Sustainability is a term many people should already be familiar with. But what does it mean when we talk about sustainability in supply chain management? Customers are all too conscious about working with businesses committed to their clear yet ambitious sustainability targets.
The pandemic brought supply chain resilience to the attention of the mainstream, let alone the board room. But with the present-day risk of climate-related events disrupting the supply chain, business leaders understand that taking real action to reduce our impact on the environment can also create cost benefits, as well as operational efficiencies.
Actions speak louder than words
Customers today expect that sustainable practices are applied across all business units. 70% of consumers say they are willing to pay a 5% premium on price for sustainable products (1.). So, it’s little wonder that companies aiming to reduce the CO2 footprint of their supply chains do so against the background of end-consumer demand for sustainable products.
A business that can prove its commitment to its carbon-neutrality targets and show measurable and tangible results can significantly improve its brand reputation and customer loyalty. Effective sustainability measures mean being compliant with global standards on emissions and ensuring supply chain partners meet requirements set out by the Climate and Clean Air Coalition and The Global Green Freight Project (2.). Embarking upon a programme of improvements means working with reliable partners with experience and expertise. The visibility of data helps identify gaps and devise an action plan.
In the logistics sector, we are experiencing how informed decisions contribute to a better environment and leverage operational and economic efficiencies. The shipping industry is a good example. Shipbuilders have taken the Paris Climate Accords to heart and are leading the way in terms of new design. 71% of new ships already comply with the terms of the Paris Agreement, with 10% of those ships boasting double the efficiency required by the treaty (3.).
Leveraging sustainability data to facilitate action
With all these considerations, how can we start to formulate an effective action plan to improve sustainability? The best place to start is benchmarking how current supply chain operations compare to where they need to be to achieve company specific targets. Ensuring the right data is available that teams can interpret effectively is essential for making informed decisions.
The most effective approach for complete visibility on areas for improvement is to collect end-to-end supply chain data on emissions, that are derived from actual operational data. These insights are then pulled into specialist reporting systems that use well-defined algorithms to calculate realistic metrics for success. This enables supply chain teams to analyse areas for improvement set ambitious but realistic targets to reach reduction targets goals.
When cost metrics are included in reporting dashboards, we can see how reducing CO2 emissions and financial savings often go hand-in-hand. An experienced integrated logistics partner can also bring an outside perspective. For example, they can neutrally challenge commercial agreements that may have been overlooked in the myriad of logistics operations or opportunities to optimise historical routing arrangements from factory to customer.
Creating a sustainability culture in your supply chain
Effective data visibility provides clear guidance for ongoing areas for improvement, but it should also offer a more strategic outlook to plan more extensive projects such as review of transportation networks or service provider portfolio. This could tackle more significant emissions gaps.
Alongside implementing projects to increase sustainability within existing business operations, carbon footprint gaps can be closed by taking part in initiatives to offset emissions. Adopting appropriate schemes which align with the core values of a business can boost reputation and brand loyalty. Working with a logistics partner who can source and arrange relevant projects mean there is visibility between monitoring carbon footprint, developing a hands-on reduction program and ensuring the offsetting is consistently on target. Schemes can range from forest protection and tree planting to clean energy initiatives in communities across the globe.
It’s not just about having the tools and data but a reliable partner who allows organisations to move towards more sustainable supply chain management. An Integrated 4PL solution provider with the right experience in sustainability optimisation can bring significant value. A proficient team will work in the background of the day-to-day operation, measuring and analysing the data to reduce and offset carbon footprint. While the business continues to focus on delivering customer value and their strategic growth.
- McKinsey - Sustainability in packaging inside the minds of consumers
- Climate & Clean Air Coalition - Green Freight
- Transport & Environment - Shipping and climate change
Your contact for Supply Chain 4PL
Dr. Matthias Hodel
Global Head of Commercial Integrated Logistics