The list of reasons to wean your supply chain from fossil fuel is compelling: regulatory pressures, tax-savings incentives, the desire to improve company environmental stewardship, or all of the above.
Most companies will not, of course, source most of their energy needs from renewable sources in the near future given the complexity involved and other challenges. However, here are a few ways to help bring your supply chain closer to the day when it becomes “net zero.”
Rate Your First Tier
Your supply chain's CO2 emissions and fossil fuel consumption largely hinges on how well your Tier 1 supplier network is committed to limiting its consumption of fossil fuels. While a company might tout how it relies almost exclusively on alternative power sources for its corporate offices in the United States, it is easy to do business with supply chain partners with poor environmental stewardship policies, thus shifting responsibility to the supplier base. To assess your entire supply chain's energy policies, start by developing a report card for your Tier 1 suppliers to assess their renewable energy policies and to set specific benchmarks they must meet to remain as a partner.
Benchmarks to consider include:
- Quantifiable goals of how much of their power is derived from renewable sources and what the percentage will be in three to five years;
- Levels of CO2 and other emissions their operations release;
- Detailed reports from Tier 1s about their supplier networks' environmental stewardship policies;
- How well they self-audit their use of renewable energy versus fossil fuel consumption.
Supply Chain Power With Solar
Much has been written about solar panel over capacity. This is a bad thing–that is, if you are an investor in companies that make the panels. However, if your goal is to shift your company's use of solar energy as a renewable energy source, now is a great time to make the leap.
Earlier this year, Apple partnered with local utility companies in China in a solar energy project that it says offers more power than all of its offices and retail outlets in China will ever need. The project is expected to eventually generate 80 million kilowatt hours per year of clean energy or enough power for 61,000 Chinese homes, Apple says. Already, Apple largely relies on solar power for 92% of its operations in the United States according to EPA data. Worldwide, 87% of Apple's operations use renewable energy, according to Apple.
How Green Is My Software
Successfully integrating renewable energy sources with the supply chain invariably involves adapting purchasing policies to achieve your goals. When done right, well written software integrated with ERP can make the transition to a renewable energy procurement strategy a smooth one.
The use of procurement software, for example, is a key component of Arizona State University's strategy to implement its sustainable design guidelines into its procurement system for vendor selection and purchases. It is also used for employee training and hiring and to gauge how well its renewable energy strategy is coming to meeting the university's goals.
According to Arizona State University, its procurement software will eventually help it achieve its sustainable energy goals so that its body of 85,000 students, employees, and contractors will only collectively generate less than 800 tons of waste per year (about 10% of the average amount of waste an average resident in the United States produces) in the “near future.”
The Smart EPA Way
The EPA's SmartWay initiative can help enterprises measure and reduce CO2 emissions and conserve energy for transportation. By taking part in the voluntary program, partner logistics companies, freight shippers, carriers, and other types of enterprises can reduce the environmental footprint of their supply chain logistics operations by following the EPA's SmartWay guidelines and using the benchmarks it communicates.
According to an EPA study, commercial truck operations are able to reduce fossil fuel consumption by 20% in a year by following SmartWay guidelines. A single commercial vehicle can save 4,000 gallons of diesel fuel in a year, the EPA said.
Watch for Critical Material Bottlenecks
There are all-too-many case studies about supply chain bottlenecks that could have been prevented–and renewable energy management is no exception. Renewable energy power, for example, uses many of the same materials that cell phones, flat screen TVs, and PCs require for production. As an example, the WWF recently reported that potential shortages of lithium and cobalt, which are used to make batteries, could create potential bottlenecks for electric car battery production.
Some rare earth materials, which are critical component for production of solar panels, wind farm components, batteries, and other renewable energy infrastructure, could pose shortage issues as well, possibly before 2020, according to the WWF.
Buyers should thus monitor and assess their downstream suppliers' procurement channels of critical materials to avoid future renewable energy bottlenecks. One way to avoid shortages, for example, is to make sure that suppliers can source batteries made with less cobalt or with recyclable lithium, for example.
According to the WWF, political solutions may be required to prevent renewable energy production bottlenecks due to potential shortages of rare earth materials, 90% of which are sourced from China, the WWF reported. “Eliminating these geopolitical constraints for rare earth materials in the short term may be difficult, but possible in the longer term as resources become available in other geographical areas as well,” the WWF said.
Is reducing carbon footprint a goal in your organization? Where have you started in managing it within your supply chain? Let us know in the comments section below.