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

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

Green Transportation- All It Takes is Innovation and Drive

Framing the Issue

“Only 22 Fortune 500 companies have begun blunting their supply chain’s impact on the environment” The amount of cargo shipped is “expected to triple in the next 20 years” Measuring ghg emissions is the “fundamental starting point” of “any serious entity” When reducing transportation emissions, “it is best to begin with the ‘low-hanging fruit’” Rail transport is four times more efficient per ton than motor and 600 times more efficient than air transport ‘Greening” Transportation in the Supply Chain

“Logistics” is the integrated management of all the activities required to move products through the supply chain. Generally, “green logistics” focuses on seeking ways to manage the environmental footprint of the supply chain associated with your product, from point of manufacture through to the end user.  This translates often to taking a life cycle approach to manufacturing and distributing your product (as well as reverse logistics in some cases).

Transportation is a very key element of the logistics process and the supply chain which runs from vendors through to you to your customers. It involves the movement of product, service/speed and cost which are three of the five key issues of effective logistics. It also impacts with the other two logistics– movement of information and integration within and among suppliers, customers and carriers.

The 2009 14th Annual 3PL Study found that newer concepts and technologies are emerging to help both 3PLs and shippers cope with a “new, slower growth world”. The report advocated creating “horizontal, cross-company supply chains refereed by neutral third parties. This innovation is based on the concept that by clustering specific logistics activities and consolidating supply chains, significant economies of scale can be achieved in terms of efficiency (logistics cost), effectiveness (customer service) and environmental sustainability (carbon footprint)”, and as noted below.

Solutions:

From a logistics standpoint, 3PL providers might consider development of strategies to eliminate unnecessary materials handling or avoidable transport, and look for efficiencies that could move more product at a time.  Trucking, rail, marine and air modes of transport all have their up and down sides and it’s best to look at point to point options that will result in lower energy/fuel costs, use of modes that use cleaner fuels (LNG, ultra low sulfur diesel), and generate fewer greenhouse gas emissions (use of larger ships that employ more efficient equipment or operational practices).

Any number of “green” strategies to enhance the competitive position of freight-forwarding services are being implemented worldwide , including at key ports of entry here in the U.S.  Most freight related environmental issues generally involve solutions to reduce energy consumption and limit greenhouse gas emissions.  Naturally some carbon or energy intensive issues can be managed only if they are directly controlled by freight forwarding companies, while other activities not under direct control can only be influenced in practice (for instance contract carriers).

Business Case Examples

• Freightliner Trucks. Freightliner Trucks addressed the issue of fuel savings by focusing on more efficient aerodynamics. The aerodynamic features to the company’s Cascadia truck result in 7.8 percent to 22 percent less drag than other aerodynamic tractors, resulting in annual fuel savings of $900 to $2,750 per truck.

• Nortel: Nortel shifted from air to sea transportation to deliver significant cost reduction and took major adjustments in production planning and order scheduling to make it work For Nortel, the increased use of sea freight has saved more than $1,000,000 versus the more expensive air freight cost, as well as the opportunity to negotiate improved pricing that has realized approximately $500,000 of cost reduction.

• The 2009 14th Annual 3PL Study: This study found that shippers want to create more sustainable, environmentally conscious supply chains. That means striking a balance between labor and transportation costs and the market value of carbon-reducing processes, compressed production cycles and less carbon intensive transportation modes that beat the competition.

Summary

Eyefortransport’s Green Transportation & Logistics European Report  (2008-09)  indicated the “The results from this year’s survey show that the supply chain industry has increased its focus on green initiatives from last year, and anticipates this trend to continue for some time yet. This has been shown in most of the topics of the survey, from increased adoption of initiatives, greater awareness of options available, growing incentives for greening whilst barriers are diminishing, to greater anticipated ROI and effectiveness of supply chains. …While those companies who have adopted strategies are gaining, those who have been left behind are finding it harder to implement changes. “

A 3PL green logistics strategy, regardless of whether you are involved with domestic or international, to be effective in gaining a competitive foothold, must recognize the criticality of:

• Customer requirements
• Mode selection
• Carrier relationships.
• Measuring/benchmarking
• Regulatory impact.
• Carrier mergers and alliances and closings
• Flexibility

Looking at these basic challenges through a sustainability lens offers greater opportunities to find innovative opportunities to optimize resources, leverage risk and maintain cost volatility through enhanced supply chain relationships

It goes to say that a sustainability-focused 3PL strategy one innovative way to respond to the dynamics of your business, its customers, suppliers and operation through cost-effective, value added supply chain solutions.

