How can a business cut costs, preserve the environment and improve its image among eco-conscious consumers? GrowthBusiness reports on strategies to green your supply chain that may even improve the bottom line.
The environment and cutting your carbon footprint were all the rage among politicians and business people up until 2008. Then the economy, recession and, of course, the deficit, took centre stage.
Green products have taken a hit in many sectors, but don’t believe that eco-friendly concerns won’t return to the forefront, or that it doesn’t make sense for your business to clean up its act. High fuel prices and rising inflation mean that efficiency is more important than ever.
From an operational point of view, many so-called ‘green practices’ are also obvious cost-savers. While cost is a concern for many, there’s a committed core of people for whom ‘eco-friendly’ or ‘low carbon’ remains paramount. These people are often customers and designated buyers and can decide the fate of your business.
START AT HOME
Before a business can begin to clean up its act it needs to undertake some sort of assessment on how it currently stands from an environmental point of view. This can be a tough process and involves a lot of legwork, but it is ultimately rewarding.
Stephen Bentley, chief executive officer of the £5 million turnover business Granby Marketing, undertook the tough challenge of implementing the environmental management standard ISO 14001. He began as a sceptic but soon found it to be a very smart move.
‘With hindsight, it’s obvious that having tighter monitoring for energy and utilities will save you money on your energy bills, but I was staggered to see how much money we were wasting,’ he says. ‘So, from initially starting with the suspicion that it was going to be a costly exercise, it became quickly apparent that it would end up saving us money.’
Granby Marketing conducted an audit of its energy use and quickly found it could save money through simple measures. Heating usage was a key area for the business and by making simple adjustments, such as altering timings to their boiler system, it was able to save money.
‘We have saved about 15 per cent on enegy bills during the course of year one, and we are continuing to make savings of 6 to 7 per cent per year thereafter – this is obviously in the face of rising fuel costs,’ Bentley continues.
For businesses to “green” their supply chain effectively the work begins at home. Business leaders need to develop a green ethos that permeates through their whole operation.
Paul Lindley is the founder of baby-food business Ella’s Kitchen, which has a turnover of £30 million. While the sourcing of his products is paramount, it is also crucial that staff “green up” when they are working in the office.
Lindley explains, ‘We have established a team of “green buddies” from each department, who meet regularly to discuss how we can make ourselves even more environmentally friendly. They set challenges such as producing the least amount of printing each quarter or cycling the most to work.’
Small efforts are useful to set the tone and get everyone thinking in the right direction.
Andrew Skeene is the co-founder of Global Forestry Investments, a £7 million business that runs sustainable forests in Brazil. The core offering of his business is implicitly connected to the environment, but he also agrees that his company needs to be green throughout.
‘We recycle, turn off equipment that’s not in use, use energy star-rated products, produce double-sided documents and refrain from printing unless it’s absolutely necessary,’ he says. ‘These may seem like small gestures, but we believe it all adds up in the long run.’
In order to thoroughly clean up their supply chains, businesses have to go out to suppliers, ask tough questions and get detailed replies. Businesses can work together on these issues and establish new ways forward.
‘At Ella’s, we ask all our suppliers to complete a “Helping Us Give Stuff Back” form – our environmental and ethical questionnaire,’ continues Lindley. ‘We then work closely with them, setting key performance indicators and establishing action plans to make improvements.’
Similarly, Bentley’s pursuit of the standard meant he had to lay down the law with his suppliers. ‘Make no mistake, the ISO 14001 is difficult to achieve,’ he opines, adding that senior managers needed to be involved and a small team of staff of three spent about 10 per cent of their working week on the task.
‘Of the eight-month audit process, the hardest part was vetting all our suppliers and, in some instances, having to part company because they either wouldn’t or couldn’t meet the criteria. We always gave them the opportunity to come on a journey with us. However, you have to accept that not all businesses will share the same priorities when it comes to green issues.’
Although you can do your own checks, there are many different bodies that certify businesses and suppliers, including the International Organisation for Standardisation (ISO), The Soil Association, Fair Trade and Recycle Now.
Professor Alan Braithwaite, an expert in supply chain management and executive chairman of LCP Consulting in Hertfordshire, says the benefits of accrediting supply chains can be huge.
He explains, ‘The greenest shipping lines are in the region of being 40 per cent better than the least efficient ones. Make sure you have accredited your chain. It is about understanding which resources you depend upon, both directly and indirectly, and then looking to make improvements at the major areas.
The environmental and the ethical are often closely tied, particularly in terms of customer base. Bulldog Natural Skincare understands this, providing an organic skincare product that the company claims is also ‘cruelty-free’.
Simon Duffy, co-founder of the £3.5 million business, says his product has to be ethical throughout. Duffy adds that he understands he must be thorough as, in the internet age, consumers can be quickly alerted to any “issues” a company might have.
‘I believe that people now want to look behind brands to understand more about the companies they are buying from. The internet is a great enabler. In the long run, people will increasingly support companies they identify with and ethical brands will gain momentum.’
Skeene agrees that green commerce is coming ever more to the fore as customers become more eco-conscious. ‘An ethically sound approach definitely gives you an edge in business. Consumers are becoming more and more environmentally aware – they want to invest in a company that has a sustainable conscience and is committed to tackling issues such as deforestation.’
But it is not just consumer spending that is affected. In the past ten years, large organisations and governments have been looking to clean up their own supply chains. This is passed down the line and presents a challenge for entrepreneurs to follow course.
Skeene adds, ‘There are no two ways about it – ethical business management, aligned with a serious corporate social responsibility agreement, is a must for any business wishing to market itself to blue-chip organisations or the government.’
GLOBAL OR LOCAL?
Globalisation has led to businesses sourcing from further afield in an attempt to get the lowest price.
However, this doesn’t always make sense, either environmentally or financially. Braithwaite has worked with businesses that purchase from China at ‘screamingly low prices’. Yet, sometimes, stock management and quality control are not all they should be when this approach is adopted.
‘There are some things that you should buy from a distributor here,’ proffers Braithwaite. ‘Our advice is to understand which products add to your bottom line and not to complicate things with a really long lead time.’
Greener businesses seem to be taking this approach already and do often look for suppliers closer to home, both simplifying their operations and cutting down on fuel costs.
Bulldog’s strategy puts paid to another misconception intimately connected to supply chains: that we don’t make things in the UK anymore. His products are all made here in “ol’ Blighty”. ‘UK manufacturing ensures that products are made close to their largest market,’ he says.
FIVE STEPS TO A GREENER SUPPLY CHAIN
1) Communicate in advance – suppliers may need time to adapt so give them the opportunity, but ultimately they cannot halt change
2) Involve your staff – top-down decision-making won’t work; you need to encourage a culture change across all departments
3) Think local – shorter supply chains have advantages, so check out your own region before thinking of China
4) Look for accreditations – there are many governing bodies and marks of approval (ISOs, Fairtrade, etc); get to know the most relevant ones for your business
5) Take small steps – it might seem like a huge task, and it can be, so don’t try to do it all overnight