Greening the Supply Chain for the Greater Good

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Companies are under pressure to make their supply chains greener. There are several reasons but most revolve around regulations, quality and enhancing value for companies and their suppliers.

During the last four years, the nonprofit World Environment Center has helped companies such as Alcoa, General Motors, Dow Chemical and Johnson and Johnson strengthen their extended supply chains. The results from these projects are compiled and analyzed in "Greening the Supply Chain in Emerging Markets: Some Lessons from the Field." The report is second in our new GreenBiz Reports series by thought leaders in the green business arena.

I spoke recently spoke to Terry Yosie, the WEC’s president, CEO and author of the report, to talk about the things companies need to know about green supply chain initiatives. In Terry’s words, We’re not talking about philosophy, public relations or politics. Greening the supply chain is about dollars and it’s about cents.

Tilde Herrera: Hi, Terry.

Terry Yosie: Good day to you.

TH: Now, Terry, how would you define a green supply chain?

TY: I think fundamentally a green supply chain has to be looked at as part of a business process with very direct and measurable value that greening the supply chain can create. I think that the green supply chain has to achieve several fundamental objectives. These would include raising the operating standards and practices and performance across the supply chain.

Secondly and more specifically, reducing any negative environmental energy in societal impacts from business operations while enhancing the positive aspect of how businesses conduct their activities in local communities and on a global basis. I think thirdly an effective green supply chain initiative would promote enterprise development, would make suppliers competitive, more efficient, thereby increasing the efficiency of the entire business set of activities.

I do not view greening the supply chain as a set of one off activities. Rather they have to be part of a broader business strategy that integrates sustainability together with the business operations in both specific locations, but also on a global basis.

TH: Can you give us a couple common examples of green supply chain initiatives?

TY: Sure. The kind of green supply chain initiatives that The World Environment Center conducts would include projects involving energy, supply, energy use, energy efficiency, environmental performance improvements whether that's air quality, water quality, waste management, as well as safety. These are all issues that ultimately affect both communities and consumers.

We particularly focus on energy efficiently and clean production and natural resource use from a standpoint of the opportunities they provide to reduce business costs. But also the opportunities they create for product innovation, reduction of climate footprints, decrease toxic emissions. I mean, I'll give you a very specific example where these kinds of activities need not be rocket science or bust the budget.

There are just loads of examples particularly in the emerging markets where something involving the use of natural lighting can reduce the energy cost to a facility or the substitution of light bulbs can improve energy efficiency. Those are very practical kinds of low hanging fruit that a supplier of any level of sophistication can implement and by doing so create some cost efficiencies, proves it's environmental performance and begins process of learning on how to climb that ladder of sustainability so that they, in fact, become a more sustainable enterprise.

We're working with global companies like Alcoa, like General Motors and others to implement these kinds of projects and their operations around the world.

TH: Can you talk a little bit about how those partnerships were formed?

TY: Generally, they result from a conversation with one of our member companies, and I'll use General Motors as an example.

TH: O.K.

TY: General Motors is rapidly expanding its manufacturing capacity in China because it wants to provide automotive products for the Chinese domestic market. And so several years ago GM, which is a member of The World Environment Center, approached us to undertake a demonstration project to learn how to implement greening the supply chain activities amongst its Chinese suppliers.

So we did a small project that took about a year with eight suppliers and concluded that there were in fact were measurable reductions in water consumption and emissions and other indicators that could be obtained at very reasonable levels of cost investment. In fact, in some cases reducing cost. That became part of a broader strategic examination within General Motors to look at something with their joint venture partners. They have a joint venture with a Chinese auto manufacturer and that joint venture is called Shanghai General Motors. We're now working with 40 suppliers of Shanghai General Motors that has a business strategy called The Drive to Green.