We Have Met the Enemy & It is Us! U.S. is Giving CleanTech/Renewables Away

“China’s leaders are investing $12.6 million every hour to green their economy… China is spending twice as much as the American Recovery and Reinvestment Act spends to lay the foundations for a green energy economy, despite the U.S. economy being 1.5 times as large as China’s.”

In a hard hitting, between the eyes article, author Ben Furnas of the Center for American Progress laid it all on the line. http://bit.ly/2vHSbC.  Despite the most recent efforts laid out in the ARRA, The United States is starting to look like a laggard in taking the initiative in diversifying itself in a new energy economy.  And while China is no beauty when it comes to pollution control (what with the number of coal plants coming on line every week there), it at least recognizes a profitable market when it sees it.  Same goes for European markets as well.  Chinas own economic stimulus plan will spend over 3 percent of China’s 2008 gross domestic product annually in 2009 and 2010 on green investments—more than six times America’s green stimulus spending as a percentage of our respective economies.

So where has America cut itself short?  The report advocates for a cohesive national energy strategy, significant upgrading of the nation’s energy infrastructure (smart grid), massive investments in technology research and development, and increased accountability in the form of a carbon tax for the most polluting industries (not tax subsidies).

Through the past eight years of the Bush Administration, efforts to advance the types of critical investments in alternative energy and policy- making slowed to a snail’s pace, while nations across the world invested in what now seems so obvious- that we all live in a finite world with finite resources. Japan, China, and European countries marched right past the United States through the passage of progressive emissions control regulations, massive public investments, and private market incentives.

But all is not lost, because many companies in the U.S. have gotten the message and are moving forward on their own.

In a recent article in Industry Week (http://bit.ly/dvoIU) author Eric Shlumpf states (and I would agree) that “Shifts in product design, raw material usage, facility location, supply chain network design and many other areas of corporate decision-making will move in new and challenging directions as the impact of high energy prices and GHG emissions trickle throughout the entire value chain”.  These pressures are driving service and contract manufacturers to the brink, and forcing new ways to rethink and retool operations to meet global market pressures.  Many large companies like Dow Chemical, US Steel, 3M, Caterpillar, Home Depot, and Pfizer are, among other process related changes, developing active energy and greenhouse gas management programs designed to manage and contain production costs, reduce energy and environmental footprints and address stakeholder and supply chain requirements.  The savings are significant.  A multitude of smaller companies are making similar investments in managing greenhouse gas footprints as an active way to contain costs, leverage competitive position in the global marketplace, and manage customer expectations or requirements.  In other words “they get it”.

This month, on the table in Washington D.C. is EPA regulation of carbon dioxide and the Waxman-Markey Climate bill (an ambitious and likely to be altered) carbon cap-and-trade legislative template for greenhouse gas containment and control.  In addition to this and regional greenhouse gas initiatives, efforts to advance a national renewable portfolio standard would spur technological development in green sectors and help drive innovation across the economy.

Thirty-nine years ago on this Earth Day, I was chucking green, brown and clear glass and newspapers into huge dumpsters in northern Illinois with my Dad.  Even then (thanks to my “Greatest Generation” Dad), I “got it”.  My dad (who passed away two years ago), also said “remember these words- If it is to be, then it is up to me”.  We have the opportunity to be the “Greater Generation”, if we can just lay down our rhetoric and “git ‘er done”!  There is nothing quite as disheartening as watching the world go rushing by while we had the chance to ride the crest of the wave.

Update: After a year of tweeting and reporting on this issue, the U.S. has shown only slight gains in retaining cleantech development.  Federal stimulus money, poor or inconsistent policy or legislation and sporadic incentives have left many in the clean and green-tech industry gasping for breath.  Still, we have a historical habit of “fumbling the lead” historically in this area.  While the U.S. has been stellar in creating many of the new technologies that can drive the economy, we have failed to embrace them.  Michael Kanellos has some suggestions as to why? http://bit.ly/bwv1w2

 

Climate Change, the Clean Air Act and the Political Sandbox

Yesterday, climate change experts from throughout the world wrapped up three day conference on climate change in Copenhagen.  At the conference British economist Nicholas Stern (who authored a major British government report detailing the cost of climate change) told hose assembled that the global recession presents an opportunity to build a more energy-efficient economy.

