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Green SC Research Report February-March 2008


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  • 1. The State of Green Supply Chain Management me Survey Resullts Survey Resu ts Dr.. Wallfriied M.. Lassar Dr Wa fr ed M Lassar Diirrecttorr Ryderr Centterr fforr Supplly Chaiin Managementt D ec o Ryde Cen e o Supp y Cha n Managemen Adriian Gonzallez Adr an Gonza ez Diirrecttorr Logiisttiics Executtiive Counciill, ARC Adviisorry Grroup D ec o Log s cs Execu ve Counc l, ARC Adv so y G oup March 2008 March 2008 Copyright 200 – Ryder Ce C 08 enter for Supp Chain Man ply nagement
  • 2. Green Supply Chain Survey Results The State of Green Supply Chain Management Table of Contents I. Introduction …….…………………………..………………………………………………….2 II. Survey Overview ……………………………….……………………………………………..2 III. Profile of Respondents …………………….……………………………………………….3 IV. State of Companies’ ‘Green’/Sustainability Activities ……….……………………7 V. Analysis of “Green’ Efforts ………………………………………………………………10 VI. Key Drivers for “Green” Activities ……………………………………………………15 VII. Benefits and Expectations for the Future ………………………………………….17 VIII. Challenges to Green Supply Chain Implementation ……………..…………….28 IX. Overall Industry Implications and Conclusions ……………………………………29 Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 1-
  • 3. Green Supply Chain Survey Results I. Introduction The environment, particularly global warming, is attracting considerable attention today from the media, academics, analysts, and the business community. The interests of business and the environment were historically viewed as incompatible, but that view is starting to change. Record oil and energy prices, for example, are spurring companies to optimize their transportation operations and reduce their energy consumption. Others are exploring ways to recycle more or reduce the amount of packaging in their products. “Green is good for business,” is the new battle cry, a logical extension of Total Quality Management, Six Sigma, Lean, and other business practices. But are we still in the ‘early adopter’ phase or is this trend more widespread? What types of “green” initiatives are companies prioritizing? What factors are driving companies to become more ‘green’? Who manages these initiatives and how is success measured? Simply stated, what is the current state of Green Supply Chain Management? The Ryder Center for Supply Chain Management at Florida International University, in collaboration with ARC Advisory Group, developed an online survey to answer these questions. This report summarizes and analyzes the key findings from the survey. II. Survey Overview The online survey was posted in preparation for the Green Supply Chain Forum at Florida International University and was also open to external supply chain respondents. This survey can be found at where it remains open until April 30th, 2008. As of March 7, 2008, seventy supply chain professionals responded to the survey. These executives came from a cross-section of companies ranging from <$50 million to >$1 Billion in sales and operating in various industry verticals. Respondents were asked a number of questions to establish the key drivers for green supply chain efforts, as well as the benefits and risks involved. Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 2-
  • 4. Green Supply Chain Survey Results III. Profile of Respondents 14% of the respondents are in the Transportation & Logistics service sector and 39% are from Manufacturing & Retailing. The remaining 47% of respondents came from firms in Other Industries including Services and 4% of the respondents did not identify their industry. Figure 1: Firm Profile for Respondents 4.3% 10.0% 8.6% 31.4% 7.1% 12.9% 11.4% 14.3% Auto Aero Electronics Mft Food Beverage Cons. Pack. Goods Chemical Pharma Healthcare Retail & Wholesale Transportation & Logistics Consulting Other Not identified Industry representation is fairly evenly distributed for our sample indicating the wide range of interest in this emerging management concern. Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 3-
  • 5. Green Supply Chain Survey Results Almost three quarters of the respondents work for companies headquartered in the United States, while 16% are from European companies and 6% from Asia/Pacific companies. This breakdown reflects the survey’s focus on the US market. Nonetheless, the relatively high response rate from US firms is further evidence that Green Supply Chain Management is gaining importance in the US. Figure 2: Firm Headquarters 6% 16% 5% 73.0% United States Mexico & Latin America European Union Asia & Pacific Rim Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 4-
