Energy Sustainability: What’s the state of the sustainable supply chain?

What is the state of sustainability in the supply chain?

I put that question to Robert Lieb, a professor of supply chain management at Northeastern University. For the past 18 years, Lieb has co-authored an annual study on the 3PL market from the perspective of the CEO. This year’s iteration was co-authored by Kristin Lieb, an assistant professor of marketing at Emerson College, and Joseph Gallick, a senior VP of sales for Penske Logistics.

For the past 5 years, Lieb tells me, he has included questions about sustainability to find out if the 3PL market was serious about the issue or if it was just a fad. Lieb’s conclusion: We’re getting serious about sustainable supply chain operations, but most initiatives today are internally focused. More importantly: Few 3PLs are winning or keeping business as a result of their sustainability competency.

That conclusion is supported by responses from the CEOs that on first glance appear to be in opposition to one another. Here’s what Lieb and his colleagues found.

• Despite the volatility of the global economy, 3PLs continue to expand their involvement in environmental sustainability issues. Sixteen of 36 CEOs reported that their companies launched new sustainability initiatives in 2010 and 19 reported that they expanded existing sustainability projects.

What kinds of initiatives? Lieb says they are across the board, depending on the 3PL. Some have developed network optimization tools to develop the most efficient supply chain networks. There has been lots of analytics to measure a supply chain’s carbon footprint. Others have focused on transportation by relying on clean diesel engines and installing governors that limit the top speed of their trucks. Still others have launched programs inside their facilities, such as energy efficient lighting or renewable power sources, such as solar and windmills on their DCs.

Sounds great. But those initiatives have not resulted in new business. In North America, for instance, the number of customers asking their 3PLs to analyze their supply chains in terms of environmental impact/costs actually declined to 8% in 2010 from 15% in 2009. Similarly, 86% of respondents said that their green capability was only infrequently a major factor in getting or keeping clients. “’Green’ is still of limited significance in getting and maintaining 3PL contracts,” the authors concluded.

How does Lieb interpret those results. The commitment to sustainability by the 3PL industry is real, he says, especially when it is tied to operational efficiencies. “Most 3PLs have a formal sustainability statement, most have someone at the senior level managing sustainability, and even in this down turn, few scaled back their commitments to sustainability and half said they launched or expanded projects,” Lieb says.

At the same time, he adds, “in most instances, a 3PLs commitment to sustainability is not what’s getting them the business. Faced with financial challenges, their client base is focused on costs even though they are asking about sustainability.”

When it comes to gaining business, most 3PLs believe that their investments will pay off in the future. “The CEO’s we talk to are expressing that it will become a differentiating factor in the future,” says Lieb. “They’re waiting for things to pick up.”