Archive for ‘Value Chain’

March 7, 2012

Is Your Supply Chain Prepared for the Future?

Dave Newman, Senior Strategist, Brightworks Enterprise Solutions GroupBy Dave Newman, Senior Strategist

The humble supply chain will undergo a dramatic change as our energy network and systems transition from oil (fossil fuel) to renewable energy. Which begs the question: Is your company ready?

A business’ success or failure always depends on its ability to source and deliver products and services to the marketplace. Let’s look at how that delivery has historically taken place, how it will change as our energy network changes and how smart companies are preparing themselves.

Supply Chain Evolution

A supply chain is a system of organizations, people, technology, activities, information and resources that move a product from a company or supplier to the customer.  Picture a relay race of many runners: Each participant moves the relay baton until it reaches the finish line or, in this case, the marketplace where the product can be purchased.

Reviewing the evolution of the supply chain gives us a valuable foundation to discover what it may look like in the future.

Pre-Industrial Supply Chain

Before the industrial revolution, most people grew, raised or hunted for their food. All basic needs were available in the nearby town mercantile. In early America, some products were imported from European nations, but they tended to be expensive and were available only to the more affluent and urban populations. Goods traveled by truly sustainable supply chains – across oceans via sailing vessels powered by winds and currents, and locally via horse-drawn wagons.

Pre-Industrial Supply Chain: Companies, Manufacturing and the Marketplace in One Location

Pre-Industrial Supply Chain: Companies, Manufacturing and the Marketplace in One Location

December 8, 2011

Four Trends in Corporate Sustainability

Dave Newman, Senior Strategist, Brightworks Sustainable Systems Groupby Dave Newman, Senior Strategist

This two-part post is the result of more than a dozen in-depth conversations with leading sustainability practitioners, most of them within Fortune 500 companies. We wanted to understand the sustainability trends these practitioners see to help us convey where, why and how leading companies are engaging sustainability to achieve their business goals.

This piece will explain the trends themselves. Part two will focus on how leaders are accomplishing their work and the first steps others can take to stay competitive.

In the last four months of conversations, we saw consistent sustainability themes emerge as companies move through the cycles of their business: from procurement and resource use to measuring and marketing. Leading companies are:

  • Acknowledging their supply chains
  • Examining their relationship to nature’s systems instead of single elements
  • Improving their data quality
  • Telling customers simple, memorable stories with that data

read more »

October 6, 2011

Are You Ready For The New Scope 3 Greenhouse Gas Emissions Standards?

Dave Newman, Senior Strategist, Brightworks Sustainable Systems Groupby Dave Newman, Senior Strategist

Ready or not, Scope 3 is here. And you’d be well advised to understand what it means for your business and prepare for its impact sooner rather than later.

Two new international greenhouse gas (GHG) emissions standards — known as Scope 3 — were launched October 4 at events in New York and London. They were released by the Greenhouse Gas Protocol, a global collaboration led by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).

The Greenhouse Gas Protocol previously released GHG emission standards for owned manufacturing and operations (known as Scope 1) and for purchased energy (known as Scope 2). The two are considered the de facto standard for global GHG emissions reporting.

Scope 3 ups the ante considerably. It enables companies to fully measure and manage emissions across their value chains and product lines for the first time. Researchers at Carnegie Mellon University have estimated two-thirds of U.S. industries would overlook 75 percent of GHG emissions if they neglect reporting on Scope 3 emissions.

Greenhouse Gas Emissions

The new Corporate Value Chain Standard helps companies discover the biggest opportunities to reduce emissions within those parts of their supply chain (manufacturing, transportation) they don’t own. The new Product Life Cycle Standard enables firms to measure the GHG emissions of an individual product, including its use by the consumer, using a credible international approach.

Among the businesses affected by the introduction of Scope 3 are consumer products companies whose value chains can stretch around the world, as well as suppliers to these companies. Scope 3 will lead companies to look both upstream and downstream in their value chain for ways to reduce GHG emissions, lower fossil fuel consumption and cost and decrease risk exposure due to future spikes in fossil fuel prices.

Here’s where it gets interesting. All companies are either producers or suppliers. And in one role or another, there’s a good chance your business will be brought into Scope 3 reporting — maybe happily, maybe kicking and screaming.

As a producer, you may choose to embrace Scope 3 and turn it into a competitive advantage. Or you may ignore Scope 3 altogether — until you can’t. At some point, a large customer is likely to ask your business to report your scopes 1, 2 and 3 emissions. At that point, choosing to ignore any of the scopes will no longer be realistic.

Walmart is the most prominent company to lean on its suppliers to report emissions and other sustainability measurements. However, that expectation or demand is becoming increasingly prevalent among larger companies and promises to gain momentum as Scope 3 reporting catches on.

Adopting Scope 3 proactively or in response to customer demand will seem daunting to many small to medium sized businesses. It will mean tracking GHG emissions, for example, from:

  • Employee commuting or from their choices of transportation and accommodations when traveling on business
  • Product movement as goods are transported from factory to store or warehouse; this would include factors that influence emissions, such as carrier type (air, ship, ground) and volume and weight of shipments
  • Materials, manufacturing, customer use and disposal of the company’s products
  • Firms that outsource their supply chain management may have little visibility into the makeup and sustainability performance of their suppliers. Similarly, they may struggle with how to gauge emissions from customer use and disposal.