  • 6. Green Supply Chain Survey Results The sample has a heavy bi-modal distribution. Fifty-four percent of our sample are very large companies with revenues of $1 Billion and thirty-three percent are smaller companies with revenues below $50 Million. This indicates a heavy interest of small and large companies in how to address the new business challenges caused by sustainability issues. The lack of representation in the middle market is surprising. Figure 3: Revenue Profile > 1 Billion 54.1% 750 Million - 1 Billion 3.3% 500-750 Million 3.3% 0.0% 250-500 Million 4.9% 50-250 Million below 50 Million 34.4% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% Filtering the data by industry shows that almost two-thirds of the large companies are in the Manufacturing & Retail sector, while one-third of the small companies are Transportation & Logistics firms. The fact that most early adopters of “green” supply chain practices in Manufacturing & Retail are large companies, and that most Transportation & Logistics companies, as well as consultants, are small businesses, helps to explain the bi-modal distribution Table 1: Industry by Adjusted Revenue [% of Answers] Revenue Industry Total Small Co Medium Co Large Co Auto Aero Electronics Mft 21.2 11.5 Food Beverage Cons. Pack. Goods 14.3 15.2 9.8 Chemical Pharma Healthcare 4.8 14.3 9.1 8.2 Retail & Wholesale 28.6 18.2 13.1 Transportation & Logistics 33.3 14.3 6.1 16.4 Consulting 23.8 14.3 6.1 13.1 Other 38.1 14.3 24.2 27.9 Total 100.0 100.0 100.0 100.0 Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 5-
  • 7. Green Supply Chain Survey Results n More than half of our survey respondent hold funct f ts tional responnsibilities in L Logistics and d about a quarter are responsible for Procu t a urement. Wh 16% hav Environm hile ve mental, Healt and Safet responsib th, ty bilities, it is s surprising tha only 7% h at have Manufa acturing respo onsibilities. Then again, although Manufacturing is generally recognized as a critica T g y d al compponent of Su upply Chain MManagement, it has trad ditionally bee managed separately en d from an organiza ational standpoint. The d data sugges this separ sts ration persissts. Figure 4: Functio onal Respons sibilities 55% 5 51% % 50% 5 45% 4 40% 4 35% 3 30% 3 23% 25% 2 20% 2 16% 16% 13% 1 11% 15% 1 7% 7% 6% 10% 1 5% 0% In reg gard to scop of respondents’ respo pe onsibilities, 5 54.3% have local, 22.9% have % national, and 12.9% hav global responsibilities. Clearly, the focus of regional to intern d ve . e our sample is on the US market. 32.9% percent of our sample holds Mana % e ager titles, f followed clos sely by Direc ctors with 25.7% C-Level executives re %. e epresent 7.1% of our sa ample and Viice-Presidents 5.7%. The remaining sample either has other titles (18.6%) or did not answ the ques e wer stion. Howeever, our sammple clearly shows that the survey w answere by corpor was ed rate leaders with responsibilities across m multiple funct tional groups. Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 6- http://rydercente supplychain
  • 8. Green Supply Chain Survey Results n IV. State of Companies ‘Green’/Su s’ ustainability Activities y Over 50% of the firms partic cipating in th survey are either don have a “green” his n’t strate or are in the early st egy n tages, while about 21% consider themselves in the e interm mediate or advanced sta a age. This implies that we are still in the “early adopter” e phasee. Figure 5: State of Green Activ vities 35% 32.4% 30% 29.4% 25% 20% 17.6% 15% 14.7% % 10% 5% 5.9% 0% We don't have a d Ear - information- rly Beeginning - active 1-2 In ntermediate - active 3- Advanced - active f - for 'green/ /sustainability' ga athering stage. yea with initiatives in 5 years with published >5 year with designing ars d strategy. s progress. results and objectives. sustainability into r . processes. Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 7- http://rydercente supplychain
  • 9. Green Supply Chain Survey Results n A mo differentiated picture emerges w ore e when we com mpare the sta of “gree activity b age en” by comp pany size. We see that a W almost 40% o small com of mpanies (less than $50 m s million in reven nues) don’t have green a h activities at a while a q all, quarter of large compan nies (over $1 1 billion in revenue are alread in the Ad n es) dy dvanced stag Mid-sized companies fall ge. s some ewhere in the middle, wi almost 86 in the Ea or Begin e ith 6% arly nning stages These s. result further ind ts dicate the “e early adopte phase of this moveme er” ent, where large comp panies tend to lead the w t way, mid-sized companie are fast f es followers, an small nd comp panies lag be ehind. Figure 6: State of Green Activ vities by Firm Size (Reve m enue) 45 4 42.9 42.9 40 4 38.1 35 3 34.4 30 3 28.6 28.1 25 2 25.0 20 2 19.0 15 1 4.3 14 10 1 9.5 9.4 5 4.8 3.1 0.0 0.0 0 We don't have a  Early ‐ information‐ Beginning ‐ active 1‐ Intermediate ‐ a B ‐2  active 3‐ Advanced active for  d ‐ 'green/susta ainability'  gathhering stage. ears with initiatives in  5 years with published  >5 year wi ye ith designing  strate egy. progress. ectives. results and obje sustaina ability into   proc cesses. Revenue <$ $50 MM Revenue $50 0MM‐$1B Revenue >$ $1B Table 2: State of your comp e f pany's green/ /sustainabilit activities by company revenue ty y Revenue Revenue Revenue e <$50 MM $50MM-$1B >$1B We ddon't have a 'green/sustain nability' strate egy. 38.1 14.3 3.1 Early (information y n-gathering st tage, no form mal 28.6 42.9 34.4 corpoorate sustaina ability statem ment or report t). Beginning (active 1-2 years, de efined/docum mented 19.0 42.9 28.1 susta ainability stateement, initiattives in progreess). Inter rmediate (act tive 3-5 years, published re esults and 4.8 0.0 9.4 objecctives, active with external groups). Advaanced (active for >5 years, designing su , ustainability 9.5 0.0 25.0 into products and supply chain processes). n Note: Cells show % excluding missing observation e ns Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 8- http://rydercente supplychain
