According to ATKearney, customers around the globe will spend close to 40 trillion dollars in 2020 with a staggering 43% increase in the last 10 years. The meteoric rise in customer spending coupled with an unprecedented increase in the working age population of countries like India will provide stupendous growth opportunities for companies all around the world. The companies are innovating their business models to promote a more virtuous buying cycle and create much more value for the customer who is getting hyper-connected and is more informed than ever before. With the burgeoning markets and ever-increasing population rates, there has been a rapid degradation of the environment globally.
According to the United Nations, cost of pollution and damages to the environment can potentially wipe out one-third of their profits. Therefore, companies need to adopt a greener approach of doing business. Companies can no longer take the supply of raw materials or energy as infinite and work to reduce not just economic but environmental and social costs of their products and services.
Bioregional Australia, an Australia based international environmental organisation has come up with a set of principles that provide a framework for organisations to combat the challenges posed by sustainability, develop pertinent challenges and communicate the challenges to the stakeholders.
According to research by Carnegie Mellon University, more than 80% of the greenhouse gas emissions of any company are due to its supply chain. Additionally, supply chains account for more than 90% of the total impact on air, water, land resources and thus can provide a huge potential for reduction in environmental impact.
A supply chain consists of multiple stages viz sourcing, manufacturing, distribution and logistics which is traditionally seen as just a means to deliver products and services from suppliers and manufacturers to the customers. It revolves around cost optimization, on- time delivery, Total Quality Optimization etc. and does not focus on reducing the environmental damage. Therefore, there is a need to integrate environmental management into various facets of supply chain viz. product designing, material selection and sourcing, manufacturing, logistics and recycling of the products post its useful life. To build a sustainable competitive advantage, companies should endeavour to implement green initiatives in each and every stage of the supply chain which however is constrained by financial and skilled human resources.
Greening the Supply Chain
“Designing is fundamental to all human activity”. Companies can fashion a lineup of eco-friendly products that would help in reduction of material usage, ease of manufacturing and can help in eco-friendly utilization of products over its entire lifecycle. Designers can identify the stage in life cycle of products where it has the maximum impact on the environment and strives to minimise waste and energy consumption.
There need to be stricter regulations for sourcing of materials such as plastics which cause irreparable damage to the environment. Companies can also provide technical and financial support to the vendors for sourcing and procurement of eco-friendly materials. The materials should be chosen based on factors like non-toxicity, abundance, reproducibility, renewability, recyclability, biodegradability etc.
Japanese have advocated the adoption of leaner and greener production systems since long. The adoption of lean manufacturing approach, six sigma, Kaizen, Toyota Production System can aid in reducing losses in production. Further, the selection of less carbon-intensive energy sources can help in reducing carbon emissions.
The material that is used for packaging should be non-hazardous and should be easily recyclable. With the rise in e-commerce, there has been an increase in the rise of packaging material like paper, plastic, bubble wraps, air cushions which end up clogging our drains and landfills. Thus, there is a pressing need to develop sustainable recycling solutions that can help in protecting our environment.
Sustainability in logistics can be implemented by monitoring fuel consumption, avoiding delivery with part truckloads, route planning and optimisation, freight consolidation etc. It can help not only in the reduction of carbon emissions but also can help in saving costs and increasing productivity. The logistics company DHL has been a pioneer in green logistics and have launched various green logistics solutions over the years and envisioned to reduce its CO2 emissions by 30% by 2020.
The world around us collapsing with rapidly increasing environmental threats. Thus it is of utmost importance for companies to be driven both financially, socially and environmentally. It is not a one-time investment but it is a continuous process of innovation and organisational commitment from the senior leadership. Pursuing a greener supply chain strategy gives the advantage of a brand who does business with a responsibility, retention of more environmentally sensitive customers, better quality of products to the customers. They need to realise that the environment is both an input and a driver of growth and they need to invest heavily in sustainability initiatives without looking at the price tag.