It has been interesting to observe that Wal-Mart, among other firms, has taken a very high public profile for leading efforts to reduce greenhouse emissions, and sustain a green perspective throughout its vast supply chain. Wal-Mart’s pledge to help reduce between 33-66 million metric tons of carbon dioxide (CO2) emissions, and up to 200,000 tons of nitrogen oxide emissions (NOx), should be applauded. But what seems disconcerting to me is the notion that this pledge seems to be again translated into mandates to certain Wal-Mart suppliers.
This seems all too familiar, and we have been here before. Did our supply chain community learn anything from the initial conformance mandates that were issued by Wal-Mart and the U.S. Department of Defense to support RFID adoption?
In 2004, Wal-Mart issued its mandates to certain key suppliers to have an RFID enabled product identification process in place by January of 2005. What followed was essentially the implementation of basic “slap and ship” conformance, as suppliers communicated that they could not economically justify any wide scale adoption. At that time, there were no generally accepted international standards for RFID enabled information transfer, and the high cost of RFID tags made wide-scale adoption prohibitive for the majority of suppliers. This has led to a forced march toward the so-called Gen2 RFID technology, with the scrapping of that earlier technology driven by mandates. It has only been of late, almost four years later, that RFID enabled processes can be considered for wider scale adoption with measurable return on investment.
Today, while we all can embrace the need to reduce overall greenhouse emissions across global supply chains, we find a similar lack of standardized and/or widely accepted measurement and tracking standards. The most noted mitigation efforts are the Carbon Disclosure Project (CDP), which Wal-Mart is a member, along with Dell, HP, PepsiCo, and others. China has been supporting its Pollution Prevention and Energy Efficiency Program (P2E2), and the ISO has been promoting its ISO 14000 family of standards. But again, more work remains.
In the area of business ROI justification, many supply chain groups will need to grapple with trading-off many of their previous efforts toward establishing very lean supply chains, with the trade-off toward a more carbon efficient supply chain. The two may not necessarily be the same in certain industries. New analysis tools with consistent measures of a carbon footprint will most likely need to be adopted.
My point with this post is that mandates tend to benefit the party that mandates, as well as certain technology vendors. Wal-Mart’s recent fourth quarter earnings statement to Wall Street points to 2008 as the year to re-emphasize Wal-Mart’s low prices, and overcome the huge increase in energy costs, specifically the cost of diesel fuel. Obviously a carbon emissions mandate among key suppliers will help Wal-Mart to achieve this goal, but at what cost to suppliers?
No supplier to Wal-Mart can afford to ignore any mandate. Many firms do not have this overall clout. But it seems to me, that Wal-Mart and other firms can reap more timely progress in an atmosphere of win-win collaboration.
Green supply chains will present many new business process and technology obstacles to overcome, similar to what has been encountered with RFID. Let’s get realistic, and make this a joint effort, without the need for mandates. Perhaps more will be accomplished, in far less time.