Archive | September, 2010

“Industrial Ecology” Revisited: Its Place in the Green Economy & Supply Chain Management

30 Sep

Back in the 1990’s there was a popular term being used called “industrial ecology (IE)”.  Basically, IE is defined as a “systematic organizing framework for the many facets of environmental management.  The industrial world was viewed as a natural system – a part of the local ecosystems and the global biosphere.  IE offers a fundamental understanding of the value of modeling the industrial system on ecosystems to achieve sustainable environmental performance (Lowe, 1993).  The IE ecosystem boundary included the raw materials grower or extractor, the materials processor or industrial manufacturer, the waste processer, and of course the consumer.  The “value chain” of product manufacturing and the handing off of raw materials to manufacturer, and finished goods to consumer (i.e. the supply chain) can be viewed much the same way as IE.

An industrial ecology (ecosystem) has been defined to exist on three levels, each characterized by the amount of recycling or reuse of material that is within the system (or the system’s “openness”). The second level is characterized by some factor of energy and material is reused within the system, and seems to be the most applicable model for actual systems. It is within these industrial ecosystems models that green supply chains will play a critical and practical role. http://bit.ly/b9Irc4.

IE is not without its critics however.  Author John Ehrenfeld produced an article from American Behavioral Scientist entitled, Industrial Ecology: Paradigm or Normal Science (Ehrenfeld, John. (2000). Industrial Ecology: Paradigm or Normal Science? American Behavioral Scientist. 44(2): 229-244, 2000).  that calls into question a possible paradox between the terams “industrial” and “ecology” and that both terms have value in both concept and practice. From Ehrenfelds perspective, “It is not an either/or, but rather a both/and” proposition.  In a recent Triple Pundit article,  Ehrenfeld states four principles that define industrial design in the context of a sustainable business:

1. closed material loops,
2. energy used in a thermodynamically efficient manner,
3. maintenance of balance of the system’s metabolism and elimination of materials that upset the system,
4. and dematerialized processes & products; delivering function with fewer materials.

Green supply chains operate on the premise that material flows and wastes generated are viewed, designed and managed in a way that “dematerializes” products, promotes optimal resource conservation, recycling and reuse.  The focus of a green supply chain then is entirely on managing material content in a systematic and collaborative way, so that all participants up and down the value chain benefit.  Of course its entirely possible that the cost of closing material loops may in some cases exceed the benefits.  So practitioners need to realistically weigh the cost-benefit of IE approaches in making design and manufacturing decisions

From a supply chain perspective, raw material price volatility (sharp rises, and sudden falls, in the price of raw materials) have been plaguing the global marketplace. In particular, energy, metals and commodities used as ingredients in manufactured goods and consumer products – have escalated since 2005.   Much of this volatility has been fueled by rapid growth in Asian markets and traditional supply and demand constraints.

IE based systems then and the new 21st century green supply chain “networks” then can be based on three key areas, each designed toward materials resource optimization, advance clean technology and demand response:

  • Technical:Engineering perspective with technological innovation; Business System and Networks
  • Shared services, transportation, and facilities
  • Community-Business Interactions: Symbiotic networks and collaborative services;  3 Es:  Economy, Environment, Equity

According to a study on IE and risk analysis by Paul Kleindorfer of the Wharton School of Management http://bit.ly/a9QugQ, “in the industrial ecology framework, each company has a special role as steward of the environment and ecosystem within which it operates…this role of product stewardship and environmental waste and risk management [encompasses] suppliers and customers just as “extended value chain analysis” encompasses suppliers and customers in the traditional supply chain improvement process.”

So green supply chain management and IE are in essence systems based operational process management practices, each designed first to manage an organizations and its stakeholders environmental footprint (materials and waste flows) and second, to be used as a risk management tool.

There are a wide variety of best practices and tools to leverage upstream and downstream value chain opportunities with principles of sustainability in mind.  Applying IE based  thinking is but one of many useful steps for organizations that want to improve their resource productivity, reduce risk and enhance business competitiveness. The whole systems perspective that IE emphasizes offers a window for organizations to add value and reduce costs both within their own four walls but up and down the supply chain as well.

