Consumers are increasingly willing to spend more money on products made by companies with sustainable supply chains. In addition, environmental sustainability practices can reduce operational costs by making your warehouses and vehicles more efficient.
Greening your supply chain can be as simple as using recycled packaging or buying locally produced goods that support independent and small businesses. More involved tactics involve establishing and communicating expectations through supplier codes of conduct.
Choose Your Suppliers Wisely
The average company’s supply chain accounts for 90% of its environmental, social, and governance (ESG) footprint, according to McKinsey & Company. This is largely because of the amount of energy required to make and transport materials and products from one location to another, which uses fossil fuels that can’t be renewed.
The good news is that most of these impacts can be easily reduced. For example, a company can reduce transportation emissions by ordering materials in bulk and using fewer trucks, planes, and ships to transport the goods to their distribution centers and customers. This helps to reduce the number of vehicles on the roads and in the skies, reducing greenhouse gas emissions and other air pollutants.
It’s also important to choose suppliers wisely, focusing on those that align with the company’s ESG goals. For example, a manufacturer may want to use organic cotton that doesn’t require as much water to grow to help minimize environmental damage. To achieve this goal, the supply chain team can work with the supplier to find a solution that satisfies both parties’ needs.
Once a supplier is chosen, it’s important to continue monitoring their performance over time. For example, if a supplier is unreliable and frequently fails to ship orders on time or provide high-quality products, the business should seek out other suppliers.
In addition, companies can improve the efficiency of their shipping operations by utilizing data to identify the best route for freight and storing inventory closer to customers to reduce the number of shipments. This will help to lower fuel usage and reduce carbon dioxide emissions while still meeting customer expectations around fast, affordable shipping. It’s also a great way to meet sustainability objectives while still remaining competitive in the marketplace.
Diversify Your Supply Chain
As most companies are aware, the supply chain is responsible for a significant portion of their environmental impact. The majority of these impacts are caused by transportation as raw materials and products are shipped around the globe. To help reduce these emissions, businesses can work to make their supplies more localized. This will decrease the number of trucks on the road, planes in the air and ships at sea. This, in turn, will help to minimize greenhouse gas emissions and other harmful pollutants.
Another way to improve supply chain sustainability is to diversify your supplier base. Having multiple suppliers can mitigate risks, increase flexibility and improve quality control. It also helps ensure that your company is not reliant on one single supplier or location. For example, if a natural disaster or political issue occurs in a particular region and causes the loss of your primary supplier, you will have alternative sources for the products or services you need to maintain customer satisfaction and operations.
In addition, working with multiple suppliers can improve your ability to save money and improve your competitive advantage. For example, if you can find more affordable raw materials, you can produce your products or goods at lower costs and pass the savings on to your customers.
Developing a more sustainable supply chain can be challenging for business. However, with proper planning and execution, the results can be rewarding in terms of savings, improved supply chain resilience and social responsibility. The key is to develop a strategy that is aligned with your organization’s risk appetite, product or service offering and supplier ecosystem. This will ensure that the benefits outweigh any risks or challenges that may arise.
Reduce Transportation Emissions
Transport emissions are the single largest source of carbon in many supply chains. Whether it is air or ocean shipping, trucks or warehouse vehicles, reducing these emissions will help businesses meet sustainability and CSR goals as well as reduce operating costs. Depending on your business’s particular needs, there are several ways to reduce transport emissions including working with local suppliers and optimizing shipping/delivery routes, seeking alternative fuels and more. Mid Nautical provides a good review of reinforced corners and edges.
Inefficient use of energy is a major contributor to carbon emissions, especially in the transportation sector. This inefficiency can occur at any point before, during, or after a shipment’s arrival. This can include everything from processing raw materials, transporting them to a warehouse, storing and taking inventory, handling and packaging products, distributing and shipping them to customers, and documenting the entire process. This is why it’s important to adopt the lean manufacturing framework, a management system that helps companies create value with less waste and resource consumption.
