Carbon Trust: The business case for proactive action in supply chain resource efficiency
Businesses can make huge investment returns through a transition from a business-as-usual approach to delivering proactive action when addressing resource efficiency within the supply chain.
That’s the view of Carbon Trust consultant Marta Iglesias, who spoke at edie’s Supply Chain Conference in London earlier this week.
Drawing on the wealth of experience and expertise of the Carbon Trust in providing sustainable solutions, Iglesias highlighted the benefits of assessing indirect carbon emissions in the supply chain, which include efficiency gains, savings to the bottom line and ultimately increased revenue.
“Our work over the last 15 years from companies in many different sectors show that there are between 20-40% savings that can be implemented, with very interesting returns on investment on capital,” Iglesias said.
“If we take a large corporation which works with a first tier of suppliers that were all able to implement 20% savings on energy efficiency, this would result in an effect of £30-300m savings in energy. Certainly, part of those savings could be passed on to the large company, and this begins to build the case for working with suppliers and incentivising their performance.”
Last year, the Carbon Trust launched the world’s first certification standard for the reduction of greenhouse gas (GHG) emissions in an organisation’s supply chain. Iglesias explains that the measure’s introduction has resulted in many companies starting to take the initiative on reporting carbon emissions in the supply chain.
A small amount of leading groups have received the Standard for Supply Chain from the Carbon Trust standard. Heathrow airport recently became the first in its sector – and only the fifth organisation in the world.
Moreover, the Carbon Trust has supported companies such as Marks & Spencer & BT to articulate carbon abatement frameworks which provide an incentive for suppliers to improve in resource efficiency.
The organisation has also worked alongside global chemicals giant GlaxoSmithKline (GSK) with its new information exchange platform, which helps suppliers to share best practice on energy efficiency and reducing environmental impacts, which is expected to cut value chain emissions by 25% by 2020.
However, Iglesias recognises that not all companies are ready for such a sophisticated programme. In her view, sometimes the best option is to take a different approach of using the company’s procurement spending as a way to convert to carbon emissions and to analysis the intensity of their supply chains.
Iglesias insists that innovative approaches can reveal which suppliers and sectors are contributing most to the emissions, and indicate where efforts should be focused for a more strategic, effective programme.
“With some of our clients, what we do is actually help them build a quantifiable business case by analysing different possible scenarios,” Iglesias added. “We look at the physical impacts of climate change, technology developments, potential regulations and energy prices. We build these scenarios and analyse in cash-flow terms the difference between a business-as-usual approach and actually taking proactive action.
“From linear value chains to partially or fully-closed loops, these approaches can be very attractive when companies can take back their products, remanufacture and sell them on with similar guarantees to a new set of consumers. Certainly, the margins are available financially because of the savings in materials and the energy embedded in those materials, the financial savings are very attractive.”
A comprehensive approach to addressing the challenge of resource efficiency within the supply chain should not be undertaken in isolation, Iglesias contends.
Echoing the views of Mars Inc’s global sustainability director Kate Wylie who also spoke at the edie Supply Chain Conference, Iglesias insisted that that cross-sector and multidisciplinary collaboration is essential to ensuring that companies build sustainable supply chains at scale.
“One of the key elements to implement a successful sustainable programme is collaboration,” Iglesias concluded. “Not only externally with suppliers which is obviously very important, but also accelerate internally and with industry partners, technology companies, logistics companies, NGOs etc. This cross-functional collaboration of product development with procurement functions is really key to make a successful programme move forward.
“This is not easy in any case, with different time-frames and objectives, but the benefits and rewards for the companies that implement these programmes are very large.”