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Sustainability, Peter Senge, and the Necessary (Supply Chain) Revolution.

29 Sep

I just finished reading an interview with Peter Senge in the October Harvard Business Review.  Senge, for those of you that are unfamiliar, founded the Society for Organizational Learning, is a faculty member at MIT Sloan School of Management, and the author the The Fifth Discipline and The Necessary Revolution.  Senge maintains that to make progress on environmental issues, organizations must understand that they’re part of a larger system. Senge also makes a great point that companies will be in a better competitive position if they understand the larger system that they operate within and to work with people you haven’t worked with before. And while these two skills might seem distinct, in practice they’re interwoven. This is generally because systems are often too complicated for one person to grasp, crossing over many boundaries, both internal and external.  It’s these external boundaries that supply chain management issues begin to become apparent.

According to Senge, and as I mentioned last month in an earlier post about Starbucks, supply chains support whole systems thinking because they focus on the “nature of the relationships”. In the HBR article, Senge maintains that in most supply chains, 90% of them are still transactional.   Manufacturer or retailers still pressure upstream suppliers to get their costs down and little incentive is given toward innovating together.  This in turn erodes trust, however, as I have mentioned in this space, changes are everywhere.  Some companies like Starbucks, Coca-Cola and Walmart are also partnering with Non-Governmental Organizations (NGO) and working in an open source manner with industry associations to innovate.   Successful ventures like Walmart/Environmental Defense Fund, Unilever/Oxfam and Coca-Cola/World Wildlife Fund are taking a collaborative approach to problem solving that drives innovation, breeds trust and industry “cred” and offer NGO’s a wider voice in addressing social, environmental performance issues in the supply chain.

But success in levering supply chains to impact environmental performance ultimate resides with corporate leaders.  Senge maintains to successfully engage thousands and thousands of people around the world from multiple organizations, you’ll need technical innovations, management innovations, process innovations, and cultural innovations.  And to effectively achieve these innovations take bold, often heretical leadership.  Organizations need to often take a step back from the details and “see the forest for the trees” (and hopefully not just see more trees!)

Research and practice in supply chain management is beginning to prove once and for all that supply chain as a “practice” offer unique learning opportunities related to triple bottom line based sustainability.  Learning experiences can range from relatively simple, incremental modifications to a current knowledge set – for example, new environmental regulations like REACH and RoHS – through to complex new approaches which will involve experimentation, small scale piloting and larger scale adaptation (such as those designed to help transporters manage their carbon emissions).

How does your company use “whole systems” thinking to manage supply chain issues? In coming weeks I will begin exploring supply chain learning and management through a sustainability lens, and share some findings from various manufacturing sectors.  It’s my hope that readers can then begin to understand how to apply whole systems approaches across enterprises in the supply chain.  It’s my grand plan that these ideas will gel into practical steps that add value and become a core operating principle in your company.

How Walmart & Others Use ‘Best Value’ Approach to Drive Green Supply Chain Management

22 Sep

I recently came across a great research article written a couple of years ago and published in Elsevier Business Horizons.  The article, entitled Best Value Supply Chains: A key competitive weapon for the 21st Century (co-author is no relation, but irony is cool nonetheless), emphasized how leading edge companies have adopted “best value strategic supply chain management” as a strategic approach to stay competitive and drive efficiency.  The authors describe this type of approach as way for companies to “excel across speed, quality, cost, and flexibility, and …require coordination across at least four supply chain elements: strategic sourcing, logistics management, supply chain information systems, and relationship management.”

