Category Archives: Supply chain

September 14, 2012 · 10:54 am

Yogurt Maker’s Sustainability Approach Has a Different Flavor

Yogurt maker Stonyfield Farm recently revealed that it had calculated the carbon footprint of 150 of its products, three quarters of the items it sells. (Disclosure: some of those items are in my refrigerator right now.) If you are interested in how companies account for and manage their environmental impacts, you should take a look at Stonyfield Farm. Here are three things worth noting:

Over half of the carbon footprint comes from milk production. That means cows passing gas and cow manure. In other words, the biggest source of emissions are verdant pastures, happy bovines, not belching factories. Research is underway to reduce the footprint of milk production. But my point is that most people don’t think of basic agricultural processes can have such a big environmental impact. They can.

Data is updated daily. Most companies that calculate their carbon footprints do so yearly. That’s because the processes most companies use are very labor intensive. There is still little automation of carbon accounting. The system Stonyfield Farm uses calculates product footprints daily and allows continuous monitoring of the company’s performance versus its goals. That should give the firm an edge in meeting its targets by enabling it to make mid-course corrections and improvements as it learns.

Focus on greenhouse gases rather than energy consumption. Many companies that talk about reducing their carbon emissions are actually focused on reducing their energy consumption. There are two reasons for this. First, consumption of non-renewable energy is a pretty good proxy in many cases for greenhouse gas emissions: the more you consume, the greater your emissions. And second, and more importantly, energy costs money while emitting carbon is still free in much of the world. So companies manage energy consumption, aiming for cost reductions and reaping emissions reductions as an added benefit. Stonyfield Farm focuses on greenhouse gas emissions rather than energy partly because a lot of their emissions don’t come from energy use (they come from cows) and they don’t come from their own operations (only 13% of the footprint is attributable to manufacturing).The link between costs and greenhouse gas emissions is much looser for them. So they are directly managing for environmental benefits, not just cost.

Stonyfield Farm has long staked out a leadership position in its commitment to environmental stewardship and its use of that commitment to boost brand value. The company’s approach to managing and tracking its carbon footprint is part of that tradition.

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July 31, 2012 · 2:13 pm

Why AT&T’s Eco-Rating System Is off the Mark

AT&T has launched its eco-rating system in stores, allowing customers to compare cell phones’ environmental impacts. The system rates handsets on 15 criteria, granting a point for each environmentally preferable criterion the handset possesses. Phones with 14-15 points will get 5 stars;  phones with 5 or fewer points will get no stars. AT&T expects most phones it sells will fall somewhere in the middle.

AT&T has articulated the following goals for this new green labeling scheme:

  • Engage consumers and respond to growing interest
  • Drive industry improvement on sustainability
  • Help set the agenda for more sustainable products
  • Anticipate regulations
  • Demonstrate AT&T leadership

As our recent research shows, a growing number of companies are beginning to take responsibility for the environmental impacts in their supply chains. AT&T’s initiative is not an example of this. Rather than stipulating sustainability standards itself, AT&T puts the onus on consumers to determine the relative importance of the environmental performance of the handsets and the manufacturers that make them.

That’s not necessarily a bad thing. But here’s what is: AT&T has just created the world’s 434th ecolabel (if you believe the tally of the Ecolabel Index).

Does the world really need another green label? Perhaps. But what it doesn’t need is the continued proliferation of brand-specific labeling. The more labels that cover the same product categories the more confusion and likely consumer indifference.

Last year AT&T competitor Sprint led the development of a standard for “environmentally preferred mobile devices” with UL Environment and has committed to certifying all handsets it sells with that standard. The AT&T labeling scheme uses some of the criteria from that standard, and blends in some others. The result is a proprietary set of hoops its suppliers need to jump through that are different from the hoops that may be set by other carriers.

Why is this a problem? Because suppliers are becoming overloaded with sustainability information requests and lack standard measures of environmental performance. In our research, we asked sustainability executives at manufacturers and retailers about the biggest challenges they faced in obtaining environmental sustainability information from their supply chains. The top answer? A lack of standard ways of measuring environmental performance, a lament shared by 62 percent of the respondents to our survey. The introduction of proprietary product rating standards only going makes this worse, and could well hamper rather than help the cause of driving sustainability in the supply chain.

