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, analyze carbon footprint and apply best practices.

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


As you can see, these performance measurement are 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 a 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 the production records.

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 is the 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

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 the emission factor. This is the amount of CO2e released for 1 kwh of electricity consumption. Then, the basic idea to calculate CO2e emission is , energy consumption*emission factor.

Each mode of transportation emits the different level of CO2e then an emission factor is different. To compute the 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
The same logic (energy consumption*emission factor) also applies to an in-house manufacturing. Anyway, the amount of available data will be more extensive. You may want to incorporate the different sources of energy in computation which is summarized as below,

CO2 Emission from Various Energy Sources
The 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 or even thousands of delivery destination. Then, how you can determine the distance?

The first piece of information you need is an geographic coordinate. The easiest way to get it is to used an geographic coordinate published by U.S. Census Bureau.

Example of Geo-Coding

As you can see, if you know the zip code, you can get Latitude and Longitude easily. Then, you use lat and long to compute the 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 the distance is a straight line from one point to another. Then, distance seems to be a bit shorter when compared with actual road contour.
- Carbon footprint analysis, even as simple as illustrated above, is useful to evaluate energy savings/green products. For example, for a manufacturer in USA, a traditional product (locally made) may release less carbon when compared with the "green" product from China. Because, USA has higher efficiency in electricity production and less travelling is required. Mapping a simple supply chain and calculate carbon emission from every link will give a better picture.

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

- Creating the awareness about a green program is also the challenging task. With Sourcemap , you can create a visual representation of a current supply chain on a geographic map with the 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 a 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 a solid methodology to audit Environmental Management System. You can use these tools to conduct a 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, an environmental management program can be too complex. EMAS Toolkit for Small Organizations by European Commission will provide basic information about an environmental management system, how to implement the program and a 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 the carriers 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 the information about the state of green program. Registration is required, after that, you will have to answer a questionnaire. The result of a questionnaire will help you identify the area of improvement.