In one example, the authors refer to “firms such as Wal-Mart, Toyota, and Zara [that have] have used their supply chains as competitive weapons to gain advantages over peers. For example, Wal-Mart excels in terms of speed and cost by locating all domestic stores within one day’s drive of a warehouse while owning a trucking fleet. This creates distribution speed and economies of scale that competitors simply cannot match.”  Exploring this approach by Walmart a bit deeper indicates several positive outcomes from an environmental perspective also.  In the past two years Walmart has committed itself to reducing its carbon footprint by 20 million metric tons by the end of 2015. The most direct manner to do this is to control how it distributes its product.  So fleet management and control, and strategic distribution placement equals lower fuel costs, miles driven and hence carbon emission reductions.  However Walmart will also accomplish its reductions largely by working with its suppliers on their own greenhouse gas emissions.  Looking a little deeper however, shows that Walmart also reported recently that its carbon emissions as a percentage of sales went down. While that is great news using ‘normalized’ performance indicators, the not so good news is that  the company’s ‘absolute’ carbon footprint continued to grow as sales and stores were added.  So this goes to show you that it is valuable to drive value through the supply chain, taking a strategic, whole systems approach to get a handle on your direct spend and indirect environmental costs.  The only way to effectively do so is to look inside the operations of your own four walls, AND explore ways to influence the outside variables that can impact your operations.

The authors also cite three key attributes of a strategic supply chain management process that must be optimized: agility, adaptability (think Darwin?), and alignment (or the Three A’s).  I agree in whole that in order to shape behavior and optimize sustainability goals within a supply chain, that its vital the companies seek to 1) set in place tools that increase flexibility and ability to rapidly respond to changes in customer behavior and preferences (agility) 2) reshape supply chains to new ways of thinking (adaptability) 2) align your organizational goals with those of your upstream and downstream suppliers, vendors and stakeholders through improved collaboration and relationship management (alignment).  Each of these success attributes plays well in the sustainability arena and in managing an organizations triple bottom line.

As I have repeatedly stated in this space, the supply chain and logistics world is changing- expanding from a company vs. company solar system to a supply chain vs. supply chain universe.  Reshaping and reforming your supply chain management practices to reflect changing business norms toward managing to the ‘triple bottom line’ makes for smart business.

Green Seals GS-C1 Taking Supply Chain Management in Manufacturing to a Greener, Socially Responsible Place

16 Sep

In late 2009, Green Seal[1] announced that they had developed a pilot sustainability standard for product manufacturers called “GS-C1”. This pilot standard recognizes socially and environmentally responsible product manufacturers so consumers can make informed choices while helping companies save money by reducing the resources they use and improving their brand and sales position.

The Pilot Standard is now available for public review until September 30th, so it’s not too late to get your comments into the queue.

While the GS-C1 Pilot Sustainability Standard is under review, Green Seal will be piloting a certification program for consumer product manufacturers. The objective of the pilot certification program is to gain practical understanding about the GS-C1 requirements and procedures from companies that are going through the certification process.

Among the criteria included in the standard are:

  1. Transparency and accountability on environmental and social policies at the corporate level;
  2. Aggressive goals, commitments and achievements on environmental and social issues, including greenhouse gas reductions, water and waste, indigenous peoples’ rights and biological diversity;
  3. Supply-chain management and accountability practices;
  4. Life-cycle analysis of product lines and commitments to reduce environmental and health impacts from manufacturing, packaging, transport and end of life; and
  5. Third-party certification requirements to verify environmental and social responsibility of products

Specific to supply chain management issues, the standard awards points for developing and maintaining environmentally preferable purchasing policies (for its non-manufacturing purchasing functions), product life cycle issues, including product design, packaging, transport/logistics and end-of product life management. Perhaps the relevance to supply chain management is Section 3.3, Supplier Management. Focus is paid primarily to “first tier” and highest priority and sub-suppliers.  Primary emphases are focused on:

  1. Identification of highest priority suppliers with the largest environmental and social impact/footprint
  2. Development and implementation of a documented management plan to reduce, in priority order, the social and environmental impacts of its highest-priority suppliers and sub-suppliers.
  3. Maintaining a Supplier “Code of Conduct”;
  4. Conform with Social Impact Assessment criteria described under SA8000 (including issues involving fair labor practices, bribery, governance and transparency);
  5. Monitoring of sub-suppliers (extra points are given if there is “Evidence of working with suppliers to resolve issues found during social and environmental compliance evaluations”.
  6. Accountability is recognized as well by designating a “senior officer” to be “responsible for enforcement of compliance with local laws, supplier Code of Conduct, and action plan for highest-priority suppliers and sub-suppliers.”
  7. Annually issue a publically available report on its supplier management activities and performance

The new standard represents a focal shift of sorts for Green Seal.  The organizations efforts to date have focused on assessing and documenting the environmental footprint of a specific product.  Now with GS-C1, the emphasis is now shifting to the entire product life cycle and all inputs and outputs from a supply chain perspective (the entire design, manufacturing, distribution and end of life management cycle).  This standard is but one of several new standards under development, such as ULE 880 (see my earlier post) that are taking a whole systems approach to manufacturing- a refreshing and necessary step to manage consumption sustainably while enhancing manufacturing efficiency.

