Trends-April 2008

Flipping through Backpacker‘s 2008 Gear Guide recently, I happened upon the magazine’s Zero Impact Challenge – a call to action for outdoor equipment manufacturers to design backpacks with “greener” footprints.

In the spirit of environmental awareness, the magazine featured five brands in the process of developing new packs that are lighter, simpler in design, made of recyclable or biodegradable materials, and reduce overall carbon output.

Mind you, only one of these new-age packs is currently on the market. Their hype is receiving some play, with the expectation that consumers will put down some green of their own.

Because sustainable manufacturing standards are still developing, Backpacker doesn’t rate products by carbon footprint yet – but all indications are that it intends to do so soon.

This means consumers will have to weigh whether purchasing a “green” backpack, arguably less durable than standard designs, is worth the $200 price tag. The marketing spin is clear; less apparent is where this demand is actually coming from and whether it is indeed sustainable.

Is the demand for carbon-light backpacks and sundry other consumer goods coming from the environmentally conscious, economically liberal buyer? Is it marketing and sales spin?

Or is it a result of cost-wary manufacturers looking to use less and/or more recyclable supplies, reduce carbon emissions, eliminate waste, and become good corporate citizens – all while padding the bottom line and towing the green one?

Walfried Lassar, Ryder professor and director of the Ryder Center at Florida International University (FIU) raised this question at the Green Supply Chain Forum this past February in Miami, Fla., co-hosted by FIU and Ryder System.

Playing devil’s advocate to a group of more than 100 transportation and logistics professionals, Lassar pondered, then provoked a panel of experts to consider whether the green consumer phenomenon might be nothing more than a fad.

If, as he suggested, the buying public is drawn to products that are environmentally sensitive, recycled, or carbon neutral, and willing to pay more for them, does that not suppose tastes could also change? Extrapolate this thought one step further: In a down economy, will consumers still pay more for carbon-friendly products?

Responding to Lassar’s query, Adrian Gonzalez, director, ARC Advisory Group and a forum panelist posed some questions of his own: “What does it mean to go green? Is reducing cargo emissions and global warming enough? Will consumers pay 10 to 30 percent more for green? This hasn’t borne out yet.”

Instead, Gonzalez argued that green awareness and compliance will ultimately fall somewhere between the supply/demand divide. “Regulations and mandates, rather than corporate goodwill or consumer demand, will drive acceptance,” he said.

Diane Mollenkopf, assistant professor in the department of marketing and logistics at the University of Tennessee, offered a counter argument, reporting that as businesses weigh profitability against sustainability, awareness assumes many forms – from stakeholder accountability and corporate social responsibility to sustainable development.

“Businesses must understand the tradeoffs. How does green compliance impact upstream suppliers and downstream customers?” she said.

In this regard, environmental efforts are very much driven by the corporation as it calculates “how much mileage it can get with a customer via green initiatives,” Mollenkopf suggested.

In the end, it may depend on the company. Consumer brands are ultimately driven by demand, noted Jay Falk, president of SRI World Group, a corporate social responsibility consultant.

The answers to these questions may be “all of the above,” as companies respond to consumer demand, economies of supply, and government oversight in their own unique ways.

Some are privately building the foundations for creating a leaner and greener supply chain footprint; many are building civic goodwill with much-publicized environmental efforts; others have no choice.

In terms of mandated requirements, European environmental regulations, notably the EU’s Waste Electrical and Electronic Equipment Directive (WEEE) effort, have pushed the envelope by legislating corporate commitment to designing, manufacturing, and recycling products with sustainability in mind.

Holding appliance and electronics manufacturers accountable for products when they are no longer usable, the WEEE mandate has forced companies to holistically reconsider product lifecycle management.

In turn, this places greater emphasis on driving visibility and creating scalability both upstream and downstream in the supply chain, from front-end R&D and procurement processes to aftermarket support and reverse logistics responsibilities.

By necessity, these companies are regulated to the point where they not only have to become environmental vanguards but supply chain leaders as well.

Where environmental manufacturing regulations have yet to be broadly enforced – in the United States, for example – many businesses are proactively creating better processes and benchmarks for reducing carbon footprints, manufacturing waste, excess packaging, idling times, and transportation routings.

