In a 2016 report, the global consulting firm Ernst & Young proclaimed that “supply chain sustainability can no longer be ignored.” The report, titled “The state of sustainable supply chains,” was based on interviews with supply chain, procurement and sustainability specialists from over 70 companies around the world. Ernst & Young found that all businesses they asked, from mid-sized firms to multinationals, are taking action to adapt to geopolitical changes, raw material shortages, and changing weather patterns, as well as to improve the impact of their activity on communities and the environment.
One important aspect of supply chain sustainability is the carbon footprint. Merriam-Webster’s dictionary defines carbon footprint as “the amount of greenhouse gases and specifically carbon dioxide emitted by something (such as a person’s activities or a product’s manufacture and transport) during a given period.” The carbon footprint of a product’s supply chain includes emissions from its raw materials, manufacturing, storage and transportation. Supply chains can be responsible for up to four times the greenhouse gas emissions of a company’s direct operations. So managing the footprint can have a significant effect on the company’s overall environmental performance.
The business case for carbon footprint monitoring
There are several good reasons to measure and manage the carbon footprint of your supply chain.
The first and most obvious one is cost optimization. Sustainability, especially in supply chain logistics, often goes hand-in-hand with efficiency. Eliminating excess carbon emissions from your logistics chain is similar to eliminating any other waste of resources. And just like eliminating waste of any other valuable resource, it can result in cost savings. Projects aiming to cut carbon emissions can yield additional benefits (like loading and route optimization), some of which could have significant financial value in their own right.
The second reason to work on reducing the carbon footprint of your supply chain is brand and reputation management. This benefit applies to sustainability initiatives in general, but carbon footprint is one of the most well-known aspects of sustainability. Both consumers and corporate customers are increasingly paying attention to the sustainability credentials of brands. For example, a report found that 69% of US consumers say that they care about companies’ corporate social responsibility. That share was 70% in the UK, 85% in Brazil and 94% China. And many companies now incorporate sustainability into their supplier selection criteria.
Investors, too, are increasingly paying attention to corporate sustainability performance. Principles for Responsible Investments, a UN-backed group of investors with about $60 trillion in assets under management, has committed to incorporating sustainability criteria into their investment decisions. Some of these investors have specifically called on companies to apply an economically meaningful price on carbon, including some investors “decarbonizing” their portfolios.
Finally, measuring and managing the carbon footprint of your supply chain is a smart move to prepare for the future. Carbon emissions are already taxed in some places, and it could become a widespread practice. According to the UN, about 40 countries and 20 cities and regions have adopted or are planning explicit carbon prices (as of mid-2016). This covers approximately 12 percent of global carbon emissions.
How IoT can help
For companies that decide to actively manage the carbon footprint of their supply chains, this is an exciting time. The rise of IoT (Internet of Things) technologies opens up new possibilities to monitor, analyze and manage the carbon footprint across the supply chain, including in places or at levels of detail not possible before. According to Ernst & Young, “technology helps companies get a better understanding of the current performance of their suppliers, track frequently and benchmark performance over time … and ultimately improve processes and increase margin.” Real-time carbon footprint monitoring is one example of cargo monitoring technology available on the market. Customers can see the carbon footprint of a shipment and use this information to map out and optimize emissions across their logistical chain.
With the business case for supply chain sustainability this strong, and the rise of technologies making it easier, now is a good time to work on making your supply chain ready for the future.
Is your company focusing on reducing its carbon footprint or engaging in any other sustainability initiatives?
Guest Blogger – Stefan Reidy
Stefan Reidy is a leader, a proud father, a supply chain enthusiast and a visionary aiming to build the ‘Google of Trade’. He is the CEO of the Swiss Arviem AG, helping manufacturers, exporters and importers to reveal inefficiencies in their supply chains, to get back in control and to start to actively manage their supply chains instead of experiencing it.
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