  • 10. Green Supply Chain Survey Results n Looki at the an ing nalysis by inddustry, we s that the Manufacturi & Retail sector is see ing more advanced than the Transportation & Logistics s e t sector when it comes to green n o activities. 85% of the Transp o portation & Logistics sec ctor is either in the early stage or r y does not have a green strate yet, while about 60% of the Man egy % nufacturing & Retail secto are alread past the early stage. This data s ors dy suggests, alo with oth research ong her findin ansportation & Logistics service com ngs, that Tra mpanies are g generally get tting “pulled d into” green activi ities by their customers, namely Man r nufacturers & Retailers. Figure 7: State of Green Activ vities by Ind dustry 75 71.4 7 60 45 4 33.3 32.3 30 29.0 0 25.9 25.9 22.6 15 14.3 14.3 9.7 7.4 7.4 6.5 5 0.0 0.0 0 0 Manufacturing & &  Tran nsportation &  Othe er (incl. Serv vices) Retail Logistics No 'green n' strategy. Early Beginning Interme ediate A Advanced Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 9- http://rydercente supplychain
  • 11. Green Supply Chain Survey Results V. Analysis of “Green’ Efforts When asked: “Which green/sustainability projects is your company undertaking?” Carbon footprint reduction in transportation is the top “green”/sustainability project companies are undertaking, mentioned by 57% of the respondents. Recycling of products or scrap material and reduction in energy consumption was also mentioned by more than fifty percent of the respondents. Reducing the carbon footprint of their overall supply chain network was also in the top five. Elimination of hazardous materials in products and manufacturing processes was mentioned about 27% and 21%, respectively. Surprisingly, the reduction of waste, either in packaging or manufacturing, showed very different results; reduction of packaging was mentioned 45% of the time while manufacturing waste reduction was mentioned by only 21% of the respondents. Table 3: Green/Sustainability Projects ‘Green’/sustainability projects Check All Top 3 Optimize transportation operations to reduce carbon footprint 57.10% 51.40% Recycle returned products or scrap material 57.10% 38.60% Reduce energy consumption in manufacturing and buildings 54.30% 45.70% Reduce packaging 45.70% 25.70% Redesign supply chain network to reduce carbon footprint 30.00% 20.00% Increase use of renewable energy sources (e.g. solar, wind) 27.10% 18.60% Eliminate/reduce hazardous/toxic materials from products 27.10% 12.90% Eliminate, reduce, or repurpose manufacturing waste 24.30% 11.40% Eliminate/reduce hazardous/toxic chemicals from manufacturing processes 21.40% 11.40% Implement Design for Environment practices in product development 18.60% 11.40% Other 10.00% 8.60% Not much activity is taking place to implement ‘Design for Environment’ practices in product development or to eliminate/reduce hazardous or toxic chemicals from manufacturing processes. There could be two possible reasons: (1) these initiatives may require more time and investment (long payback period) than other types of initiatives; and (2) most survey respondents may not be fully aware of the initiatives taking place in product development and manufacturing, since only about 7% of the respondents have responsibility in these areas. Overall, it appears that companies are tackling the ‘low hanging fruit’ first, either activities that are already part of standard practices, such as optimizing transportation, or activities that are reactionary responses to acute problems, such as escalating fuel and energy prices. Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 10-
  • 12. Green Supply Chain Survey Results n When it comes to cooperatio with exter n o on rnal parties, working wit suppliers o green th on suppl chain activ ly vities dominates. Anothe interesting finding, alt er g though not c completely surpr rising: only 3 respondent reported w ts working with competitor and 35 sa they hav h rs, aid ve no plans to engage with them This is no the unified approach t m. ot d that is talked about in d indus stry circles! It also sugg gests that achieving stanndard metric definitions aand meassurement me ethodologies for green a sustainability activities will not h s and happen quick or easily, even at the industry lev kly vel. Figure 8: Externa Cooperatio on Green Efforts al on Suppliers 37 12 7 Customers 30 18 8 Transportation Companies T 26 16 11 Government Agencies 21 1 18 14 