Assessing, managing and reporting GHG emissions and other environmental impacts are fundamental steps for companies interested in mitigating risk (see our free webinar on the subject) and creating competitive advantage.  Our consultants have years of experience in sustainable design, manufacturing and transport for companies like Nike and for suppliers to major retailers like Walmart as they have managed Scopes 1 and 2. Clients like these sometimes need help to map their value chains and product lifecycle components to locate and gather the appropriate data, effectively engage suppliers to provide Scope 3 data and produce reports that are appropriate for customers asking for emissions data, or for other constituents interested in the client’s sustainability performance.

While Scope 3 may appear complex and confusing, the two new standards have been in development for more than three years with numerous stakeholder events, multiple drafts, comment periods and road testing by more than 60 companies. So the Greenhouse Gas Protocol has taken good care to address and remove obstacles to rapid adoption of the new standards.

The question is: are you ready to add Scope 3 to your list of sustainability advantages?

September 13, 2011

Manufacturer Value Chains: Turning Sustainability Risks into Opportunities

Dave Newman, Senior Strategist, Brightworks Sustainable Systems GroupBy Dave Newman

Senior Strategist, Brightworks Sustainable Systems Group

Businesses with global value chains can find any of their three core responsibilities – meeting consumer demands and legal requirements while also making profitable products – suddenly disrupted by sustainability-related trends and impacts.

Sustainability related trends and impacts

Companies often have difficulty understanding how these issues may affect their value chain of suppliers, operations, customers and consumers. And if the issues are understood, how will they influence corporate strategy and deployment of resources?

We at Brightworks use a systems thinking approach that looks beyond the problem at hand to include all the related possibilities. Systems thinking enables companies to design and implement strategies that reduce market uncertainties.

How Unsustainable Practices Create Risk

The risks and uncertainties inherent in emerging sustainability trends and impacts can be illustrated by several examples:

  1. Energy costs: A primary economic threat for most companies, and especially in extended value chains, is the unpredictable, volatile cost of energy, mostly tied to the cost of oil. Oil is the material basis of many products and provides the primary feedstock to transport goods from manufacturers to markets across the globe. So, what happens when the price of oil rises from $90 a barrel to $125…$150…$200? These price fluctuations put profitability at a high risk.
  2. Consumer expectation: Consumers and customers vote with their dollars every day when they purchase goods and services. Growing numbers of global consumers do care about their environment and want to purchase products from companies they believe are good corporate citizens.
  3. Pressure from business: Businesses are also dictating the demand for sustainable practices among their suppliers. Walmart, for instance, introduced a Sustainability Index in October 2009 to their largest suppliers. Their goals were to help create a more transparent supply chain, accelerate the adoption of best practices, drive product innovation and ultimately provide their customers with information they need to assess a product’s sustainability. If a supplier receives a failing score, it may at some point be dropped as a Walmart vendor. Other well-known companies, including Proctor & Gamble and Staples, have introduced sustainability scorecards, ratings and performance targets for their suppliers. Expect more businesses to introduce environmental programs targeted to their suppliers. Those suppliers ignorant or dismissive of this trend stand to lose business.
  4. Legal risks: In 2009, the State Council of China announced that China will commit to reduce its carbon intensity (defined as a reduction in CO2 per unit of gross domestic product) by 2020. It is highly likely that the carbon intensity goal will bring with it a similarly serious commitment and effort on the part of the Chinese government. For many businesses, the Chinese commitment provides certainty. That’s not the case in the U.S. The Environmental Protection Agency formally declared that carbon dioxide from the burning of fossil fuels poses a threat to human health in 2009. However, this “endangerment” finding has been challenged in federal court. No one in the U.S. can be certain EPA or Congress will establish any CO2 regulations.

Turning Risk Into Opportunity

With risks like these posing threats to manufacturers, no wonder leading companies are planning ahead instead of waiting to be disrupted.

Consider, for example, Nike’s goals for footwear manufacturing: zero waste, zero toxics and 100% closed loop systems by 2020. Waste from footwear production was substantial and often was incinerated or sent to landfills. In pursuit of its goals, the company sought to reduce post-manufacturing waste and responsibly manage its disposal. If Nike had viewed this as an issue-specific, isolated problem, it might have mitigated the risk by simply purchasing a different feedstock or attempting to recycle more. By viewing the solution as part of a connected system, Nike was able to achieve greater environmental and business results.

Post-production rubber from the creation of outsoles produced one of the largest waste streams. So the footwear sustainability team developed markets for post-production rubber. One buyer was Nike itself. Once the post-production rubber was ground up, it could be used as feedstock for rubber outsoles. Working with the footwear design team, Nike began to market “regrind” rubber in various models and use it for up to 5% of the rubber outsole.

The company then looked to develop markets in Asia and the U.S. for regrind rubber. One such market was artificial athletic fields that used reground, used tires. Nike successfully positioned its regrind rubber as superior. For example, it could be sorted by color, contained zero additional materials and did not mark footwear and field equipment.

Through the sustainable footwear team’s vision and action, Nike was able to meet corporate waste goals, responsibly manage factory waste and create income from royalties by licensing “Nike regrind” to artificial field developers.

A Lesson in Systems Thinking

Any enduring initiative within a business, including sustainability, requires a comprehensive approach. By focusing first on a set of goals to chart their course, and then viewing their goals and challenges as an interrelated system rather than an isolated problem, Nike reduced one of their manufacturing waste flows and transformed it into top line revenue growth.

All businesses run their own sustainability risks, especially if they sell to consumers or manufacture products. And like Nike, they have access to these corollary sustainability opportunities. Systems thinking helps businesses spot these opportunities and better position themselves to withstand the changing environment of regulation, consumer demand and energy volatility.

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