Saving Green While Going Green
While good for the environment, supply chain sustainability can also be good for the bottom line if incorporated into a company's supply chain strategy.
In the past, most companies were concerned primarily with forward logistics processes, and, to some degree, returning product to suppliers. Today, companies also focus on reverse logistics processes, not only from a waste perspective, but also because of environmental concerns and how they can add value to customers and the bottom line.
Regaining Product Value
As a result of this shifting focus, supply chain sustainability has become a common term that encompasses the management of environmental, social and economic impacts, and sound governance practices throughout the goods and services lifecycle.
Another term has emerged as a result: green logistics, which refers to minimizing the ecological impact of logistics. An example is reducing the energy usage of logistics activities and the usage of materials. Reducing a supply chain's carbon footprint is a priority.
Environmental considerations greatly impact a number of logistics decisions. For example, many products can no longer be placed in landfills. As a result, many companies must take back products at the end of their useful lifetime. At the same time, landfill availability is decreasing, resulting in higher landfill costs.
Many products, such as cathode ray tubes in old TVs and computer monitors, are banned from being placed in landfills either because they present a health risk or because they take up too much space. Product bans represent a new reverse logistics opportunity. Because companies are forced to take back products when they are banned, they reuse the products and recapture their value.
Implementing Green Initiatives
Companies such as Hewlett-Packard and Xerox have adopted Extended Product Responsibility (EPR) programs, which focus on the product's total life and look for ways to prevent pollution and reduce resource and energy usage through the product's lifecycle.
Programs and processes such as product take-back and EPR are part of a strategy that has become known as closed loop supply chains, which are designed and managed to encompass both forward and reverse flows in a supply chain.
The reverse logistics activities of reuse, remanufacturing, refurbishing, and recycling have come to be known as the four Rs of sustainability. Many organizations now use the four Rs together in broad programs where they complement each other.
Other examples of companies using green supply chain concepts to their advantage include:
- Johnson & Johnson's energy efficiency program, which resulted in an estimated $30 million in annualized savings over the 10 years prior to the company's 2006 sustainability report.
- Nestlé, through a combination of packaging source reduction, reuse, recycling, and energy recovery, saved $510 million worldwide between 1991 and 2006, reports Eric Futin in The Establishment of Global Supply Chain.
Now and into the future, environmental considerations will have a greater impact on logistics decisions.