Predictions for the Next Ten Years

Top 8 Green Supply Chain & B2B Trends

By Jamie OHalloran
GXS Senior Solutions Consultant and Sustainability Director

Environmental science tells us that in as little as five years people will be experiencing undeniable changes in the physical world. These changes will have dramatic impacts in certain geographies and in less-developed economies. In industrialized nations there is going to be greater demand for businesses and individuals to do their part to embrace the basic tenets of environmental sustainability: Reduce, Reuse and Recycle.

In an effort to keep with those ideals, the number of trends being predicted here has been reduced to a manageable eight. That’s a full 20% reduction on the business as usual top 10 lists.

Consumers Everywhere Will Do More With Less

1. As sensitivity to the environment increases, consumers will do more with less–less packaging, less space, less non-renewable raw materials, and, of course, less waste. The concept of a green supply chain has always embraced efficiencies such as lean methods and reusable shipping assets. As a result, sustainability initiatives are typically well correlated with short-term and long-term cost savings. However, there is an increasing acceptance of measuring the true cost of a supply chain. The true cost includes not only the traditional manufacturing, transportation, sales and marketing expenses for a product, but also the environmental impact or carbon footprint. The new perspective will translate into a hyper-awareness of environmental costs. The result will be a stamping out of waste in the supply chain as it relates to raw materials, packaging and shipping mode selection.
   
   
2. The trend toward “less is more” will also impact the behavior of the consumer. We will continue to see significant growth in consumption in Eastern countries, most notably China and India, due to the rapid expansion of the local economies. However, consumer aspirations in developed countries, such as the US, will start to shift away from the American model of uber-consumption toward a more sustainable approach. Bigger won’t be seen as better. On the contrary, the consumer will repel old notions of the big cheap “throwaway society.” In fact, this “reset world” has sadly been forced upon the US consumer in the recent economic recession. The average US consumer was spending roughly 20% beyond their earnings, using credit cards and mortgage borrowing to make-up for their income shortfall. As the economy stabilizes into the “new normal,” consumer behaviors will naturally adjust to a more sustainable, corrected level. Fewer goods and locally-made goods will be more attractive, if not a necessity, for US consumers. The good thing for the environment is that less and local naturally translate into green.
   
   
3. Another major change will be that service will augment, if not replace, products in traditional spaces. You have heard of software plus service. In the future, you will think footwear plus services or housewares plus services. Nike is already thinking of their business models where their customers would lease shoes rather than buy them. Nike would replace worn parts instead of throwing them out. Rules like the Waste Electrical and Electronic Equipment (WEEE) directive in the European Union have manufacturers seeking alternatives to recycling. For example, home appliance manufacturers could “re-core” washers, dryers and refrigerators with a new computer or smart grid hookup instead of scrapping the whole unit. Service will augment the supply chain in every conceivable way and in many ways inconceivable today.
   
   

Green is the New Sticky

4. We tend to think of the “stickiness” for products as being associated with additional features or services that addict customers, making it harder to switch to an alternative vendor. “Sticky” can also be achieved through aligning with your customer’s core values and your expression of these values in the marketplace. For retailers and manufacturers which depend heavily on sourcing raw materials, component parts or finished goods from third-party vendors, green will extend beyond the enterprise into the supply chain.  Companies must evaluate their supplier’s ability to support the efforts to build a green brand, comply with environmental regulation and perform carbon or other Corporate Social Responsibility reporting. The brand, legal and financial risks of continuing to do business with a non-green supplier will increase sharply in the coming years. Sales and marketing organizations need to be able to articulate and measure the way your product or service can reduce your partner’s carbon footprint. By making a customer greener year over year, suppliers can increase their ”stickiness” today and tomorrow.
   
   

The Price of Carbon Outweighs the Price of Fuel

5. The price of carbon will be a major force in driving green initiatives across the supply chain. As a result, many of the activities in today’s supply chain will need to be reevaluated. For example, manufacturing of heavy or large items in low-cost geographies far from the point of end consumption will be re-evaluated. Companies will need to weigh the cost advantages of Asian labor against the price of carbon used in high-polluting motor and ocean carrier fleets. As environmental changes increase public awareness and demand for action, ocean carriers will begin to leverage renewable energy sources. For example, the use of spinnakers (sails) and nuclear power will emerge in commercial vessels.
   
   
6. The usage of rail transport will go up, while air freight and long-haul motor will go down. Rail transport, both for commercial shipping and passenger travel, will see a significant reemergence as access improves and cities grow while suburbs decline. In fact, most cities are green and growing. We will also see a reevaluation of commercial air regulations. For example, aviation authorities may choose to allow planes to glide into airports instead of powering in. Gliding into landing saves over 10% of the fuel and appears to pose no safety risk. 
   
   
   

   Rise of the Slow Lane

7. Since the 1970s, we have known that massive amounts of petroleum could be saved if we could just drive 55 miles per hour. The same concept holds true for international shipping. An ocean freighter operating at top speed may be able to get from Shanghai to Los Angeles in 10 days. However, the fastest trip may not be the most economical or greenest mode of transportation. The major ocean carriers have always known that they could save a significant amount of diesel fuel if they ran their container ships, oil tankers and other fleet vessels at slower speeds. But who is going to tell the customer that it’s going to take three days longer to get their product to the destination in order to save a few barrels of oil? In the future, transportation carriers will offer better rates, measurably lower carbon costs and tailored services for lower-priority freight. Shipments of patio furniture and above-ground pools that absolutely, positively don’t have to be there overnight, or even in 13 days from China to the US, will take travel at a slower 16-day pace instead.
   
   

The Death of Green

8. It is not that green will die as much as just go out of use. What we think of as green or environmentally-sustainable activities today will be business-as-usual tomorrow. Initiatives, such as Walmart’s Supplier Sustainability Assessment, the trading of carbon in capital markets and tighter government regulations, will leave no room for bad actors in the supply chain. For many years, environmentalists have been predicting such an end state. ”Someday green will just be the way we do business and live.” And that someday will certainly happen within the next 10 years.