Supply Chain Environmentalism directly impacts competitiveness and has been embraced by some of the world’s biggest companies.
Supply Chain Environmentalism is defined as the effort of the retailer community to recast the competition in the commodity marketplace by treating carbon dioxide (CO2) content as a differentiator for same-priced commodity products.
Think of one big box retailer competing with the others because its $1.39 screwdriver has 10 pounds less CO2 than their competitor’s $1.39 screwdriver. Think of “green labels” that allow the consumer to learn, with a glance, the CO2 emitted in the production and delivery of a product. Think of merchants competing for customers on the basis of whose product mix has been produced and delivered with the least amount of harm to the Planet.
In the new world of Supply Chain Environmentalism, the spoils of competition will go to those retailers who spoil the least.
Consumer Data Validates the Importance of Supply Chain Environmentalism
Credible data show that consumers are increasingly more concerned about the effects of CO2 emissions and energy use, and have developed an ever-growing recognition that immediate steps need to be taken to reduce those emissions. In a June 2009 survey by BBMG, three out of four U.S. consumers (77 percent) said they “can make a positive difference by purchasing products from socially or environmentally responsible companies.” Seventy-two percent said they have “avoided purchasing products from companies whose practices [they] disagree with.”
Investors are demanding change, too: U.S. and Canadian companies considered 68 global warming-related resolutions filed during the 2009 proxy season, up from 61 in 2008, according to Ceres, a national network of investors, environmental organizations, and public interest groups. Nearly half of those resolutions filed this year were withdrawn when companies agreed to make climate change-related commitments.
Congress Could Supercharge Supply Chain Environmentalism in the Climate Bill
Having advanced utterly without legislative incentive to do so, Supply Chain Environmentalists could be supercharged were Congress to include in the Waxman-Markey climate bill a robust retail product labeling provision and related program for giving retailers CO2e (carbon dioxide equivalent) credits for a portion of the greenhouse gas reductions they drive from the supply chain of qualifying products.
Products could become “qualified” for credits through the retailer’s submittal, under oath, of a CO2 baseline profile to the U.S. Environmental Protection Administration (EPA). Carbon credits could be awarded to the retailer for CO2e reductions achieved with respect to that product over a given period of time. The retailer could be allowed to sell those credits in the market, or return the value to the consumer in the form of a cash rebate. Such a rebate would prove, once and for all, that green -- environmentally beneficial practices -- brings green -- money.
Supply Chain Environmentalism Answers the Critics from the Left, Right and Center
Critics of the climate bill argue it will be ineffective because China, India and other “low-cost center” countries have not been engaged, and because unilateral U.S. CO2 restrictions and the resulting increased costs will make U.S. companies uncompetitive in the global market.
Supply Chain Environmentalism, however, lashes the market to the quest for a climate change solution in a way that squarely addresses and solves both of these criticisms. Since much of the production of commodity products today occurs in China, India and the other “low-cost center” countries, it is in those countries where the big box Supply Chain Environmentalists will use their market power to drive CO2 from the process. And far from becoming less competitive, Supply Chain Environmentalists will have the opportunity to increase their market share by recasting the competition for commodity products in terms of CO2 content, not just price.
Perhaps best of all, Supply Chain Environmentalism will do what all free market advocates want most: place in the hands of the consumer the ability to reward the competitor that spoils the least. And, by making Supply Chain Environmentalism voluntary, rather than mandatory, market forces and not the government will determine whether “green labeling” is a passing fancy or one of the keys to survival in the new 21st Century carbon-constrained economy.
Finally, Supply Chain Environmentalism will not require the creation of any new regulatory agencies. The EPA can vet the validity of CO2 claims on “green labels” in the same way the agency oversees truthful disclosure about emissions subject to permit. Labeling abuses that harm consumers can be addressed by the Federal Trade Commission. Abusive exercise of market power can be addressed through long-established mechanisms in the anti-trust and unfair business practice laws.
Consumers and leading companies are ready for Supply Chain Environmentalism and the planet can’t wait: Let’s fire the starting gun and let the market crown the winners and losers in our new carbon-constrained world.
Lawrence E. Goldenhersh is president and CEO of Enviance, Inc., a provider of Internet-based software that help organizations manage carbon and other regulatory risks.
Image CC licensed by Flickr user Peter from Wellington.