March 20, 2008 | Comments: (0)
Carbon-measuring software evolves
How do you accurately and meaningfully measure the predicted carbon impact of a new project? After all, you don't want to discover -- too late -- that its environmental impact has made you Public Enemy No. 1 for Greenpeace.
In an effort to aid companies as they struggle to balance profitability and environmental responsibility, vendors are rolling out increasingly sophisticated tools. Among those vendors is ILOG, which this week released a Carbon Footprint extension to its LogicNet Plus XE supply-chain application. This remarkable tool serves a valuable function: It's designed to help companies evaluate the impact that various supply-chain network configurations and transportation strategies would have on their carbon footprint.
Suppose you're a manufacturer with a couple of distribution centers and a manufacturing plant on the East Coast, yet business is booming to the point that there's demand for your product across the country. ILOG's supply-chain app would map out several scenarios to assess the cost of adding new facilities in various locations, then factoring in different means (planes, trains, or automobiles) of transporting goods and the impact that the various configurations would have on service (40 percent next-day delivery vs. 80 percent, for example).
Balancing costs against service reliability is tough in and of itself. But let's say you're a green-minded CXO who has pledged to put a cap on your company's carbon emissions. Now you have to add environmental considerations to the already complex equation. Is it even possible, you might wonder, to make broad changes to your supply chain -- including adding distribution centers and manufacturing plants -- while maintaining (or even lowering) your carbon footprint?
That's where ILOG's Carbon Extension comes into play. According to the company, it can estimate the carbon impact of changes to the supply-chain network by computing the total carbon emissions associated with the new distribution facilities, plants, and modes of transportation used between various points. The carbon figures come from a pool of data from reputable sources, including the U.S. Department of Transportation and the World Resources Institute. Thus, the extension can provide a general estimate as to what the carbon emissions are of, say, a warehouse in New Mexico built in 1973 or the emissions from a train loaded with widgets traveling from Bismark, N.D., to Boise, Idaho. Alternatively, a user can enter his or her own data about a specific facility or mode of transportation if it's more accurate.
I spoke with David Simchi-Levi, a professor at MIT and product strategy consultant to ILOG, who guided me through a scenario featuring an undisclosed office-furniture vendor with two manufacturing distribution sites: one in Des Moines, Iowa, and one in Dover, Del. The company sought to redesign its distribution network to reduce costs and improve customer service -- and shrink its carbon footprint to align with corporate environmental objectives.
Using LogicNet Plus XE with the Carbon Extension, the company cranked out various scenarios that involved adding between two and seven new distribution centers. Turns out that moving to four distribution centers would have resulted in the highest costs savings. Thus, a company that wasn't thinking about green metrics might have gone with that option.
The company found, however, that by going up to six distribution centers, it would have slightly higher costs (1.6 percent), but it would reduce transportation distances by 20 percent and overall carbon emissions by 11 percent.
Those results might come as a surprise: How could adding six more energy-consuming distribution centers result in less carbon waste? The answer: With the six-center model, the company relies more on trains for transporting goods inbound than it does on trucks to ship products outbound. Trucks have a significantly higher environmental impact than trains, according to Simchi-Levi.
ILOG's Carbon Footprint extension is an effective tool, and we'll no doubt continue to see more vendors offering similar assistance -- such as tools for predicting the carbon output of a newly remodeled datacenter -- aimed at helping companies gauge the carbon footprint of their operations. The market is ripe as more decision-makers are forced to choose between saving that extra dollar or releasing that extra pound of CO2.
Posted by Ted Samson on March 20, 2008 03:00 AM
February 19, 2008 | Comments: (0)
Study ties sustainability to stock performance
Report also reveals supply chain as a blind spot for companies' sustainability plans
Companies paying closer attention to embracing environmentally and socially responsible practices enjoyed higher stock-share growth over the past three years compared to do companies didn't, according to survey results released this month by The Economist Intelligence Unit (EIU).
"Causality is difficult to establish but the link appears clear," says the report titled "Doing good: Business and the sustainability challenge," drawing from a survey of 1,254 business executives from around the globe. "The companies that rated their efforts most highly over this time period saw annual profit increases of 16 percent and share price growth of 45 percent, whereas those that ranked themselves worst reported growth of 7 percent and 12 percent respectively. In general, these high-performing companies put a much greater emphasis on social and environmental considerations at board level, while the poorly performing firms are far more likely to have nobody in charge of sustainability issues."
(These findings may not come as a surprise to those who have read "Green to Gold", in which author Andrew Winston shared similar conclusions.)
Additionally, just over half of the executives surveyed said that "the benefits of pursuing sustainable practices outweigh the costs, although well over eight out of ten expect any change to profits to be small."
The greatest cost reduction, according to the execs: lower energy expenditures, though sustainable practices can also open up new markets and boost a company's reputation.
When asked which actions they'd implemented in the past five years to address sustainability, the top response at 55 percent was "set policies to reduce energy consumption."
Next on the list, at 51 percent, was "Taken steps to improve governance in relation to your organization's environmental and social performance" at 51 percent, then "Revised and tightened controls to support ethical business dealings/avoid allegations of corruption" at 40 percent.
Supply chain as the weakest link
According to the report, the supply chain remains a sustainability blind spot for most organizations. Only 29 percent of respondents said they had a sustainability plan in covering the entire organization and its supply chain. Further, only 35 percent said they considered it important to take action in regard to addressing suppliers' sustainability practices.
That trend may change, though, as more big-name companies such as HP, Dell, IBM, Motorola, and Wal-Mart draw attention to the business case for keeping the supply chain clean.
"Doing good: Business and the sustainability challenge" can be downloaded for free EIU Web site.
Ted Samson is a senior analyst at InfoWorld and author of the Sustainable IT blog. Subscribe to his free weekly Green Tech newsletter.
Posted by Ted Samson on February 19, 2008 05:00 AM
