Companies, at one level, are increasingly focused on Corporate Social Responsibility (CSR), including the Green Supply Chain, as a strategic objective, but are struggling to link those strategies with overall bottom-line success. They also lack the information needed to make many decisions optimally.
Those are the key takeaways from a new report from IBM on the “sustainable enterprise.” (To download the full report, go to: Leading a Sustainable Enterprise.)
It’s not just about being socially responsible, the report makes clear; it’s about doing so in a way that maximizes financial performance.
Unfortunately, how to do that in a rapidly changing world, in which both regulations and customer/consumer preferences are vague and equally dynamic, is anything but clear, and leaves companies with new and complex decisions:
“Can [corporations] cut down on waste without increasing the price of products? Do they need to rethink distribution options to reduce carbon and the impact of volatile energy prices? Should they segment products and services to meet a growing number of consumer sustainability concerns?” the IBM report asks. “The answers to these and other questions like them involve managing an intricate new set of tradeoffs.”
In the end, the report says improved information relative to CSR issues and performance is key – and most companies are very early in the journey.
The need for information regarding various aspects of corporate responsibility are large and growing for both internal and external needs – faster than most companies can keep up.
Interestingly though, IBM says the focus may be too much on external reporting to customer, the media, etc, rather than internal decision-making needs. That opinion was based on this year’s survey of more than 200 corporate executives worldwide.
“Our 2009 survey reveals that sharing relevant information to educate and inform stakeholders was a primary objective,” the IBM report says. “Interestingly, using information to optimize supply chains, transport and logistics, waste management and product lifecycle was a far less prevalent goal.”
Therein lies the opportunity, the IBM report says. It cites the example of Chinese shipping and logistics giant COSCO, which has been able to analyze its current carbon footprint and develop alternative logistics strategies to reduce carbon emissions.
COCSO calculated tradeoffs between carbon prices and consumption, logistics costs, carrier types and load capacity, information on product demand, customer service, etc. At the same time, it looked at alternative modes of transport, freight consolidation and network configuration strategies. As a result, it reduced the number of its distribution points from 100 to 40, reducing supply chain costs by 23% and reducing carbon dioxide emissions by 15%.
Another interesting example comes from the Dutch company Friesland Coberco Dairy Foods, which totally redesigned the way it makes baby food. Ingredients that constitute the flavor varieties are now added at a later stage in the supply chain, a change that can cut inventory and transportation by an estimated 127,000 miles per year, with corresponding carbon reductions, the report notes.
Improving Green Supply Chain Visibility
The report segments sustainability information into eight categories:
- energy management
- carbon management
- waste management
- water management
- sustainable procurement
- product composition
- ethical labor standards
- product lifecycle
What is meant by some of these categories are clear (e.g., energy management), others less so (e.g., product lifecycle). The report also says that “Outperforming organizations in our survey were significantly more likely to collect timely information about their operations,” but the basis for this conclusion is not clear.
Still, we liked this chart that summarizes the frequency with which the surveyed companies collect data across the eight categories listed below.
The report notes that few companies are getting much useful information from suppliers. 30% as of yet are not asking for information from suppliers across any of the eight categories, according to the survey responses.
In the end, the report challenges companies to really analyze what information they need to make informed, timely and relevant decisions relative to sustainability.
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