Ecosystem Aware

Global Supply Chain Management

N.Viswanadham
Emissions Trading
 The Basic Principle of Emissions Trading
Global Supply Chain Management
l Suppose there are two firms, X and Y that are polluting the atmosphere.
l The country wants to decrease overall level of pollution and mandates
that both firms reduce the amount of pollutants they emit into the
atmosphere.
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l The cost of emissions reduction might differ markedly for these two
firms. Firm X might be able to reduce its emissions at a much lower
cost than Y.
l The difference in the cost of emissions reduction creates a market
opportunity: the firms could reduce the same amount of total emissions
at a lower cost if firm X reduces more than what it has to and sells its
extra reduction units to firm Y at a cost lower than the cost of emissions
reduction for firm Y.
l Firm X will gain because of the difference between the cost of
emissions reduction for firm X and firm Y. Firm Y will also gain for
the same reason.
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 Cap-and-trade
Global Supply Chain Management
l Regulatory bodies establish a cap called emissions cap on the level of
emissions permitted in a jurisdiction.
l The participants in the program receive credits distributed (sometimes
given, sometimes purchased through auction) by the regulatory
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authorities, which correspond to the amount of pollution (defined as the

number of tons of pollutants in a year) that they are expected/allowed to
emit within one year.
l If they exceed the cap, they have to buy credits from other participants
who have excess credits (i.e., they have polluted less than their
allowance).
l Hence, total pollution is limited to a total amount (cap) and trading
allows for an efficient allocation of pollution as those participants who
can reduce emissions in a cost-effective way will do so and benefit
from trading with those who cannot.

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 Cap-and-trade-Example
l There are two power plants. Plant A emits 100 tons of CO2, and plant B emits
Global Supply Chain Management 200 tons of CO2, so total emissions is 300 tons.
l The regulatory authorities put the cap at 210 tons of CO2 in total (30%
reduction). Both plants have to decrease pollution by 30%. i.e. A can emit only
70 tons of CO2 & B can emit only 140 tons of CO2.
l The cost of reduction of one ton of CO2 for plant A is $20 (for the first 30 units
of emissions) and $50 for plant B (for the first 60 units). If plants A and B
Ecosystem Aware

reduce pollution separately, the total cost to reduce emissions to 210 tons will
be $3600 [($20 30) + ($50 60)].
l Plant A is able to reduce its emissions at a lower cost than plant B. If it can
reduce more than 30 units, it can sell permits to plant B.
l If plant A reduces 60 tons of CO2 at $20, and plant B could reduce 30 tons at
$50, implying that the total cost to reduce total emissions to 210 tons would be
$2700 [($20 60) + ($50 30)].
l A can sell extra 30 units to B at a cost between $20 and $50 and get profit for
extra emissions reduction. B also benefits, as the average cost of reducing
emissions is lower than $50
l A and B could be in different continents

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 Offset
Global Supply Chain Management l A carbon offset is another type of commodity that represents
the reduction of one metric ton of carbon-dioxide equivalent
(CO2) by a qualifying carbon-reduction project.
l The offset may or may not represent the actual reduction of
CO2 emissions.
Ecosystem Aware

l Examples of offset projects include renewable-power

generation, energy efficiency projects, & forestry and
industrial-waste remediation.
l There are governing bodies that attempt to ensure offsets are
real & accounted for properly.
l A renewable energy certificate (REC) can be converted into
carbon offsets, by proving the renewable energy generated is
actually offsetting an equivalent amount of carbon-based
electricity production
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 Green Supply Chain Network- Definition
Global Supply Chain Management
l GSCN is a strategically designed inter-organizational
network delivering green products
Designed and produced using environmentally friendly green
Ecosystem Aware

procurement and manufacturing strategies processes

Deliver low carbon foot print products or solutions to the customers
Reduce resource usage, waste and pollutants following the cradle to
cradle protocol and encouraging re innovations: reuse, repair and
recycle. Backward SCN and Reverse Logistics networks in place
Minimal carbon foot print using efficient trading mechanisms
l The GSCN functioning is Coordinated & Executed so that its
outcomes conform to the objectives of triple bottom line:
Sustainability, Economic development & Social wellbeing

