How does a company with operations in 30 countries and major investors to satisfy go from having a warm, fuzzy feeling about environmental responsibility to doing something about it?
Step one is to figure out the impact of one's operations. Considering the complexity of a global supply chain, that's no easy task. Companies struggle to measure direct emissions of greenhouse gases, let alone those of the many partners involved in getting their product to market.
It makes sense to start small. Novozymes A/S is a Danish biotech company which manufactures enzymes for a variety of industrial uses. It wanted to know whether it was making the right decision in opening a second production facility in the U.S. The company believed that its new plant in Blair, Neb., supplementing an existing facility in Franklinton, N.C., would lead to an overall reduction in greenhouse gas emissions caused by transportation. But it needed hard numbers to prove the hypothesis.
Loire Marteney, customer supply chain manager for the Americas with Novozymes North America Inc., had been trying for some time to fund a tool that would measure emissions. She was especially keen on using it to influence decisions about supply network design. The opportunity finally arose when Jan Chen Blaagard, Novyzymes' supply chain director for the Americas and director of global planning, joined the Supply Chain Resource Cooperative at North Carolina State University. Chen Blaagard asked his management team whether anyone had a pet project that was begging for resources to get off the ground.
At Marteney's urging, Chen Blaagard recruited three supply-chain undergraduates at North Carolina State to come up with a carbon dioxide calculator. The idea was to compare emissions related to inbound transportation of raw materials at the two plants between 2008 and 2010 (as if the Blair facility were operating during that time). The tool could then be used for future decisions about expanding the company's production and distribution network.
The students didn't lack for models from which to draw. Only one problem: they were all different. There's no globally accepted standard for measuring CO2 emissions; depending on which you choose, the conclusions can vary widely. In the U.S., the students looked at "standards" deployed by the Environmental Protection Agency, Surface Transportation Board, Association of American Railroads and the non-profit Carbonfund.org. They also studied the approach of the U.K.-based Department for Environment, Food and Rural Affairs (DEFRA).
Combining all of the models except for that of Carbonfund.org, which proved to be an outlier, the students came up with an acceptable range of numbers. Arlan Peters, Novozymes' sustainability manager for North America, then validated the results against the European Union database known as Ecoinvent. (He used SimaPro, a software application for lifecycle assessment and carbon footprinting, to accomplish that task.) That provided the company with a baseline for making its final calculations.
The tool developed for Novozymes at North Carolina State takes raw shipment data and parses it by weight, mileage and destination. (The age of transportation equipment is also a factor.) Results, expressed in tons per mile or kilometer, can be applied to a variety of "what-if" scenarios to determine the impact on network design.
The model ended up confirming Novozymes' belief that the Nebraska plant would result in a significant reduction in CO2 emissions. Of course, a glance at a world map suggests the same thing: raw materials destined for Franklinton travel by ship from Shanghai to Norfolk, Va. via the Panama Canal, then are trucked to final destination, for an overall journey of about 12,000 miles. Materials for the Blair plant are unloaded at the port of Los Angeles, then shifted onto eco-friendly rail, for a total transit of 7,500 miles. Seems like a no-brainer, from the standpoint of environmental impact as well as cost.
In any case, Novozymes now has an in-house method by which it can make similar determinations in the future. Marteney says greenhouse gas emissions will be one of several factors that drive changes in the network. The calculator could also serve as a means of reassessing the existing setup on a periodic basis.
"We wanted to do something simple, so that when we do make changes, we can go in and consider the environmental components of our distribution network design, without having to pay someone to do it for us," she says. "It's a simple, reusable tool that we can use to get some meaningful data."
Novozymes has calculated the carbon footprint from its manufacturing operations and power usage for many years. However, it still has work to do in measuring emissions related to its extended supply chain. Other companies and groups are attacking the problem from various angles. The non-profit Carbon Disclosure Project, which tracks corporate climate-change data, has issued a white paper on how to evaluate a business's profitability in light of the CO2 it burns. In the private sector, big companies such as Wal-Mart Stores Inc. are starting to require suppliers to report on their own emissions and energy usage.
So progress is being made. More common, though, are the kind of fledgling efforts that Novozymes has made toward measuring a discrete portion of its supply chain. From there, companies can move toward a system to identify opportunities for nurturing the environment as well as the bottom line. The two goals are far from mutually exclusive.
Next: Does business care about human rights?
- Robert J. Bowman, SupplyChainBrain
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