3PL providers 3 1 21 16 16 Consultants 17 15 1 17 Technology Companies 16 17 1 17 Non‐G Government O Organizations 11 21 17 Competitors 3 10 35 0 10 0 20 30 40 50 5 60 Yes, working g with these pa artners on the ese issues Not working g with these pa ploring the possibility artners but exp Not working g with these pa artners and no o plans to enga age with them partners on th hese issues Table 4: Which of the followi external parties are y working with on e o ing you g n/sustainabil initiatives? [Number of responde green lity ents] Not working with t Not workin with ng Yes, working with , thes partners and se d these partners but thes partners on se no p plans to engage e exploring the g th hese issues with them on these e possibillity issues Compe etitors 3 10 35 Non-G Government Org ganizations (e.g. 11 21 17 Carbon Disclosure Pr n roject) Technology Compani ies 16 17 17 Consultants 17 15 17 Third P Party Logistics (3PL) provider rs 21 16 16 Governnment Agencie (e.g. Environ es nmental 21 18 14 Protec ction Agency) Transp portation Comp panies 26 16 11 Custom mers 30 18 8 Suppliers 37 12 7 Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 11- http://rydercente supplychain
  • 13. Green Supply Chain Survey Results n Almost 40% of th 56 firms t he that are active with gree activities do not have any metrics en e s to meeasure green n/sustainability results in their firms. These res n sults indicate that e standdard metrics do not yet e exist or are still being deeveloped in this area. It also raises t seriou questions about how well companies can act us s tually manag their gree ge en/ susta ojects if they can’t establ ainability pro lish a baselin and meas ne sure progres Metrics ss. for pa ackaging and energy consumption a the most common. T d are t These metrics coincide with t top gree the en/sustainab bility projects companies are doing, a shown pr s s as reviously in Table 2. e Figure 9: Green/S Sustainability Metrics by State of Green Initiativ [Observa y y ves ations] We don't have green/sust tainability  30% % 7% 2% metrics. for packaging r Metrics f reduction. 4% 16 6% 5% % 11% Metrics for energy/fuel r reduction. 4% 6% 16 5% % 11% Metrics for h hazardous/toxic material  2% 2 4% 2% 9% 9 reduction. Metrics for recycling. 4% 2% 5% Metrics for other initiatives 4% 2% 0% 10% 20% 30% 40% Early Beginning Intermed diate Adv vanced Table 5: Green/S e Sustainability Metrics by State of Gre Initiative [%] y een es How would you characterize the st tate of your comppany's green/suustainability act tivities? Early Beginning Intermediate Advanced Total Metric for other initiatives cs 0% 4% 0% 2% 5% Metric for recycling cs g. 0% 4% 2% 5% 11% Metric for hazardou cs us/toxic materi reduction. ial 2% 4% 2% 9% 16% Metric for energy/f cs fuel reduction. 4% 16% 5% 11% 36% Metric for packagin reduction. cs ng 4% 16% 5% 11% 36% We don't have green/sustainability metrics. y 30% 7% 2% 0% 39% Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 12- http://rydercente supplychain
  • 14. Green Supply Chain Survey Results More than a third of the firms responding to the survey either did not track their competitors or felt that they are lagging their competition and industry peers in regard to green activities. These numbers reflect the fact that, as the previous page highlights; many companies lack the metrics to adequately understand the scope and progress of their sustainability activities. If companies are unclear about what they’re doing internally, how can they compare themselves against other firms? Then again, almost two thirds of our sample felt that their companies were at least on par with their competition in regards to green activities. These results are more likely based on perception than actual benchmark data. Figure 10: Benchmarking Green Efforts against Competition 10.80% 24.60% 35.40% 29.20% Our company lags the competition and industry peers. Our efforts are comparable to the competition. Our company is ahead of the competition. Don't know ‐ We don't track our competitors' efforts. Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 13-
  • 15. Green Supply Chain Survey Results n Green efforts are mainly run out of the S n e Supply Chain Manageme departme n ent ent, followed d by Ennvironmental, Health, an Safety de nd epartments a cross-fun and nctional team Simply ms. stated companie are manag d, es ging sustainability effort in a variet of ways, a no single ts ty and e approoach is domiinant at this time (anoth indicator that we’re s in the ‘early adopter her still r’ phasee). Figure 11: Respo onsibility for Green Effort ts er Othe 26.20% Part of ou ur Supply Chaiin department t's  21. .30% responsibilities. Part of our Envir ronmental, Hea alth, and Safet ty  18.00% % departmment's responsi ibilities. A cross‐fun nctional team m managed by an n  executive fu ully allocated tto sustainabilit ty  14.80% projects. We have a ''C Corporate Susttainability''  dep partment with fully allocated d resources an nd  11.50% management. m Part o of our Regulatory Complianc ce  8.20% % deppartment's res sponsibilities. 