AT&T said it introduced the eco-rating system in part because it wanted to show leadership. Going it alone, though, is an outdated mode of leadership, especially in this arena. A better model is the one embodied in the Sustainable Apparel Coalition. In that organization, dozens of manufacturers and retailers, including direct competitors, came together to develop a single sustainability measurement standard for their entire industry. The coalition unveiled version 1.0 of that standard just this month. They’ve deferred the possible development of a consumer-facing label to a later date.

AT&T can’t really say for sure what impact the new labeling scheme will have on its supply chain. But it is hopeful that it will be good for the top line. According to market researcher NMI, which AT&T hired to help understand the marketing benefits of ecolabels and green seals, “seals increase purchase intent.”

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· 12:53 pm

Free Webinar: Sustainability in the Supply Chain

Green Research is hosting a free webinar to share highlights of its latest research on the best practices, latest trends, and new tools for managing and improving sustainability in the supply chain.

Please register for “Sustainability in the Supply Chain: Tools, Trends & Best Practices? on Aug 9, 2012 11:30 AM EDT at:

https://attendee.gotowebinar.com/register/1670708262142123520

The research was conducted over three months and drew on executive interviews, a global survey of sustainability executives, briefings with technology providers, and a review of public documents outline corporations’ sustainability initiatives.  Green Research recently published the complete results of the study in a report available for purchase and immediate download here.

Key questions answered by the research include:

  • Can companies improve sustainability in their supply chains without compromising their business goals?
  • What are leading corporate practices for improving sustainability in the supply chain?
  • How should companies assess supply chain sustainability management vendor solutions?

Who should attend?

  • Sustainability executives and practitioners
  • Supply chain and procurement executives
  • Corporate leaders
  • Sustainability and strategy consultants
  • Vendors of IT solutions
  • Non-governmental environmental organizations
  • Universities and sustainability research centers
  • Sustainability public relations and marketing agencies

Attendance is limited. Priority will be given to to retailers, manufacturers and their agencies.

Register now by clicking here.

After registering, you will receive a confirmation email containing information about joining the webinar.

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July 24, 2012 · 8:30 am

Focusing on Sustainability, Companies to Collect More Data from Suppliers

Executives See Path to Significant Sustainability Gains

New York City (July 24, 2012) – Green Research, a New York-based corporate sustainability research and advisory firm, today released a new study of corporate environmental sustainability practices and trends.  The study finds efforts to improve sustainability in corporate supply chains are hindered by poor data quality and a lack of measurement standards. In a survey of 30 senior sustainability and procurement executives at major companies globally, 62 percent of executives said their efforts to track supply chain sustainability performance are impaired by a lack of measurement standards. For suppliers already beleaguered by numerous information requests, things will get worse before they get better: 81 percent of companies plan to ask suppliers for more information in the coming year.

Executives Believe Gains Are Possible without Compromising Business Goals

Despite the challenges, executives are optimistic about the prospects for significantly improving sustainability in their supply chains. “Companies often lack direct control over their suppliers and sub-suppliers,” said David Schatsky, principal analyst and founder of Green Research.  “But new tools and management practices are empowering companies to drive improvements in supply chain sustainability.” Sixty-four percent of executives surveyed said their companies can have significant influence on their top suppliers’ sustainability performance.  Eighty-four percent believe their companies can obtain much better environmental performance from suppliers without compromising their companies’ business goals.

New Management Practices Profiled

Supply chain sustainability improvements will be made possible in part by the adoption of new green technologies throughout the supply chain but also by new management practices, Green Research found. The company conducted a series of exclusive executive interviews coupled with an analysis of public company disclosures to identify 10 supply chain sustainability best practices. These include setting specific goals; educating and supporting suppliers; and leveraging emerging standards to collect and analyze sustainability data from the supply chain.

