Green leaders

In a struggling economy, making supply chains more environmentally sound isn’t as easy—or as clear a priority—as it once was. Deborah Aarts sits down with with six experts to find proven, cost-effective ways to go green.

Earlier this spring, with the recession still close in the rearview mirror, MM&D hosted a roundtable discussion to assess the state of sustainability initiatives in Canadian supply chains.

At the table were six industry experts: Jack Ampuja, president of Supply Chain Optimizers; Bob Dineen, president and general manager of Dominion Warehousing & Distribution Services Ltd; Bob Edwards, vice-president and general manager of Green Age Design; Barry Murphy, national sales manager at Wheels Group; Donna O’Reilly, vice-president of commercial financial services at RBC Royal Bank (which sponsored the event); and John Scheel, vice-president, supply chain at Grand & Toy.

A recurring theme in the discussion was the importance of creating green solutions that are really effective—from both an environmental and cost perspective—in today’s economic climate. As the panellists shared experiences and ideas, the following five best practices emerged.

1. Learn to identify greenwashing

The roundtable agreed on one fact: it’s easy to talk the green talk. These days, nearly every company has the word “sustainability” featured prominently in its corporate literature. With organizations of all shapes and sizes broadcasting the same message, it’s tough to separate the legitimate leaders from the greenwashers that deliver no real improvements.

That’s why it’s important, when evaluating suppliers or service providers, not to take sustainability claims at face value.

“A mission statement is only a meaningless line on a piece of paper if it’s not part of company culture,” Dineen said.

“Do companies actually live up to the mission that everyone externally—as well as internally—is looking at? Are they really doing the things they say they are?” Ampuja asked.

“The worst thing is for a company to say ‘we’re going to do something’ and then make zero progress. At that point, they’ve lost credibility entirely.”

What is the best way to make sure your partners are living up to their promises? According to Ampuja, it’s all about the data.

“Don’t just give me verbiage. Give me numbers,” he said. “I want to see actual reports and details on what you’re doing to prove that you’re green so that we can all line up together.”

He acknowledged that relatively few companies currently have the capabilities to do this, adding that it will be easier to do as companies become more sophisticated in measuring the environmental footprints of their supply chains.

“A lot of this type of measurement is immature at this point. We really don’t have good standards or good systems of doing it. But as the pressure builds and more people get on the bandwagon, we’re going to see those details flesh out and become much more real.”

Edwards identified external validation as a good tool to distinguish credibly sustainable companies, pointing out that the option is gaining in popularity.

“A good way to fight claims of greenwashing is to have some kind of third-party certification ready,” he said. Moreover, he added that all companies might soon be aiming towards a similar set of guidelines. “I believe there will be an international standard. Kyoto will drive it.

It’s not too far down the road.”

“It’ll be like the ISO registrations we were seeing 10 or 15 years ago,” added O’Reilly.

There’s nothing wrong with holding partners to set environmental standards, but Scheel warned that taking a strict approach may mean sacrificing relationships with good business partners.

“The problem with [environmental mandates] is that they really shrink the pool of people you can deal with,” he said.

“If you look at it from a vendor compliance point of view, initially, large companies are going to be much faster to be able to jump on board. A lot of smaller vendors don’t have the capital and resources to play. So consequentially it’s almost anti-small business; by mandating [rigid sustainability targets], you might be squashing opportunity.”

2. Lead—don’t follow—governments

Many in the supply chain industry have delayed going green until the federal government implements a comprehensive set of regulations.

Such rules—whether related to carbon caps, clean engines, waste production or any other environmental metric—would “definitely be drivers of change,” Murphy said.

While this prospect makes some uneasy, Ampuja said there is plenty of opportunity for shippers to take an active role in shaping policy.

“Governments don’t lead the public. They respond to the public,” he said. “So the onus is on business. If the public gets the feeling that business isn’t doing enough on green and sustainability, there will be a clamour, and the government will step in to help. If the public gets the impression that business is really out front doing things, there won’t be that kind of clamouring. So as businesspeople you’ve not only got to be doing something, you also must be broadcasting that information.”

Edwards chimed in to point out that the government can be an ally in building sustainable supply chains.

“Yes, government is regulatory, but it is also very supportive towards research and development,” he said. “Whatever efficiency you’re going for, you can go to them under the various programs that are out there and find dollars to put toward your test or your model.”

3. Get your service providers on board

The group went on to discuss whether shippers or service providers should bear responsibility for bringing sustainability initiatives to the table.

Some in the group said that carriers and 3PLs tend to be reactive, arguing that most would not be moving towards sustainability if shippers weren’t pressuring them. For these companies, going green is more a market-driven competitive differentiator than it is an act of altruism.

