CGN Edge Blog

Green Supply Chain Management: A  Key Differentiator That Can Drive Your Bottom Line

Dec 26, 2018 12:04:43 PM Posted by: Asheema Govil
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Introduction

As the world grows more conscientious of environmental issues and global warming, companies are adopting greener and more sustainable business practices. Companies are reevaluating their supply chains, from purchasing, manufacturing processes, managing the use of materials, logistics, and distribution of final products. Green Supply Chain Management drives value creation across a supply chain to reduce environmental effects. Improved environmental performance means lower waste disposal and lower overhead costs.

Companies like IKEA, Target, Tesla, and Walmart are pouring billions into sustainable initiatives, making public announcements, while investors and consumers keep a close watch. Many assume that low-cost supply chain options are incompatible with a green supply chain. However, it’s not always the case. Green initiatives can be cost savers. For example:

  • Packaging optimization results in reduction of packing materials
  • Eliminating hazardous materials reduces handling, disposal and regulatory costs
  • Alternative, sustainable or reusable, materials reduce cost of production
  • Eliminating waste reduces the cost of disposal
  • Reduced shipments lead to less fossil fuel consumption

Walmart has been recognized as one of the revolutionary companies implementing a green supply chain. The company has dedicated time and effort into investing in on-site solar systems and additional partners with suppliers and governments to improve access to renewable energy. All in all, the company has committed to reducing its emissions by 18% by the year 2025.

Caterpillar is one of the leading re-manufacturing companies in the world that brings back end of life products to usable conditions, thereby significantly reducing its environment impact through their sustainable business model.

Green Supply Chain

Figure 1. Implementing a Green Supply Chain

Challenges of implementing a Green Supply Chain

  • Cost to "go green": companies must encourage green products/services, green technology and green supply chain management (SCM) requires significant funding to be funneled into research and development
  • Initially, any resulting profits will be minimal since recyclable and renewable products are costly. However, green supply chains tend to be profitable in the long run
  • Consumers may not be willing to pay a higher price for eco-friendly products, which would result in a downturn in profits
  • Lack of available technology to support companies in their efforts to go green
  • Companies may not have the capability to collect and analyze appropriate data in their supply chains to make use of existing technology
  • There will always be an existing trade-off between efforts to go green versus lean supply chain practices

We at CGN have uncovered green and sustainable supply chain opportunities for Fortune 100 companies, using our proven approach to overcome their key challenges.

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CGN offers end-to-end supply chain solutions from strategy to execution. To learn more please contact us.