The EU ETS (Emission Trading Scheme) will most likely have implications for design and operation of supply networks.
One of the emerging questions is whether (or perhaps rather, to what extent) allocation of carbon emission credits to companies will reduce carbon footprint of the particular product.
Let’s for the sake of the argument view the physical product and the individual company as unit of analysis.
There are at least two aspects that are of interest for those who work with the term ‘supply chain’ in their research and management practice:
1. Pushing emission up-stream the supply chain?
A problem may arise if these are not distinguished properly, for example if a company seeks to reduce it’s carbon emission by pushing emission-intensive operations up-stream their supply chains, into the hands of their suppliers.
One of the criticism of just-in-time and lean operations was the idea of inventories being pushed up-stream the supply chain, into the hands of the suppliers. As consequence, the stock of particular components was not reduced, it was simply re-located.
Will this also happen with carbon emission?
For a company that is efficiently managing it’s carbon footprint, and under circumstances t where demand of carbon credits exceeds supply, will the sourcing criteria now include sell? That is, either selling credits to suppliers and customers who are in need of this, or even taking over some operations from these supply chain members that are carbon intenstive?
This is of course highly speculative, but nevertheless, with an efficient market for carbon credits, the sourcing criteria will certainly extent to: make-buy-or-sell.