Carbon Performance a Key Determinant for Suppliers

A full half of multinational companies plan to select suppliers based on carbon performance, according to a study by Carbon Trust Advisory.

The research says that 29% of suppliers are likely to lose their places on green supply chains if they do not have adequate performance records on carbon. The research also finds that 58% of multinationals will in the future pay a premium for low carbon suppliers to reduce their overall corporate carbon footprints.

Apparently suppliers are in the hot seat- are you one of them? Carbon isn’t the only critical factor in supplier evaluation. Water and energy management are also becoming critical sustainable business strategies to address with internal and external supply issues. To unprepared organizations, the business risks of carbon, water, and climate change disclosure takes many forms:

• Potential increase in operating cost
• Potential increase in supply costs
• Potential disruptions to supply or loss of supplier relationships
• Potential loss of revenue or market share
• Potential to business reputation
• Potential inability to secure investment dollars or capital

As if these reasons alone weren’t enough to green the supply chain, consider the top 10 reasons why most companies are incorporating sustainability into the supply chains.

• Increase Profitability – Proactively incorporating sustainability concepts into your supply chain will decrease cost and add the value to operations.
• Asset Utilization – Incorporating greater eco awareness into transportation and inventory practices will increase utilization of key assets.
• Risk Mitigation – Promoting greater understanding of sustainability within the company’s supply chain will mitigate environmental, social, and market risks.
• Innovation – Incorporating sustainability concepts into the supply chain will be a catalyst for supplier innovation.
• Alignment – Negotiating business sustainability policies with suppliers and customers will promote alignment across the supply chain.
• Continuous Improvement – A common understanding of sustainability concepts, goals and Customer Service – Implementing sustainable best practices within the supply chain will standardize operations and allow for improve customer service.
• Regulatory Compliance – Green supply chain management will help ensure regulatory compliance.
• Product Differentiation – Creating uniquely different green supply chain practices will differentiate the company and its products in the market place.
• Enhance Reputation – Demonstrating green business practices will promote business sustainability and enhance company reputation.

Creating supply chain management alignment through increased eco awareness, cooperative business relationships, and applied sustainability concepts can have immediate business impacts and reduce business sustainability risk.

Article by Julie Urlaub, Founder and Managing Partner at Taiga Company; appearing courtesy 3BL Media.