Supply Chain sustainability: problems, solutions and successes

“With great power, comes great responsibility”— Voltaire/Uncle Ben.

Amazon is an e-commerce behemoth. It had sales in 2012 grossing over $60 billion, and shows no signs of slowing down. While managing a very complex logistics network and supply chain is no easy task, the online retailer is unusually quiet about its energy efficiency and sustainability. While over two-thirds of S&P 500 companies release a sustainability report, Amazon remains silent. Furthermore, Amazon does not share its greenhouse gas emissions with the Carbon Disclosure Project. In recent times, the company has been criticized for its minimal attempts to reduce its carbon footprint.

In an era where large corporations are subject to consumer scrutiny, not being forthcoming with such information can cast an unwanted shadow on a company. The consumer expects to be privy to a transparent view of the supply chain, from the raw materials and manufacturing, to the energy used in the process. One must also bear in mind that the industrial sector uses up to nearly a third the Earth’s primary energy resources.

At the very least, Amazon has recognized the issue at hand. The online retailer has responded positively to a recently requested shareholder resolution from the Calvert Asset Management Company. They asked that Amazon’s Board of Directors to publish a report detailing what methods the company is using to manage sustainability.

The plot however thickens; if Amazon does not embrace improving sustainability and at least some transparency, then its competitors will. In fact in some cases, they already have.

Take Wallmart for example; besides mirroring Amazon by introducing a same-day delivery service, it has also implemented and created an index which rates their suppliers on their sustainability. The company is also not shy about flexing its corporate muscle to encourage suppliers to join its battle to combat carbon emissions.

So what should companies such as Amazon do in these circumstances?

They are fortunately not without options or suggestions from the world’s leading minds in supply chain energy efficiency. Last year, the University of Minnesota Institute on the Environment’s NorthStar Initiative for Sustainable Enterprise (NiSE) and the Environmental Defense Fund (EDF) collaborated and gathered 31 representatives from companies coming from diverse sectors ranging from academia to retail, for a two-day work-shop. They discussed, and attempted to find solutions for implementing more effective energy efficience in the supply chain. Their findings were published this year in August.

The report gave four key suggestions to improve supply chain sustainability, but at the heart of the recommended action, is that energy must be managed at each piece of the supply chain puzzle. Regions, organizations and industry sectors, need to be open to sharing data, common metrics and analytics. Collaboration is thus essential.

Equally crucial for large companies is a willingness to invest in their supply chains. This could mean offering financial support or providing guidance to get the ball rolling. It is not enough to simply set sustainability targets for suppliers or manufacturers, which are in all likelihood, without some aid unattainable. This is especially true in developing countries, where such processes are frequently outsourced. Making an initial investment of time and resources can go a long way.

One company that has been successful in this manner is IKEA. The Swedish furniture retailer is exemplary for assisting suppliers with a variety of challenges ranging from responsible procurement to sustainable energy practices. The company intends to put €1.5b towards renewable energy, such as in China, where IKEA announced it would not only begin to use solar panels in all the buildings it owns, but also install them in its supplier base. Through implementing such methods as well as working with Chinese suppliers to seek out the fastest return on investment, the company can cut utilities costs and reduce its greenhouse gas emissions.

Supply Chain sustainability is thus achievable, but requires a strong planning strategy and efficient network collaboration. What other requirements do you feel play a role in managing a sustainable supply chain?