Green supply chains -The best of planet and profit
Author: Abrie de Swardt - IMPERIAL Logistics
( Article Type: Sustainable Development )
South Africa’s Logistics sector has much to contribute as the country focuses more intently on issues of sustainability. Supply chains hold substantial potential to contribute to the achievement of ‘Vision 2025’, which aims to improve South Africa’s energy mix by having 30 percent of clean energy by 2025.
The business case for ‘green supply chains’ is highly attractive. By addressing the problem of carbon emission and environmental pollution, companies not only limit carbon footprint and waste, but optimise supply chain performance. In essence, it’s a balancing act that requires the identification of ways in which ‘green’ can increase revenue, reduce costs and nurture the environment. ‘Green’ must become the way in which companies manage their supply chains, across people, process and technology. Supply chains become leaner and greener through making the right procurement decisions, working closely with customers, business partners and employees, and the intelligent application of supply chain modelling aided by the necessary tools.
Our State of ‘Green Logistics'
The need for southern African businesses to green logistics and transportation in particular, is dire. The 7th Annual State of Logistics™ survey finds that freight transport is estimated to contribute roughly 8% of energy-related CO2 emissions worldwide. It emphasises that South Africa is the largest CO2 emitter from fuel combustion in Africa. Expanding on this, it points out: “The transport sector (freight and passenger movement) consumes 27% of South Africa’s total final energy, 78% of its liquid fuels and 1.6% of its electricity. In 2009, 23 million tons of greenhouse gasses were emitted in South Africa due to land freight transport activities. This amounts to 49% of transport emissions and just over 5% of total emissions for the country.” ‘Green’ initiatives should clear three hurdles, namely financial, environmental and social acceptability. Companies must become educated on the subject of sustainability – the technology and solutions that best suit their needs. Once this knowledge base is established, measurement of a company’s carbon footprint must be undertaken and change levers identified. Thereafter, business case supported initiatives can be pursued.
Notably, it takes a ‘green’ mindset from employees and partners to maximise its impact. This speaks to a comment by renowned supply chain expert, Dr. John C. Langley, Clinical Professor of Supply Chain Management and Director of Development for the Center for Supply Chain Research at The Pennsylvania State University, “We need to evolve, change and reinvent. We must manage our evolution of focus from supply chain organisations to supply chain consumers. We need supply chains that leverage core competencies, are able to change, adapt and be resilient.”
Zoning in on ‘green’ investment
Undoubtedly, investing in ‘green’ technologies and assets such as Euro5 vehicles, ‘green’ Distribution Centres (DCs) and zero-emission vehicle refrigeration plays an important part in the equation. Further assets needing to be greened include warehousing, fleets, workshops, wash bays and office buildings. Combined with behavioural change, use of greener assets makes for a compelling business environment. Renewable energy has significant potential that is not yet being effectively harnessed in supply chains. Consider the way in which electricity consumption for lighting purposes can be decreased simply by leveraging natural light in a warehouse. Or the way in which water run-off from a warehouse roof can be stored for vehicle wash bay usage. Use of solar power in South Africa can essentially provide energy for free, post payback period. In buildings, motion sensors are able to automatically switch off lights and air conditioners in empty offices.
Vehicle refrigeration is a further area that has potential to decrease a supply chain’s carbon footprint. Technologies such as the nitrogen powered, zero emission eco-Fridge are noteworthy. Importantly, South Africa’s first Euro5 fleet took to the road in 2011. Utilised broadly in European markets, these vehicles are equipped to lower carbon emission standards, with engines that run on low sulphur diesel and additives that further reduce toxic emissions.
Combating a regional water crisis
Better management of water, increasingly being referred to as ‘the new carbon’ is a critical area needing to be addressed. According to the CSIR Perspective on Water 2010 Report: “South Africa is a dry country. Although some parts have higher rainfall than others, the country’s average rainfall of 450 mm per annum is far below the global average of 860 mm per year.”
The State of Green Business Report (2011) notes, “Companies in water-intensive industries, such as beverages, semiconductors, electric power, and chemicals, have been increasingly addressing their impacts over the past several years. But now attention has trickled down to a broader array of companies, as the tide of attention reaches a new high-water mark.”
As significant water consumers, logistics businesses are no exception. The requirement? Once again to become educated about how to better manage this scarce resource, to measure our water footprint and implement water conservation initiatives within operations. Employee behaviour again comes into play to ensure optimal implementation of water saving initiatives.
Eco-environmental logistics collaboration
Companies are scrambling to grasp the importance of ‘green’ in the context of future business. Perhaps if one considers research from Georgia Tech (2002) that found the average failure of the supply chain equates to 10% of market capitalisation, the ‘green logistics’ evolution would gain critical mass. Closer collaboration between the public and private sectors would be fast tracked.
Dr. Langley’s noteworthy view is that co-suppliers have enormous opportunities for collaboration centering on logistics. He believes that “the payoffs start with lower costs but extend into even more important areas such as reliability, shorter cycle times, and greater flexibility. Multiply these benefits many-fold as more players get involved.” Nowhere is this collaborative approach more beneficial than in addressing sustainability. Creating ‘green supply chains’ is not a business trend that will die out. It is business that will die out if it does not integrate ‘green’ into its best practice. The beauty is that there is no choice between making economic sense and ensuring that environmental factors are addressed. The two are one.
