The Green Supply Chain Challenge

Most companies aren’t tracking the environmental costs of transporting their products. But that’s about to change, a GTM Research report finds.

Real men do logistics. How do they pay for it?

That old Army saying represents a challenge for companies that want to make their supply chains more environmentally sustainable. Simply put, most haven't yet made it a core investment, according to a GTM Research report.

The Greening the Supply Chain report surveyed 74 sustainability executives, 89 percent of them at companies with more than $1 billion in annual revenues. Right now, most of those executives are focused on cutting supply chain costs, with sustainability falling about midway in their list of priorities, the report found. 

Fewer than half the respondents said they are tracking the environmental impacts of the trucks, trains, planes and ships that carry their products. Most said they aren't using low-emissions vehicles or working with companies that do.

But most of them plan to start spending more on supply chain sustainability in the next two years, the report found. Top reasons included improving energy efficiency and meeting customer expectations, though reducing carbon emissions, complying with new and existing regulations and managing increased risk were also cited.

The report also highlighted a line of business likely to be in much demand – providing software and systems that help companies pull together all their sustainability efforts.

Only one-fifth of the companies surveyed said they've integrated the systems that manage their environmental information with those that manage supply chain activities, though 45 percent said they are working on that.

And while most of the companies aren't yet reporting to third-party sustainability initiatives such as the Carbon Disclosure Project, four-fifths say they will start doing so in the next two years. 

Giants like Walmart and PepsiCo also are asking their suppliers for sustainability data. That may well require those suppliers to get information from their suppliers, and so on down the chain (see Green Light post).

That may present a particular challenge to smaller companies, which find it harder to justify the costs of sustainability reporting than do big companies (see Obstacle to Cutting Emissions: Filling Out Surveys).

On the other hand, big companies that have made bold sustainability promises also have the most complex supply chains to manage, the report noted (see Coca-Cola Enterprises Sets 15% GHG Reduction Goal).

All these pressures are likely to drive investment in software that merges carbon accounting, energy efficiency, regulatory compliance and financial reporting.

That's a focus of startups such as Hara, Carbonetworks, CarbonFlow, Planet Metrics and CSRWare, as well as enterprise software giants SAP, CA and Microsoft (see CA's EcoSoftware Lands Tesco as First Client and Carbon Accounting: It's All About Appearances).

Spending on sustainability can pay off, executives insisted. The report cited office supply chain Staples, which said it saved 20 percent on fuel just by limiting its trucks' top speed to 60 miles per hour. Adding anti-idling software added another 11 percent savings.

Walmart has also made its truck fleet and warehouse network more efficient. It had some help from the Rocky Mountain Institute, which has launched the U.S. Council for Freight Efficiency (USCFE), an industry partnership to work on more efficient trucking technologies and policies (see Rocky Mountain Institute's Plan for Big Sustainability).

Not all emissions come from trucking, of course. Coca-Cola is seeking to phase out refrigerators that use potent global warming agents such as hydrofluorocarbons, since its 9 million coolers and vending machines make up a significant chunk of its greenhouse gas emissions (see Study Calls Refrigerant, Air Conditioner Gases Threat to Environment).