Climate Action 2011-2012

supply chain Management
steps to sustainability
Assessing the supply chain
for efficient production, cost
and reputation
By Frances Way, Programme Director at the Carbon
Disclosure Project (CDP)
It makes good business sense to assess the supply chain
for efficient production, cost and reputation. When this
is done with an awareness of climate change impacts,
it can uncover opportunities companies can capitalise
on. A value chain approach is required and for this to
be successful procurement teams and suppliers must
be educated in the risks that climate change presents.
Efficient use of energy in the supply chain can reduce
operating costs. Measurement is key to driving efficiency;
it not only provides a baseline but improves understanding
and highlights opportunities for improvement. Supplier
performance management should include greenhouse
gas (GHG) emissions management, and this can be
facilitated by scoring and benchmarking. Relationships
between buyer and supplier have to be transparent and
collaborative; your suppliers may hold the solutions.
In order to avoid catastrophic climate change and respond
to the challenge of increasingly scarce natural resources, we
need to decouple economic growth from GHG emissions
and move to a low carbon economy. Companies will be
required to make both strategic and operational adjustments
throughout their value chain by focusing on efficiency,
transparency and performance management. It will be
challenging but this is a predictable industrial revolution
with significant opportunities that companies can plan to
capitalise on. The management tools they require follow
the same principles as those already used to assess efficient
production, cost and reputation.
The value chain approach
A value chain approach to carbon management considers the
impacts from production to consumption of a company’s
products. Increasingly companies look beyond the invoice price
of materials to consider the total acquisition costs associated
with how the materials are handled, stored and disposed of.
Taking a value chain approach to climate change impacts
includes assessing the packaging, transport and processing of
the materials. Volatile energy prices have motivated companies
to focus on the energy use of their suppliers, and the energy
efficiency of the products they provide to consumers. Imperial
Tobacco Group in 2011 began to turn to suppliers’ Carbon
Disclosure Project (CDP) reporting history to check their
energy use and climate risk management, before granting
price increases due to energy costs.
Like the bulk of the iceberg, much of your climate change
risk could be below the surface in your supply chain.
Procurement professionals also need to think about the cost
of stock shortages and whether changes in weather patterns
and extreme weather events are likely to disrupt supply chains.
We need to decouple economic
growth from GHG emissions and
move to a low carbon economy.
Devastating floods in Pakistan led to soaring cotton prices
at the end of 2010, which impacted the operating margin for
Primark and the share price of its parent company Associated
British Foods. The exposure of child labour issues in apparel
supply chains revealed that consumers expect companies to
look after their whole value chain – and failure to do this can
have a serious impact on their reputation.
educaTe and share knowledge
Climate change and carbon management may be familiar
terms but the details around their impacts are not common
discussion topics for buyers and suppliers. Internal training
workshops for procurement professionals and supplier
summits are effective forums for raising awareness, sharing
knowledge and motivating individuals to drive action. In
2010 Bank of America held a two day global supply chain
conference, ‘Partnering for a Sustainable Future’. It was
attended by Bank of America employees and about 400
representatives from 100 suppliers.
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145 climateactionprogramme.org