0% 10% 20% 30% Note: Un nder ‘OTHER’ th following wa mentioned: he as Maarketing Initiative Co ommittee Memb bers with other full time jobs r Ad hoc projects a d across a wide r range of disciplines Th hrough a Green Committee n Geeneral Corporat Mandate but still not down to the trenche te t es We have formed a Green Comm e mittee with exeecutive sponsor rship as part of our first steps f s Co onservation dep and operatio pt ons Infformally by a g group of interes sted consultant ts Lead by EH&S de epartment with engagement a h across the com mpany Th is a newly re his egistered comppany Ou Customer ba interest in e ur ase embedding GHG Modeling in o software G our My company is owner operated...I strive to co y ontinually educa myself on s ate sustainability implementation Ha yet to be def as fined Cu ustomer manda ated, and define by the custo ed omer (major re etailers). Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 14- http://rydercente supplychain
  • 16. Green Supply Chain Survey Results n VI. K Drivers for “Green” Activities Key ” A det tailed analys of the rea sis asons why co ompanies enngage in gre activities was een s develloped by ask king the que estion: “Pleas rank, in o se order of impo ortance, the top 3 reaso your com ons mpany is active with gree en/sustainab bility initiativ ves?” The reesponse was s surpr rising. Figure 12: Green Activity Key Drivers y Corpo orate responsibil lity agenda 21 2 6 7 Re educe costs 11 9 5 Compliance wit th government/r regulations 10 6 5 Pressure f from customers/consumers 9 9 6 Priority y of CEO/Board o of Directors 7 14 4 Reduce carbon n emissions 5 7 7 Improve publi ic relations 3 6 12 Reduce e hazardous/toxic c materials 1 3 7 Improve productivity 1 3 2 Pressure from m suppliers 1 4 0 Pressure from m Investors 11 2 Pressure from co ompetitors 0 3 5 Pressure from Employees 0 3 Pre essure from Non‐Government Org ganizations 02 0 5 10 15 20 25 30 35 Ranked 1 Ranked 2 Ranked 3 It sho ows that cor rporate leade have gra ers asped the im mportance of sustainabilit and are f ty settin the agend It also s ng da. shows that c compliance w regulatio and pres with ons ssure from custoomers are als strong forces in getting companie to act. The analysis reveals that so es green supply cha managem n ain ment has mo essure points and is oved beyond isolated pre driven by a comb bination of re egulatory an market fo nd orces that ha caused c ave corporate leadeership to take notice. e Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 15- http://rydercente supplychain
  • 17. Green Supply Chain Survey Results n When asked: “Which stateme best cha n ent aracterizes th primary justification o your he of comp pany's green/sustainabili projects?” more than a third of th responde ity n he ents chose Susta ainability/env vironmental- l-improveme projects t ent that as a byp product have a cost or ve produ uctivity bene The seco most im efit. ond mportant justtification for green projeects was Cos st reduc ction project that as a b ts byproduct be benefit the en nvironment l listed by abo a quarter out of the responden The com e nts. mbinations of environmen efforts t f ntal that are syne ergetic with cost rreduction do ominate the justification for green ac ctivities at about 60%. TThis result lends support to the “green is good for b s business” perspective ma compan any nies are taking when justi g ifying green initiatives. Figure 13: Justific cation for Gr reen Efforts 40% 35% 35.5% 30% 27.4% 25% 20% 15% 14.5% 11.3% 10% 8.1% % 5% 3.2% 0% Sus stainability  Cost  C Prod duct  Regulato ory  Quality  Productivity  projects p reduction  enhancement complian improveme improvement nce  ent  t  ojects pro ects proje project ts projects projects Note: Commplete stateme ents for categ gories are as follows 1 Sustainability/enviro onmental-imp provement pr rojects that as a byproduct have a s t cost or productivity benefit. y 2 Cost re eduction projects that as a byproduct b benefit the environment. 3 Produc enhanceme projects that as a bypr ct ent roduct benefit the environm t ment. 4 Regula atory or manddate complian projects t nce that as a byprroduct benefit the t enviro onment and/or improve cos productiv sts, vity, and/or qu uality. 5 Quality improvemen projects th as a bypro y nt hat oduct benefit the environm ment. 6 Produc ctivity improv vement projec that as a b cts byproduct ben nefit the enviro onment. Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 16- http://rydercente supplychain
