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The Role of Sustainability in the Modern Supply Chain

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Last week this author attended Oracle’s Modern Supply Chain Experience conference held in San Jose California. This conference is hosted annually by Oracle, and provides a singular focus on broad supply chain related technology and business process topics.  Attendance this year was impressive, upwards of 2000 attendees from multiple industry settings.

I had the opportunity to participate in two different panel discussions.  One was the role of sustainability in the modern supply chain.  Our panel was moderated by Rich Kroes, Director, and Sustainability Strategy at Oracle and included two other panelists besides myself: Jon Chorley, Chief Sustainability Officer and Group Vice President, SCM Product Strategy at Oracle and James Ayoub, a student at Penn State University.    Oracle_MSCE_Jan_16

To its credit, Oracle sponsored the attendance of nearly 80 students from various supply chain management programs both in the local area and across the country. These students were afforded the opportunity to attend general sessions, a dedicated set of student focused session tracks as well as participate in a panel discussion, including our sustainability panel. Our sincere thanks and shout-out to Oracle for their generous outreach and support, was of the first that this author has witnessed from a specific technology company.

Our sustainability panel touched upon various topics regarding how sustainability is manifesting itself across industry supply chains.

On Supply Chain Matters, we have highlighted industry supply chain efforts dating back to at least our founding in 2008.  While some initiatives have stemmed from regulatory directives and requirements such as REACH across chemical focused supply chains, RoHS within high tech, or Conflict Materials, others have been spawned from aggressive and committed corporate sustainability goal setting. Many global corporations have declared carbon reduction and sustainability goals mapped to specific timelines and much of the facilitation or enablement of such goals originates specifically within supply chains because product value-chains are responsible for a considerable portion of carbon and greenhouse gas emissions. Consider the carbon emissions footprint of transportation and logistics, manufacturing or agricultural production for example.

Many Consumer Products and Food producers such as Procter & Gamble, Nestle and Unilever and others are recognized for their wide reaching efforts for incorporating sustainability in business strategy. Beverage companies such as Coca Cola, PepsiCo and SAB recognize that large consumption of water is a critical component of a sustainability strategy.  They have each appointed senior managers responsible for water conservation and sustainability initiatives that insure supplies of water are continuous.

High profile manufacturers in the high tech and consumer electronics sector such as Apple, Dell, Hewlett Packard and others have always been on the forefront of sustainability initiatives.  Across various other industries, innovators have been openly active and committed to sustainability efforts because it drives benefits.

Consumers and customers have in-turn, continued to actively support brands that demonstrate a commitment to sustainability and preserving our planet. James Ayoub was very articulate in expressing how consumers of his millennial generation care about their environment and factor buying and loyalty decisions based on the reputation of the brand in active sustainability efforts.  James further shared highlights of internship efforts in supporting corporate initiatives in this area as well as how Penn State’s supply chain management programs and academic instructors weave sustainability into the curriculum.

Jon Chorley noted the dual role of Oracle in the area of sustainability, first as a corporate citizen and in providing technology that supports the management and tracking of such efforts.  Having inherited a high tech manufacturing supply chain from the past acquisition of Sun Microsystems, Oracle inherited a high tech manufacturing value-chain with many opportunities for continued efforts in sustainability.  As Chorley exclaimed to the audience, it makes good business sense to have sustainability weaved into business strategy in four impactful dimensions:

  • Innovation- both product and process focused and in supply and value-chains that become self-sustainable
  • Enhancing the Brand– Consumers and customers making their buying decisions not only on product form and function but on the brand’s commitment to sustainability and combating climate change.
  • Strategy and Stockholder Value– Sustainability efforts insure strategic continuity of supply of commodities, raw materials and natural resources. They insure that a firm has plans and strategies that can support long-term competitiveness and industry leadership.
  • Cost– in carbon and missions reductions that save our planet and in the monetary costs of materials, processes, product packaging and movement of goods.

I also had the opportunity to share with our audience my perceptions of the potential industry supply chain impacts from the recent Paris climate agreement. In December, 195 nations became parties to the Paris Climate Agreement (COP21) that commits to holding the increase in global average temperature below 2 degrees Centigrade (3.6 degrees F) above pre-industrial levels and to pursue efforts to limit temperature increase to no more than 1.5 Celsius above pre-industrial levels.

Whereas the prior Doha Agreement among 37 nations, the new Paris Agreement addresses climate change challenges after 2020. The Paris Agreement further represents the first time that such a large portion of the global countries have explicitly declared that the existence of climate change and heighted greenhouse emissions provides global risk.

From the accounts that I have read, the implication of this Agreement  reflect clear messages that much of the globe’s remaining reserves of coal, oil and gas must stay in the ground.  Reduction of deforestation must become global-wide priority.

The implications of such goals are yet to be fully understood by industry and supply chain audiences. One European based research firm declared that supply chain mitigation initiatives will be the Number 2 most effective strategy for achieving COP21 commitments.

Our panel concluded with thoughts that under COP21, industry supply chain involvement in sustainability has little choice but to move into a mandatory stage. Think of all the ships, railways, trucks and equipment that make-up the global movement of goods. Think about current manufacturing, assembly and farming processes primarily powered by fossil fuels and you begin to get a sense of the seriousness of this next stage.  Businesses and their associated supply chains must take on a more implicit responsibility to act in ways never before, in with innovation of a large scale.

Thus, vision and leadership among both public and private sectors is now a must and critical for alignment of efforts in joint investment, in policy, in rewards and in penalties.  Because supply chains are intrinsically global in scope, there will be requirements for far broader collaboration within and across industries, suppliers and service provider communities to overcome these new challenges.

I very much enjoyed discussing such an important topic with my fellow panelists and I thank Oracle for the opportunity as well as the commitment to the topic of sustainability.

Bob Ferrari

© 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

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