2 The environmental perspective

Let’s now start the exploration of the sustainability perspectives with the perspective that tends to steal most of the limelight when talking about sustainability: the environmental perspective.

Figure 2 The environmental perspective

What does ‘environmental performance’ mean?

When people say the word ‘environmental’ when talking about supply chain sustainability, they may have various things in mind. Let’s begin the exploration of the environmental perspective in Activity 1 by discussing and agreeing what we mean by ‘environmental performance’.

Activity 1 Defining environmental performance

15 minutes

Consider the term ‘environmental performance’. Note down the different areas that you think would need to be considered when evaluating the supply chain performance in that particular aspect.

Provide your answer...

2.1 The impact of logistics on the environment

When discussing logistics, both inbound and outbound logistics are considered. In other words, the movements involved in sourcing and replenishing the raw materials, components or finished goods needed for a business processes, as well as the movements of goods from an organisation to its customers, back to suppliers or out for disposal and recycling.

In the context of logistics, the prime concern tends to be pollution, or the impact of vehicle emissions into the atmosphere, onto the road or into the water. Vehicle emissions generally relate to burning fossil fuels and the gaseous and particulate emissions from the engines.

To get a sense of the scale of the impact that these emissions have on the environment, let’s have a look at the UK government’s transport statistics from 2016. Figure 3 shows the volume of freight moved each year. (A ‘tonne kilometre’ is the unit representing one tonne moved one kilometre, taking into account both weight and distance. So, 1 tonne moved 50 kilometres is the same as 50 tonnes moved 1 kilometre in this chart.) The chart shows that 76% of the freight moved in the UK was by road, and that that totalled 152 billion tonne-kilometres.

Figure 3 Domestic freight: goods moved by mode, 1990–2015

If you link the tonne-kilometres to the statistics of greenhouse gas emissions, you can see that in 2014, 514.4 MtCO2e (million tonnes of carbon dioxide equivalent) were released into the environment – 23% of which comes from us, transporting boxes of stuff from one link in the supply chain to another.

Now consider the logistics in your own organisation. In terms of raw materials, components and finished goods, what weight of goods is moved and how far? If you are based in the UK, what was your organisation’s contribution to the 152 billion tonne-kilometre figure of road transport? Was that contribution fully justifiable? To assess that, it is not only the weight and distance of the freight that needs to be considered; the way that the freight is transported is a key factor, as Figure 4 demonstrates.

Figure 4 Comparison of typical CO2 emission between modes of transport (IMO, 2009)

In the discussion about the impact of logistics, we have predominantly focused on emissions by transport vehicles. We have not considered the environmental impact of constructing new roads, railways, airports or ports. These tend to be out of the direct control of the organisation, but are a result of the aggregate demand.

Let’s continue our discussion now by looking at the environmental impact of manufacturing and production.

2.2 The impact of manufacturing and production on the environment

When considering the environmental impact of production, we are looking at two key elements:

  • the pollution caused by generating the energy used in production
  • the pollution caused by the manufacturing process itself.

Pollution from energy production

Not just large traditional industries use lots of energy. For example, the information and communication technology (ICT) industry consumes massive amounts of power. However, in the absence of the large smoking chimneys that traditional industries have, this fact gets easily overlooked. The UK’s Parliamentary Office of Science and Technology (2008) predicts that ICT will be responsible for 3% of global emissions by 2020.

Just keeping the data available that facilitates a smoothly running supply chain requires vast amounts of energy. Have a look at the numbers in the United States:

US data centres consumed about 70 billion kilowatt-hours of electricity in 2014, the most recent year examined, representing 2 percent of the country’s total energy consumption, according to the study. That’s equivalent to the amount consumed by about 6.4 million average American homes that year. This is a 4 percent increase in total data centre energy consumption from 2010 to 2014, and a huge change from the preceding five years, during which total US data centre energy consumption grew by 24 percent, and an even bigger change from the first half of last decade, when their energy consumption grew nearly 90 percent.

(Sverdlik, 2016)

A total of 90% of all the energy used in a data centre goes to keeping the system cool. Admittedly, this is not just data required for the supply chain (it also includes videos of silly wet cats, and pictures of your colleagues on the beach), but you hopefully get the point.

Activity 2 Energy consumption in your organisation

20 minutes

In his book How Bad are Bananas?, Mike Berners-Lee calculates the carbon footprint of a vast range of items.

  • A spam email, unopened, has a carbon footprint of approximately 0.3g CO2e (carbon dioxide equivalent, the standard unit for measuring carbon footprints).
  • An average email produces approximately 4g CO2e.
  • An email with a large attachment results in approximately 50g CO2e. So an email with a long attachment sent to nine people has the same carbon impact as flying a tonne of freight one kilometre.

Consider the large energy consumers in your organisation.

  • What proportion of the consumption is due to ICT?
  • Does your organisation have a strategy for reducing energy use? Does that include ICT?
Provide your answer...

Pollution from the production or manufacturing process

In some cases, the pollution caused by the business activities is clearly visible. Consider the extreme examples of the BP Deepwater Horizon oil spill in 2010 or the explosion at the Chernobyl nuclear plant in 1986.

But in other cases, the pollution that is created in the production processes of goods and services is less obvious. Consider a power plant that draws water from a river to cool its systems and then returns the warmer water back to the river. Even if no chemicals are added to the water and safeguards are in place to ensure that fish are not drawn in, the warmer water changes the environment at the outlet. The changed profile of the water can alter the species that live at that point.

Any production facility will have a level of emissions to some degree. In most cases, the aim is to identify and control the emissions.

In the UK, it is the role of the Environment Agency to legislate and inspect operations. Similar agencies operate in the rest of Europe and across the world. Environment Agency officers liaise with organisations to ensure that environmental performance is optimised. Rigid limits are set for the release of pollutants, and these are enforced through legislation. The costs that organisations may incur by not complying with the regulations can be vast. By adopting explicit sustainability principles, organisations are more likely to meet the standards and avoid fines and clean-up costs.

2.3 The impact of waste on the environment

So what is waste? The common dictionary definition is ‘unwanted or unusable material, substances, or by-products’ (Oxford Living Dictionaries, n.d.).

According to the UK Department for Environment, Food and Rural Affairs (DEFRA), waste refers to ‘any substance or object which the holder discards or intends or is required to discard’ (DEFRA, 2012, p. 24).

Quite often we think of waste as being an issue for the production (operations) department, rather than in the context of supply chain management (SCM).

If you were to consider the ways in which SCM can impact on waste, either positively or negatively, you may come up with some of the following points:

  • ordering too many items could result in the supplier or purchaser needing to dispose of the surplus
  • waste created during transportation either through damage, perishability or obsolescence
  • inaccurate specification of the products could lead to wastage or rework
  • disposal of waste products.

With these in mind, read the following example:

In the early 1990s, at the start of the boom for home computers, a container ship left Japan with a container completely full of 2× speed CD drives for the home computer market.

The transportation time from the factory to the UK distributors was approximately eight weeks. By the time the delivery was made, the computer industry had moved on and the new standard for the CD drives was 8× speed. This meant that the shipment was unsellable, and so it was scrapped.

In this example, the potential outcome may not have been foreseeable, but ultimately the waste was due to the logistics – therefore, it was the ‘fault’ of SCM.

Besides the impact that these issues have on the environment, they often also imply significant costs. Therefore, when discussing supply chain sustainability, it is also important to consider the financial perspective. Let’s do that in the next section.