Turning up the heat on British business

Achieving environmental best practice in a company's supply chain can have a very positive impact on profits, says Caroline Brown

Last year the Stern review heightened concerns about the potential impact of climate change on the global economy by claiming that the world's GDP would shrink radically if these issues went unaddressed.

As a result, the UK government has proposed new legislation and introduced new initiatives to slow down the impact of global warming on our nation's future economic prosperity.

This, coupled with increasing pressure from external stakeholders for companies to adopt green practices, has led many businesses to review and evaluate their operations, and in particular their supply chains. In light of this, auditing processes and management systems have been devised to facilitate this work. Many companies are now beginning to use auditing and management systems to switch to more sustainable ways of operating.

The Stern review estimated that the overall costs and risks of climate change would be equal to losing at least 5% of global GDP each year, with the possibility of reaching 20% if disregarded. The report further identified measures for reducing greenhouse gases through carbon pricing, which include green initiatives such as global carbon trading schemes and green taxes on business.

As a result, the government has taken measures to diminish the detrimental effects of greenhouse gasses and carbon emissions on the environment. By working in association with other organisations, Defra is funding a number of programmes to encourage business to reduce emissions, which include the climate change levy, climate change allowances, and energy trading schemes.

The government's overall aim is to achieve change by working in partnership with other nations to implement a long-term framework, which will lead to a low-carbon global economy. As such, it has proposed the introduction of a new climate change bill, which coincides with its long-term plans to cut European-wide carbon emissions by 60% by 2050.

Thousands of companies and organisations in the UK are not yet covered by the current EU schemes limiting carbon emissions. But the proposed bill, which is set to be implemented across the country, would draw them into the net and could potentially result in heavy fines and legal costs.

Businesses today need to be conscious of both external stakeholders such as investors and consumers and internal audiences - employees - all of whom have the potential to make a detrimental impact on each business's profitability if their environmental concerns are ignored. Faced also with growing legislation on carbon emissions, companies are becoming increasingly aware of the need to go green.

Consciousness of the problem itself and the impact of new legislation are driving businesses in all sectors to review and develop their environmental performance. One key area of a company's environmental commitment is its supply chain procurement and management process.

The corporate objectives of any company should include a study of its procurement techniques. This element can contribute towards achieving sustainable development by ensuring that suppliers, contractors and the products and services concerned are sought and obtained from those who themselves are committed to best environmental performance.

Today, the government is driving sustainable procurement as one of its key elements of overall sustainable development of business. This involves a company taking environmental, social and economic factors into account in considering what products are made of and where they come from.

By considering these issues, companies can benefit immensely, through funding from government-operated schemes as well as building a more positive corporate image among key stakeholders, even reducing business costs.

Depending on the sector in which a company operates, its supply chain may not be as simple as purchasing a product, manufacturing it and selling it on to the end user. Nevertheless, the majority of companies have supply chains of some sort. And achieving environmental best practice across this element as well as the rest of the business's activities can be highly rewarding.

Pinpointing the environmental strengths and weaknesses of a company's supply chain is essential. This can be undertaken via an audit, designed to identify a company's current compliance with environmental legislation and best practice.

The auditing process would be measured against the requirements of relevant legislation including, the Environment Agency's Pollution Prevision Guidelines, and the International Standard for Environmental Management Systems BS EN ISO 14001.

In addition to boosting environmental credentials, the positive financial impact on business is potentially great. The audit can often lead to cost savings by identifying over-burdensome procedures and practices, or more effective means of achieving the same goals.

Numerous systems exist. One such is National Britannia's Corporate Systems Audit, which has three principal steps based on the individual specifics of the company concerned. In general practice, the first step of this specific audit would assess the compliance status of the company with environmental legislation by inspecting current documentation. This could include the company's current environmental policy, its environmental manual, and a review of arrangements responding to an environmental incident. More specifically, in analysing a company's supply chain operations, this would include energy consumption, use of delivery vehicles and analysis of other forms of emissions outlets would be scrutinised.

Each audit relates specifically to the company and indeed the sector in which it operates. For example, the Environment Agency rates chemical companies as one of the highest polluting outlets.

Following the initial review, the results would be evaluated and the significant strengths and weaknesses of the company's supply chain operations and other businesses elements highlighted.

This would then lead to identifying a basis for managing the environmental impact of the organisation concerned, which would also highlight existing strategies, arrangements and management practices that are beneficial to the environmental.

The final stage of the audit would include the production of an environmental action plan, setting out existing arrangements for environmental management of the supply chain and other key elements, including the level of implementation.

The environmental action plan would give clear recommendations for improvement with each item prioritised by level of risk, likelihood of enforcement action, and liability involved in not being able to demonstrate compliance. Tasks would be identified to ensure clients achieve cost-effective continual improvement in environmental management.

Following the audit, the key step of monitoring and maintaining the effectiveness of the supply chain is by implementing a management plan.

This would ensure the company would be achieving its environmental goals in improving its supply chain and other business-related operations, also guaranteeing that it complies with environmental legislation.

A number of software packages exist to manage a company's supply chain and diverse business operations, which includes National Britannia's web-based environmental management system, Environmentcheck Interactive.

The risk-based system, benchmarked against all applicable environmental management legislation, presents tasks through a series of checklist questions, the frequency of which is directly related to the level of risk. In terms of supply chain management, this could evaluate the energy or waste management systems in all elements of the operation.

The system includes procedural guidance in relevant areas and templates to allow all relevant information to be recorded, including environmental monitoring records and environmental training records.

The system can also prevent legal comebacks. In cases where companies are charged for breach of the measures, this system would allow them to demonstrate proof which would protect them against breach of environmental legislation.
Caroline Brown is head of operations in the environmental division of the National Britannia Group. Call 02920 852852 for more information

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