|Firms should look at measures to make their supply chains 'greener' not only because it is seen as 'doing the right thing' but because it is also the 'right thing to do', a new study suggests.
Management and technology consultants Diamond suggest that introducing environmentally friendly and ethical practices into the supply chain is not only good for improving a company's image: it also improves operations and reduces costs.
Diamond analysts Mark Baum and Darin Yug said that green supply chain initiatives have moved rapidly from merely compliance with environmental regulation towards a means of effecting real cost savings in areas such as energy conservation or recycling.
They quote examples from the food and beverage industry to highlight their point: NestlĄ§¦'s sustainability programme helped the Swiss group make packaging material savings of $510m between 1991 and 2006, while Heineken's Aware of Energy project was expected to lead to energy cost reductions of around 15 per cent by 2010.
Baum and Yug say that companies wanting to follow suit must be careful to have an integrated strategy for greening their supply chain and not merely attempt to 'patch' a solution onto an existing strategy.
"The key to extracting business value lies in establishing a long-term green strategy that is aligned with corporate strategy and approached top-down," the analysts write.
But they warn that management should not focus entirely on the business gains to be made from greener supply chains.
"Not every initiative will have a positive return on investment. Therefore, it is essential to think about all the green initiatives together as a balanced portfolio, with some initiatives being done on an investment basis."
Key to a successful transformation of the supply chain is leadership, the analysts note.
"Most companies face an uphill battle when implementing green initiatives because these efforts are typically managed in isolation by a firm's environmental health and safety team."
Instead, Baum and Yug say that companies should create a "governance council" that would coordinate efforts across all company divisions and departments, from supply chain and operations to marketing and sales.
"Corporate communications should also be linked with the sustainability initiatives to ensure that the impact of the initiative is being communicated to customers, shareholders and the general public," they add.
Any plans to move towards a greener supply chain must also be implemented gradually, the analysts say, since wholesale change in one fell swoop would prove ruinously costly.
"Greening is best accomplished in small steps: for example, green initiatives can start in areas that have the greatest business and environmental impact and companies can look forward to quick wins before moving forward."