“If I don’t lead the customer to the solution and someone else does, I’ve lost that customer forever,” said Dineen. “If I lead him to the solutions, even if I have to take a short-term hit on it, it’s ultimately the right thing to do and the customer will stand by me.”

Ampuja pointed out that shippers interested in end-to-end sustainability have an obligation to ensure their partners are on the same page.

“What everyone is starting to realize now is how interconnected the supply chain is,” he said. “If I’m going to be green, I have to know my supplier is green. If my supplier is doing things that hurt my green efforts, then I’m in a vulnerable position.”

That may work well conceptually. But when it comes to implementation, Scheel backed a different approach. At Grand & Toy, he has often turned to 3PLs to take the lead in implementing green measures. Larger service providers have the wherewithal to invest in sustainability-related research and development, he said; they are the ones who know how to do things like maintain hybrid trucks or incorporate energy-efficient distribution centre technology.

“They can come up with something a lot better than what I’d ever be able to drum up,” he said. In fact, sustainability has become a cornerstone of the company’s service provider evaluation process.

“We have a corporate sustainability report prepared for us, and every carrier or vendor we buy from has to meet that measured standard…It’s a matter of us asking ‘how clearly can you tell us what you’re doing for us?’”

As a service provider, Murphy has noted many customers taking a similar tack.

“We’re finding more and more people interested in what we can do in terms of optimization of their networks and their supply chains,” he said. “At the same time, we’re also looking to talk to them more about converting their truckload business to intermodal rail or boxcar.”

This approach is win-win, he said, as it forces everyone to up the ante. Thanks in large part to such back-and-forth consultation with customers, Wheels Group was able to move 192,000 tonnes of freight by rail in the US last year. In doing so, it generated 19,483 tonnes of carbon—a 58 percent reduction from the 46,133 tonnes that would have been generated by truck.

4. Change the status quo

Scheel brought up an example of one operational change that has proven very successful in reducing Grand & Toy’s carbon footprint. The company had long offered customers next-day delivery as its standard service option. A relic of the days when sustainability was a fringe concern—if it was on the corporate radar at all—rush delivery was considered a cornerstone of the business.

When the company started to brainstorm ways to cut costs while improving its environmental performance, someone tabled the idea of giving customers the option to defer delivery. Even though the next-day guarantee was core to the business, the team figured it couldn’t hurt to ask.

“We actually went out to the marketplace and asked our customer base ‘does next-day delivery really matter?’ Almost immediately, 75 percent of our customers said ‘it doesn’t matter to us. We’re more than willing to take delivery in 48 or 78 hours,’” Scheel explained. “After all, it’s office products…We’re not delivering vital organs.

“I think there is value in getting the whole industry to change the [next-day delivery] paradigm. I think we’re working on something that was cool in the 1970s or 1980s. The world has changed.”

With such overwhelming support, Grand & Toy has started extending its delivery windows, and the benefits have been huge. Over-the-road trips are fewer and far more efficiently loaded, which has played a major role in reducing emissions. The change is also paying off operationally.

“From a supply chain perspective, you can imagine what the ability to lag your product by an extra 24 hours means. It gives you the opportunity to do things like consolidate loads and pick in batches. There’s a whole bunch of things that make it a lot more dynamic,” Scheel said.

The change played a role in reducing the number of Grand & Toy warehouses from seven to three. And those facilities are far more efficient; thanks to the company’s decision to consolidate volumes, workers can now pick in eight hours what used to take 16. That saves money for the operation and conserves a tremendous amount of energy. It’s just one example of a bottom-line-motivated project that is also helping the environment. And it wouldn’t have been possible without challenging the status quo.

5. Evaluate yourself

Scheel’s example fits with another best practice to emerge from the roundtable. Ultimately, the group found that the best way to facilitate meaningful environmental improvements is not implementing state-of-the-art technology or adopting rigid corporate mandates, helpful though they may be. Rather, it is the decidedly budget-friendly practice of taking a critical eye to what’s already taking place.

“My experience is that without any capital expenditure you can affect an energy budget by at least 25 percent by putting more effort into the existing infrastructure,” said Edwards. “You just have to work harder. You have to measure it and monitor it and know what you’re actually doing in your systems.

“If you put all the pieces together, plus conservation, plus managing your systems the way they’re supposed to be managed, you can get those overall rates of return for the project.”

“I think a lot of good has come out of the recession, because it’s forced a lot of businesses to evaluate everything,” O’Reilly added. “Two or three years ago they wouldn’t necessarily have been looking at where they could improve operational efficiencies to become more environmentally sustainable.”

Ampuja elaborated on her point.

“The supply chain is a big creator of carbon. So how do you reduce it? You try to manage the supply chain better,” he said. “There is a whole bunch of things that almost any company can do that are common sense. Take a closer look at load utilization or the number of miles that are run that you don’t need. You don’t need a lot of fancy software or outside help to get started. You just need common sense.”