Does Going Green Matter? – Lessons from 5 Eco-Friendly Supply Chains

by

ERP Market Analyst

A few weeks ago, we began asking consumers if they care whether or not a company greens its supply chains. 125 readers responded, and this is what they had to say.

Over 90% of respondents (113 of them, to be exact) said they would consider changing their purchasing habits based on announcements of greener supply chains. Among the many comments that readers had, a few key issues appeared most frequently:

  • Voting with your dollars – As one reader suggested, “every dollar we spend is a vote, and by spending it on a business with sustainable practices, I get to support them.”
  • Greenwashing – Some readers noted that they are “tired of greenwashing” and would be more likely to avoid a company that makes a “specific point of going green without any other benefit.” As one reader stated, “it would be more impressive to discover a company working hard behind the scenes and not shouting about it.”
  • Higher prices – Others expressed concern over the potential for companies to use green proclamations as an excuse to raise their prices. One reader argues, “I simply can’t afford to pay more for a product because it’s green. I can afford a dollar or two, but $15? No.” Another reader adds that the willingness to pay more for a “green brand” would depend on “extensive and credible documentation asserting that it was significantly less bad for the planet.”

As these comments suggest, readers want to be sure that companies don’t settle for doing just enough to win favor with consumers. In fact, 95% of the readers who responded believe that companies aren’t doing enough limit their environmental impact. A few of the suggested reasons are:

  • Putting profits first – Many readers feel that these businesses are “afraid of the costs involved in changing to and maintaining green standards.” As one reader argues, our current economy “allows companies to get away with whatever it takes to make a profit, even with so-called regulations in place.” Another reader feels certain that “whenever they challenge profits, environmental measures will continue to be ignored.”
  • Lack of visible action – Other readers note that it is much easier to have a spokesperson announce grand, sweeping changes than it is to actually make simple ones. One reader puts it this way: “It makes me mad when I hear of a company claiming to “go green” then I can’t find a recycle bin at their store to save my life!”
  • Perceived consumer indifference – Going back to the concept of voting with dollars, many readers feel that customers haven’t given companies any reason to change. One reader argues that “there will always be a market for cheap and dirty products because people are not going to pay much more for a product just because it is green.” Another reader simply suggests: “They don’t believe customers actually care.”

Our survey suggests that customers do care, although the chart above indicates that they aren’t all concerned with the same things. Unsurprisingly, reduced fuel emissions and reusable packaging were at the top of the list, each with 100 readers describing these actions as very important to them. 88 readers find it very important to be able to keep tabs on these companies, putting the public disclosure of environmental information in a close third.

Interestingly enough, readers seemed least passionate about the activities directly related to the grand scope of the entire supply chain. Fewer than half of the voters (61 of them) felt that refusing business with non-green suppliers was very important, and a large number of readers seem indifferent toward the concept of phasing out the supply chain by bringing more tasks in-house. We argued in the article below that these activities may have the greatest impact over the long term, but our voters’ attentions continue to focus elsewhere.

Do consumers not care about the more high-level announcements after all, or are they simply hesitant to believe such long term plans are achievable or worthwhile? What do you think? The survey remains open below, so be sure to join the conversation and share your opinions.

 

Original post – This article is the first in a series about businesses going green. Today’s focus is on the supply chain, and the question is: can large companies distributing products to consumers across the globe actually have a positive impact on the environment? They’d certainly like you to think so. In recent years, it has become very fashionable for a company to announce that they are “greening” their supply chain. The changes these companies propose would have a significant effect on their carbon footprint, not to mention their public profile.

So, what’s the real reason for the move toward green supply chains? Do these companies really care about the environment, or are they just trying to win over consumers? We’re curious: would the eco-friendliness of a company’s supply chain affect your decision to buy their products? Before we dig into these topics, we want to know what you think.

Survey closed.

In this article, we’ve listed five companies that are trying to set a good example. In particular, these companies are teaching three key lessons:

  • Sourcing – In order to claim that their supply chains truly are green, many companies are holding their suppliers to higher environmental standards. This could mean submitting new operational requirements to current suppliers or leaving current suppliers to find greener ones.
  • Packaging – Products are sold in packages and travel in larger packages. Many package types are either non-reusable or non-recyclable. Also, bulky packaging often prevents more items from being transported at a time. In order to solve these problems, some companies have invested in more efficient packaging made of durable materials.
  • Delivery – Traditional principles of delivery often sacrifice efficiency for speed. Rather than wait for a full truckload, companies often dispatch less-than-truckload (LTL) deliveries. As critics have suggested, LTL deliveries are basically “transporting air” and polluting the air at the same time. Thus, many companies have devoted themselves to “despeeding” their supply chain in order to deliver full truckloads.

