Can You Build a Carbon-Efficient Supply Chain?

"Green" aspirations top the business agenda in 2008, and that starts with an examination of a company's supply chain. But determining the carbon footprint of any supply chain is a complicated, expensive and uncertain endeavor.

By Thomas Wailgum
Thu, January 03, 2008

CIO — There's no shortage of green initiatives growing from companies' marketing departments. Yet while CEOs and marketing chiefs may be demanding greener operations, most supply chain execs don't know where to begin.

In a recent Forrester Research report, analyst Patrick Connaughton notes that "tightening regulatory pressure and pervasive media attention are moving supply chain sustainability issues up the corporate agenda." But, he continues, "surprisingly, very few companies are measuring the environmental impact of their supply chains today."

Then there's the nagging question of just how much consumers care. "Consumers have expressed in surveys that they are interested in this," says Edgar Blanco, a research associate at MIT's Center for Transportation and Logistics. "But in the key moment of purchase, it's unclear how much more they are willing to pay. And that's what companies are struggling with."

The problem, say researchers, lies in the intricate nature of supply chains. These webs of suppliers interact with multiple partners (and their partners, and their partners). How does a company figure out which emissions are its responsibility? And how much will it cost to reduce them? Blanco says companies have a long way to go in order to fully comprehend the size and scope of their carbon footprints.

Complex Carbon Calculations

When it comes to how much green initiatives actually cost companies, estimates can vary widely. For example, an August 2007 survey of 1,400 "key players" in the real estate and construction industry found that they misjudged the costs and benefits of green buildings.

The survey by the World Business Council for Sustainable Development (WBCSD), found that respondents had estimated the additional cost of building green at 17 percent above conventional construction, which the WBCSD contends is more than triple the true cost difference of about 5 percent. Survey respondents also estimated greenhouse gas emissions by buildings at 19 percent of the world's total, though the WBCSD claims that the actual number is 40 percent.

For the supply chain, Blanco says, there are no reliable benchmarks that can offer companies a ballpark figure of just how much they'll have to spend to green their supply chains.

Here's why. According to Blanco, a representative from an electronics manufacturer described to him the complexity relative to the carbon footprint of its printer products: 10,000 parts from 5,000 suppliers who in turn have 3,000 partners. "Companies have information on their immediate suppliers, buy beyond that they don't really know," Blanco says.

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