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Global Supply Chain Management

Sustainability Initiatives in Practice

Ecosystem Aware

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 Green Supply Chain Innovations
Global Supply Chain Management
l Low-carbon innovations arent just new products and technologies. They
also include new services and processes in such industries as ICT,
chemicals and materials, agriculture, law, accounting, and consulting.
l Examples:
Ecosystem Aware

The Dutch flower industry cultivate flowers in rock wool & transport in the
same trays, reducing shipping time and cost.
Best Buy partnered with GE to bring new home energy management systems,
smart appliances, and renewable energy products to market more rapidly
Morrison & Foerster LLP began law practice focused on clean technology
offering corporate and litigation services, along with technical expertise in
intellectual property, energy, and environmental law. Billings grew from $6
million in 2006 to around $100 million in 2011.
Automakers are adopting new start-stop battery systems from Johnson
Controls that turn vehicles engines off rather than idle when the vehicles
stop.

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 Green Delivery
Global Supply Chain Management
l Videoconferencing system substitutes for many forms of business
travel. HP and its customers saved 66,000 metric tons of carbon
dioxide-equivalent (CO2e) greenhouse gas (GHG) emissions in two
years, and HP reduced its employee business travel by 43 percent.
Ecosystem Aware

l SAP introduced Carbon Impact On Demand 5.0 carbon management

software in 2010, leading the $1.3 B Enterprise Carbon Accounting
(ECA) marketplace.
l HP works with corporate customers to design, implement, and
manage an imaging and printing infrastructure. For one customer with
10,000 employees, HP has reduced printing energy consumption by
66 %. Fortune 500 companies could avoid about 2.3 million metric
tons of CO2 annually by reducing printing.
l For low-carbon innovations to take root, companies must develop
the necessary networks of external partners that enable them

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Global Supply Chain Management

Sustainability Initiatives @
Ecosystem Aware

CEMEX- Building Solutions Company

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 CEMEX: Sustainability Initiatives
The cement industry is conventional and low-tech,
Global Supply Chain Management
l
but CEMEX stands out as an emerging economy
Giant
l CEMEX is a best-practice modelsince the
Ecosystem Aware

late 1980s it has grown rapidly from a local

cement producer to become the Third Largest
Cement Company in the world.
l The success of the company is because of it has
built superior information and logistics
capabilities, Excellent business models, and an
efficient supply chain with risk green operating
practices.

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 What are CEMEX's Offerings?
Global Supply Chain Management

l CEMEX is a growing global building-solutions

company that provides products of consistently
high quality and reliable service to customers and
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communities in Americas, Europe, Africa, the

Middle East, and Asia.
l The operations network produces, distributes,
and markets cement, ready-mix concrete,
aggregates, and related building materials to
customers in over 50 countries

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 Carbon Foot Print of Cement
Global Supply Chain Management
l The production of cement is carbon-intensive, requiring high
temperature sintering of limestone, clay, and iron oxide to
create clinkerthe base material for cement.
Ecosystem Aware

l This heating process takes place in large rotary kilns that

reach temperatures over 1,400C (2,500F) to catalyze
proper chemical reactions.
l Both the fuel requirements of the kilns and the reaction
processes, result in significant releases of CO2into the
atmosphere.
l The cement industry as a whole represents 5% of all carbon
emissions associated with human activityan issue that has
spurred widespread effort to reduce the carbon footprint of
cement production
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 Ecosystem Aware
Global Supply Chain Management