Report Offers Vendor Assessment Guidance

The study also finds that a wide range of technology vendors and service providers have entered the market with solutions for helping companies collect, track and manage supply chain sustainability performance data. The study presents profiles of a dozen such vendors representing a range of approaches for addressing supply chain sustainability issues, along with a Vendor Assessment Framework companies can use to help them select an appropriate vendor. Nearly 40 percent of executives surveyed in the study said their companies were somewhat likely or very likely to acquire a new IT system to help with supplier sustainability information over the next 12 months.

The supply chain sustainability study is available for purchase online at greenresearch.com.

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April 25, 2012 · 5:50 pm

Which Looks More Sustainable?

On a recent GreenBiz webinar, Jeff Rice, director of sustainability at Walmart, gave a compelling presentation of is company’s approach to sustainability. This slide caught my eye. It illustrates what Walmart calls its “productivity loop”:

Source: Walmart

Walmart has been a real sustainability leader in recent years and deserves lots of credit for it. But to my mind, this picture has nothing to do with its sustainability leadership nor, for that matter with sustainability. Indeed, to me it depicts an inherently unsustainable dynamic: prices the spiral endlessly downward while sales continue to rise. I am pretty sure there is a lower limit on prices, and an upper limit on sales for that matter.

Contrast Walmart’s “loop” with this depiction of the “Circular Economy,”, from the Ellen MacArthur Foundation:

This is a vision of a truly sustainable system.

Now, the comparison isn’t exactly fair, because Walmart is an enterprise, and its “productivity loop” depicts its own operating model, while “The Circular Economy” depicted above is an entire economy. But it is worth thinking about what the future of sustainability demands of a retailer like Walmart, after it has wrung environmental and economic inefficiencies from its own operations and from its suppliers. How will it need to adapt its model to fit with and support a sustainable economic ecosystem?

Any thoughts?

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January 4, 2012 · 9:47 am

Knowing Your Supply Chain from a Hole in the Ground

A new standard of accountability and traceability for supply chains is emerging. Companies are increasingly faced with the need to be able to trace their supply chains back to the hole in the ground their raw materials came from. This is one of the implications of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a U.S. Federal law passed in 2010. Section 1502 requires any company that must file reports with the SEC to assess its supply chain for the presence of “conflict minerals” and determine whether they originate in mines in the Democratic Republic of Congo or surrounding nations.

There are lots of nuances and implications to the law. (For more information, see Dodd-Frank Section1502.) But an essential one is that companies are being asked to know far more about where the raw materials in their products came from, and the conditions under which those materials were obtained, than ever before.

On behalf of a client I am currently researching the impacts of Dodd-Frank Secdtion 1502 on companies. A number of the firms I’ve interviewed see a broader trend toward ever higher standards of visibility, traceability and accountability in company supply chains. As they work to design processes that will enable them to comply with the new rules, they are trying to think ahead and design them to be able to accomodate new requirements, which they believe are all but inevitable.

Another example of these heightened standards for traceability and accountability is the recent announcement by fruit producer Chiquita Brands that it had committed to identifying – and eliminating from its list of fuel suppliers – all of the companies that it believes sell diesel made from Canadian tar sands oils. This action came after a pressure campaign from the environmental group ForestEthics.

We are entering an era when “fungible commodities” such as petroleum and tin are not as fungible as they once were. Companies are going to need to improve their supply chain game to keep pace with rising expectations for traceability and accountability.

What are your thoughts?

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December 19, 2011 · 8:45 am

Seven Highlights from 2011 and the Outlook for 2012

With the end of 2011 in sight and a new year on the horizon, it’s a good time to reflect and to plan. Let’s reflect on the key events in supply chain sustainability from 2011.

Highlights from 2011

So many supply chain sustainability initiatives and announcements occurred in 2011 that any summary is necessarily selective and subjective. But here are a few that I think are significant.