It’s not simply a matter of creating and marketing a paradigm that looks good to consumers; it needs to look good to corporate investors as well. This requires a sea-change vision that begins at the top and trickles down.

Embracing supply chain sustainability therefore requires embracing green’s inconvenient truths, observed ARC’s Gonzalez. “We are currently treating the symptoms of non-sustainability – supply chains that weren’t designed with environmental compliance in mind,” he said.

To that point, supply chain green initiatives will be costly. “Green is good for business, but at what cost? We need to transform the DNA of supply chains and reshape consumer expectations,” Gonzalez said.

Stonyfield Farm is a perfect example of this new wave of thinking. Gary Hirshberg, chairman, president, and CE-Yo of the Londonderry, N.H.-based organic yogurt and dairy producer calls it “inventing the future.”

At the Green Supply Chain Forum he traced Stonyfield Farm’s organic legacy, while specifically detailing how it has achieved status as a green leader by targeting logistics and supply chain management efforts.

In 1994 it became the first U.S. manufacturer to entirely offset its CO2 emissions. Over the past 10 years, by improving efficiency at its New Hampshire yogurt-making facility, Stonyfield Farm has saved more than $1.7 million and 46 million kilowatt hours of energy – savings that represent enough energy to power 4,500 homes for one year, and prevent more than 15,400 tons of CO2 from entering the atmosphere.

While streamlining energy use (heat and electricity) has contributed significantly to these savings, Hirshberg acknowledged that supply chain costs contribute up to 90 percent of total carbon emissions.

Perhaps the only thing more remarkable than Stonyfield Farm’s success in reducing its global carbon footprint, then offsetting it, is that it has woven these sustainability strands into the helix of its supply chain.

“We reduced our logistics footprint by 40 percent by measuring carbon emissions, reducing LTL movements, and using more truckload transportation. My logistics people are my venture capital,” Hirshberg quipped.

As Gonzalez observed, Stonyfield Farm is reshaping consumer expectations, while showing businesses how far they can raise the green bar to accommodate a strategic corporate vision that delivers on the forward line and to the bottom line.

Spinning “greenism” to a certain consumer demographic is only part of the equation – embracing sustainable product development, and making it a core value chain component means converting the masses: consumers, supply chain partners, corporate shareholders, and employees.

These sustainability questions aren’t exclusive to any one industry – they are increasingly ubiquitous as green awareness penetrates the global marketplace and supply chain.

As businesses look to better match supply to demand and streamline transport and inventory carrying costs, sustainability efforts present an opportunity and a challenge.

For now, consumers will determine whether upgrading to a less durable, more expensive biodegradable backpack is a better gamble than a fix-it-yourself roll of duct tape. Manufacturers and retailers will decide for themselves whether marketing to demand trumps a sustainable grassroots supply chain.

In time, government regulation may very well force the issue. Then companies and their customers will have no choice but to play and buy the green card.

U.S. Ports Secure Funding

The Department of Homeland Security’s (DHS) recent allocation of $389 million in Infrastructure Protection Program funds to eligible U.S. port authorities—under the auspices of the federal Port Security Grant Program (PSGP)—provides a much-needed and anticipated capital infusion as efforts to secure global trade at home continue.

The decision fulfills a stipulation included in the SAFE Port Act that specifically authorized $400 million a year in grants for the program. This is the first year that the total allocation, less money for administrative purposes, has matched the mandated level.

The PSGP provides grant funding to port areas to protect critical infrastructure from terrorism. It is primarily intended to assist ports in training; enhancing risk management capabilities; domain awareness; and capabilities to prevent, detect, respond to, and recover from attacks.

As with the last round of port security grants in 2007, DHS has again pre-assigned funds to Tier I (L.A./Long Beach) and Tier II port areas (Savannah), where only the fiduciary agent of those port areas can apply for award grants.

The funds are then distributed to implement port area-wide risk management and mitigation projects, as well as continuity of operations plans. Tier III (Port Everglades) and all other eligible entities may apply directly for the funds.