Our exclusive industry survey shows that momentum is moving CEOs and other company leaders to put sustainability into a supply chain context
Tuesday, February 09, 2010
By Tom Andel, Contributing Editor
Environmental sustainability is becoming synonymous with business sustainability. That’s because saving the environment is becoming a required business practice among supply chain partners.
If you do business with Walmart, you know this already. If you want to do business with Walmart—or any of its competitors and supply chain partners for that matter—environmental sustainability has probably been a popular topic of conversation at many meetings.
Is all this talk just talk, or are we seeing what used to be a lot of hot air being converted to useful energy?
To find out, Material Handling Industry of America (MHIA) did a survey of material handling and logistics professionals across a broad range of industries. The replies from nearly 200 of these leaders show that although environmental sustainability efforts may start for company-centric reasons, supply chain momentum is having out-of-the-box results.
Link-centric thinking
Environmental sustainability efforts often start slowly and reluctantly. However, it looks like industry has reached a point of no return.
Only 21% of our survey respondents indicated they have not set sustainability goals for their logistics operations. The majority either indicated they have (53%) or they may (26%).
Internal mandates are the strongest driving force for sustainability practices (63%). Only 10% of these programs were initiated by trading partners. Federal, state and local incentives motivated 15% of respondents with goals in place.
For those whose mandates came from within, in most cases it was at the CEO’s instigation (42%). Other C-level people also exerted influence (23%), followed by department heads (14%).
Energy efficient lighting and greener packaging methods proved most popular in the drive toward sustainability (68% and 63%, respectively). Equipping material handling systems with more efficient motor controllers showed 46% of the time. Upgrading the efficiency of their HVAC systems (40%) was also popular.
Converting IC lift truck fleets to electrics proved to be a surprisingly popular option at 33% of respondents. It’s surprising because the majority of lift trucks in use today are already electric, so it may be that this proved to be the lowest hanging fruit still available for some.
With all these options, 9% have still chosen to do nothing—at least yet. They did provide excuses, however. A full 39% of them said that sustainability was either a longer-range plan or that current economic conditions make sustainability a lower priority (33%).
Green’s not contagious--yet
Do those who have taken action believe they’re making a difference? The vast majority (82%) believe these actions have had some environmental impact. Almost as many (79%) believe they also have some economic payback. However, while these actions have proven rewarding, 70% of respondents indicated they did not follow anyone else’s lead in establishing their objectives.
Furthermore, only 24% are making sustainability a supply chain issue by asking suppliers to meet sustainability standards, although 34% are considering it. A solid 43% majority have no intention of putting their suppliers on the spot—at least through next year. However, of the 43% that indicated they are not now asking suppliers to turn green, 37% said they would in the coming year. And 35% of them indicated they would make sustainability a condition of doing business with them. Forty-two percent would consider making such a mandate.
Just how green?
Of those who are making sustainability mandatory for suppliers, 35% are also asking them to measure their carbon footprint—to put a number on their greenhouse gas emissions. Almost half (45%) of them won’t go that far, but 19% are considering it.
While we did indicate only 10% of respondents have received sustainability mandates from customers, 32% of all respondents said their larger customers are starting the ball rolling by setting standards. Meanwhile, 18% said larger customers are considering it. However, if they haven’t heard anything about a sustainability standards mandate from large customers, 76% said they probably won’t in the coming year. The remainder expect to get that call in the next 12 months.
For those respondents whose larger customers have asked them to meet certain sustainability standards, 49% indicated it was a condition for doing business with them and 30% said these customers were considering a mandate. Where a customer mandate already exists, 41% indicated that mandate includes measuring their carbon footprint. Nineteen percent indicated that exercise, while not yet mandatory, may soon become so.
The color of money
This brings us to the question every business manager looking down the end of a loaded mandate wants answered: how much will it cost?
Expectations range across a wide spectrum. Some (27%) say between $10,000 and $50,000. The next greatest expectation (22%) was between $100,000 and $500,000. A solid 16% expect to spend more than $1 million, while 14% lowballed their guess at between $1,000 and $10,000. Nobody expected to pay less than $1,000.
Of those without mandates at this time, 20% don’t expect to spend anything on sustainability initiatives in the next two years. The rest have budgets that range between $1,000 and $1 million.
Does sustainability have a payback?
Most who indicated they’ve made some investment—whether in HVAC systems, automated material handling systems, packaging or lift truck fleets—said reducing their greenhouse gas emissions has gone hand-in-hand with lowering their electric bills. Some indicated paybacks within two to three years. However, those schooled in “best practices” will tell you not to look for paybacks when it comes to doing the right thing.
Tom Andel has been covering materials handling, transportation, distribution, manufacturing, and supply chain management for 29 years. He is currently a columnist and blogger for Modern Materials Handling, and a contributor to Logistics Management, both Reed Business Information publications. He was a Jesse H. Neal National Business Journalism Award finalist in both 2001 and 2004, and has been an active member of the Warehousing Education and Research Council (WERC).
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