Decoupling Green Technology from Climate Change Hysteria

Having worked 4 years for one of the most advanced auto parts suppliers in the world and having now worked for supply chain software provider, Manhattan Associates, for more than 2 years, I have a grounded understanding of technology's role in supply chain innovation. Responsible supply chain management dictates that technology is not introduced for technology's sake; rather, it is thoroughly justified against a company's corporate strategy and financial health.

Due to the flood of research and scientific opinion now questioning and debunking anthropogenic global warming (AGW) theory, it is my opinion that goods and services firms are at a critical stage in deciding just how to react to climate change alarmists and the resulting governmental policy. As I mentioned in my previous post on this subject:

"...no responsible manager would ignore new data and/or research that solidly put into question the assumptions of an existing strategy; unless, of course, that manager is so emotionally and financially tied to that existing strategy."

Where climate change initiatives are already being forced upon your business or organization due to the enactment of legislation by governmen, such as that which Australia plans from 2010, the laws must be followed. However, supply chain managers still have a responsibility to execute their own research as part of the overall supply chain intelligence effort. If unjustifiable regulation is going to have a negative impact on your supply chain, the supply chain manager is responsible to present executives with the data. This will empower executives to properly lobby the government for laws to be changed. However, there are a significant number of green technologies and innovations that can improve environmental stewardship without the need to adhere to climate change and carbon footprint hysteria.

Th ROI of many green technologies and innovations have been proven when deployed properly across the supply chain, but each company will have to justify a "green" investment against their own strategy and budgets. Last year, Manhattan Associates sponsored a "sustainability" survey conducted by the research divisions of Supply Chain Management Review and Logistics Magazine. Below are some highlights from that survey:

""More corporate leaders are doing something about environmental concerns, but they aren’t taking their eyes off the bottom line, according to the results of an online study on "The Green Supply Chain," conducted by Supply Chain Management Review and Logistics Management magazines.

"The study also found concerns about waste and recycling are more important than greenhouse gas emissions and resource consumption."

In terms of content:

"The study discussed topics such as the most important environmental issues, specific supply chain green actions currently in place and planned for the future in manufacturing, warehousing, and/or distribution, ROI on green initiative investment and level of collaboration."

"In all, 250 readers of both magazines from a variety of industries chose to participate in the study. Most of the respondents, according to the study’s report, work in supply chain management and/or in logistics and transportation. Nearly half of the respondents are based in a corporate headquarters."

Fortunately, based on the responses below, it seems that many companies in the U.S. have yet to fall prey to climate change hysteria. Rather, companies are appropriately pursuing initiatives that are not only environmentally friendly but that have tangible ROI:

"As to what companies are looking to do about the environment, nearly two thirds of the respondents said waste disposal and recycling were the most important environmental issues to address, beating out conserving natural resources, greenhouse gas emissions and “green” consumer buying preferences.

"Davies said companies are recognizing the value in having less to clean up. "The more you reduce waste, the more you reduce cost," he said."

"Respondents indicated their companies are seeking better public relations and customer satisfaction through greener initiatives, but cost savings are still most important. Nearly two thirds of respondents cited cost justification as the top barrier to sustainability initiatives in their companies.

"In addition, 60% of respondents whose companies are implementing sustainability initiatives said the companies also have a method of measuring return on investment for each of those initiatives.

"Davies was not surprised by these numbers. "Very few initiatives get funded because they are green," he said. "They get funded because there is a return on investment.""

Manhattan Associates followed up this survey with an article at their site titled, "The Eco-Business of Supply Chains: Putting a "W" in Both Columns." The article points out some tangible cases of blending business with environmental responsibility:

"Some of the largest, most recognized brands have made the correlation between operations and the environment within their supply chains:

• Wal-Mart — In Canada, the company switched some of its shipping crates from cardboard to plastic, which allowed the crates to be used approximately 60 times instead of once. The company estimates it saved $4.5 million from the switch and reduced waste by 1,400 tons.
• Staples — The office superstore installed skylights in its distribution centers and now uses dual-speed drive motors on conveyor systems. The company has reduced per-square-foot electricity by 15 percent.
• REI — The outdoor gear retailer is taking steps to make it easier for its supply chain to more quickly and easily identify green products. The Outdoor Industry Association's Eco-Working Group brings together more than 40 outdoor brands, supply chain partners and other stakeholders to create a framework to measure, report and improve the environmental impact of their products.