  • 18. Green Supply Chain Survey Results n VII. Benefits and Expect tations for t Future the Four of the top fi expected benefits ge ive d enerated by green activit ties are exte ernal market t oriented benefits. The top tw benefits t wo that rate eith most imp her portant or im mportant are e enhanced public relations (50 out 57 mentions) and enhanced b 0 brand image (49 out of 57 mentions). Th third is reduced energ costs (49 out of 57 m he gy mentions) followed by ased consum loyalty a revenues (44 and 45 mentions, respectively increa mer and s 5 y). Figure 14: Expected Benefits generated by Green Eff s forts Enhanced p public relations 24 26 3 1 Enhance ed brand imag ge 21 2 28 4 Reduce ed energy cos sts 20 0 29 12 Increased b brand loyalty y by consume ers 19 9 25 4 eased revenues Incre 18 8 27 8 d market share Increased 17 24 4 10 15 22 13 1 Improve ed productivi ity Im mproved quali ity 12 25 12 9 31 8 2 Re educed servic ce related cos sts Reduc ced uncertain nty 8 12 18 5 Reduced p packaging cos sts 6 32 1 1 Re educed manufacturing cos sts 5 17 6 28 Reduced raw m material or component cos sts 4 26 6 2 0 10 20 30 0 40 50 5 60 Most im mportant Important Less imp portant Not importa N ant at all Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 17- http://rydercente supplychain
  • 19. Green Supply Chain Survey Results When filtered by industry the results are even more interesting. Only 16% of the respondents working in the Food, Beverage, Consumer Packaged Goods industry see brand image as the most important benefit and instead focus on energy savings at (almost 67% mentioned it as the most important benefit). Retail and Wholesale representatives share that view and 75% of the respondents mentioned energy savings as the most important benefit. Transportation and logistics companies expect increased revenues (55%) and consultants clearly focus on brand image and public relations as the most important benefit (71% and 57%, respectively) for their business. Table 6 - Benefits derived from going 'Green' by Industry Category Industry Food Auto Aero Beverage Chemical Retail & Transport Electronics Cons. Pharma Consulting Other Wholesale & Logistics Mft Pack. Healthcare Goods Most n 3 2 1 4 3 4 7 Enhanced important % 42.9 40.0 25.0 50.0 33.3 57.1 41.2 public relations n 3 2 3 3 5 2 8 Important % 42.9 40.0 75.0 37.5 55.6 28.6 47.1 Most n 2 1 0 3 3 5 7 Enhanced important % 33.3 16.7 0.0 37.5 37.5 71.4 41.2 brand image n 4 2 4 3 5 2 8 Important % 66.7 33.3 100.0 37.5 62.5 28.6 47.1 Most n 2 4 1 6 1 1 5 Reduced important % 28.6 66.7 25.0 75.0 12.5 12.5 31.3 energy costs n 4 2 2 2 4 5 10 Important % 57.1 33.3 50.0 25.0 50.0 62.5 62.5 Increased Most n 1 1 0 3 3 5 6 brand important % 16.7 20.0 0.0 37.5 37.5 71.4 35.3 loyalty by n 3 3 3 3 4 1 8 consumers Important % 50.0 60.0 100.0 37.5 50.0 14.3 47.1 Most n 0 2 1 4 5 2 4 Increased important % 0.0 40.0 33.3 50.0 55.6 28.6 23.5 revenues n 4 2 1 3 4 4 9 Important % 66.7 40.0 33.3 37.5 44.4 57.1 52.9 Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 18-
  • 20. Green Supply Chain Survey Results n When asked: “In your opinio green sup n on, pply chain innitiatives make our supp chain ply More efficient, Do affect ef on't fficiency, or Less efficien nt?” two thir of all res rds spondents think that overall supply chai managem in ment will becoome more e efficient due to green effort This prov ts. vides further evidence th the indus r hat stry expects bottom line results from m the sustainability efforts. y Figure 15: Efficie ment on Gree Supply Chain Initiativ ency Assessm en ves 70% 60% 67.2% 50% 40% 30% 20% 24.6% 10% 8.2% 0% More efficien M nt Don't t affect efficiency Less efficient t Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 19- http://rydercente supplychain
  • 21. Green Supply Chain Survey Results When asked: “Do you expect a change of importance of green transportation and logistics issues over the next three years?” 83% of the respondents felt that it will increase in importance, while only 10% expect it to rise to #1 priority. No respondent thought of it as a trendy “fad” and only one respondent thought it may decrease in importance. Figure 16: Change of Importance on Green Transportation/Logistics Issues 5% 1% 84% 10% It will become the No.1 priority. It will become more important. It will remanin at the same importance level. It will be less important. Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 20-
  • 22. Green Supply Chain Survey Results A more differentiated picture emerges when we filter the previous responses by company size and industry respectively. We see that almost 50% of medium sized companies are convinced that green supply chain management will become their top priority. Not surprisingly 25% of consulting firms believe that green issues will become their top priorities in the next 3 years, reflecting the overall importance of the topic and its impact on their consulting work. Surprisingly, only in the Chemical, Pharma and Healthcare sector do we find a significant percentage of respondents to identify green issues as top priority. As expected, none of the respondents thought green issues will lose importance. Table 7 - Importance of Green Transportation and Logistics Issues by Company Size and by Industry Do you expect a change of importance of green transportation and logistics issues over the next three years? It will remain at It will become It will become the same It will be less the No.1 more important. importance important. priority. level. Company Size [%] Small Co 5.00 90.00 5.00 Medium Co 42.86 57.14 Large Co 6.45 83.87 6.45 3.23 Industry [% within Industry] Auto - Aero - Electronics Mft 71.43 14.29 14.29 Food - Beverage - Cons. Pack. Goods 100.00 Chemical - Pharma - Healthcare 20.00 80.00 Retail & Wholesale 12.50 87.50 Transportation & Logistics 10.00 80.00 10.00 Consulting 25.00 75.00 Other 5.88 88.24 5.88 Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 21-