Above all, these five companies have proven that the shift to green is not necessarily a costly one, and three of them, Wal-Mart, IBM, and Pepsi, are among Gartner’s Top 10 Supply Chains of 2010. By finding ways to merge green strategies with their existing financial goals, these brands have had great success not in spite of a greener supply chain but because of it. Of course, these companies are just the tip of the melting iceberg. If you know a company that belongs on this list or believe these companies should be doing more, please share your ideas in our comments section.
 

IBM

Crack open IBM’s computer hardware and you’ll find parts from many different suppliers. If IBM wants to be green, those parts have to be green. This means encouraging or even forcing their suppliers to shift their methods toward environmentally friendly alternatives.

Recently, IBM rolled out a list of guidelines for their suppliers, and two of the requirements are particularly intriguing. First, the suppliers must publicly disclose their environmental impact, which would bring the motivating factor of transparency into the equation. It’s much easier to pollute without hesitation when no one knows you’re doing it. With this rule in place, suppliers will be held accountable for their actions.

Second, IBM wants its suppliers to “cascade” these regulations to their own suppliers. Rather than IBM investigating its entire supply chain, each stage of the chain must ensure that the previous stage is environmentally responsible. Most companies dealing with goods have to monitor a number of suppliers to assess the true green-ness of the supply chain, and IBM has set the benchmark for achieving this goal with the least amount of effort. That being said, IBM is in a particularly competitive industry. If signing with greener suppliers puts them at a financial disadvantage, will IBM still feel the same way?

WholeFoods

This natural foods supermarket chain is known for being green in terms of both its products and its practices, and like IBM it takes great care in sourcing its suppliers. For example, the company has made a Palm Oil Pledge, which states that they will only use certified sustainable palm oil in their own brands. Using oil from suppliers that destroy rainforests would harm the company’s environmental reputation, which exemplifies how many things a company must consider when going green.

This is why Whole Foods has made significant changes in many areas. In addition to converting its delivery fleet to run on biodiesel, the company has commissioned trucks with fuel systems that allow the engines to be turned off during the lengthy loading and unloading periods rather than idling. Also, Whole Foods recently announced new regulations for its product packaging. To set an example for its suppliers, the company switched to post-consumer recycled content bottles for its nutritional supplement brands. The goal is reducing the amount of plastic used in packaging and encouraging the switch to glass whenever possible. Of course, we’d still like to see them do away with paper receipts.

Walmart

Though some might be surprised to hear Whole Foods and Wal-Mart mentioned in the same green breath, the fact is that Wal-Mart has gone to great lengths to limit its negative environmental impact. Like Whole Foods, Wal-Mart has made great progress in packaging. Their long-term goals are to reduce packaging by 5% before 2013 and be packaging neutral by 2025.

In order to accomplish this, Wal-Mart has developed a “packaging scorecard” for its suppliers. The scorecard provides metrics by which companies can measure their packaging system’s effect on the environment, focusing on greenhouse gas emissions, material choices, and chemical composition. The company recently announced that 50% of the corrugated box packaging used for its Member’s Mark apple juice is from 100% recycled materials and was produced with 35% renewable energy from hydroelectric plants.

Some would say that these efforts can’t make up for the harmful effects of encouraging shoppers to drive several extra miles to shop or abandoning hundreds of stores and leaving vacant, unused warehouses behind. In fact, Wal-Mart’s most significant opportunity to make amends may come from its influence over other brands. In addition to greening its own operations, Wal-Mart has convinced companies like Johnson & Johnson, Procter & Gamble, and Unilever to find greener sources for their products. By doing so, the company has essentially laid out an ultimatum: if you want a presence in our stores, prove that you are making an effort to reduce your supply chain’s carbon footprint. Wal-Mart’s pull with other brands may be more useful to the environment than any improvement it could make to its own practices.

Patagonia

If Wal-Mart is the company that gets other brands to improve their supply chains, Patagonia is the company whispering in Wal-Mart’s ear and telling it what to say. There has been chatter in recent months about this surprising relationship, in which Patagonia is apparently helping Wal-Mart green its supply chain.

In fact, Patagonia is helping anyone who will listen through a new web series called The Footprint Chronicles, which documents the environmental impact of every stage of Patagonia’s supply chain. Before this series, there had been talk at Patagonia of trying to shorten the supply chain by eliminating sea shipments and finding closer suppliers. However, the company ultimately discovered that less than 1% of its total energy use came from sea shipping. What the company will probably not report is the much higher percentage of energy use that occurs once their products begin moving on the ground. As a slow-moving mode of transport, ships are more likely to wait for full capacity before disembarking. With trucks, companies often favor speed over quantity, which is why green-thinking companies are despeeding their supply chains by holding delivery vehicles at the loading dock until they are full.

