common measures of sustainability changes.
Companies serious about embracing sustainability have a strategic partner in their procurement organizations. They occupy critical positions as gatekeepers for the firm, keeping non-sustainable goods and services out of the supply chain. Typically 60% of corporate spend procures goods and services, giving the purchasing professional the clout to further the sustainability goals of the organization.
Many U.S. firms are starting to embrace the development of economic and environmental sustainability of their supply chains. These efforts will continue to improve the supply chain and reduce cost. But for this to succeed we must pursue Elkington's "Triple Bottom Line" of people, planet, and profits.
Dr. Martin Theodore (Ted) Farris II, Ph.D., CTL is a Professor at the University of North Texas Professional Program in Logistics and Supply Chain Management. He is presently a 2009-2010 Charn Uswachoke International Scholar and was a 2008 Austrian-American Fulbright Scholar at the Fachhochschul Studiengang Produktions-und-Managementtechnik in Steyr, Austria. Prior to joining academia, he worked for International Business Machines and INTEL Corporations in systems, new logistics development, international purchasing, inventory and production control, and traffic functions. Ted is also the First Vice Chair of ISM's Logistics & Transportation Group and can be reached atted.farris@unt.edu. Membership in the Group is open to all ISM members who are responsible for or have an interest in the Logistics & Transportation fields.