  • 23. Green Supply Chain Survey Results One of the most surprising results were derived from questions about consumer attitudes. When asked: “In five years, how much importance do you believe customers/consumers will place on ‘greenness’ when making purchasing decisions?” two fifth off all respondent still look at sustainability efforts as taking a backseat to or being just one part within the tradeoff system of cost, quality and service. In other words, while companies expect a halo effect from the green effort when it comes to brand equity and public relations issues, firms are well aware of the fact that end customers will demand ‘greenness’ within the current market value system. Figure 17: Importance of Greenness in Consumer Purchasing Decisions 20% 34% 46% Some importance, but cost, quality, and service will still dominate purchase decisions. An equal balance between greenness, cost, quality, and service. Very important; willing to make cost or service tradeoffs for 'green' supplier. Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 22-
  • 24. Green Supply Chain Survey Results n We th asked managers to speculate on consumer willingness to spend mo for hen m n ore ‘green’ products and services with the qu a s uestion: “As a Consumer which of t following r, the g produucts would you pay 10% more for an ''environm y % mentally-frien ndly'' option? Mark all ? that aapply.” The two big ticke items in f et family purcha ases, house and car are at the top o e of the list. Food and Washing M d Machines follow. Responddents expec only about a quarter o ct t of onsumers or less to willin all co ngly spend 1 10% more fo electronics, clothing a toys. or and Figure 18: Enviro onment Frien ndly Option Car 68.60% Ho ouse 50.00% Food F 50.00% Washing Machine W 50.00% Televi ision 27.10% Comp puter 24.30% Clothing 22.90% Toys T 20.00% 0% 10% 20% 30% 40% 50% 60% 70% Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 23- http://rydercente supplychain
  • 25. Green Supply Chain Survey Results n We th turned our attention to business to business relationshi with the question: hen o n s ips “In fiv years, ho much imp ve ow portance will companies place on gr s reenness/ su ustainability when selecting su n uppliers?” Figure 19: Impor rtance of Gre eenness in S Selecting Sup ppliers Ve ery importannt; willing to m make cost or  21.30% service trade s eoffs for 'gree en' supplier An equual balance bbetween  39.30% greenness, cost, quality, and service Some importan nce, but cost, quality, and  s service will st till dominate partnering  39.30% decisions 0.00% No o importance e whatsoever 0% 5% 10 15% 20% 25% 30% 35 40% 0% 5% Again almost 80% of respon n, ndents feel t that business partners w mostly loo at the s will ok existing value pro opositions of cost, qualit and servic or put gre f ty ce eenness into the mix at o equal consideration. Only abo 20% of the respond out dents expect greenness t carry to favor with busin rs ness partners It is very c s. clear that re espondents f this surve for ey understand how important it is for green activities to support an enhance t existing n o nd the busin ness proposittion. Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 24- http://rydercente supplychain
  • 26. Green Supply Chain Survey Results n A warning signal emerges wh one look at the pre hen ks eceding analysis and com mpares to the answers to th following question: “D you expe costs of d he Do ect doing busine as a ess result of ‘greener products o services w increase, decrease, o remain unchanged?” t r’ or will or More than half of our respondents feel th green ac f hat ctivities add to the cost o doing of busin ness. Yet the also understand the d ey doing busine with cust ess tomers does not rely on green activities, but instead o the trade between costs, quality and service. If the n b on eoff n cost o doing gre business cannot be c of een controlled, sustainability efforts may suffer. y y Figure 20: Chang in Costs o doing Busi ge of iness due to Greener Pro o oducts 60 0% 50 0% 53.2% 40 0% 30 0% 27.4% 20 0% 19.4% 10 0% 0% 0 Increase I Decrease No Change Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 25- http://rydercente supplychain
  • 27. Green Supply Chain Survey Results n A fea of increase regulation continues to exist. Alm ar ed n most 90% of all respondents f answwered yes to the question “Do you t n: think the futu legislativ landscape regarding ure ve e clima change will lead to in ate w ncreased reg tainable business gulations on 'green'/sust practtices?” Figure 21: Increa in Regula ase ation on Gre Practices een s 90% 9 80% 8 88.70% 70% 7 60% 6 50% 5 40% 4 30% 3 20% 2 10% 1 11.30% 0% Yes No At the same time respondent also feel t e e ts that market forces will p pressure them to engage m e in gre activities The quest een s. tion: “Do you think mark forces will lead to inc u ket creased greenn'/sustainabl business p le practices?” w answere with a yes by more th 9 out of was ed s han f 10 re espondents. Figure 22: Marke Force Influ et uence in Gre Practices een s No o, 6.50% Yes, 93.50% % Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 26- http://rydercente supplychain
