Green strategies to cope with climate change

Increased regulation, structurally higher energy prices, and shifting consumer demand and are driving a slow but very visible transition to a global lower-carbon (*) economy. The writing is on the wall. Only some companies will be winners and others losers in this new order of the world.

Businesses with global supply chains are the first to experience the stress caused by shifting weather patterns on one hand, and increased costs on the other. From devastating tsunamis to mighty hurricanes – it is clear that there is no messing with nature. Katrina (see picture) is estimated to have been responsible for $81.2 billion in damage, making it the costliest natural disaster in U.S. history.

Ongoing turmoil in the middle-east, increased demand for fuel and energy from growing economies in China & India (though per capita consumption is still very low in these countries) have spurred an unprecedented oil price rise in 2008. The most recent price per barrel maximum of $147.02 was reached on July 11, 2008.

Not all is lost though. Awareness about the environment, eco-friendly products, and the desire to comply is at an all time high – and growing by the day. Terms such as ‘Corporate responsibility’, and ‘sustainability’ are increasingly finding their way into boardrooms of large companies. According to an Aberdeen Group March 2008 report – they found that Best-In-Class companies have demonstrated improved operations in at least four different areas:

• Transportation & Logistics Costs – 2% decrease Vs 1% for industry average
• Energy Costs – 6% decrease Vs significant increase for the industry
• Operations & Facilities Costs – 2% decrease Vs No Change
• Supply Costs - 2% decrease Vs No Change

There are many initiatives being pursued. The three “R”’s have emerged as an easy reminder to workable plans for saving the environment:

• Reduce: Initiatives focused on reduced energy usage across transportation fleets, decreased electricity consumption due to facilities redesign/reequipment etc.
• Recycle: Utilizing “grey water” for washing, paper and plastic recycling among others
• Reuse: Leveraging new more durable packaging to reduce waste – and cutting down trees

In addition we recommend a fourth “R”-Replenishment (or carbon offsetting) as a sustainable complement to the strategies outlined above.

It is evident – going “green” is not strictly about the environment – but that it also translates to big green $$’s!

_________________________________

(*) Source McKinsey Quarterly

(**) Source Wikipedia: A carbon footprint is a "measure of the impact human activities have on the environment in terms of the amount of greenhouse gases produced, measured in units of carbon dioxide. It is meant to be useful for individuals, nations and organizations to conceptualize their personal (or organizational) impact in contributing to global warming.