Green up your supply chain

For companies not yet able to access the carbon allowance trading market, managing supply chain emissions is increasingly being viewed as a way to cut energy costs.

Over 50 percent of an average company’s carbon emissions typically come from the supply chain rather than from within its own four walls. Companies are now seeing a return on investment (RoI) from embedding sustainable practices into the procurement function, with more than 50 percent of large businesses and 25 percent of their suppliers experiencing cost savings as a result of carbon management activities in the past year.

These numbers come from a supply chain report recently published by investor-backed group the Carbon Disclosure Project (CDP), which looks
at the climate change actions and performance of 57 leading global companies and 1,000 of their suppliers across a broad cross-section of industries.

According to the CDP, 86 percent of the surveyed companies saw commercial benefits from working closely with their suppliers to improve performance and mutual return on investment, a robust increase from only 46 percent in 2009.

PepsiCo, for example, has uncovered more than $60m (£37m) in energy savings opportunities across its beverage plants as a result of its carbon management strategy.

Walter Todd, vice president of operations, PepsiCo UK & Ireland, said: “By providing suppliers access to the same energy assessment tools we use in our own operations, we have seen mutual RoI.”

How to do it

1 Using sustainability criteria to select suppliers When purchasers have more demand power, and suppliers have relatively little, sustainability requirements can be integrated into a request for supplier tenders, and there are opportunities to deselect suppliers that do not meet target expectations

2 Reducing external demand for carbon The most effective strategy is often simply to reduce demand. Travel is an example of a category area that meets these conditions. Video conferences can be used instead of flights, and rail travel is substituted in place of plane travel where appropriate

3 Improving carbon performance with suppliers Use a collaborative process to improve performance and manage sustainability with a selection of suppliers. Examples include moving production in-house, which resulted in big emission and waste reductions and cost savings

Source: Carbon Disclosure Project