Study Shows Benefits, Challenges of Going Green Upstream

Study Shows Benefits, Challenges of Going Green Upstream

A new study by Natural Logic, a Berkeley, Calif., environmental consultancy, provides insight into the key strategies behind effective supply-chain initiatives.

Getting full environmental value out of supplier relationships is an elusive goal for most companies, even those with robust supply chain environmental management programs. Effective programs require copious amounts of TLC, and there are countless barriers that can short-circuit even the best-designed program.

A new study by Natural Logic, a Berkeley, Calif., environmental consultancy, provides insight into the key strategies behind effective supply-chain initiatives. It stems from interviews with senior EH&S, supply chain, and sustainability executives across a range of sectors, including chemicals, food and beverage, forest products, health care, pharmaceuticals, shipping, and technology.

The free, downloadable report offers five key conclusions:

  1. There is growing interest in the opportunity to significantly increase the business impact of environmental and social initiatives by focusing on key customer/supplier relationships.

  2. This is being driven, in part, by powerful market trends that increase the attractiveness of a proactive approach to supply-chain issues and opportunities.

  3. While most companies report that they still employ an ad hoc, reactive approach to supply-chain partnerships, a few leaders are showing the way forward with more strategic approaches.

  4. A number of critical skill gaps and organizational barriers need to be overcome in order for more companies to take full advantage of strategic supply-chain opportunities.

  5. A well-conceived strategic partnership approach can address many of these obstacles and create significant value for suppliers/customers.
Among the market trends cited by Natural Logic as contributing to the growth of supply-chain environmental initiatives is increasing customer awareness of life-cycle impacts, and customer willingness to hold companies accountable for their activities across the total value chain. Another is the consolidation of retail channels, which creates more powerful leverage points for activists on environmental issues. Still another is the growing corps of environmental leadership companies seeking support on their initiatives, including those committed to major greenhouse gas reductions and environmental procurement programs.

All of which mean new pressures, costs, and opportunities for companies that look upstream, says Natural Logic.

The study reveals a variety of the barriers to success, including inadequate internal knowledge and resources, the extreme complexity and fragmented nature of many supply chains, and a lack of clarity about who should be driving innovation and change in this area.

But such obstacles can be overcome through systematic, proactive efforts to identify and develop new solutions and business models, including asking the right questions about supplier relationships (see box). Also important is to train the critical business functions, such as product development and customer account management, in environmental life-cycle thinking, and to demonstrate the potential new business opportunities to be derived by studying existing cases and best practices.

Copies of the report, “Creating Value Through Strategic Supply Chain Partnerships,” can be downloaded online.