Courtesy AU Optronics Corp.

Some companies are not waiting around for the specifications to be completed.  AU Optronics Corporation (AUO) is one of many examples of companies that are adapting to the ‘new normal’ in supply chain management, where environmental issues and social accountability are factored into daily operations. AUO built one of a handful of factories that are (Leadership in Energy and Environment Design (LEED) certified. The company has established a proactive program with its subcontractors and suppliers and includes elements related to quality, green products, manufacturing, labor and ethics, cost and ESH (see attached Figure). A cross-functional team from the company’s Quality Department, Risk Management & ESH Department, Procurement Department, and R&D Department, conduct audit activities. The company has strict acceptance requirements and will not accept a subcontractor or supplier until all of its environmental and social aspects of its products or services are approved. The company also conducts routine management, periodic audits, and ratings for subcontractors and suppliers.  On paper at least, AUO appears to be doing things in alignment with both ULE880 and GS-C1.

I encourage you to consider GS-C1 and ULE 880’s positions on supply chain management and plan ahead for what is undoubtedly a sign of ‘greener’ things to come in business management.

This post was originally published on the Kinaxis Supply Chain Expert Community Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog


[1] Green Seal is a non-profit organization devoted to working towards environmental sustainability through environmental standard setting, product certification, and public education. The intent of Green Seal’s standards is to reduce, to the extent technically and economically feasible, the environmental impacts associated with manufacturing and services. (Source: www.greenseal.org)

Green Supply Chain Gets a Boost from ULE 880- Draft Sustainability Standard for Manufacturing Organizations

14 Sep

Today marked the end of the initial 45 day comment period for ULE 880 – Sustainability for Manufacturing Organizations. [NOTE: the comment period has been extended until September 21st]. This draft sustainability standard is the culmination of a partnership between UL Environment (ULE), a division of Underwriters Laboratories, and Greener World Media.  The standard for businesses and other organizations, focusing on their environmental and social performance, was designed “to create uniform and global metrics for customers, stakeholders and trading partners”, essentially ‘harmonizing’  the wide variety of standards, guidelines and specifications for driving sustainability in organizations.

According to the draft document preface, “Our vision is to create a uniform, globally applicable system for rating and certifying companies of all sizes and sectors on a spectrum of environmental and social performance characteristics. ULE 880 will fill a major void in being able to consistently understand and measure how, and how well, a company is doing in understanding, addressing, and communicating its environmental and social impacts. It will also provide a standardized mechanism that allows organizations and their stakeholders to factor companies’ environmental and social performance into their core decision-making processes, thereby elevating the importance of these issues within companies.”

At its core, ULE  880 is designed principally as a procurement tool, allowing companies,  public agencies, and institutional buyers to assess the performance of  their supply chains and trading partners. It is intended to complement  existing and future product procurement specifications throughout many layers of an organizations supply chain.

ULE 880 covers five domains of sustainability:

  • Sustainability Governance: how an organization leads and manages itself in relation to its stakeholders, including its employees, investors, regulatory authorities, customers, and the communities in which it operates
  • Environment: an organization’s environmental footprint across its policies, operations, products and services, including its resource use and emissions
  • Workplace: issues related to employee working conditions, organization culture, and effectiveness
  • Customers and Suppliers: issues related to an organization’s policies and practices on product safety, quality, pricing, and marketing as well as its supply chain policies and practices
  • Social and Community Engagement: an organization’s impacts on its community in the areas of social equity, ethical conduct, and human rights

The 60-plus page draft standard contains 102 questions (or “indicators”), including 18 in Governance, 45 in Environment, 15 in Workforce, 15 in Customers and Suppliers, and 9 in Social and Community Engagement. Each of the indicators has certain “weightings” and not all of them equally distributed.  The Environment, for instance covers 80 points, Governance and Customers/Suppliers 40 points each, and Workplace and Social/Community 20 points each. In addition, there are also 18 “Innovation Points” — 3 points each for 6 different indicators — that reward companies for going above and beyond the standard.