Greenhouse gas inventories of the supply chain

More companies are going to begin calculating greenhouse gas inventories for their supply chains and their products following the release in 2011 of two standards. In October the World Resources Institute introduced the new standards for value chain (scope 3) accounting and product life cycle accounting. Already, according to a new Green Research survey of sustainability executives, sixty percent of respondents say their company will calculate its scope 3 emissions in the coming year and over half intend to report the results publicly. These standards will help companies understand and begin to take responsibility for the carbon emissions of their supply chains.

Monitoring and reporting the use of conflict minerals

This year saw a lot of discussion and analysis of the implications of a new U.S. law that will shine a light on the supply chains of thousands of companies. The law in question is the Dodd-Frank law, whose conflict minerals provisions require U.S.-listed companies to conduct due diligence of their supply chains and report whether they are buyers of conflict minerals (minerals that may originate in the Eastern Congo and surrounding areas and whose trade may provide funding to armed groups in the region). In 2011, dozens of major companies including Apple, General Electric, Ford, Hewlett-Packard, Intel and Motorola worked to analyze their exposure and obligations under the law and began to put in place the due diligence processes required to ensure they are in compliance with eventual final rules. Given the global nature of supply chains, these regulations will have global impact and will accelerate the broader trend toward supply chain visibility and accountability. We maintain a site with news and information on the conflict minerals provisions of the Dodd-Frank law at section1502.com.

Sustainably sourced packaging

Green Research studies have found that companies in many industries entered 2011 with goals to reduce the volume of packaging they use. In 2011, we saw a number of commitments and initiatives to enhance the sustainability of packaging materials themselves. Toy makers Hasbro and Mattel announced commitments to shift to sustainably sourced packaging materials, for instance. Dell announced a new packaging material made of sustainably sourced mushrooms. PepsiCo announced a new plant-based bottle, and AT&T announced plans to begin using packaging that is partly plant based.

Commitment to sustainable palm oil

The Roundtable on Sustainable Palm Oil announced a surge in purchases of certified sustainable palm oil and many major companies, including Asda, Johnson & Johnson, Kellogg’s, McDonalds and SC Johnson announced commitments to shift their most or all of their purchases of palm oil to certified sustainable sources.

Forest products certification controversy

A conflict between competing North American forest products sustainability standards boiled over in 2011 as a number of major U.S. companies including Aetna, Allstate, AT&T, Comcast, Garnet Hill, Office Depot, Performance Bicycles, State Farm, Sprint, Symantec, United Stationers and U.S. Bank dropped the Sustainable Forestry Initiative in favor of Forest Stewardship Council. There are already too many “standards” in the sustainability field; some consolidation is welcome.

Business decisions about ecosystem services

The World Business Council for Sustainable Development introduced a new tool this year to help corporations put a monetary value on the ecosystem services they affect or depend on. The Corporate Ecosystem Valuation (CEV) tool is intended to help companies incorporate thinking about ecosystem services corporate in their strategic and financial planning. Shortly after the CEV tool was published sports-lifestyle apparel maker PUMA released a much-lauded “environmental profit and loss” statement that not only valued the company’s environmental impacts but also revealed that most of its impacts occur in its supply chain, something that is true for many companies.

Supply chain goals still in short supply

Despite the growing awareness that, for many companies, the supply chain is where many if not most of their environmental impacts occur, many companies have struggled to make firm commitments for improvement in this area. In a 2011 study of the global pharmaceutical industry, for instance, we found that ninety percent of the sustainability goals pharmaceutical manufacturers have announced deal with their internal operations; only a handful deal with the supply chain. Supply chain goals are scarce in the other industries we studied as well, including alcoholic beverages, food processing and telecommunications.

Outlook for 2012

All of this sets the stage for what promises to be redoubling of effort to improve the sustainability performance of company supply chains. According to the aforementioned survey of senior sustainability executives, improving supply chain sustainability is the number two sustainability initiative (behind employee engagement) of their companies for 2012. I expect to see companies aim for closer collaboration with suppliers, adopt more stringent scorecarding, put a greater focus on ecosystem services and biodiversity, and apply the new carbon accounting standards to their supply chains, among other initiatives.

[This post first appeared on the 2degrees Network.]