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Sustainability Initiatives
 CEMEX's Three Main Sustainability Objectives
Global Supply Chain Management
l Enhance its Value Creation: CEMEX aims to deliver the
innovative, high-performing products, services, and
solutions to the resource-constrained society requires for
building a low carbon economy
Ecosystem Aware

l Manage its Carbon Footprint: CEMEX strives to

minimize the ecological impacts of its operations in the
communities in which it operates by carefully identified by
carefully measuring and reducing its carbon footprint to
technically and economically feasible lowest levels
l Engage Stakeholders: With highly committed &
empowered employees, CEMEX closely collaborates with
a variety of institutions with complementary core
competencies to strengthen the local communities
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 CEMEX Carbon Strategy
CEMEX has designed its carbon strategy to help reduce
Global Supply Chain Management
l
the environmental impacts of its operations, while creating
economic value and driving the construction industrys
participation in the development of a low-carbon economy.
Ecosystem Aware

l The key components of CEMEX carbon strategy:

l Reducing the ecological footprint of our production process
Replacing traditional fossil fuels with lower-emission alternatives
Reducing the clinker content in cement
Increasing our use of renewable electricity and the energy
efficiency of operations
l Aligning operations and initiatives with international
standards, regulations, and market-based mechanisms for
emissions reduction

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Global Supply Chain Management Carbon Footprint Tool
l A
key pillar of our CO2 reduction efforts is
our Carbon Footprint Tool (CFT) that
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helps us to quantify the direct and indirect

amount of CO2 emitted during the
production process of cement, concrete and
aggregates up until the product leaves our
facilities.

N.Viswanadham
 Waste to Value
Global Supply Chain Management
l Cemexs carbon strategy is to reduce the environmental impacts of its
operations, as well as to drive the development of a low-carbon economy
from waste to value
l Cemex uses residues or by products from industrial, domestic, agricultural,
Ecosystem Aware

and forestry processes to fuel its cement facilities .

l The wastes include Used tires, Spent solvents and waste oils, Processed
municipal solid waste, Household waste, Agricultural wastes such as rice,
peanut shells and coffee husks and animal meal, Sewage sludge
l The process reduces our reliance on fossil fuels
l Cemexs use of alternative fuels increased to27.1 % of total fuel mix
from20.3% in2010
l Mimicks Bioecosystems where waste for one entity delivers
value for another

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 Developing Alternative Energy Sources
Global Supply Chain Management
l CEMEX owns a wind farm in Oaxaca, Mexico with a
capacity to provide 25 percent of the energy needed to run
Mexican operations, and in 2011, allowed CEMEX to avoid
Ecosystem Aware

489,169 tons of CO2emissions.

l CEMEX reduces carbon footprint by using efficient process
technologies and changing the way it sources electricity.
l In 2011 CEMEX Philip-pines launched a collaborative
project with Sinoma Energy Conservation Ltd to devise a
system for capturing waste heat from kilns to produce
clean, alternative electricity.

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 Drivers of Green Initiatives
Physical change in the environment is the basis
Global Supply Chain Management
l
for policy decisions on environmental regulation.
l Regulation, in turn, can affect the development,
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availability and dissemination of technology.

l Regulation and availability of technology affect
national and global markets.
l Consumer habits, and thus the demand for
greener products, can affect the way companies
do business and encourage them to adopt new
technologies that allow them to meet new
consumer needs.
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 Green Vs Customer Value
Global Supply Chain Management

l No new low-carbon innovation will survive in

the marketplace if it fails to maximize customer
value along multiple dimensions.
Ecosystem Aware

l Reductions in carbon emissions alone will not

make low-carbon innovations successful in the
marketplace; the innovations must also bring
bottom-line value in terms of total cost reduction,
enhanced performance, or competitive edge.

N.Viswanadham
 Conclusions
Global Supply Chain Management
l Green supply Chains is a very important
subject that effects all the three sectors of
the economy and also the livelihood, health
Ecosystem Aware

and well being of the humans and other

species
l Not given enough attention as yet.
l Green SCN design is an important topic that
deserves the attention

N.Viswanadham