 Sept. 2, 2008 - A new Ernst & Young report warns companies against relocating their manufacturing operations to certain developing countries - because lower environmental standards put them at risk for sinking reputations and costly product recalls.
"A side effect of globalization has been for some businesses to shift operations to locations with weaker environmental protection," the report notes. "These lower standards have resulted in costly product recalls of contaminated goods, damage to workers' health, and pollution of public drinking water of electrical waste."
Companies need to be fully aware and in control of operations throughout the supply chain, the report continues, in part because of reputational risk but also because local standards are expected to rise sharply as the effects of climate change become more evident.
"If a business does not apply to the highest standards, it will store up problems, requiring severe and painful short-term cuts in future," the report concludes.
For many companies, rising fuel costs have already forced them to rethink their traditional supply chain models, siting factories closer to the end markets where their products will be sold.
Some other key findings of the report include:
- 71% of respondents see reputation and brand as the areas where sustainability issues will provide opportunity.
- 63% see green supply chains as a path toward revenue growth by selling surplus efficiency allowances under the EU Emissions Trading Scheme.
- Despite widespread recognition of sustainability as a significant opportunity and threat, only 12% of respondents rated it among their top three supply chain priorities.
To download the complete report, click here (PDF). |