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November 30, 2011 · 8:30 am

Corporate Sustainability Leaders to Focus on Employee Engagement and Supply Chain in 2012

Study Identifies the Only Two Sustainability Ranking Schemes Relevant to a Majority of Companies

New York City (November 30, 2011) – Green Research, a New York-based corporate sustainability research and advisory firm, today released a new report based on its annual survey of sustainability executives. The report, a planning and benchmarking tool for sustainability executives, finds that companies will focus significant staff time and financial resources on two sustainability initiatives above all in the coming year: employee engagement and supplier sustainability performance. Believing engaged employees to be a key to high performance, 88 percent of companies will be investing significantly in employee engagement in 2012, while 73 percent will focus on improving the sustainability performance of their suppliers. “Companies have good reason to focus on employee engagement and supply chain,” said David Schatsky, author of the report. “Engaged employees make things happen. And the supply chain is where the bulk of the environmental impact is for many companies.”

The study analyzes the staffing and spending plans and high-priority initiatives of top sustainability executives at some of the world’s leading companies. It draws on an exclusive, in-depth survey of nearly 50 senior sustainability executives (three quarters of which are the senior-most sustainability executive/chief sustainability officer) at global companies. These are leading companies in a dozen industries across North America and Europe, 80 percent of which have revenues of $1B or more. “We think this is the highest-quality panel of respondents ever assembled for a survey focused on corporate sustainability tactics and strategies,” said Schatsky.

The report finds that sustainability spending will rise significantly in 2012. About a third of companies surveyed are adding staff to their sustainability departments in the coming year. And fifty percent of firms will increase spending on sustainability initiatives across their companies, compared to a quarter that will increase the budgets of their sustainability departments.  “Companies are funding various departments to support their sustainability initiatives, rather than centralizing those funds with sustainability teams,” said Schatsky. “The crucial role of sustainability teams, besides coordinating sustainability strategy, is to help other departments make the business case for those initiatives,” he added.

Other topics covered in the research include: carbon accounting, ecolabels, life cycle assessment, corporate reputation, sustainability reporting, environmental credits and offsets, and sustainability rankings. The report found that despite a proliferation of corporate sustainability rankings, only two rankings are relevant to a majority of companies: the Carbon Disclosure Project (CDP) and the Dow Jones Sustainability Indexes. Sixty-four percent of respondents consider CDP important to the company and its stakeholders; 53 percent say the same about the Dow Jones Sustainability Indexes. All other rankings are important to a small minority of companies and their stakeholders.

The study, “Annual Sustainability Executive Survey, 2012” is available online at greenresearch.com. To learn more about the research, please visit greenresearch.com or contact David Schatsky at 646-783-8337 or info@greenresearch.com.

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August 4, 2011 · 9:30 am

Pharma Companies Face a Supply Chain Sustainability Opportunity

We published another sustainability goals benchmark report today, this one  focused on the pharmaceutical industry. A couple of things that stand out from the benchmark:

- Judging from the goals they have announced, the major pharmas are serious about sustainability. All but one have specific, quantified sustainability goals.

- The pharmas are facing a major opportunity. Ninety percent of the goals they’ve announced deal with their internal operations. Most of the pharmas are not yet willing or able to announce supply-chain goals of any specificity. Yet the supply chain may account for the bulk of potential environmental impacts in some cases. GlaxoSmithKline, for instance, found that in 2009, the greenhouse gas emissions from its supply chain were twice those from its internal operations.

This suggests an opportunity to seize sustainability leadership for whichever companies can bring some focus to improving the environmental performance of their supply chain. These are highly sophisticated companies. I’m sure they are up to the challenge.

You can find our goals benchmarking research here.

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May 19, 2011 · 11:12 am

PUMA and Environmental Costs

Did you hear that “sportlifestyle company” PUMA burns up about half its income in environmental degradation? That factoid was not emphasized in this week’s announcement that the company had developed an “Environmental Profit & Loss Account.”

