Rio shines a light on climate change

Rio shines a light on climate change

Friday’s opening ceremony was a festival of fun, history and an important look forward at the future of a planet facing climate change. Reactions on social media were largely positive, but the politicised nature of the topic, especially in the US, did cause some pushback.

I’m proud that Rio chose to feature what many of our business leaders have been saying for years now: we need to work collectively together around the world and across businesses to address the reality of climate change.

Data from our Future of Supply Chain survey 2015 shows that most organisations have made progress on sustainable initiatives because it’s the right thing to do, because there’s a financial incentive and, in many cases, because both are possible.

Table listing sustainability initiatives ranked by likely investment in the next 18 months.

Of the eight initiatives, only waste reduction is cited by a majority as both the “right thing to do” and something with a clear financial payback. This aligns well with classical supply chain thinking in terms of material efficiency and is mature in industries like automotive, moulded plastics and food production.

Close behind are initiatives in sustainable water and renewable energy, where almost half see a clear financial payback. Examples seen in the SCM World community over the past year include Google’s renewable energy initiatives, which work within the context of a portfolio strategy to control costs and volatility in prices, or PepsiCo, which, like The Coca-Cola Company, has driven aggressive water conservation targets with solid business cases.

As shown in the graph below, an initiative worthy of mention is green products. Consumers have demonstrated a lack of support in retail, often passing on environmentally friendly products for alternatives perceived to be cheaper. The case of Procter & Gamble’s Tide washing detergent illustrates how consumers tend to penalise the low carbon footprint concentrated offering in favour of the big, cheap bottles of store brand. That companies like P&G are willing to continue is a testament to their sense of stewardship and accountability.

Recent discussions in our supply chain community have uncovered a critical enabler of sustainable products: your suppliers. Many of the innovations related to materials sourcing, production efficiency and packaging are directly controlled in your supply base. Again, our Future of Supply Chain survey 2015 research highlights how your peers view building relationships back into the supply base.

Chart comparing consolidation and collaboration as business value drivers.It’s interesting here to see that chemicals, CPG, hi-tech and food & beverage are more aggressive on supply collaboration and relationship management than their remaining industry peers. Each of these industries has a direct consumer connection and are likely to face both pressure and demand for sustainable products. Note, however, that the last link in the consumer value chain – retail – is at the opposite end of the spectrum.

As summer fades into autumn and you begin conversations on strategies for 2017, it may be time to consider a plan for sustainable products. Certainly the conversation is happening in parts of your value chain.

The next two weeks promises exciting finishes, major upsets and first-hand demonstrations of the power of collaborative teamwork. As the world comes together, Rio has sent a big message to supply chain executives on the growing global demand for sustainable products and action against climate change.

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Author Matt Davis

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