Any company can manage some of these cost cutters: installing sensors that dim lights in unoccupied offices, for instance, or ending unnecessary business travel. But what about a company’s suppliers and partners? Major players such as Nike and Wal-Mart have been saving money for years since revamping their supply chains to reduce waste, and the trend continues. Coca-Cola, for instance, just announced that it will use its market heft to phase out harmful hydrofluorocarbon coolants throughout its supply chain, replacing them with more environmentally friendly alternatives.
You might think this bears little relation to small businesses because they lack the resources to conduct exhaustive studies of what every link in their supply chain is doing, much less the power to force compliance. But increasingly, both information and better supplier choices are becoming available to small and medium-size businesses.
If you decide to green your supply line, consider starting with a software package of the sort sold by companies such as Hara and SAP. This software, while demanding an upfront investment, contains enough data on most industries to shed light on your entire manufacturing chain, from the raw material to the finished good. Once you can see which points in your chain produce the most greenhouse gas emissions or waste, you can take the first steps to greening. What you’ll find will likely surprise you, as waste appears in surprising places; in the food industry, for instance, I learned that fertilizer can be quite harmful, while long-distance shipping is actually fairly environmentally friendly.
Even without software, there are a few obvious places in your supply chain to look:
- Waste in packaging, either from your suppliers or from yourself. Products often come swathed in unnecessary packaging, which adds both material and disposal costs.
- Your shipment schedule. It’s often possible to consolidate shipments, or take them less often.
- The materials in your product. Your customers will appreciate a switch to recyclable products, and if you’re recycling in bulk, you can often sell the raw material. That’s not the case with trash.
- Different supply chain partners. A few years ago this may have been a nonstarter; now, an increasing number of companies think going green is important.
- Your finished product. Do parts need glue and solder, or can they simply snap together? Most manufactured goods have the potential for improvement.
Most importantly, set aside time to find improvement rather than waiting to see whether politicians pass more environmental laws. When I recently spoke to Peter Graf, the head of SAP’s sizable sustainability division, he credited the company’s early start for the lead it has over competitors today. “As soon as there’s legislation, there’s no more room for competitive differentiation. Everyone will just comply,” he told me. When everyone is toeing the same line, there can be no leaders.