As extreme economic conditions force companies worldwide to refocus efforts on short-term survival, switching to greener supply chain practices that can reduce a company’s carbon footprint has become a priority for many organizations. Businesses are learning that collaborating with supplier partners could be the secret to keeping these initiatives on track.
This message was discussed in the “Carbon Disclosure Project Supply Chain Report,” conducted by the Carbon Disclosure Project, a London-based association focused on business risks and opportunities presented by climate change and its impact on carbon emissions. RedPrairie Corp., Milwaukee, sponsored the report, which was written by New York City-based PricewaterhouseCoopers.
In the retail industry, the majority of a company’s carbon footprint is often found upstream in the supply chain. However, an increase in carbon-based regulations, volatile energy prices and the physical impacts of climate change are forcing all companies to rethink their supply chain practices and implement ways to reduce carbon emissions.
“Climate change is becoming a material issue for increasing numbers of sectors and businesses as it affects extreme weather events, higher carbon prices [and taxes] and changes in consumer demand,” said Frances Way, head of supply chain, CDP. “This consumer demand will impact companies directly, as well as through the supply chains.”
As more companies experience these events, they are reevaluating how to integrate more sustainability initiatives into supply chain practices—a move that will allow them to offset operating costs, achieve a more efficient supply chain and mitigate long-term risk, according to participating companies.
Over the last decade, companies have defined carbon-focused supply chain practices as “nice to have” initiatives. However, retailers now recognize the operation as a “valuable strategic tool for business improvement,” the study reported.
In fact, 48% of participating CEOs already have changes under way in their supply chains to respond to climate changes, or plan to jump into such a project within 12 months. Out of this group, 66% of chief executives were already experiencing a return on their investment, or expected to gain an ROI within the year.
And these projects tend to run the gamut. For example, one major clothing retailer recently reduced its supply chain operating costs by 17%, the study said. By redesigning its distribution and logistics chain, the retailer also saved more than 4,500 tons of carbon.
“Learning to reduce carbon emissions not only promotes a healthier planet, but also a sustainable and cost-effective business,” said Mike Mayoras, CEO, RedPrairie.
Retailers and suppliers are aware that the affect of climate changes on carbon emissions can hold critical financial and operational implications on a brand. The best way for retail companies to ensure that they achieve their goals of cutting carbon emissions is to collaborate with supplier partners, according to the study.
This includes retailers and suppliers aligning supply chain objectives and working together to communicate and work through challenges and design applicable practices. Partners’ first priority should be gaining an understanding of the regulatory environment.
“As the cost of carbon becomes internalized through regulations, supplier partners will have to work closely together to minimize the potential cost increases,” the study reported. “Companies should also be willing to get actively involved in regulatory developments to help shape new legislation.”
The study makes clear: If supplier partners fail to work together on these efforts, they will not be able to overcome challenges related to regulations, and worse, they will fail to efficiently operate in the marketplace.