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Green Supply Chain Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 1- http://rydercenter.fiu.edu/greensupplychain
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 Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 2- http://rydercenter.fiu.edu/greensupplychain
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 http://rydercenter.fiu.edu/survey/greensc/greensc.htm 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 Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 3- http://rydercenter.fiu.edu/greensupplychain
10.0%
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Auto Aero Electronics Mft Food Beverage Cons. Pack. GoodsChemical Pharma Healthcare Retail & WholesaleTransportation & Logistics ConsultingOther Not identified
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
Industry representation is fairly evenly distributed for our sample indicating the wide range of interest in this emerging management concern.
Green Supply Chain Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 4- http://rydercenter.fiu.edu/greensupplychain
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
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Green Supply Chain Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 5- http://rydercenter.fiu.edu/greensupplychain
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
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]
Industry Revenue 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
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Green Supply Chain Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 10- http://rydercenter.fiu.edu/greensupplychain
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.
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Green Supply Chain Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 13- http://rydercenter.fiu.edu/greensupplychain
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
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Green Supply Chain Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 18- http://rydercenter.fiu.edu/greensupplychain
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
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Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 20- http://rydercenter.fiu.edu/greensupplychain
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
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Green Supply Chain Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 21- http://rydercenter.fiu.edu/greensupplychain
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
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Green Supply Chain Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 22- http://rydercenter.fiu.edu/greensupplychain
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
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Green Supply Chain Survey Results
Green Supply Chain Forum 2008 at Florida International University February 7, 2008, Kovens Conference Center, Miami Florida, USA -Page 29- http://rydercenter.fiu.edu/greensupplychain
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.