However, Patagonia has made some troubling comments in response to some of its more questionable environmental practices. When Patagonia discovered that a jacket manufacturer was releasing a harmful chemical into the atmosphere, Patagonia spokespeople stressed that the chemical made the jacket more durable. They felt that a less durable jacket would do more harm to the environment because people would throw them away sooner. We’re not sure this statement holds water, since Patagonia’s customer base seems more likely to mend a worn jacket or donate it to charity than to simply throw it away.

Pepsi

Pepsi’s Canadian branch has devised an effective way to cut back on their transportation pollution. In the past, Pepsi had its bottles delivered to its plants by other suppliers, which meant gas-guzzling trucks carrying bottles from all over the country. The company realized that the easiest solution was to simply manufacture the bottles itself.

After spending $65 million to bring in the necessary equipment, Pepsi has saved over 4 million gallons of fuel and now controls the creation of their own bottles. Of course, this doesn’t do much to change the fact that Pepsi is selling millions of plastic bottles to consumers who will in all likelihood add them to our growing global landfill.

This is why the motivations behind companies going green are often unclear. Financial gains may be their real reason for going green, but their success would nevertheless encourage others to follow their lead. Many of the companies implementing these changes have reported a positive return on their green investments, which proves that you can protect the environment and your bottom line at the same time. By working to eliminate wasteful packaging and redesigning transportation plans in ways that help the environment and save the company money, supply chains could be green in more ways than one.

 
  • http://reducefootprints.blogspot.com Small Footprints

    Excellent ~ I look forward to reading the survey results and your subsequent articles on these issues! :)

  • http://ecofuture.net/business/ Ecofuture

    I have been searching on how eco-friendliness of a brand determine customer behavior lately. I would like to refer to yout survey results in my page.

  • http://www.ourdailygreenlife.blogspot.com FreshGreenKim

    I contend that anything is better than nothing, but I do question the motivations of the companies and whether such choices are more lip service than true commitment to the environment. However, I still say it’s a step in the right direction. I wrote a post about it today.

    http://ourdailygreenlife.blogspot.com/2010/09/supply-chain-green.html

  • http://mildredlynn.blogspot.com Mildred Lynn McDonald

    I am concerned (and trying to educate myself about the motivations of many companies in the context of “green washing”.

    That being said, what gives me hope is that companies are made up of people, and at the end of the day, I have great faith people because we all breathe the same air, drink the same water, and walk on the same Earth. Step-by-step:)

    Thanks for posting the survey and I’ll encourage others to participate too.

  • http://www.momswearyourtees.blogspot.com Scarlet

    I love supporting green companies. The best part is the more people do so the more it brings down the green prices!

  • http://www.linkedin.com/in/peterforint Peter Forint

    At a YTA luncheon last about IBM’s Smarter Planet, we learned that IBM has shifted to 80% services and 20% hardware from the opposite only a few years ago. They’ve also optimized their datacenters, virtualized their servers and driven down their energy consumption quite significantly. This impacts their bottom line directly with savings and by new business opportunities through consulting with their customers to do the same. Hence, I don’t see their supply chain efforts as being greenwash.

  • http://www.goforchange.com Julie Gabrielli

    Thanks for this great research and survey. The more this information is put in front of business owners, the more awareness and change.

    A recent study by A.T. Kearney showed that during the current economic downturn, companies that show a true commitment to sustainability — which, presumably, includes a green purchasing policy — appear to outperform their industry peers in the financial markets.

  • http://www.thegreenhaus.co.uk Jane

    Let’s abolish the ‘greenwash’. Sustainability in all aspects of product manufacture & delivery are key.

  • http://smartlifeways.com michelle victoria

    I agree about getting rid of “greenwashing” and this will happen as more of us realize what greening really is. It is up to us as consumers to let companies know that we do really care, and will support companies that are doing the right thing, and stop buying from companies that ignore seeking alternative ways for making their businesses sustainable.
    I think economics will also drive companies as they see that this can be more profitable, as well as gaining new customers.

  • Margaret Theis

    I hope more consumers let companies know their feelings on the subject of reducing their carbon footprint. Unless we demand/expect it, they will do what is most cost effective for them.

    I think Shaklee should be on your list as they were the first company to certified as “Climate Neutral”, no small feat. They contine to walk their talk.

  • http://www.bluewaitui.com Linda Blue

    I live totally off the grid and appreciate the efforts of the companies that are making progress on the supply chain issue. It is one of the main things that keeps me from being 100% green. I try to purchase green, but it is near impossible. I’m glad thing are moving in a green direction.

  • Annette Lyjak

    I think it is wonderful you are doing this survey and am really interested in your results. I’m conducting a similar survey with the employees at my company.

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