In recent times, climate change has emerged as one of the most pressing challenges threatening human existence. With the 2015 Paris Agreement, governments around the world pledged to prevent global warming by exceeding two degrees Celsius. This commitment has not only required governments to act but also civil society and businesses to reduce their environmental impact. The consumer goods market which is expected to experience significant growth has a crucial role in reducing greenhouse gas emissions, thus achieving the UN 2050 emission targets. Every step in the supply chain impacts the environment. From sourcing materials, production to packaging, distribution, consumption and end-life disposal. As businesses strive to reduce carbon emissions, sustainable supply chains will become increasingly essential in creating a cleaner, more efficient and carbon-neutral future.
Investors, customers and government bodies are increasingly putting pressure on businesses to provide evidence of their sustainability efforts as well as support carbon taxes and carbon-reduction targets. Hence, capturing and monitoring carbon emissions has become a top priority for them and their suppliers. While it is still a new concept, it is encouraging to know that many organizations are working with various sustainability practitioners to reduce their Green House Gases (GHG) emissions in line with climate science. Moreover, they are leveraging on best practices and case studies from sustainability experts at annual conferences, via online training modules and through capacity-building campaigns. By showcasing the success stories, organizations not only recognize their efforts but also demonstrate the practical benefits of sustainability initiatives to others in the supply chain.
In the past, companies only had visibility into their operations, leaving them and their consumers unaware of the end product’s full environmental impact. However, due to globalization, there is a necessity for more visibility and transparency in global supply chains. Businesses need to look at supply chain efficiency as more than a cost-saving mechanism and track each step from end to end to accurately measure their carbon and environmental footprint. During this process, the entire supply chain partner needs to be considered. It is easier said than done as the majority are facing challenges in data collection needed. They lack the required technology or expertise to track and quantify emissions across their supply chain, making it difficult to identify sources of emission and opportunities for improvement. Environmental impact assessments (EIA) that are aligned with Carbon Disclosure Project (CDP) questionnaires and GRI guidelines may form the starting point to gauge the performance on important aspects of performance. The information can then be used to compile the environmental metric in the annual scorecards.
The transportation industry is crucial as it is an integral part of the economy and environment. However, it is becoming more volatile in the supply chain, with increasing fuel prices affecting freight rates and impacting the overall value chain. Organizations must find new solutions to minimize transportation costs and ensure transportation capacity to maintain a competitive edge. This has called for the need to incorporate a sustainability plan into the business strategy. Optimizing the transport network may be complex, but it eliminates cost overruns, reduces fuel consumption, and creates fewer emissions. As a result, it reduces carbon footprint and eliminates other disruptions to the functioning supply chain.
Due to the complexity inherent to many supply chains, businesses often do not have a full understanding of their sustainability impacts. A good first step in closing that gap is by listing to one’s suppliers, identifying the environmental risks associated with each one of them and prioritizing related efforts. Tier 1 suppliers can then provide sustainability indicators to further classify them based on environmental performance. Also, setting procurement standards for suppliers can be a direct mechanism to address upstream emissions. Strong standards link practices to procurement decisions, such as mandating a specific share and quality of renewable power, required levels of recycled materials or process efficiency. Procurement functions will have to adjust as will product development, finance and strategy. At the same time, the number of interfaces between functions in climate-related topics need to be reduced. All of this requires better organizational governance and policy restructuring.
The fast-moving, consumer-centric world requires a different sort of supply chain. Traditional supply chains sought to achieve stability and minimize cost. Future supply chains will be more dynamic and agile enough to predict, prepare and respond to rapidly evolving demands. The journey toward a carbon-neutral and sustainable supply chain is not easy, but it’s essential for the organization’s long-term success. Businesses must measure, track and monitor their carbon and environmental footprints to understand their current situation and what changes need to be made. With the right tools and expertise, we can start progressing towards a greener supply chain, building trust with customers and suppliers who share a commitment to environmental responsibility.