The Opinion Page
News and comments about the issues facing today's SCM and Inventory Management professionals.
My article as shown below was published in the November 2011 edition of Durham Business Times:
Realizing sustainable business practices continues to be a key objective amongst progressive retail business enterprises. What is it that drives leading companies to implement green practices? What results might a firm expect to achieve by following a sustainable path? Precisely what are industry leaders doing to achieve superior results?
In June 2010, Industry Canada, in cooperation with Supply Chain & Logistics Canada (SCL) and the Retail Council of Canada (RCC) released a report titled “Green Supply Chain Management: Retail Chains and Consumer Product Goods – A Canadian Perspective.” The report reveals the findings from an exhaustive survey conducted by SCL of over 1,165 business entities, including Canadian retail chains, Consumer Product Goods (CPG) suppliers and so-called third-party providers of logistics and transportation services.
A key finding in the report was that while contributing firms were virtually unanimous in their feeling that Green Supply Chain Management (GSCM) practices were strategically important, less than 60% of retail chains reported having GSCM practices already in place.
Three important drivers emerge: the high cost of inbound/outbound transportation, high costs of energy and fuel, and the desire to achieve competitive advantage. Green initiatives are further motivated by executives who feel that a commitment to sustainability will enhance brand equity, create a positive image with customers, and satisfy new and emerging government regulations.
Best-in-Class (BiC) companies cite numerous tangible business benefits arising from GSCM, including improvement in compliance and conformity to recycling and packaging regulations, reduced energy consumption, decreased waste, decreased packaging, improved customer retention, reduced distribution cost, greater distribution efficiency, and increased service differentiation.
Training on green practices, investment in green initiatives in the community, joint process improvement initiatives with supply chain partners, establishment of third party green certification for major suppliers, purchasing renewable energy, adopting an internationally recognized reporting framework (performance on green metrics), and rewarding supplier practices are all listed as effective GSCM facilitators.
BiC retail chains concentrate green efforts on activities within distribution centres: energy management control, employment of reusable/sustainable pallets, installation and maintenance of dock seals and canopies, paperless DC processes, motion detector lights, recycling of waste, optimized space utilization, and use of reusable/sustainable shipping platforms or containers are all common initiatives.
Retail giant Walmart Canada has achieved tangible results through sustainability initiatives. In May 2011, Toronto-based trade group PAC-The Packaging Association held its fifth annual Packaging Sustainability Conference. Walmart Canada’s President and Chief Executive Officer, David Cheesewright, was a keynote speaker.
While it seems that some businesses have not yet made the connection between sustainable practices and cost savings, it is certainly understood at Walmart. “For 49 years and from the word ‘go’, Walmart has always been about selling for less and saving people money,” commented Cheesewright. “To do that, you have to be passionate about reducing costs, about eliminating waste and about being efficient – many of the things we now call sustainability.”
Walmart identified packaging as an important area of focus. Its Sustainable Packaging Scorecard tracks over 240,000 products. Greenhouse gases emitted per ton of production, material value, product/package ratio, cube utilization, transportation, recycled content, recovery value, renewable energy, and innovation are detailed for each item.
Collaboration is critical. “When it comes to sustainability,” said Cheesewright, “we’ll even work with our competitors. We’ll share everything we have with anybody. If we work together on sustainability, and work on it across boundaries in a way that perhaps we haven’t done in the past, we can make progress at a rate that I don’t think the industry has seen before.”
Walmart’s Director of Sustainability, Jeff Rice, pointed out that for a large majority of companies with whom the retailer works, most of their environmental impact can be found in their supply chain.
“In fact, we found that for 50 percent of companies, 90 per cent of their environmental impact occurs either in their supply chain or in their downstream value chain – in the way that their customers use and dispose of their products,” said Rice. “This underscores the importance of collaboration.” To support broad sustainability, Walmart uses a Life-Cycle Assessment (LCA) measurement system for new packaging, meant to measure true cradle-to-grave cumulative carbon footprint impact.
“Don’t just say this is too hard to do,” said Cheesewright, because there are a lot of things that seem ‘too hard to do’ that can get done – with the right creativity.
John Skelton is the Principal Consultant and founder of Strategic Inventory Management.