Even though the federal government has failed to pass meaningful climate change and energy legislation, "greening the supply chain" remains a priority for many companies. Businesses are turning to their supply chains to eliminate waste, reduce their environmental impact and diminish risks associated with climate change and resource depletion.
Now, more than ever before, a wide range of stakeholders, including commercial customers, consumers, investors, analysts and others, is demanding transparent information about the lifecycle of products and services.
To help you get your arms around these environmental concerns, Ernst & Young LLP has identified five specific climate change and sustainability risks to supply chain operations. This list includes:
Strategic. For many companies, the supply chain provides a significant opportunity to improve competitive advantage and reduce cost and waste. Leading companies understand this link, particularly as stakeholders become more interested in social and and environmental costs.
Compliance. Organizations that are required to comply with green supplier programs now need to track data on energy use and make the information available for audits. On the flip side, any company that has instituted a green supplier program needs new processes to track and monitor supplier compliance and to use the data to drive decision-making.
Financial. Supply chain issues impact an organization's financial strategy in multiple ways. For example, companies are looking to their supply chains for opportunities to cut costs, potential cash management and liquidity implications and new due diligence requirements for acquisitions. Additionally, as companies increase public disclosures in non-financial reports, CFOs and audit committees are exercising more oversight.
Reputational. Many companies are implementing supplier qualification programs to ensure they do business with suppliers that share their values. These companies may conduct regular audits of suppliers, which might include compliance with emissions, waste and safety guidelines.
Operational. Spare parts inventory management, manufacturing equipment utilization, and planned maintenance are just a few areas where the level of efficiency could be improved. Other operational areas to assess include: unplanned downtime, reduction and innovative uses for manufacturing waste, transportation, logistics and facilities.
For even more details, see the full 16-page report, The five highly charged climate change and sustainability risks for supply chain operations.