Green Supply Chain : Metrics, Analysis and Best Practices

Due to the increasing concerns about environmental issues, many supply chain professionals find it necessary to understand the problems from system perspective rather than in single business entity. Green Supply Chain is then the attempt to measure, analyse and improve performance among various members to ensure that these companies are operating in environmentally friendly manner. Then, this article show how to measure performance, carbon footprint analysis and best practices.

Green Metrics
Many supply chain management initiatives start with performance measurement. Leading consulting firm like LMI Government Consulting utilized cross industry platform, SCOR Model, to deliver quick performance measurement. Example of green metrics are as below,

Green SCM Metrics

As you can see, performance measurement is centered around cost, policy compliance and amount of wastes generated from the system.

- Compliance costs, Non-Compliance costs and Energy costs can be found in standard financial statement.
- Policy compliance such as % of correct packaging, % of supplier with EMS system, % of carriers with environmental criteria is one type of supplier evaluation criteria.
- Amount of wastes such as % of product returned, % of product disposed against product re-manufactured, liquid waste, solid waste and recycle waste can be found in production record.

One special type of metric is amount of Carbon Emission. This measurement needs lot of work and will be discussed in next topic.

Carbon Footprint Analysis
Carbon Footprint is amount of greenhouse gas generated by various activities, usually expressed in kilogram or tonne. Since there are many types of greenhouse gas such as Carbon dioxide (CO2), Methane (CH4), Nitrous oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs) and Sulfur hexafluoride (SF6), they are called collectively as CO2e. In order to capture the amount of CO2e emission, simplified supply chain map with analysis procedures are explained below,

Simplified Supply Chain Map

1) Raw Material Sourcing
Energy consumption is a big source of CO2e. In order to determine the amount of CO2e released during production, you need to know how many units your suppliers produce a year (Total Output), Electricity Consumption a year and how many unit you buy from them.

CO2 Emission from Suppliers

Another piece of information you require is called emission factor. This is the amount of CO2e release for 1 kwh of electricity consumption. Then, Basic idea to calculate CO2e emission is , energy consumption*emission factor.

2) Inbound Logistics
Each mode of transportation emits different level of CO2e then emission factor is different. To compute emission from inbound logistics activities, total weight and distance should be identified. Then, total CO2e emission is the result of weight in tonnes x distance in km x emission factor / 1,000,000.

CO2 Emission from Inbound Logistics Activities

3) Manufacturing at Processing Plant
Same logic (energy consumption*emission factor) also applies to in-house manufacturing. Anyway, amount of available data will be more extensive. You may want to incorporate different source of energy in computation as summary is as below,

CO2 Emission from Various Energy Sources

4) Outbound Logistics
Same logic (weight in tonnes x distance in km x emission factor / 1,000,000) also applies to outbound logistics. Anyway, you may find that you have hundreds of even thousands of delivery destination. Then, how you can determine the distance?

First piece of information you need is geographic coordinates. The easiest way to get this is to used geographic coordinates published by U.S. Census Bureau.

Example of Geo-Coding

As you can see, if you know zip code, you can get Latitude and Longitude easily. Then, you use lat and long to compute distance between you and your customers as below,

Example of Distant Calculation in Excel

The benefit of this approach is that you can calculate the distance from you to every customer rapidly in excel file. Anyway, please note distance is straight line from one point to another. Then, distance seems to be a bit shorter when compared with actual road contour.

Best Practices 
- Carbon footprint analysis, even as simple as above, is useful to evaluate energy savings/green products. For example, for manufacturer in USA, traditional product (locally made) may release less carbon when compared with "green" product from China. Because, USA has higher efficiency in electricity production and less travelling is required. Mapping simple supply chain and calculate carbon emission from every link will give a better picture.

- Green House Gas Protocol has established tools in excel to calculate carbon emission from various activities in supply chain management. Even though extensive data input is required, they are more accurate. They are freely available to public here.

- Creating awareness about green program is also a challenging task. With Sourcemap , you can create visual representation of current supply chain on geographic map with emission data on the map and it's free!

Ecomapping is also the visualization tool to help you identify source of wastes in both manufacturing and office environment. This tool also provides guideline how to eliminate source of wastes.

- Environmental Management System is inevitable part of initiatives. Global Social Compliance Program has created the tools called The GSCP Reference Tools. These tools provide solid methodology to audit Environmental Management System. You can use these tools to conduct self assessment at your company to identify issues with management system, energy and greenhouse gas, water, air pollution, waste management, pollution prevention, incident management, contamination, land use and nuisance. The same tools can also be applied to suppliers audit.

- For small and medium business enterprises, environmental management program can be too complex. EMAS Toolkit for Small Organizations by European Commission will provide basic information about environmental management system, how to implement the program and useful case study.

- United States Environmental Protection Agency (EPA) has established a program called SmartWay. The purpose is to try to reduce carbon and air pollutant emission in transportation sector. EPA has compiled the list called "Current Carrier Ranking and Emission Rates". As a freight shipper, what you can do is to select carrier with lower emission.

- Sustainable Manufacturing Toolkit is another useful tool from Organization for Economic Co-operation and Development (OECD). This tool provides 7 step to environmental excellence with key performance indicators, action steps and good practices.

- Carbon Disclosure Project provides the opportunity for every company to disclose information about the state of green program. Registration is required, after that, you will have to answer a questionnaire. The result of questionnaire will help you identify area of improvement.

- Green Supply Chain Training, green initiative is a long term commitment, then, proper training will be helpful. University of San Francisco offers online training about this topic. Your can learn interesting concept such as equipment calibration, supplier integration, product recycling and so on. Another benefit is that you can learn at your own pace and you can apply the knowledge directly to your work.