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1 May, 2008 Mastering Carbon Management: Balancing Trade-offs to Optimize Supply Chain Efficiencies |
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| As the planet heats up, so do regulatory mandates to reduce greenhouse gas emissions worldwide. Much of the opportunity to address CO2 emissions rests on the supply chain, compelling companies to look for new approaches to managing carbon effectively - from sourcing and production, to distribution and product afterlife. The trade-offs in the supply chain are no longer just about cost, service and quality - but cost, service, quality and carbon. By incorporating carbon reduction into their overall SCM strategy, companies can help reduce their environmental emissions footprint, strengthen their brand image and develop competitive advantage. |
Introduction
The volume of global trade has more than doubled in the last decade - reaching six times the rate of growth of the world's gross domestic product (GDP) during the same period of time. This phenomenon has been facilitated by relatively cheap energy, with low attention given to the impact on climate change. Consider that the global fleet of oceangoing ships accounts for more CO2 emissions than any of all but six countries worldwide. Yet, none of this environmental impact is reflected in shipping prices.
With estimated economic damage of about US$85 for each ton of carbon dioxide, capping greenhouse gas (GHG) emissions and putting a price tag on them became inevitable. Indeed, under the European Union emissions trading scheme (EU ETS), such a setup is already in effect for certain industries. Similar schemes are popping up across the United States in separate groups of states and in other major industrial economies worldwide.
Going forward, firms should expect to be charged for their CO2 emissions. And most certainly, this charge will force a change in the way companies run their supply chains. Common practices of the last century - like long-distance airfreight, small batch size, just-in-time concepts and energy-intensive production in countries with low environmental standards - will likely go by the economic and political wayside. Reducing the supply chain's carbon footprint will become an inescapable obligation.
This white paper was published in May 2008.
Click here to download full report.
