Many businesses are beginning to notice how changes in weather patterns affect the way in-which products are manufactured. I just read an article by Malcolm Fox called The Cost of Climate Change and it really highlights the risks that companies will face if they fail to navigate their business to accommodate  for the environmental shifts and the rising cost of carbon.

Fox states that the costs of carbon are likely to be set by the markets in a cap-and-trade scheme where economy-wide emission allowances are introduced and then gradually lowered to meet greenhouse gas reduction targets. The current uncertainty around the cost of carbon as well as the absence of a renewed Kyoto treaty, is seriously hindering planning and investment.

His point of view was published this August in Inside Supply Management .

Fox urges companies to be aware of their carbon footprint size. Now this knowledge will serve to be a good benchmarking tool for companies, and one way to measure their carbon efficiency, or lack thereof is through Econometric I/O modeling.

Econometric input/output modeling: This provides insight into the flow of environmental impacts by looking at expenditures between sectors throughout an economy. This helps calculate  how the environment impacts the supply chain, which is very sensitive to climate change. It will also help companies save a lot of mopney, as the cost of carbon is expected to rise to about $70 in 2050.

Currently, only 20% of S&P’s 500 companies disclose the amount of their emissions. This means that there needs to be more ways for companies to gather data on tracking their emission usage, and use this information as a tool to compete in todays marketplace, and figure out a way to avoid paying such high prices for carbon.

A source to view industry GHG emissions is the EPA’s U.S. Greenhouse Gas Inventory.

Now is time for the ‘so what?’ factor. The more detailed information we have on individual companies use of greenhouse emissions the easier it will be for companies to decrease their carbon footprint. This will help companies implement alternative plans, that will prove to be more environmentally sound, and cost-saving as well. The ball is rolling, a precedent will be set and supply management is changing in big ways. Ya heard?

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