The E P&L calculates environmental aspects of the company’s operations, such as water use and greenhouse gas emissions, and ascribes a financial cost to them. An E P&L doesn’t have to show only costs; it would ascribe revenue to initiatives that produced a net improvement of environmental performance, such as planting trees. PUMA does not show any such “environmental revenue” lines.

The company calculated that the environmental cost of the greenhouse gas emissions and water consumption across its supply chain in 2010 was €94.4 million, with over 90% of the total attributable to its suppliers. Net earnings in 2010 were €202.2 million, meaning that including environmental costs in the company’s P&L for real would slash its earnings nearly in half.

This initiative, the splashy announcement of it, complete with a live online Q&A by PUMA CEO and chief sustainability officer Jochen Zeitz, and ensuing publicity around it, are likely to stir greater interest in the corporate mainstream in the financial costs of environmental degradation.This is a great thing because accounting for the full cost, including ecological costs, of doing business, would go along way toward creating the incentives needed for dramatic improvements in corporate environmental performance. So despite my grim take on PUMA’s numbers, this is a wholly positive step and should be applauded.

PUMA’s calculus draws on the concept of ”ecosystem services.” For readers wanting to get up to speed on the concept of ecosystem services and how they are valued financially, I’ve assembled this selective reading list to get you started. If you have other sources you find valuable, please leave a comment.

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April 4, 2011 · 5:22 am

The Carbon Footprint of Bread

I came across a nifty study of the carbon footprint of bread, just published in the International Journal of Life Cycle Assessment. The study looked at bread produced and consumed in the U.K. The bottom line: the carbon footprint of bread ranges from 977 to 1,244 g CO2 equivalent per 800 g loaf. On their own those numbers aren’t that interesting,though the fact that carbon footprint exceeds the weight of the product itself, while not all that unusual, does makes one think.

Data from the referenced study

The study was interesting for what it revealed about the major sources of carbon emissions (the so called hot spots) in the life cycle of a loaf of bread . The study is also interesting because it compared the footprint as calculated using primary data from a specific U.K. bread supply chain against calculations using generic data from life cycle inventory databases. Using primary data tends to be costlier and more time consuming. So if generic data can suffice to acheive the goals of a life cycle assessment, it is a more economical choice.

According to the study, wheat cultivation contributes 35 percent of the carbon footprint, and consumption (including refrigerated storage and toasting) contributes another 25 percent. Assumptions about the amount of food consumers waste suggest that another 5-10 percent is contributed by waste bread being discarded by consumers. Packaging and transportation were relatively small contributors to the carbon footprint.

The hot spots were the same for primary-data analysis and the secondary-data analysis, supporting the idea that the goal of a study should determine its data-gathering strategy. Carbon-labeling–providing data to consumers supposedly to enable them to make purchase decisions based on product carbon footprints–requires data from specific product supply chains. But other uses, including identifying the hot spots so a manufacturer could focus on those for improvement, could well be supported by secondary data.

My favorite finding from the study is that whole wheat bread has a lower carbon footprint than white bread. Milling the flour for white bread uses about 23 more energy per loaf, because it uses the grain less efficiently. So eat healthier and reduce your carbon footprint.

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March 15, 2011 · 1:57 pm

How Finance Departments Do Sustainability

When your company makes sustainability a part of its strategy, it looks for ways to embed sustainability thinking through the organization. In some departments, it’s pretty clear what that entails.

  • Product development may seek sustainably sourced materials or designs that are energy efficient to operator or easier to recycle
  • Supply chain may set sustainability standards for suppliers
  • Manufacturing may focus on improving the energy and water efficiency of processes and the management of waste
  • Facilities and IT have a lot of low hanging fruit in energy efficiency
  • Transportation and fleet management groups may look at alternative fuel and hybrid vehicles and route optimization
  • Human resources may take on employee engagement programs
  • Marketing and public affairs groups will take on responsibility for engaging with external stakeholders and communicating about your company’s sustainability efforts

Where does your finance department fit in all of this? Finance can, of course, work to improve the efficiency of its own operations. The finance department at Yale University, for example, recently announced that it switched from paper to digitial distribution of its financial report to save paper and money. Some banks offer “green treasury” services to eliminate the paper involved through the treasury function.

