These efforts to collaborate with the supply chain and drive greater emissions reductions can lead to benefits in four key areas: reduced risks, lower costs, new revenue opportunities, and better brand positioning (Figure 5).
Mitigating: Reduced risks and lower costs
In the past year alone, 30% of member companies reported supply-chain disruptions due to weather-related incidents. Climate scientists predict that storms will become more frequent and more intense in the future,4
potentially greater risks for companies with extended supply chains or agricultural networks (or both).
For example, the 2011 floods in Thailand significantly disrupted the personal computer industry. Roughly a quarter of all hard drives come from the region of Thailand that was most impacted by the flood, and the subsequent shortage has triggered price increases of as much as 40%, with effects expected to linger into 2012. One analyst estimated that a 10% rise in the average cost of hard drives would cut Dell’s gross margins by 40 basis points.5
Supply-chain engagement can help mitigate these risks and also reduce costs throughout the supply chain. A recent Gartner survey found that 56% of companies name the reduction of operational costs as a key supply-chain priority.6
costs come primarily through energy efficiency measures, but also through collaborative efforts in packaging, logistics, and other functions.
“The worldwide shift to give priority attention to all things climate related, even beyond regulatory requirements, creates ideas for innovations and expanded sales opportunities for Microchip. Thousands of customers are creating new products and new uses for microcontrollers, analog and Flash IP solutions. Customers want devices and technology that can do more things with less power and help them create products that help reduce the emissions of CO2e.”
Figure 5 – Supply-chain engagement leads to new revenue opportunities and better brand positioning, as well as reduced risks and costs.
• Creating new business models • Collaborating to develop new markets • Innovating to develop new products and services
Certain / Short-term Cost Reduction
• Improving energy efficiency • Streamlining supply chain and logistics • Innovating with suppliers and customers
• Focusing on and showcasing innovation • Collaborating to increase transparency • Engaging employees and investors
Innovate Less Certain / Long-term Risk Management
• Protecting License to Operate • Integrating Sustainability triple bottom line consideration with corporate risk management.
• Diversifying business model and operations
4 Pachauri, R.K. and Reisinger, A. (Eds). “Contribution of Work- ing Groups I, II and III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change;” (2007). Inter- governmental Panel on Climate Change, Geneva, Switzerland. Available at: http://www.ipcc.ch/index.htm
5 “Thai Floods an Overhang as Dell Reports Earnings;” Reuters, Nov. 15, 2011; http://www.reuters.com/article/2011/11/15/
6 “Nine Key Supply Chain Sustainability Trends for 2011” (Gartner)
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