Mark Carney’s not the only one giving ‘forward guidance’…
Canadian financial rockstar Mark Carney has taken up his post as
Saviour Governor of the Bank of England and revealed his secret weapon (drum roll…) forward guidance. What this means in practice is that the BoE will set out the conditions for changing interest rates so investors can understand the risks better and make their investments more confidently. Simple, but apparently very effective.
And it turns out that he is not the only one using this technique. One of the biggest impediments of greening the supply chain is the old ‘chicken and egg’ situation. If there’s no demand for a greener product or material, there’s no supply. And if there’s no supply, well you get it…
The Carneyesque solution is ‘forward commitment procurement’ – tell the market what you will want in the future, how much and by when. Then suppliers can gear up to supply that need, knowing that the demand will be there – and that demand for the conventional solution will fall. The European Postal Services did this for hydrogen-powered vans and HM Prison Service is doing it for ‘zero-waste mattresses’.
Like all the best solutions, simple but clever.
Image: World Economic Forum