But your finance department can play a much larger role in supporting your sustainability strategy than just improving its own operations. Finance creates leverage. And sustainability-minded finance can be a key ally to sustainability leaders.

We recently interviewed senior sustainability leaders at more than 30 major companies in North America and Europe. In that research we heard a few things about how finance departments are behaving at sustainability minded companies. (Our latest research report, based on those interviews, is available for purchase at an introductory price here.)

A few finance practices emerged that sustainability leaders should be aware of:

Allocate a pool of capital project money to the sustainability department. At most companies, central sustainability budgets are small. Capital projects, even those intended to to deliver sustainability benefits, are funded out of other departmental budgets. And sometimes sustainability projects get pushed aside by a department’s other priorities. To ensure that some worthy projects get done each year, one company we spoke with allocates a pool of money to be used for capital projects directly to the sustainability group. The sustainability department is able to use those funds to support a couple of capital projects of its choosing. And it also works  with other departments to influence their budgets to take on other worthwhile projects. You might want to see if your department can obtain a mini capital budget of its own in the next budget cycle.

Calculate risk-adjusted returns realistically. At some companies, sustainability projects have a hard time getting funded because they don’t appear to pass the company’s rate-of-return hurdle. The thinking goes like this: Why invest scarce capital in a lighting retrofit when a new product launch could deliver a rate of return many times greater? But the reality is that many sustainability projects–especially those centered on improving efficiency–have highly predictable rates of return and present almost no risk at all. Other projects they might compete with, such as new product launches or marketing campaigns, may be inherently riskier. Thus sustainaiblity initiatives can have a superior risk-adjusted rate of return. Make sure your finance department calculates risk-adjusted returns appropriately..

Sustainable 401K. Some companies tell us that their sustainability program is motivated in large part by a commitment to their own employees, who value a socially and environmentally responsible workplace. At such companies, it makes sense to look at financial benefits, such as 401K programs, through a sustainability lens. A growing number of 401K plans offer socially or environmentally responsible investment options. You finance department can help choose appropriate options for your company.

How is the finance department supporting sustainability at your company? Please leave a comment to discuss it with us.

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January 14, 2010 · 8:28 pm

Carbon on Company Balance Sheets?

Despite the fizzle after the great fanfare of the Copenhagen Summit, many companies remain intensely focused on the strategic implications of climate change. Some believe that a requirement to monitor, report and reduce their carbon emissions is coming and is just a question of time. Indeed, some observers believe that carbon accounting is destined to be embedded in the core of enterprise systems, with carbon emissions tracked continuously and treated like any other balance-sheet item.

I recently had the opportunity to speak with David Abood, Managing Director, Sustainability Services North America and Climate Change Solutions Global Lead at Accenture, the consulting and strategy firm. In his experience, the attention companies are putting on carbon accounting, tracking and reporting varies according to the risk and opportunity they attach to it. Companies that see themselves “in the cross hairs” of future cap and trade programs are, as you might expect, paying close attention. For instance, Accenture is being asked right now by major companies that would be “capped entities” (bound, under proposed cap-and-trade legislation, to limit carbon emissions) to do company-wide system implementations to handle the requirement of detailed tracking of carbon emissions, or to do carbon analytics as a managed service.

But even companies that are not destined to become capped entities are getting increasingly engaged, he says, whether due to pressure from their customers or from organizations like the Carbon Disclosure Project. He expects the CDP to push for increasingly granular emissions tracking over time. This will inevitably drive more detailed reporting by the growing number of reporting companies and eventually their supply chain partners too (as I’ve noted here).

Accenture has made a substantial investment in building a capability to help clients cope with climate change. The firm has some 200-300 people in its Sustainability Services practice and around 2000 people company-wide with a focus in this area alongside their principle functional or industry expertise. The company has done an analysis of the “whole software market” around carbon accounting, Abood says, and are working with SAP, Carbon Networks and IHS, among other potential partners.