To minimize transportation emissions, you can work with suppliers to reduce their own fleets of vehicles and trucks or seek out zero-emission trucking vendors for your own delivery fleets. In addition, you can encourage employees to carpool or use ride sharing apps, reduce parking requirements and other barriers to active transit, and promote other modes of low-emission passenger and freight transportation. These strategies can reduce toxic air pollutants that disproportionately impact communities overburdened with multiple sources of pollution and improve quality of life.
Efficiency improvements are one of the easiest ways to reduce transportation emissions. The biggest opportunity for efficiency improvement in T&L is eliminating empty miles, which account for around 35% of a truck’s total mileage. This can be accomplished by using tools that track the number of stops made and routes taken, and by utilizing trailer pools to maximize the load sizes for each trip. Additionally, by using digital documents and sign-on-glass technology to eliminate paper waste, you can reduce carbon emissions even further.
Perform Complex Analyses of Your Data
As the planet continues to warm and resources become scarce, business leaders are being urged to make sustainability a top priority. This involves implementing sustainability-focused practices throughout all stages of supply chain operations, from the design phase to the procurement of raw materials to the manufacturing phase and last-mile logistics. This also includes working with suppliers that adhere to social sustainability guidelines, such as not employing child or forced labor.
One of the most challenging obstacles in establishing sustainable practices is the lack of access to accurate and comprehensive data. This can be a problem because without accurate and complete data, it’s impossible to identify areas of waste or inefficiency. For example, if a company doesn’t have accurate inventory levels or a clear picture of the supply chain, it may end up shipping materials a long distance, which results in high energy costs and GHG emissions. Moreover, warehouses can account for up to 13% of all supply chain-related GHG emissions, due to their large cement structures that require energy for heating/cooling and lighting.
A comprehensive understanding of the supply chain can be achieved with the help of software tools that allow a business to map its entire network of suppliers. This helps a company to trace products from the raw material stage through the final product, identify all suppliers, assess their regulatory and political risks, and conduct system audits. Moreover, it can help a company avoid unsustainable practices like working with suppliers that use child labor or sourcing from countries where environmental regulations are not well-established.
Once the initial mapping process is complete, a business should start identifying its specific goals and determining how to meet them. This will involve evaluating the impact of each sustainable practice on the environment and the company’s overall financial health. It will also involve creating a plan to implement the plan and a timeline for carrying it out. Finally, the company should commit to continuous monitoring and reporting its progress. Regularly publishing sustainability reports will keep the business accountable to its own goals, and will also help it win customers.
Plan for the Future
Developing and implementing supply chain sustainability practices can help reduce a company’s carbon footprint and environmental impact. It can also improve a business’s image, increase profits, boost sales and brand loyalty, and help companies get renewed “social license to operate.” Moreover, it can lead to lower logistics costs and improved inventory management.
Despite the clear benefits of sustainable operations, many companies have not yet made the changeover to green processes. This is partly due to the fact that many sustainable initiatives require a significant investment and a shift in business culture. But as sustainability becomes a more pressing issue for both consumers and investors, it’s time to start making these investments.
For example, one way to cut down on the environmental impact of your supply chain is to prioritize relationships with suppliers that use renewable energy. This allows you to power your facilities using alternative energy sources, as well as transport your finished goods with trucks, ships, and planes that run on cleaner fuels.
Another way to make your supply chain more sustainable is to promote the idea of circular economies within your company. This means turning waste products into new materials or supplies for your supply chain. For example, Kellogg’s has partnered with Seven Bro7hers Brewery to create a beer that uses the wheat byproducts from its cereal production.
The average company inherits 90% of its ESG (environmental, social, and governance) impacts from its supply chain, according to McKinsey research. If the media reports that your company’s supply chain is causing pollution, deforestation, or involves labor issues like child or forced labor, this can hurt your business’s reputation and damage its stock price.