Sustainable Supply Chain Elements

Direct sustainable supply chain elements mentioned in Section 6.5.3 of the standard include requirements and related point allocations for:

  • Supply Chain Policy
  • Tier 1 and Tier 2 Supply Chain Inventory (why not Tier 3 or Tier 4?)
  • Supply Chain Monitoring and Assessment (not a great deal of detail in this element)
  • Supply Chain Reporting

Also, like other elements of the proposed standard, ‘Innovation Points’ are allocated for Training and Targeted Continual Improvement Metrics.  In addition to this specific clause of the standard, there are specific elements associated with Environmentally Preferable Purchasing and ‘greener’, more efficient transportation planning and logistics…all of which represent vital parts of the sustainable supply chain.

The ULE 880 standard offers promise to take sustainability to a whole new level e.g. organization based certification, and acknowledges that supply chain considerations are vital to a ‘sustainability-focused’ organization.  The next step for the standard will be a peer-reviewed response to the more than 600 commenters from over 30 countries that have requested and reviewed the document to date.  In coming phases, a small set of manufacturers will be engaged to pilot  the standard and the verification/certification delivery model, prior to wider release and market implementation. Stay tuned!

This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog

Observations about the Environment, Sustainability & Rosh Hashanah (the Jewish New Year)

8 Sep

Recently, after 53 years on this planet, I chose to officially sanctify my Jewish journey by becoming a Bar Mitzvah.  I had to this point been what I have called a “gastronomic Jew”.  While I have been deeply committed to my Jewish heritage, culture and culinary virtues all these years, I have been largely devoid of religious “calories”.  This path that I chose this year is unique for me as it is for all Jews.  As a scientist, I have had to face the many conflicts between the real and the imagined, the science and the mystical nature of religion and have yet to reach any final conclusions.

But what I have been able to reconcile through this process is a deeper appreciation of the interconnectedness between what I do professionally (as an environmental management consultant and trainer) and with what the Torah and Jewish scholars teach us about environmentalism.  Many Talmudic themes center around the concept of “sustainability”.  For instance, calls to manage resources wisely, to limit conspicuous consumption, provide for and between generations, are common threads weaved throughout Jewish thought.   For 5771 years, Jews have heeded the biblical call “to till and to tend” the earth.  Here in the U.S., the Coalition on the Environment and Jewish Life (COEJL) has helped tens of thousands of Jews make a connection between Judaism and the environment.  There are even green tips to have an ‘eco-kosher’ New Year.

Just as John Muir did when he walked the floor of Yosemite Valley, perhaps I too have discovered that “finding God in nature” can be a deeply Jewish experience.  My mission then, is to bring the concept of tikkun olam (repairing the world) by helping to foster the ancient tradition of respecting (and repairing) the environment in which we live- not only in my neighborhood, but in the business community.  I  continue to hope that you will all join me on that quest.

Thanks and deep love to my wife (who encouraged and continues to inspire me), my children (who motivate me, support my work and cheer me on), and to my close family, friends and business colleagues that have carried and shared this merging of sustainability and religious choice, on both a personal and professional scale.   As in life and professionally, it takes many wings to fly- so, why should religion and sustainable living be any different?  It DOES take a community. 

L’Shana Tova Umetukah ([a] good and sweet year)!