So, is the day at hand when most companies will track carbon emissions continously, and integrate emissions reporting into core financial and operational reporting? Not quite. Abood says that vision is “in everyone’s sights” but ackowledges that no one has yet “cracked the code.”

If you have a point of view on where carbon accounting is headed, please consider leaving a comment.

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October 8, 2009 · 12:04 am

The Supply Chain a Focus of Sustainability Strategy

I am excited to highlight my newly published research report on supply chain sustainability.

The report draws on a survey of supply chain executives at 74 companies as well as interviews with firms such as Alcatel-Lucent, Coca-Cola, Diebold, Dow Chemical and Staples. Eric Klein, a quantitative market research jock formerly of AMR Research, designed and processed the excellent survey.  And co-author Paul Baier, head of climate consulting for Groom Energy provided great direction for the research and conducted the interviews together with Eric . The report was published last week by GTM Research.

Here are some of my favorite highlights from the research:
Three-quarters of respondents to our survey believe that their company’s environmental stance will have a material impact on customer relationships within the next three years. Just over third of them feel the issue is material with customers today.

Energy efficiency is by far the most popular sustainable supply chain activity right now. This is due to a number of factors, including the relative ease with which energy efficiency programs can be implemented and the measurable cost savings and associated carbon footprint reductions they deliver. Recent volatility in energy prices and the rising profile of energy policy on the national level may also play a role.

Many companies have not yet integrated the systems that manage their environmental information with those that manage their supply chain activities, presenting a hurdle for those companies seeking to make environmental concerns a factor in supply chain design and operations. This is an opportunity for systems integrators and tech vendors who can help companies surmount this challenge. Forty-five percent of respondents to our survey say they have just begun to integrate those systems, and nearly a quarter say they are dealing with numerous disconnected applications, databases and spreadsheet components–which are ripe for rationalization and integration.

A minority of respondents to our survey say they currently participate in third-party sustainability reporting initiatives, such as the Carbon Disclosure Project (CDP).  But, 80 percent of respondents say they will be reporting in the next 12 to 24 months. This is one of the facts that led me to laud the CDP in a recent post.

A significant majority of companies believe that greening their supply chains will pay off over time, in some combination of brand enhancement, efficiency gains and cost savings. However, many companies today say they struggle to communicate the financial rationale for sustainability programs.

Overall, supply chain spending plans remain fairly firm this year despite the recession. A majority of the respondents to our survey said that their 2009 supply chain spending will increase versus 2008 levels, by an average of 11 percent. In aggregate, respondents are increasing spending by 3.8 percent.

We segmented respondents to our survey based on the number of supply chain sustainability initiatives they were engaged in. This led us to classify 30 percent of respondents as sustainable supply chain leaders. Leaders, we found, are more likely to incorporate environmental concerns in the design of their supply chain and to review the design at least annually. They are three times as likely as sustainable supply chain laggards to believe that their business relationships with customers are materially dependent on their environmental stance; and they are substantially more likely than laggards to anticipate hard and soft payoffs from embracing sustainable business practices.

Based on this and other research I’ve done, here’s a short list of principles for sustainable supply chain success:

  • Listen to your customers – and understand that sustainability is increasingly a concern of theirs, and look for opportunities for competitive advantages.
  • Measure ROI, but be flexible about how to calculate it.
  • Be open to experimentation. Sustainability in the supply chain is an emerging area, and most companies are still learning. Be willing to experiment to find out what works.
  • Adopt a portfolio strategy: Mix quick-wins with initiatives offering a longer-term payoff.
  • Compelling strategies deliver more than cost savings. They also create new capabilities for customers.
  • Exploit all opportunities for cost savings from energy efficiency, transportation, and packaging.
  • Invest in public disclosure of GHG inventory through programs like CDP, as your competitors are or will do so soon.

I think it’s a pretty good look at sustainability in the supply chain. If this is an area of focus for you, I suggest you pick up a copy of the report. (I can get you a modest discount, too. If you’re interested, drop me a line.)

Have you identified principles for sustainable supply chain success? If so, please consider leaving a comment and sharing your insights.

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