The Birth of Green Supply Chain Requirements

October 23rd, 2009 by Joe_EDI

If your inbox is like mine (and you actually get time to read industry news) you can’t help but notice all the sustainability and green supply chain talk in the market. Everyone’s talking green. Consumers have moved from “in-house strategies” – shunning plastic bags and recycling – to “out-bound” strategies that involve making purchasing decisions based on the “greeness” of products. We’re not just talking about products that are environmentally friendly – we’re talking about consumers patronizing companies and stores that are green conscious, that contribute to a greener environment – that leave a smaller footprint than they did before.

These preferences aren’t lost on companies like Wal-Mart. In an effort to capitalize on this growing demand, Wal-Mart has initiated green supply chain requirements in an effort to build their brand. If you want to monitor supplier trends for Food & Beverage – look no further than Wal-Mart…when Wal-Mart initiates and succeeds, other retailers follow and that of course impacts suppliers.

Wal-Mart has been rolling out plans for what it calls a sustainability index — a measure of how green the products it sells really are. It is asking each of its suppliers, 15 questions about the life of their products from manufacturing through disposal: Not only are they asking questions about packaging but broad footprint type questions s about greenhouse gas emissions, social responsibility, waste reduction initiatives and water use.

Now step into the shoes of a future of Wal-mart shopping. The word is Wal-Mart plans to do more with the index than simply using it to guide its own purchases from suppliers. This database could inform consumers as well. This data could be put into kiosks and other readable versions (RFID scanners) in every aisle so that consumers could gauge the environmental impact of their purchases. And if you think about the implications this has on suppliers you realize that they are in for some major changes in how they do business today.

Wal-Mart doesn’t execute on any strategy if it can’t streamline it’s own operations. If, for example, Wal-Mart’s suppliers are mandated to create smaller packaging, suppliers will be able to put more of those products in a shipping container, which means they’ll can get more product on a truck; it lowers the amount of energy and fuel used to transport the product too. However, the chain reaction does not stop there. It also means more products on store shelves and a higher probability of customers finding the products they seek and fewer man hours spent restocking shelves – a win-win for both parties and the planet.

So what’s next? How far will suppliers need to dig into their supply chains to effectively make sustainability decisions, collect this data, and meet green supply chain requirements report data…and get some payback from it. Isn’t that always the rub of supply chain mandates? Stay tuned. Much more to come.