Since our beginning, humanity’s concept of trade has been vast. Towns, cities and countries traded among themselves the goods they had in excess for the goods they lacked. The rapid acceleration of production and transportation technology over the last century has led to what we now understand as the supply chain, a connected system of trade and supply that branches out across a global landscape.
That inherently connected structure was cause for concern during the COVID-19 pandemic, when international border closures and personnel disruptions caused bottlenecks at various stages. When shelves were sparse and boats were waiting weeks on end at loading docks, we were offered a valuable lesson: A problem at any stage of the supply chain, in any part of the world, has downstream effects that reach us all.
The inherent risk of supply chain interconnectivity is a perfect analogy for the problem of our ecological crisis — a less visible but even more urgent descent that’s walked parallel to the pandemic in the past two years. Ecological waste, the accumulation of greenhouse gasses, the overuse of natural resources and the overconsumption of carbon are problems that need to be solved in aggregate; otherwise, they affect every link of the global chain.
The very nature of the problem is daunting. With still recovering budgets, it’s hard for any employer, supply chain professional or team member across the supply chain process to feel that their actions could have any import. Nonetheless, implementing green solutions within the supply chain will be a step-by-step process. The recovery we seek will happen slowly, on a company-by-company level. When that task is taken seriously in aggregate, the progress will add up faster than what might be imaginable now, at what feels like an inflection point in the crisis.
Green Saving Green: The Financial Case
Early last year, when environmental disclosure nonprofit CDP studied data from more than 8,000 companies, it found a combined $120 billion of expected increased costs among those companies within the next five years. Those increased costs are stemming solely from environmental risks. And because most supply chains run on tight profit margins, the increases will create a domino effect — raising the cost for their buyers, who will pass the increase on to their consumers.
The sector most at risk for that increase is manufacturing, and the most crucial environmental risks positioned to cause the increase are climate change, deforestation and water-related impacts. The report is taking into consideration the possibility for the increase in natural disasters brought on by a changing climate, as well as the increased cost of raw materials as natural resources are depleted, and the cost associated with regulatory and governmental sanctions for their ecological performance. The CDP’s findings make the need to address environmental risks through the supply chain absolutely vital for suppliers, producers, vendors and consumers alike.
Equally important in the CDP’s report are two positive findings. First, the number of supplier companies disclosing this kind of data to their corporate partners increased 16% even with the COVID-19 disruption, from less than 7,000 to more than 8,000 within the space of a year. That’s important, because no one can fix a problem that isn’t yet specific and visible.
Second, suppliers last year undertook activities that cut emissions by 619 million metric tons of carbon dioxide emissions. That’s a cost savings of $33.7 billion. In environmental terms, that’s equivalent to the emissions from 159 coal power plants running for a full year; an incredible leap in the absolutely correct direction.
Still, only 37% of suppliers are engaging their suppliers to cut emissions. If these actions were taken up in aggregate — if the 37% simply doubled to become 74% — imagine the progress that could again take place in the space of a year. The first line of offense we have in bringing those numbers into reality is the tool of knowledge itself. Suppliers, company leaders and logistics professionals have had no shortage of priorities calling for their attention in the last two years. Overlooking the imperative for green solutions might be a dire mistake, but it’s nonetheless understandable.
If one vendor sparks the process, the results will no doubt follow across the entire supply chain. Partnering with manufacturers who commit to sustainable materials can drastically cut deforestation and water-related impacts, two of the primary resource spends that are currently creating the problem. And if vendors put in place some goals for the supplier’s carbon offset strategy, or if they can provide some research on the benchmarks for greener transportation, their suppliers will have a simplified path in walking toward that kind of progress. Slowly but surely, the numbers will add up even faster than they have in the last year.
The corporate supply chain has a long way to go; supply chain emissions are 11.4 times higher than operational emissions on average. But substantial, earth-changing progress can happen in the space of a year. This should be the hopeful takeaway for companies at any stage of the supply chain; when one company takes a small step forward, the effect of the action is amplified and passed on throughout the entire supply chain. That’s how we’ll move toward greener, global solutions — by walking together in the same direction.
Tara Milburn is founder and CEO of Ethical Swag.
Read more of SupplyChainBrain's 2022 Supply Chain ESG Guide here.
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