Corporate Social Responsibility & Sustainability- Their Place in a Green Supply Chain

3 Sep

As we here in the U.S. head into Labor Day weekend, a few news items caught my attention this week.  Each of these moves by large consumer and retail brands call to mind that there is a social side of the supply chain that adds organizational value and enhances brand reputation.  This has been made more evident recently by all the discussion regarding efforts to change U.S law to squeeze ‘conflict minerals’ associated with manufacturing of cell phones, batteries and other electronics (http://bit.ly/aaae1V)

Yesterday an article in Triple Pundit (The Most Important Assets are not on the Balance Sheet http://bit.ly/9fDfd5), noted that there are several “intangible” assets that create organizational value.  Each of these “assets” clearly can (and should in my opinion) extend up and down the supply chain.  First and foremost, a company’s primary assets are its employees. The article makes a valid point that employees are “the secret in the sauce and the glue that holds the corporation together”. Without employees to produce the goods, ensure product quality, move those goods efficiently and respond to customers, other company “assets” hold little value beyond their resell potential.  Next, a company’s reputation is its most important asset, particularly if the corporation publicly declares commitment to the triple-bottom-line. As reported by Jeffrey Hollender earlier this year, Fortune Magazine has estimated that a company’s reputation represents 75% of the total value of an average business. Finally, company mission provides the long term direction on what tangible assets to acquire, align with and where to divest. It’s said that the mission is the “organization’s compass and the written articulation of corporate soul”. The article argues the importance of corporate social responsibility (CSR) as a key intangible that can affect corporate success and bottom line performance.

In a similar vein, several companies stepped into the spotlight this week to shine the importance of social and environmental responsibility along the supply chain.

First, Nestle, the world’s biggest food group, announced late last week it would invest $487 million in coffee projects by 2020 to help the company optimize its supply chain http://bit.ly/dhDhGY.  Part of this plan includes the “Beyond the Cup” Nescafe Plan (http://bit.ly/9TnCIs): distributing 220 million high-yield, disease-resistant coffee plantlets to farmers by 2020, expanding technical assistance and buying directly from growers.  The company announced its plans to double the amount of Nescafe coffee bought directly from farmers and their associations.  All of the directly purchased green coffee will meet the company’s “4C” sustainability standards by 2015, with the support of the Rainforest Alliance and the 4C Association. The Rainforest Alliance is a nongovernmental organization that certifies farms for meeting sustainability criteria. The 4C Association, registered in Geneva, works towards sustainability in the coffee sector with a code of conduct and a verification system.   Over 90,000 tons of Nescafe coffee will be sourced under the principles of the Rainforest Alliance and the Sustainable Agriculture Network, a coalition of conservation groups, by 2020, the company said.   With apologies to Maxwell House and Kraft Foods, now that’s coffee that is “good to the last drop”!

In an upstream supply chain twist, Corporate Express/Australia has recently announced two major initiatives designed to encourage and assist businesses to become more environmentally and socially sustainable (http://bit.ly/bMB0U8).  The company has produced the “Go Green Guide” – for a Greener Workspace” and is focused on adopting sustainable procurement practices. The 100% recyclable Go Green Guide features:

  • Over 1500 environmentally preferable products across all lines of business;
  • Facts and figures demonstrating the effect all businesses can have on the environment by using environmentally preferable products;
  • Explanations of certification labels to help businesses make environmentally conscious purchasing decisions;
  • An action plan that provides businesses with easy steps on how to start their journey towards creating a greener workspace.

Finally, Unilever has come up with a new tool designed to help reduce greenhouse gas emissions in its supply chain. http://bit.ly/aLZ9wF.  The company has developed The Cool Farm Tool.  The tool enables both supply chain managers and individual farmers to input data they have access to in their daily jobs, and uses this to calculate their total greenhouse gas emissions from fields, inputs, land use and land use change, it said.  “Farmers are then able to see the effect that making small actionable changes to their agricultural methods will have on their overall carbon emissions (such as using a different fertilizer, for example).”

Each of these examples underscores the “whole systems” approach that I’ve previously written about in this space and that underscore transparency and collaboration the “value” in the supply chain.  Each company recognizes that to be a truly sustainable organization, it must reach deep beyond its four walls to its suppliers and customers.

What is your company doing to engage it’s supply chain to enhance corporate social responsibility and implement environmentally responsible product stewardship- along the entire supply chain?  Happy Labor Day, everyone.

This post was originally published on my New Green Supply Chain Blog, which can be found at https://community.kinaxis.com/people/DRMeyer/blog