BSR Preview: Managing Energy Use in Your Supply Chain

The annual BSR Conference is taking place next month in New York City, bringing together business and NGO thought leaders to talk about real-world ways that companies are addressing a number of sustainability challenges.

In advance of the event, I interviewed Ryan Schuchard, BSR's manager of Research and Innovation (and a regular contributor), about the supply chain energy management panel he will be moderating next month.

Matthew Wheeland: Your first session at the BSR Conference, starting November 3 in New York City, is entitled "Supply Chain Energy Innovation." What will you be covering in your panel?

Ryan Schuchard: We are seeing more and more often that companies are going beyond their own operations to manage the environmental impacts of their supply chains. [Editor's note: For more details on this, see for example Ryan's recent article on Scope 3 emissions in the latest CDP report.]

At the same time, there are a number of new standards in the works for supply chain management, like the GHG Protocol's Scope 3 Initiative; companies that have already begun getting systems in place to manage the energy used in their supply chains will be at a competitive advantage when these standards are finalized and become more widely adopted.

For our session at the conference, we'll take a look at these emerging standards, and talk with some of the companies and suppliers that are already working on supply chain energy management and can offer tips on getting started and lessons learned from their experiences.

MW: Who else will be on the panel with you?

RS: Also on the panel is Bruce Bergstron, the vice president of vendor compliance at Li & Fung. He is also a co-founder of our Energy Efficiency Partnership in China, and he'll give his view from Hong Kong and discuss why energy matters in and around China, especially in light of the recent power restrictions the country is implementing to meet its energy efficiency targets.

Ken Lanshe launched and oversees Walmart's 300+-supplier energy initiative in China, and he'll talk about some of the challenges to creating large-scale supplier trainings and some tips on overcoming those challenges.

Jay Celorie, Hewlett-Packard's Global Program Manager for supply chain energy, is also going to be on the panel, discussing how to effectively engage suppliers, as well as how to think about data efficiency and integrity issues. As a co-leader of the Electronic Industry Citizenship Coalition's supplier carbon reporting system, Jay has a uniquely grounded view on the potential for propagating data management up and around the supply chain.

And Pankaj Bhatia, who is the director of the World Resources Institute's GHG Protocol Initiative, will give us an overview of the group's Scope 3 protocol work.

MW: When we hear companies talk about supply chain management from a sustainability standpoint, it's more often about carbon footprinting and product impacts. What efforts are you seeing companies undertake around managing the energy in their supply chains?

RS: There are a number of areas where companies are working, but the ones that first come to mind are introducing suppliers to climate or greenhouse gas management by using practical energy management techniques. They're also training and helping suppliers to develop energy management capabilities, and inviting them to share data about their impacts and lessons for corporate climate and CSR reporting.

MW: What challenges do you hear from companies when they're talking about working with suppliers on energy use?

RS: There are really three issue areas that we hear the most about. First is operations on the supplier side, which reflects the fact that many suppliers are operating at a low management capability, and that there are few local service providers for energy efficiency tools and few informational tools. On top of that is the fact that energy is often relatively low cost, especially compared to the cost of investing in efficiency programs.

The second area is engagement between companies and their suppliers. Companies have to build awareness among their suppliers about the importance of climate and energy issues, then suppliers have to give the company permission to take on that energy management role, and the companies have to build the motivation among their suppliers to bring these energy management to fruition.

And the third area is integrating that work on the company side. It comes down to operational efficiency between companies and their suppliers, the company having the ability to make sense of critical information, and developing a credible approach to communication with stakeholders about energy issues with suppliers in the context of their overall climate-related strategies.

This informs an effective role that a company can play by focusing on providing insight, offering information tools, and introducing incentives. Earlier this year, BSR published a report on these kinds of energy efficiency projects in China, Unlocking Energy Efficiency in China: A Guide to Partnering with Suppliers.

MW: What are the biggest drivers leading companies to start working on supply chain energy management -- are they business-oriented, policy-oriented or environmentally oriented -- or all three?

RS: I see three big drivers: First, a growing price on carbon is creating impacts -- and new industries -- throughout supply chains and global business networks. Second, geophysical change is augmenting business landscapes -- and it is persistently unpredictable. Third, pressure to know and disclose granular, subtle climate and energy interrelationships and explain and improve the level of confidence in reported data is relentlessly increasing. All together, these three pressures are making the business case for supply chain energy management increasingly clear.

MW: What kind of work is BSR doing with companies on the issue? Can you expand on the Energy Efficiency Partnership a little bit?

RS: We've been working with Walmart on developing the supplier energy initiative that Ken Lanshe will discuss, and that grew into our Energy Efficiency Partnership, which is now more than 10 companies and 80 of their suppliers, all of who are interested to find practical, turnkey solutions for energy management.

MW: What is the current state of the art of supply chain energy management, and what do you think the state of the art will be 5-10 years from now?

RS: The current state of the art is having a good view of suppliers' impacts and issues at specific sites, rather than just through synthetic data like we have with lifecycle assessments. I think the future state of the art is doing this on greater scale, with good analytics about risks and opportunities throughout global supply chains with a reflection on precise local trends and developments.