“Coming out of this we have got to lay the foundations for a low-carbon growth, which is going to be like the railways, like the electricity, like the motorcars, this is going to be over the next two, three decades the big driver in investment,” Stern said.

What’s our tattered economy to do?  In this same week, the U.S. Environmental Protection Agency proposed the first comprehensive national system for reporting emissions of carbon dioxide and other greenhouse gases produced by major sources in the United States.  EPA is developing this rule under the authority of the Clean Air Act (CAA).  Draconian perhaps?  Yes indeed, as I will opine in a moment.  It is my humble view that decades of economics based incentives to reduce air emissions appear to be about to be thrown under the bus.  And while the focus of the attention is on more energy intensive sectors such as cement production, iron and steel production, and electricity generation, the net is being cast much wider and may inadvertently capture less polluting industries and small businesses, impacting a wider sector of the economy which may be unnecessarily burdened.

So what’s the problem?  Congress appears to be the problem. While a number of states and regional initiatives are preparing their patchwork of GHG cap and trade frameworks and legislation (some like in Oregon and Washington appearing to be in a death spiral), Congress is sitting on its hands and all too slowly is slogging away at bringing meaningful and balanced cap and trade legislation to the floors of Congress.  Further, President Obama’s appears to be burdening climate change legislation with extra baggage, and this is not making the situation any better. The 2010 budget plan calls for using a carbon cap-and-trade system to raise as much as $646 billion in new revenue for the government between 2012 and 2020.  Much of the funds would go to subsidize clean technology research.  All good it seems.  Until one digs into the details.  According to the budget plan, most of the money raised would go toward a refundable tax credit of up to $400 for working individuals and $800 for working families, subject to income limits.  While I am all for social reinvestment, this makes reaching consensus on climate change more politically charged.

The President may be entering dangerous waters by putting economic renewal too heavily on the back of cap and trade legislation and in mixing social agenda issues in as well.  In fact, it’s the Democrats that are now putting up such a big fuss.  As noted in the Wall Street Journal (blog) http://blogs.wsj.com/environmentalcapital/2009/03/12/cap-and-horse-trade-obamas-uphill-battle-for-climate-bill/, the so called “Blue Dog” Democrats worry that the Presidents blueprint for tackling climate change will unduly burden Rust Belt states by raising energy costs for consumers and manufacturers. Many Democrats are upset that the revenue will be used for generic tax cuts and to help fund other programs, rather than for specific help to cushion the blow of increased climate regulation.

Indeed, what I hear in the great Northwest among business leaders appears to echo those in the beltway, who are concerned about the impact of federal or state cap and trade legislation on local economies.  But consider the alternative…the EPA way.

Many argue that the U.S. Supreme Court’s 2007 decision, Massachusetts v. EPA (which affirmed that carbon dioxide emissions are a pollutant as defined by the CAA) is the leverage needed to allow for carbon emissions to be regulated by the EPA.  That is true, because the EPA was essentially forced by the Massachusetts v. EPA decision to proceed with developing greenhouse gas regulations under the Clean Air Act unless or until Congress acted.  Many argue that the EPA is in the best position to manage a federal cap and trade program and integrate seamlessly all of the many regional and state initiatives currently in process.  But one can only imagine the years of litigation that will result from imposing new, wide reaching rules.  Despite the relative success of the CAA over the past 30 years, it’s a relatively rigid framework, whereas market-based systems like Cap and Trade may be more successful in the long run at controlling costs and spurring innovation through incentives and regulatory flexibility. But now the President appears to have convoluted the political process by padding the legislation with social agenda items.

Scientists assembled at this week’s climate conference have restated clearly that the urgency of the current situation cannot be overemphasized.  Climate change appears to be accelerating at a rate beyond previous Intergovernmental Panel on Climate Change (IPCC) expectations, and that the window for a timely response is closing quickly. The dire direction in which our world appears to headed requires a dual pronged strategy that provides a policy pathway that will begin to reduce emissions immediately, and a political pathway that avoids continued gridlock, as is being witnessed in Washington this week.

Is everyone able to play in the same sandbox? Do it for our planets sake.