Optimizing Energy Use is our Best Green Strategy

With crude oil continuing to soar to record levels, the author advocates for retailers and other companies to cross corporate boundaries in order to create new best practices for energy-efficient sustainability.

By Joseph C. Andraski, VICS

Prices for crude oil reached yet another record high today ($135) and there is no end in sight to the pain at the pump, as the average price in this country for gasoline is expected to reach four dollars per gallon soon.

As focus invariably shifts toward the procurement of new and alternative sources of energy, I reflect back on an interesting Wall Street Journal feature in March. Entitled "ECOnomics," it captured a broad range of opinions about the opportunities and timing surrounding alternative sources. The overall discussion from that section yielded four key conclusions for me:

1) Don't expect a return to pump prices that the USA has enjoyed for decades.

Despite the best conservation efforts, demand continues to grow - especially in many of the developing countries around the world, such as China and India. We cannot depend on those countries to hinder their economic growth with costly, vast and enforced conservation efforts. Growth in the supply of fuel can not be counted upon to keep up with growth in demand. Furthermore the organizations of oil-producing countries continue to manage supply and prices in their own best interests.

2) The availability of alternative fuel sources in sufficient quantities is decades away.

Forecasts which are predicting 20 years out are very likely to be overly optimistic and even inaccurate. The actual forecast could be 15-40 years for alternative or renewable fuels to be available sufficiently, depending upon a myriad of factors. That doesn't even take into account the International Energy Agency (IEA) forecast. Currently, 80 percent of the world's current energy supply comes from fossil fuels - and in 25 years, it will be 81 percent - a "What's the point?" proposition.

A related huge hurdle is return on investment for alternative fuel distribution. Of the 169,000 gas stations in the United States, a small percentage are owned by major corporations, so the remaining small operators would have to make vast investments in new pumps and tanks. In the meantime, if motorists can't refill easily, why will they buy great numbers of alternative fuel vehicles?  And if they don't buy, why should gas stations invest? How long will it be before a sufficient mass of demand for the alternative fuels can deliver an ROI on alternative fuel investment to that small gas station operator?

The likelihood of new forms or sources of energy being developed anytime soon is small. Certainly we need long-term efforts to create energy and sustainability breakthroughs, but we cannot leave it to chance that breakthroughs will come in time. (The environment is much too important to be left to chance.)

3) In light of the above, the major gains in energy-related sustainability in the foreseeable future will likely be derived from innovative efficiencies and conservation.

The major categories of gains in efficiency and conservation will come from the following:

Innovative new products are an important - but insufficient - source of conservation. In my opinion, the lion's share of consumers are not willing to pay substantially more on a total life cycle basis for environmentally friendly products.

While energy-consuming appliances will continue to deliver important efficiencies and be an important contributor, they involve too small of a proportion of total energy consumption to make enough of a difference.

And while innovations in manufacturing processes and product design will be important, they also involve too small of a proportion of total energy consumption to make enough of a difference.

Given all these considerations:

4) Those who will make the biggest differences in sustainability and the environment are those who develop innovative efficiencies and conservation in transportation.

There needs to be both long-term and short-term gains made with transportation efficiencies. Moving goods from point A to point B must improve.

Long-term possibilities entail research and development and gradual market changes as relative fuel and related costs change (which will make some modes of transport more expensive). Government incentives may need to go beyond tax breaks for developing alternative fuels, but little has been done in that arena thus far. In spite of all of the rhetoric, we have to pursue short-term money issues (not withstanding political promises in an election year).

While it is critical for people who wish to make a real difference in our environment to evangelize change within their companies, there is a bigger opportunity to make a difference not just within a company, but across an industry, the continent and even around the world.

For our part, VICS has put sustainability at center stage (our green creed is called LESS - Lower-cost, Environmentally Sound, Sustainable). As we outline our initiatives, we find that collectively, our industry can have a profound impact on sustainability in the short term. VICS and our retail and consumer goods members are helping lead the way. These companies and their combined domestic and global supply chain footprint represent an opportunity to effect real, relatively near-term gains in the most important areas of sustainability.

Imagine, for instance, that we reduced the resin used in one hanger by 30 percent - and then multiplied that by more than 8 billion. It would drastically cut petroleum consumption, not to mention the impact that hangers have in landfills use. Imagine going even a step further and making hangers recyclable or no petroleum. The only way to do that is adoption by the entire retail industry.

Another opportunity is with packaging, an area that has largely been ignored. Excess packaging can be found in almost every industry. We're cutting down trees, recycling cardboard (which consumes energy), transporting unnecessary weight and filling up rooms with packaging that could instead be filled with finished product.

Currently, VICS is developing an "Empty Miles Call to Action." Its stated mission is to reduce the number of empty miles in order to increase capacity, cost effectively, in an ever increasing constrained motor carrier industry, in order to be more competitive at retail. Estimates suggest the motor carrier industry is 10 percent to 30 percent below optimal effectiveness.

Several potential benefits from this Empty Miles initiative can be attained including reduced operating expenses, improved driver productivity, reduced congestion, more frequent store deliveries, more efficient use of highway infrastructure and a positive impact on the environment/sustainability.

There are many more examples of improving sustainability via industry-wide change. There will be more.

Collectively we can come together and create standards of communication and metrics that accelerate and orchestrate new product design, in a way such that more products and manufacturing processes better support sustainability measures.

Participating in an organization such as VICS, which crosses corporate boundaries and industry lines, is a way to create new industry-wide and worldwide best practices and guideline standards. The way to make the big difference in sustainability today is by getting involved.

Joseph C. Andraski is the president and CEO of VICS (the Voluntary Interindustry Commerce Solutions Association). Formed in 1986, VICS, which claims more than 200 companies with combined revenues exceeding $2 trillion, provides a forum for retailers, suppliers, information systems solutions providers, consultants and third party providers, to develop supply chain processes and technology that improve supply chain efficiency and effectiveness. VICS pioneered the implementation of the cross-industry standard, Quick Response (QR), designed to simplify the flow of product and information in the retail industry for retailers and suppliers. Further information is available at www.vics.org.

Prior to joining VICS, Andraski held several positions with Nabisco Inc., including vice president of supply and customer marketing. He had been active with the Grocery Manufacturers Association, serving as the chair for the logistics committee. He also served as a senior vice president of OMI, a retail software provider. Considered to be one of the key leaders of Collaborative Planning Forecasting and Replenishment (CPFR®), he recently created and launched the VICS CPFR Certification Program. He can be reached at jandraski@vics.org.