Supply chains consume resources on a large scale, making decarbonization an enormous priority.
As companies vie for visibility through climate change commitments, however, implementation remains fraught with challenges.
To reduce greenhouse gas emissions, there are four key areas on which supply chain leaders must focus: structures, partners, processes and performance.
Structures: Environmental Sustainability Programs. For many global supply chain organizations, engaging in course-correcting environmental practices is like turning the Titanic. That said, the imperative is unavoidable, and even the largest companies in the world have launched corporate environmental sustainability programs. These include comprehensive plans and mapping efforts that will reach to the very structure of how a company operates and ensure phased, effective change.
An example of a corporate program on a large scale is that of American Electric Power (AEP), which has stated that clean energy objectives require a wholesale transformation of the electric sector. AEP has published environmental, social and governance (ESG) disclosures for 15 years, and completed a yearlong assessment in 2020, resulting in a widely used Climate Impact Analysis Report.
The company’s new carbon emission reduction goals, updated in 2021, are an 80% reduction by 2030 and net-zero by 2050. Armed with a clearly defined plan, AEP has steadily shifted structures and operations over the last decade, and will continue to do so for at least a decade more. Included are coal plant and coal-fueled fleet retirements, training for employees in new technology, and support for communities transitioning to new energy sources.
It’s helpful to see how even a large company, one whose revenue relied almost completely on traditional energy consumption, could and did pivot. Yet structural change has to be carried out in the real world. In the supply chain, this is where supplier engagement comes into play.
Partners: Supplier Engagement. Supply chains consist of many links and relationships among coordinating parties to carry out operations. In the conversation around sustainable practices, the issue of supplier selection often arises. Supply chain companies committed to reducing emissions should partner with suppliers of like mind.
But there’s more to it than just strategic and visionary partnerships. Ongoing engagement, and a willingness to implement new practices, are key. Suppliers can say they’re committed to the cause, but their claims must be backed up by data on their carbon footprint and emissions generated by standard operations. If a supply chain company is to show measurable progress in reducing emissions, it must have extensive supplier data, and suppliers that are willing to report it.
Another component is third-party reporting. Any company that’s serious about environmental sustainability will likely use impartial researchers and reviewers to regularly monitor operations. Suppliers must be willing to provide information to these reporters, and work closely with everyone involved to ensure that reports are accurate.
Processes: Tracking Carbon. This hasn’t always been standard practice in the supply chain. But future-minded companies that are dedicated to making good on corporate pledges must exercise transparency, which means arduously tracking and monitoring processes.
Data management and analysis are part of any transportation spend management maturity model. Adding in new elements by tracking carbon is a step in the right direction.
Performance: Monitoring and Evaluating. No environmental sustainability plan is complete without ongoing monitoring and performance evaluation. The accountability inherent in public pledges necessitates this, as does an understanding that revenue leaders are unequivocally committed to a greener future.
Long-term goals need to be translated into operational short-term ones, all of which must be planned out, monitored and measured. In short, the roadmap must be followed. Continued agility and adaptation will typify the companies that excel in this effort fast enough, versus those that are left behind.
Steve Beda is executive vice president of customer success for Trax Technologies, a provider of transportation spend management software and services.
Timely, incisive articles delivered directly to your inbox.