Inside Logistics

The business case for supply chain sustainability

While efficiency is essential, meaningful attempts to reduce environmental impacts are now an equally important aspect of successful supply chain operations


July 8, 2015
by Duncan Wilson

Duncan Wilson is VP corporate social responsibility, Port Metro Vancouver

Duncan Wilson is VP corporate social responsibility, Port Metro Vancouver

Gone are the days when productivity was the main, if not sole, measure of supply chain excellence. While efficiency is essential in our industry, a demonstrated awareness of and meaningful attempts to reduce environmental impacts are now an equally important aspect of successful supply chain operations.

Aside from being the right thing to do, incorporating sustainable practices into supply chain operations makes good business sense.

Organizations that effectively manage environmental impacts, and are receptive to the concerns and interests of local communities, enjoy greater levels of public trust, stakeholder confidence and long-term stability. Those that don’t face increasing risk and uncertainty that can threaten their bottom line and, ultimately, the viability of their business.

When considering the pressures, uncertainties and risks that exist now–and even more so in the future–it makes the question of how to sustain value creation all the more important. Which is why sustainability is an increasingly important driver of long-term value for businesses across the supply chain.

Planning
The first step towards sustainability is defining what it means for your business. It starts with engaging your organization and key stakeholders—from industry, government and local communities—to identify common ground and build a collective vision for the future.

For example, our Sustainable Gateway Definition Initiative–an ambitious vision for a world-class sustainable port in Vancouver–was developed with extensive input from our stakeholders. As was our Port 2050 scenario planning process, which examined a variety of possible growth trajectories and what each would mean for port operations.

This type of proactive planning and long-term thinking helps reduce uncertainty for our operations, as well as those of our customers and stakeholders. It also ensures our organization will be in the best position possible to remain competitive by leveraging our assets, playing to our strengths and mitigating potential risks.

Programs
Sustainability programs can and should benefit both the environment and business.

Programs must strike a delicate balance of reducing environmental impacts while enhancing business productivity. For instance, through our Smart Fleet Strategy, we have outfitted all trucks licensed to operate at the port with GPS units and are developing a common reservation system, meaning trucks will operate more efficiently and spend less time idling in traffic.

It is also important to carefully weigh the financial burden of any program. In 2015, we were the first port in Canada to address diesel emissions from operating equipment. Our Non-Road Diesel Emission Program is aimed at reducing diesel particulate matter associated with terminal operations and cargo handling equipment.

The program instituted a fee for the operation of older, dirty equipment. However, before launching it, we undertook extensive financial modeling to ensure fees would not cause undue harm to a terminal operator’s bottom line.

As some environmental programs will involve upfront costs, one way to encourage participation is through incentives. Our EcoAction program, which reduces emissions from ships, offers operators up to a 47 percent discount on harbour rates for vessels that go beyond required emission reduction levels. More than 500 ships participated in our EcoAction program this past year, which was the equivalent of removing approximately $1 million from Port Metro Vancouver’s revenue stream—a cost we are ready to absorb because the risk of not addressing environmental impacts is simply too great.

Businesses that produce environmental impacts, as many in the supply chain industry do, only need to consider the potential risks of not taking action, such as being the target of collective action, legal fees or operational disruptions, to immediately see the business case for sustainability.

Relationships
Fostering respectful and mutually beneficial relationships with local partners is also an essential component of supply chain sustainability. Without their support, our industry would be unable to operate in and around local communities.

For a relationship to be respectful, businesses need to consider and, where feasible, accommodate the input of local stakeholders. For supply chain operators, that can mean reviewing operational impacts on traffic flows and noise levels. To make the relationship beneficial, businesses should seek out opportunities to give back and tailor their support to the needs of local communities.

Transparency is also critical to building trust that forms the bedrock of these relationships. Businesses that demonstrate accountability enjoy greater public acceptance. An example is an annual sustainability report, which provides the public with a comprehensive overview of operational, environmental and social performance.

Lastly, healthy, productive relationships require sustained engagement. Businesses should maintain a presence in key local communities. Some options include assigning permanent staff and office space, participating in relevant committees, as well as holding or attending local events that provide an opportunity for both official and unofficial community consultation.

Sustainability is not easy. It means thinking years, if not decades, in advance. It often demands forgoing short-term gains in exchange for long-term benefits. But incorporating sustainability practices today is what will ensure there is a business to grow tomorrow.