Supply Chain Energy Efficiency Critical to Reducing Carbon Footprint

New University of Minnesota report offers strategies to boost life cycle energy efficiency

Minneapolis-St. Paul—Aug. 27, 2013—Companies that want to reduce their carbon footprint need to pay attention to the energy they use. But at least as important—and in some cases even more so—is paying attention to the energy used by links in their supply chain.

The University of Minnesota Institute on the Environment’s NorthStar Initiative for Sustainable Enterprise, along with the Environmental Defense Fund, provide valuable suggestions on why and how to do so in a new report, Supply Chain Energy Efficiency: Engaging Small & Medium Entities in Global Production Systems.

Based on a two-day workshop tapping the brains of 31 representatives of energy service companies, financers, retailers, nongovernmental organi­zations, government and academia from around the world, the report provides an intriguing look into thinking about industrial energy efficiency within the system of a supply chain, and highlights opportunities for corresponding cost-, reputation- and energy-saving improvements.

“The industrial sector consumes nearly one-third of all global primary energy and the opportunities for improving energy efficiency in the industrial sector are vast,” says symposium organizer and researcher Jennifer Schmitt.

To realize these opportunities we must manage energy across organizations, industry sectors, supply chains and regions, which will require significant new and increasingly more transparent data, common metrics and analytics. Public and private collaboration will be crucial to reduce the transaction costs of implementing supply chain energy efficiency, particularly with regard to credit enhancement, technology provider accreditation and governmental policies.

The report highlights four recommendations coming out of the symposium that span across the many actors involved in saving a kilowatt hour:

1. Engage leading companies to identify high-quality suppliers for pilot supply chain energy efficiency improvements.

2. Create one or more sector-based collaborations for improving supply chain energy efficiency by assembling groups of peer manufacturers within a supply chain and using benchmarking, process capability analysis and best practice sharing to identify and improve energy efficiency and industry competitiveness.

3. Increase transparency and standardization of energy use, audits and supply chain information.

4. Create finance and credit risk approaches and models for portfolio-level energy efficiency and energy management projects.

“These recommendations, coming out of our discussions at the symposium, provide an unprecedented ability to characterize and benchmark sector-level and facility-level energy savings opportunities, share knowledge in ways that allow for the flexible application of technological and organizational information in a supply chain environment, and coordinate resources across regions and across public and private actors,” Schmitt says. “Approaching energy efficiency through the supply chain holds great potential for both carbon and financial savings.”

From a technical perspective, success will demand accurate, reliable and consistent computations and measurements across an expansive range of technologies, supply chain configurations and financial mechanisms. From a develop­ment perspective, resources from key actors—namely, large leading companies in supply chains, national governments, transnational organizations, and technically adept NGOs—will be required to create fundamental pre-competitive infrastructure and demonstration projects to further prove the concept.

The information and recommendations in this report represent incipient thoughts of stakeholders and experts within the global energy efficiency and research communities; advancement beyond this initial stage will require more detailed documentation and long range planning. Nevertheless, identifying these key barriers and brainstorming ways for overcoming them is imperative for maximizing supply chain energy efficiency.

View and download a copy of the report.