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Supply Chain Carbon Management Enters the Mainstream

Cost and risk factors may be making the management of carbon dioxide emissions a strategic imperative for many companies, yet they are not the lone critical drivers pushing greenhouse gas emissions reduction up the boardroom agenda. 

As carbon management and climate change are increasingly seen as a business opportunity to drive top line growth, other factors are emerging beyond risk management to bring about change and embed the issue across the business and into the supply chain.

One such factor is the changing expectation of employers as a result of generational and social change. The idea that companies need to recognize the impact of their climate change action and carbon management in order to attract new talent and employee engagement may not be new, but it is growing in importance.

In the Carbon Disclosure Project's latest supply chain report written by AT Kearney we can see this begin to emerge as a real driver for change, with employee motivation doubling as an objective for organizations' climate change strategies within just a year. 

The growing need to demonstrate action on climate change to employees is just one example of how an organization's workforce is helping to bring about a shift in strategy. Organizations are also beginning to realize that their ability to bring about sustained change and really embed carbon management across a business and into its supply chain will increasingly come from the bottom up, such as in the education and training of staff. Educating procurement teams, who manage supplier relationships, on the importance of climate change, encourages innovation and change.

Again, the CDP Supply Chain report reveals a shift, with more businesses in 2010 (41 percent, up from 26 percent in 2009) training procurement staff in this area, and 25 percent providing awards and recognition to staff that exceed climate change targets. This rising commitment increases pressure on suppliers to act, but it also means closer collaboration from customers in working with their suppliers to reduce emissions.

We are also witnessing a significant surge in brand improvement as a key objective for climate change strategy over the last year, from 38 percent in 2009 to 73 percent of companies in 2010. Badly managed environmental impacts in the supply chain create significant brand risks, particularly for many consumer facing companies. Just look at the negative PR for McDonald's from their beef production and rainforest destruction. However, this is about more than protecting the brand from risk; clearly organizations are moving to increasingly leverage opportunities of climate change for top line growth.

Another driver for change includes product differentiation -- rising to 60 percent of companies in 2010 seeing this as an objective for climate change strategy, up from 41 percent in 2009. New product innovations have significant potential to reduce emissions along the product life cycle as nearly half of a company's supply chain emissions are actually generated during the use and disposal of products. Examples of product re-design to reduce carbon impact include low temperature washing detergent, easy-to-rinse shampoo, and energy efficient electronic devices.

With up to 80 percent of a company's overall emissions in its supply chain, there is huge potential for companies to meet their increasingly aggressive emissions reduction targets. Whatever the factors driving better management of carbon in the supply chain, those companies aware of the potential will race ahead of their slow-to-move peers. 

This will not only better protect them from risk but also help attract top new talent, elevate the brand, and drive greater product innovation for competitive differentiation. 

Image CC licensed by Flickr maartmeester.

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