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Pump Up Green Supply — Or Else

October 2nd, 2006 · by Tim Minahan · 2 Comments · enviro/social sustainability, supply management

Last week SpendMatters leader Jason Busch accused me of stumping for former President Bill Clinton in my post on the Global Clinton Initiative. That characterization may have been apt years ago when I tracked the overhaul of federal procurement policies during the first Clinton Administration. (I will not divulge my current political allegence.) However, my recent post was apolitical. It was intended to be a wake up call to supply management and C-level executives on the need to develop environmentally and socially responsible supply strategies. 

My encouragement is not a pie-in-the-sky, do-good pep talk. Sustainable supply methods are now critical to enable globalization strategies, reduce costs, and assure supply. Even ardent right-winger Bill O’Reilly last week said he agreed with Clinton (and Al Gore) on the need for U.S. businesses to wean themselves off of fossil fuels as a matter of competitive advantage.

Examples of how sustainable supply strateiges can provide a competitive edge are plentiful. An earlier post here showed how an aggressive PC and monitor recycling has helped Hewlett-Packard gain supply cost, assurance, and performance advantages over competitors who are now scrambling to offset higher gold and copper prices. Likewise, Starbucks and WalMart are using environmentally and socially responsible supply approaches to gain cost and marketing advantages.

If that’s not enough of a motivator, new governmental policies could force your hand on sustainable supply strategies sooner than you think. California last week became the first state to impose limits on gases suspected in global warming. Under the plan, California pans to cut carbon dioxide emissions by 20% by the year 2020. Supply managers doing business in California will need to be cognizant of CO2 emissions in order to avoid taxes or fines. Upon signing the bill, Republican Governor Arnold Schwarzenegger said the move, which will launch a myriad of California-based “clean technology” startups such as those focused on cellulosic ethanol production will “pump up the economy while protecting the environment.”

The new law follows California’s move last year to introduce new regulations to reduce hardardous wastes in high-tech manufacturing. It also portends a new wave of state, federal, and global regulations aimed at cutting greenhouse gases and eliminating the use of hazardous materials in products and manufacturing processes. Other regulations that will push enterprises in every industry to begin embracing sustainable supply management strategies include:

  • Environmental regulations against hazardous materials in electronics equipment, including China, Korea, Japan, Argentina, and the states of Maine, Maryland, and Washington. And new environmental regulations are being extended to other industries, such as chemicals, automobiles, and wood-based packaging.
  • European Union’s Restriction of Hazardous Substances (RoHS). The law, which went into effect July 1, prohibits the use of parts that contain lead, mercury chromium, and other hazardous substances.
  • Europe has also launched the Waste Electrical and Electronic Equipment Directive (WEEE), which requires every country to recycle at least 4 kg of e-waste per capita by the end of 2006.

Such regulatory pressure will force companies to wake up to the need for sustainable supply strategies. In light of this fact, I will repeat some recommendations to put into your compliance toolkit:

  • Become your company’s resident expert on pending environmental regs and assessing their potential impact on supply markets. (The above links offer a good primer on what’s coming down the pike.)
  • Build cross-functional product compliance teams — consisting of design engineers, commodity managers, manufacturing, marketing, and aftermarket service managers – to embrace a “design for the environment” approach to ensure compliance for future products. Be sure to incorporate recycling, reuse, and disposal factors into your design plans. And consider ways to turn environmentally sound products into marketing boons that yield both higher prices and profits. (Hey, this strategy has been working for Starbucks and organic farmers.)
  • Enhance demand- and supply-planning capabilities to ensure supply strategies support your company’s compliance goals.
  • Nuture long-term relationships with critical component suppliers to ensure supply of critical compliant and non-compliant parts.
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2 responses so far ↓

  • 1 Supply Excellence » 2007: The Year of Sustainable Supply Strategies // Jan 2, 2007 at 11:13 am

    [...] Such myopic thinking is based on the premise that environmentally or socially sound supply strategies are merely an added expense. If your approach is to only consider sustainable supply approaches in reaction to regulatory penalties, you’re doomed to failure. (But if fear your motivation for sustainable supply, here’s something that will certainly scare you into action.) [...]

  • 2 Supply Excellence » Sustainable Supply: There’s No Denying It // Aug 7, 2007 at 4:21 pm

    [...] Of course, I warned you that more stringent regulations were coming. But, as I noted before, the leaders in corporate responsibility and sustainable supply strategies are not viewing these approaches as an added cost of business. Instead, they are see sustainability as a way to operational and supply costs, increase brand equity and revenues, and penetrate new markets. (It didn’t go unnoticed that the fastest growing business units for both DuPont and GE are those focused on sutainable energy and resources, such as cellulosic ethanol or desalinization technology.) [...]

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