ISO 50001: Supply Chain Impacts

The release of ISO 50001, the first ISO standard for managing energy use, provides opportunities for engagement in energy management for a wide variety of stakeholders including end users, electric and gas utilities, original equipment manufacturers (OEMs) of energy-using equipment, and suppliers. This article, focusing on supply chains, is the third in a three-part series examining the significance of ISO 50001 for utilities, OEMs and supply chains.
 

Supply Chains: The Rest of the Iceberg

Like an iceberg, the true scale of energy use by industrial supply chains can be mostly hidden beneath the surface. As manufacturing companies have become less vertically integrated the energy footprints for a growing number of manufacturers has been spread across a vast network of industrial suppliers. In some industrial sectors, more than 50 percent of a company’s energy footprint can reside upstream in the supply chain(1). This large proportion of embedded energy makes engaging suppliers in energy efficiency important to improve industrial energy performance.

Whether end users or suppliers adopt ISO 50001, both sets of stakeholders have the potential to generate meaningful effects up and down industrial supply chains, influencing the stability and sustainability and energy performance of the entire network.  According to  Meeta Kratz, Sr. Director of Customer Business Issues at Grainger, “We have seen that sustainability has grown into part of daily life and we are seeing increasing requests for relevant products and services, documentation on our internal efforts, and more detailed reporting to our customers on how we are helping them manage their sustainability initiatives. We look at sustainability holistically—we have one platform that drives both our internal operations and our customer offer.”

How ISO 50001 Treats Suppliers

ISO 50001 requires that companies take into account energy impacts when conducting procurement and selecting suppliers. Companies must develop purchasing specifications for services, products, and equipment that can have significant impacts on energy use and inform their suppliers that procurement of such services and equipment will be partly evaluated based on energy performance. An effective way to affect the supply chain is to encourage the suppliers themselves to adopt ISO 50001. By working with suppliers to establish ISO 50001 as a standard energy management plan, companies can ensure that the following impacts are spread throughout the whole supply chain:

Improved Business Collaboration

One of the fundamental advantages of ISO 50001 is the emphasis on consistent measurements of energy use and efficiency measures. This makes information sharing between companies seeking to conform with ISO 50001 easier because it helps standardize data and offers valuable opportunities for cross company information exchange. The leveraging made possible by ISO 50001 can lead to further energy performance improvements across the supply chain.

Reduced Price Volatility

The outsourcing of functions once performed internally has been one of the overriding trends in industry. Though this can lead to cost-efficient specialization, it also means more dispersed energy costs incurred by multiple companies that perform functions that once were performed in-house. Often, a large proportion of embedded energy in many products today is beyond a company’s direct control.   Encouraging suppliers to adopt ISO 50001 helps the entire supply chain by reducing energy costs as a percentage of total expenditures across the entire network, reducing costs for all participants. This can help limit energy price volatility across the supply chain.

Improved Branding

Conformance with ISO 50001 is a powerful sign of a corporation’s commitment to sustainability, both to corporate suppliers and individual customers. Instead of focusing on discrete technologies, ISO 500001 engages organizations to take a holistic and continuous approach toward energy efficiency. The legitimacy and certainty that an ISO standard represents makes it a cornerstone of any branding effort based on demonstrating a commitment to sustainable and sound energy management.

1. Based on Carnegie Mellon University, Green Design Institute, Economic Input-Output Lifecycle Assessment, 2010

Alliance Industrial Intern Evan Perkins was a major contributor to this article.