If 2021 was the year companies innovated to overcome supply chain disruption, 2022 might be the one in which they create more sustainable networks. As more employees, investors and customers demand these changes, companies will come under increasing pressure to build out supply chains that support environmental and social responsibility.
While pre-pandemic supply chains were rarely in the mainstream consciousness, the environment changed dramatically when shortages of basics like toilet paper and face masks made headlines in 2020. The following year further exacerbated supply chain disruptions as labor shortages, port congestion and escalating freight rates continued to stall attempts at kickstarting the global economy.
The more aware consumers were of supply chain issues, the more invested they became in the relationship between supply networks \and climate change.
“For many businesses, supply chains have come into focus because they use a lot of resources and money and are frequently a source of unnecessary waste,” says David Luther in Supply Chain Sustainability: Why It Is Important & Best Practices. “Thus, supply chain sustainability has emerged as a key corporate goal.”
To stay ahead of the curve, supply chains will need to embrace environmental, social and governance (ESG) models that appeal to customers, business partners, employees and shareholders alike. According to an article by JD Supra, "While any progress a company makes to embrace ESG goals is important, only those companies that truly grasp the concepts and weave them into their core mission and vision will emerge as winners.”
According to Accenture, supply chains generate 60% of global emissions and hold 5.5 times more carbon intensity than the rest of a business. Companies that make net-zero commitments must adopt carbon-neutral products, production and supply chain practices. They can further contribute to sustainability goals by embracing circular supply chain principles and moving away from single-use products. By mitigating adverse environmental and societal impacts, companies earn trust and create more sustainable supply chains.
Accenture sees technology as a viable tool for companies committed to operating more sustainably. "Using digital technology, including supply chain analytics, you can measure trust with stakeholders," says the consultancy, which combines artificial intelligence with ESG data to assess companies' sustainability records. "The result? Transparency and a greater understanding of key stakeholder trust."
Transportation and yard management systems, along with visibility tools, can also help shippers to reduce fuel usage, mileage traveled, shipment volumes and overall carbon footprint.
To the extent possible, businesses need to eliminate rush shipments, which tend to require a mode of transport with a high carbon footprint, as well as cause unnecessary disruptions to production schedules. It helps to have visibility into forward-deployed inventory, to avoid making a new product if stock is already available within the network. By breaking into existing production schedules, companies increase the need for off-spec material and create other manufacturing inefficiencies that lead to a larger carbon footprint.
There’s a strong correlation between the cost of a shipment and the carbon footprint of its delivery method. Lower-cost modes of transport, such as rail, release fewer carbon emissions. Transportation management systems can help determine the most carbon-efficient and cost-effective way to send an order on time.
In rail transportation, the reduced impact is often the result of shorter routes and fewer interchanges. Switches and longer distances increase the carbon footprint and overall cost of the journey. In trucking, the lowest-cost carrier is often the one whose network best aligns with the shipper’s needs, resulting in fewer deadhead miles to get to the pickup location.
By increasing capacity utilization, companies can lower the number of shipments needed. Yard management and dock-scheduling systems can further improve operational fluidity, so that trucks experience lower dwell times and less idling.
The challenge for organizations now is to make their supply chains even more sustainable, their products and practices more environmentally friendly, and their workplaces more inclusive. JD Supra says many companies are pushing for new ESG standards and certifications to help them achieve competitive advantage in the market.
Certified B Corporations, for example, are those that meet the highest standards of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose. Administered by B Lab Global, the certification is one of several ways that companies can broaden their approach to ESG and supply chain sustainability. According to Gartner, 85% of investors consider such factors when making investment decisions. “Companies cannot afford to sit idly by and watch from the sidelines,” JD Supra notes. “With the call from investors amplifying the ESG call from customers, companies must act now.”
Ken Sherman is president at IntelliTrans.
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