Next, the article discusses how informational architecture can be transformed to realize dual benefits in both operational efficiency and environmental impact. There are a few mentions about the reduction of CO2 emissions, but it is important to remember that CO2 is not pollution:

• Carbon Dioxide (CO2) is a natural part of Earth's Atmosphere (NASA)
• Carbon Dioxide (CO2) levels in the atmosphere have risen from 0.028% to 0.038% (380ppm) over the past 100 years (IPCC)
• Carbon Dioxide (CO2) is not toxic until 5% (50,000ppm) concentration (Source)
• Any detrimental effects of Carbon Dioxide (CO2) including chronic exposure to 3% (30,000ppm) are reversible (Source)
• OSHA, NIOSH, and ACGIH occupational exposure standards are 0.5% (5,000 ppm) Carbon Dioxide (CO2) (Source)

As I have implied previously, a company, organization, or individual may be able to measure their own carbon emissions over time, but it is not possible to explicitly link these emissions, or even a change in emissions, to specific climatic events. Thus, the driver to these initiatives should be centered around either creating more value or reducing costs in a way that provides positive, immediately tangible and measurable impacts on your business and the surrounding environment. I am disappointed CO2 emissions reduction is mentioned so prominently in this article, and when I say this, I am writing as the author of this blog and in no way representing Manhattan Associates. However, even if you strip out the CO2 language, it retains some great recommendations for enhancing supply chain informational architecture (strike lines are mine):

"Before investing heavily in redesigning products and facilities, there can be great benefits to starting within the four walls, applying the latest innovations in inventory, order, transportation and distribution management technologies as the foundation for green initiatives.

"The following are examples of how real-world technology applications can combine traditional supply chain strategies with an eco-friendly approach to produce a type of two-fold benefit aimed at both the business bottom line and the health of the environment:

• Inventory Management — Companies can optimize order frequencies with replenishment optimization tools that examine the economics of various ordering cadences. For example, by moving to an every-other-day shipment schedule, a big-box retailer, traditionally receiving daily deliveries of inventory, has the potential to realize both fuel and labor savings while reducing emissions by as much as 40 percent.
• Order Management — With the right technology, companies can dynamically re-route inventory being received at transload facilities. Take an outdoor gear company receiving shipments in Long Beach, Calif., and sending products through a Houston distribution center before they're delivered to a Salt Lake City store location — a total distance of 3,100 miles. By delivering those same products directly to Salt Lake City from Long Beach, this company has the opportunity to reduce lead times and delivery miles by 77 percent which, in turn, adds up to fuel savings and reduced CO2 emissions.
• Transportation Management — Through in-depth transportation procurement solutions, companies can now prioritize shippers and carriers with standardized environmental factors. Based on new EPA data that assigns carbon ratings to shippers and carriers, companies can potentially leverage that information to make transportation procurement decisions — adding "least environmental impact" into priority considerations, along with "least cost" and "best service."
• Distribution Management — Companies can get smarter and greener about the way they pack goods. Through the latest innovations in distribution management technology, for example, an online retailer can optimize order packing via cubing algorithms which consider weight, volume, product dimensions, constraints, nesting, protection, etc. This retailer will more than likely reap the eco-benefits of reduced packaging requirements as well as a reduction of CO2 emissions by more effectively and efficiently packing products to maximize three-dimensional space within cases, pallets and trucks.

"When evaluating each of these strategies, you'll obviously need to carefully consider the impact to your operations. Remember, there is no "one-size-fits-all" when it comes to supply chain optimization or sustainability initiatives. Each of these strategies has eco-benefits, but they also have trade-offs from an operational perspective. Once you ensure the change provides a positive impact to both the environment as well as your bottom line, then you'll achieve the desired win-win.

As with any strategy, the key recommendation is to thoroughly do your research including thoroughly questioning the conclusions of consultants that advocate implementing CO2 tracking/reduction schemes. Delineate in the research where you can decouple climate change hysteria from the initiatives and technologies with truely tangible outcomes. Clearly evaluate the motivations of those promoting CO2 reduction schemes and ask for the list of research upon which their conclusions and assumptions are based--do you really want to defer major strategic decisions regarding your supply chain to organizations based on alarmism and hysteria? Below are a couple quotes that we would be wise to keep in mind regarding CO2:

""Carbon dioxide is not a pollutant but a naturally occurring, beneficial trace gas in the atmosphere. For the past few million years, the Earth has existed in a state of relative carbon dioxide starvation compared with earlier periods. There is no empirical evidence that levels double or even triple those of today will be harmful, climatically or otherwise. As a vital element in plant photosynthesis, carbon dioxide is the basis of the planetary food chain - literally the staff of life. Its increase in the atmosphere leads mainly to the greening of the planet. To label carbon dioxide a "pollutant" is an abuse of language, logic and science." - Robert M. Carter, Ph.D. Professor of Environmental and Earth Sciences, James Cook University"

"Carbon dioxide is not a pollutant. On the contrary, it makes crops and forests grow faster. Economic analysis has demonstrated that more CO2 and a warmer climate will raise GNP and therefore average income. It's axiomatic that bureaucracies always want to expand their scope of operations. This is especially true of EPA, which is primarily a regulatory agency. As air and water pollution disappear as prime issues, as acid rain and stratospheric-ozone depletion fade from public view, climate change seems like the best growth area for regulators. It has the additional glamour of being international and therefore appeals to those who favor world governance over national sovereignty. Therefore, labeling carbon dioxide, the product of fossil-fuel burning, as a pollutant has a high priority for EPA as a first step in that direction." - S. Fred Singer, Ph.D. Professor Emeritus of Environmental Sciences, University of Virginia

In the end, readers of this blog have the ability to do their own research and come to their own conclusions. My belief is that it is entirely possible to operate an environmentally friendly business and yet steer clear of climate change hysteria. In a future post, I will discuss the benefits of deploying a "Green Grid."