  • 28. Green Supply Chain Survey Results n The m market force that were most freque es ently mentio oned to impa green eff act fort were: End-C Customer Deemand, Bran Perceptions, and Raw Materials C nd w Costs. Figure 23: The Market Forces M s 80% % 70% % 71.40% 7 60% % 50% % 51.40% % 40% % 30% % 20% % 22 2.90% 10% % 4.30% 0% % End‐Cu ustomer  Brand  Raw Ma aterial  Other Demmand Perceptions Costs Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 27- http://rydercente supplychain
  • 29. Green Supply Chain Survey Results n VIII. Challenges to Green Supply Ch n hain Implem mentation We conclude our analysis by listing the c challenges th responde hat ents listed w when ementing sus imple stainability a activities. La of standa ack ards in regard to metrics and s meas surement meethodologies points to th need for more knowle s he edge develo opment throu ughout indusstries. The need to keep customers’ existing valu propositio that are ue ons based on quality, costs and s d , service expectations are the second most impor rtant challe enge. Figure 24: Supply Chain Implementation Challenges y Lack of glob bal standards in metrics and… d  29 9% 14% % 11% Balancing g green efforts w with customer… r  % 26% % 10% 11% Getting suppliers s and trading p partners to act… t  11% 11% % 13% Redesigning supp ply chain netw work to reduce… e  9% 3% 13 11% carbon‐emissions data from… 6% 7% 6 Obtaining c m  6% nt government… 4% New or more stringen t  13% 7% Obtaining chem O tion data from… 4% 3% mical composit m  Other r 3% Changing o our manufacturing processes s 7% 6% Traini ing employees s 6% 4% 0% 10% 20% 30% 40% 50 % 0% 60% Rank 1 Rank 2 Rank 3 The o heme for the green supp chain foru at Florida International overriding th e ply um Unive ersity in February 2008 w the inte was egration of green supply chain mana agement within the basic business pro n b oposition and green supp chain imp d ply pact on the bottom line. . Clear industry is longing fo a better understanding of how gre efforts impact the rly, or een ness processes including costs and h busin how green ef fforts can be harnessed to bring e manuufacturing coosts down w while not neggatively impa acting quality and service y e. Green Supply CChain Forum 2008 at Florida International U University February 7 2008, Kovens C 7, Conference Cente Miami Florida USA er, a, -Page 28- http://rydercente supplychain
  • 30. Green Supply Chain Survey Results IX. Overall Industry Implications and Conclusions The State of Green Supply Chain Management today can be summarized this way: We are still in the early adopter phase, and the leaders are mostly large companies (over $1 billion in revenues) that are focusing their efforts primarily on ‘low hanging fruit’ opportunities to reduce costs, improve the environment, and enhance public relations. All of the companies surveyed believe “greenness” will have some importance in consumer purchasing decisions and supplier selections in the future, and 20% believe it will play a “very important” role. In addition, almost 90% of the companies surveyed believe new government regulations related to climate change and sustainability will emerge down the road. Therefore, it’s clear that companies are not treating sustainability as a fad, but as a new aspect of achieving business success, along with cost, quality, and service. This is why sustainability efforts are being driven by the CEO and the Board of Directors at many companies. But much more work is required, particularly to develop and implement standard metrics and measurement methodologies. History has shown repeatedly that standards accelerate the adoption of technologies, products, and business processes; the same will hold true for sustainability practices once globally accepted standards are developed and implemented, and government regulations are harmonized around the world. Similarly, in order to achieve the greatest environmental and financial benefits, in the shortest amount of time, sustainability and “green” efforts must be viewed as a global business initiative that extends across companies and industries. This implies that companies must not only work collaboratively with their suppliers and customers, but also with their competitors. However, almost none of the companies surveyed are currently working with competitors on sustainability efforts, and almost none plan to work with them in the future. While opportunities may exist for companies to leverage “green” practices as a competitive weapon, you can argue that even greater benefits exist, for the entire business community and the planet, if companies instead share their experiences and successes in this area with one another. Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 29-