News & Publications
Supply Chain Sustainability: Good for the Environment and Good for the Bottom Line
On average, an organization’s supply chain emissions are four times greater than those of their direct operations, however, most of the effort organizations put forth to limit emissions focuses on their direct operations (CDP, 2017). This leaves an enormous opportunity for companies to take actions to work with their suppliers to lower emissions. It is a challenging task, but some large organizations are paving the way and saving money to boot. Global economy big buyers, such as PepsiCo, Johnson & Johnson, and Walmart are using their spending clout to drive significant emissions reductions and are cascading best practices along the way.
The BMW Group is another example of a company that has taken steps to strategically engage their suppliers in reducing emissions. They have a vast global supplier network, which provides a major source for value creation and innovation. Their supplier engagement emphasizes transparency and carbon dioxide emissions reporting. In 2016, they achieved transparent carbon dioxide reporting to the Carbon Disclosure Project (a non-governmental organization that records resource consumption and emissions) by their suppliers for 69% of the BMW Group purchasing volume (BMW, 2017). This allows the BMW Group to track year-over-year performance and develop competitive goals. As a result, the BMW Group initiated pilot projects with their key suppliers in 2016 to reduce emissions and set bilateral targets for its highest carbon dioxide emitting suppliers.
In their 2017 Supply Chain Report, of 4,366 companies from the public and private sector with a combined procurement spend of $2.7 trillion USD, the Carbon Disclosure Project reported companies with emissions reduction projects, captured $12.4 billion USD in cost savings as a result of their carbon-cutting measures. In addition, almost half of the highest savings initiative were related to energy efficiency with a payback period of three years or less (CDP, 2017).
With the ratification of the Paris Climate Agreement and consumer pressure on the rise, it will not be possible to overlook this critical area for much longer. Managing environment supply chain risks and impacts are complex, but it is worth the effort to develop a strategy to address them. It will require resources to understand complex systems, but companies that master this will find themselves with a competitive advantage and increased profit margins.
Allyn Contributor: Shannon McCormick-Grubbs
About Allyn International
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, FL U.S.A, Shanghai, P.R. China and Prague, Czech Republic. For more information, log on to www.allynintl.com.
References:
BMW Group, Supply Chain Management, retrieved on March 23, 2017, https://www.bmwgroup.com/en/responsibility/supply-chain-management.html
CDP Supply Chain Report 2017, https://www.cdp.net/en/articles/supply-chain/supply-chain-the-missing-link-for-corporate-climate-action