Greening the Supply Chain

June 16, 2008

Manufacturers, trade associations and others are seizing the opportunity to help distributors go green, offering everything from green products to software that helps monitor environmental sustainability efforts

By Victoria Fraza Kickham, Managing Editor -- Industrial Distribution, 3/1/2008

Bill Balek remembers when the trend toward selling environmentally friendly products began. It was about six years ago and it took hold first among makers and sellers of cleaning chemicals, explains Balek, director of legislative affairs for ISSA—The Worldwide Cleaning Industry Assn., which represents distributors and manufacturers of janitorial/sanitary supplies as well as cleaning companies.

From there, the trend crossed into every major product line in the cleaning industry. The trend has taken such strong hold that ISSA members are beginning to define their green efforts in broader terms than just the products they sell: When it comes to creating competitive advantage, Balek says, companies want to be seen as making strides toward environmental sustainability—by reducing carbon emissions, recycling and conserving water and energy, for example.

“Companies are looking more to their overall operations and ways to distinguish themselves on environmental attributes that transcend their products,” says Balek. “They're looking at operations, delivery. … They're trying in many ways to reduce their environmental footprint.”

What's driving the trend?  
Environmental sustainability (the term used in corporate circles to describe efforts to reduce a company's negative impact on the environment) is largely being tackled by the industry's giants. Take a look at any of the top publicly traded companies' annual reports and you'll find stated goals for recycling, reducing carbon emissions and designing more energy-efficient facilities.

Such programs complement the many product-focused goals those companies have already undertaken.

Meeting green needs  
Trade associations aren't the only ones capitalizing on the green trend. When Ralph Bianculli founded the Paradigm Group in 1999, his company quickly identified the environmental movement as a growing trend in the supply chain. Paradigm Group is a manufacturer, master distributor and marketing company focused on jan/san, breakroom, food service, packaging and related supplies. The manufacturing division launched its Emerald line of green products in 2001 with an eye toward capitalizing on the newfound trend. Paradigm's marketing group works with distributors looking to expand into the jan/san market and helps them find ways to integrate green products cost-effectively.

“Our expertise is delivering business solutions to distribution companies who are looking to expand their product portfolio,” Bianculli says. “We forecast [the green trend] about six years ago and developed a brand to fill that need. …What we're finding, as we continue to evolve in this green environment, is that there are a lot of consumers and distribution channels that think converting to green costs more— and it doesn't.”

Paradigm analyzes distributors' product mix, customer base and green goals to determine how they can add green products without increasing costs or inventory. Essentially, Paradigm figures out how to avoid adding excess or duplicate SKUs to the distributor's inventory by stocking products that satisfy existing needs as well as green ones.

“It doesn't take much, it just takes a little effort,” Bianculli explains, adding that sales of Paradigm's Emerald line of jan/san products tripled from 2005 to 2007.

“If people are listening and committed, moving into this product space and being able to satisfy your customers is relatively easy,” he says.

In the cleaning industry here at home, many states have implemented environmental standards and policies for products used in schools, hospitals, nursing homes and other institutions. ISSA's Balek points to the Illinois Green Cleaning Schools Act, which requires all public and non-public elementary and secondary schools with 50 or more students to establish a green cleaning policy and exclusively use environmentally sensitive cleaning products. Balek says the trend is spilling over to other sectors as well, with many commercial and residential leasing companies requesting green cleaning products and services.

“That's what's really gotten the attention of the supply side of the industry,” says Balek. “Our manufacturers and distributors are looking at ways to pursue environmental strategies that meet those [legislative] demands.”

And they often turn to their industry associations for help. Balek says education is ISSA's single largest task when it comes to green issues, and the association works closely with the green industry's standard-setting bodies in pursuit of those goals.

Balek says three organizations are emerging as the premier green standard-setting agencies in the United States: Green Seal, TerraChoice and the U.S. Environmental Protection Agency's Design for the Environment program. ISSA works with those groups on a range of issues—revising existing standards, setting new standards, negotiating discounts on certification fees for members, as well as education and outreach programs. “Members look to us for help in defining environmentally preferable cleaners and for information on how to implement a green cleaning program—so they can go out and help their customers implement one,” Balek explains.

In the same vein, ISSA published “Green Cleaning for Dummies,” and updated its previously released paper, “Green Cleaning Product Procurement Policies, Initiatives and Requirements in the U.S.,” in 2007; the latter lists programs, policies and mandates by state and for the federal government. Among the association's most recent offerings, ISSA is planning a slate of training programs regarding the Illinois Green Cleaning Schools Act. Run in conjunction with the Healthy Schools Campaign—a group that promoted the passage of the Illinois act—the program will show distributors, manufacturers and cleaning companies what they need to do to comply with the new law. The program will also help drive business to ISSA members: Companies that participate in the program will be listed as preferred providers of green products and services to schools throughout the state.

