Analyst Insight: In recent years, sustainability has had a rocket-ship ascendance into the spotlight. Supply chain sustainability is no exception. In fact, an annual survey from the MIT Center for Transportation & Logistics has found that companies are facing sustained, increasing pressure year after year to make their supply chains more sustainable. However, while sustainability efforts ramp up, we’re still trying to crystalize how exactly we define supply chain sustainability.
Should supply chain sustainability be limited to climate change mitigation, or should it also include social dimensions like human rights protection and diversity, equity and conclusion? It’s a uniquely confounding moment; at present, there is no broad consensus across industries or geography — which is telling in and of itself. Discrete focus areas of sustainability are prioritized differently in various industries, and so supply chain managers need to bear in mind a wide range of sustainability dimensions to meet their goals as they work with customers, vendors, policymakers, and investors with varying priorities.
But, amid this confusion, there’s no time to feel sorry for ourselves! New policies and stakeholder expectations are coming, and we have to be prepared.
In the next few years, we’re looking for a few major improvements in this area. The first is how we measure supply chain sustainability, particularly in Scope 3 emissions. Right now, we can talk about a lot more than we can actually measure in terms of supply chain sustainability — hence, perhaps, the dissensus mentioned above.
Second, as the definitions and parameters of supply chain sustainability become more widely standardized, policy expectations need to settle as well so that businesses can effectively plan for them. Firms can and will adapt to new rules, once they know what exactly they are and have a reasonable expectation that they won’t change.
And third, firms’ urgency of action needs to match the intensity of their publicly stated net-zero goals. We’re not there yet; research has found that firms’ actual investment in sustainability has consistently lagged behind their goals. It seems like a lot of companies are betting on a fourth-quarter Hail Mary pass to meet their net-zero goals.
Things are heading in the right direction, though. Within two to three years, we can expect to see some major changes in mode choice on the roads and on the seas, as well as many more companies using alternative-fuel freight trucks and cargo ships.
The problem, however, is that with many vessels, there is a long wait to procure and receive them —especially ships. So if a company wants alternative-fuel vehicles, they might need to order now and wait a few years. Essentially, then, firms need to bet now on still-unproven-at-scale alternative-fuel technologies and live with those bets in the time leading up to their net-zero goals.
Outlook: Crisis improves us. COVID-19 was a catastrophe that had the unexpected benefit of improving supply chain sustainability. In the near term, it’s clear that Russia’s invasion of Ukraine will be the next crisis that begets supply chain sustainability improvements. We already see it with energy conservation efforts in Europe. Further out, there will be some other horrible calamity — there always are — and that too will challenge us to rationalize our energy and resource conservation yet again.
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