Going beyond products  
Offering green products is the logical place to start in this environmental revolution, but many distributors have moved beyond that and are considering their own environmental footprint in their daily operations. They're looking at ways to conserve energy, comply with state and federal environmental standards, reduce waste and cut down on carbon emissions. Wolseley, for example, tracks and publishes its company-wide carbon emissions and water usage, among other environmental measures.

Software companies such as Infor are stepping in to help manage those efforts. Infor recently launched a “Going Green” initiative aimed at helping companies implement environmental sustainability programs by using their enterprise software. The company is highlighting its green efforts in three areas: Reducing energy consumption with its Enterprise Asset Management (EAM) program; decreasing companies' carbon footprints through its Supply Chain Management (SCM) application; and using Product Lifecycle Management (PLM) to help companies adhere to regulatory mandates.

With Infor's EAM system, companies can track the energy consumption of individual assets—everything from equipment used in the warehouse to air conditioning units used to cool their facilities. Companies can then be more pro-active in maintaining the equipment, says Rod Ellsworth, vice president of enterprise asset management consulting for Infor. The system also helps companies identify alternative, energy-efficient solutions when deciding to “change out” existing equipment, he says.

“Essentially, we're trying to promote ongoing environmental sustainability,” Ellsworth says.

His colleague Andrew Kinder, director of product marketing for supply chain management, agrees, noting that, “Green is everywhere, really. It's part of the way customers and companies will operate in the future.”

Infor's SCM application helps distributors analyze fuel usage and carbon emissions so they can make changes, where necessary, to shipping and transportation methods. That could mean turning to hybrid vehicles for local delivery or switching from air to rail freight for larger shipments. The company's PLM program factors legislative and regulatory guidelines into the distributor or manufacturer's software system so they can stay compliant on a range of issues–including disposal of hazardous materials and shipping regulations on various products. Kinder cites the European RoHS standard as one set of criteria that can be factored into a system.

“We're cognizant of the issues; we're putting in the requirements to track that information so [the distributor or manufacturer] doesn't ship things a certain way, or ship things incorrectly,” Kinder says. “We're building intelligent software to help companies be compliant and we're putting in the traceability to help them meet legislative requirements.”

There's no shortage of tools to help distributors achieve these goals. From new products, to government-sponsored training programs, to software designed to monitor progress toward environmental goals, the green movement has branched out into the supply chain, with no end in sight. And though larger companies are the most outspoken about their green efforts, Balek and others say it's a trend that will affect distributors and manufacturers of all sizes. What's more, they say going green is more than a trend—it's a competitive advantage.

“[The green trend] transcends all industry sectors,” says Balek. “I can't think of one that's not been touched. … This is something I think companies would be wise to investigate as a way to grow their businesses.”

In an online poll conducted by INDUSTRIAL DISTRIBUTION, 69 percent of respondents said their customers are asking them to provide environmentally friendly products and services. And distributors are beginning to meet those requests: 74 percent of respondents said green products are on their radar screen, representing 25 percent or less of their total product offering. Nine percent said their companies offer no green products at all.

What's ahead?  
Down the road, distributors and manufacturers will likely be looking at environmental sustainability not just in their own operations, but throughout the entire supply chain. Ellsworth says he's already seeing some manufacturers evaluate their carbon footprint from the time they import the raw materials for their product until it is delivered to the customer's door—a process that goes well beyond the manufacturer to include distributors, third-party logistics companies and more.

“Right now, [Enterprise Asset Management] is a key part of it—companies are saying, 'We use energy, which creates emissions, so let's track that; let's try to reduce it,” Ellsworth says. “But they're starting to say, 'What is the total carbon footprint of the product we produce?' Eventually, people will look at bringing all of those together.”

Kinder says he sees another issue on the horizon: Opportunity.

“What I sense happening over the last 12 months or so is that companies have started to think of green not as a cost, but as an opportunity,” he explains, pointing to a survey Infor conducted in 2006 among hundreds of supply chain managers. The survey asked several questions about environmental issues and their impact on the supply chain; the results were largely apathetic, Kinder says, with most respondents claiming that going green was too costly and that the government should subsidize corporate efforts to do so.

When Infor conducted the survey again a year later, the results were dramatically different, with respondents noting the various things their companies were doing, or considering doing, to become more environmentally friendly.

“The media is greening us, without question, and I think that's having an impact on industry,” Kinder says. “In many ways, we're being conditioned to be attuned to these things. As a result, companies are looking at it differently these days.”
 

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