The sustainability of supply chains is a hot topic among manufacturers, as companies increasingly focus not only on their own carbon footprint and environmental impact but on the impact of their suppliers. This increasing focus is in part because the carbon footprint of a company’s own energy use is often significantly lower than that of its suppliers. In fact, supply chain emissions are, on average, 5.5 times higher than a company’s direct operations, CDP said in 2019.
Benefits of Focusing on Supply Chain
As corporations strive to comply with stringent regulations and increase the success of their sustainability and CSR programs, supply chains are an important aspect of the journey, and some of the largest are making significant strides.
In 2017, Walmart implemented Project Gigaton, a program to work with suppliers to reduce emissions from its supply chain by one billion metric tons by 2030. As of August, 2020, the retail giant said it had signed more than 2,300 suppliers, writes Supply Chain Dive.
Similarly, the Absolut Company is working with supply chain partners to help move them toward circularity, the company said in its 2019/2020 Sustainability Report.
Mitigating risk is another key reason for boosting supply chain sustainability. Companies will face up to$120 billion in costs from environmental risks in their supply chains by 2026, according to recent research released by CDP. The report found a combined $120 billion of increased costs among companies disclosing to CDP within the next five years from environmental risks, with manufacturing ($64 billion), food, beverage and agriculture ($17 billion), and power generation ($11 billion) reporting the most potential cost increase. Due to most supply chains running on very tight profit margins, increased costs are expected to be passed up the chain in a domino effect to their buyers. In turn, these companies are likely to pass the cost onto consumers, the report notes.
One way to mitigate such risk and green the supply chain is through renewable energy, writes Sustainable Brands. Sourcing renewable power enables companies to be prepared to maintain operations even in a time of crisis or climate disaster that affects power supply. And mitigating risk ultimately saves money.
Manufacturers are also boosting the sustainability of their supply chain in order to cut costs. Efficiency in the supply chain — in areas such as warehousing and distribution, for example — can reduce overall expenses for your firm.
And cost reductions can be significant. Unilever said recently (via Supply Chain Dive) that it has cut costs by $1.5 billion through sustainable sourcing since 2008.
But supply chains are a complex network of suppliers and carriers, complicated by multiple siloed organizations spanning procurement, logistics, and operations. Improving supply chain sustainability is a not-insignificant challenge.
Often, organizations collect massive amounts of data from their supply chains in the hopes of turning manual workflows into digital ones. However, because so much time is spent preparing, analyzing, and communicating the data, supply chain decision-makers face “cognitive overload, which costs organizations millions of dollars in waste,” says Priyesh Ranjan, CEO of supply chain software company Vorto. “Relying on these incremental shifts to modernize the supply chain is inadequate in addressing the inefficiencies crippling the industry.”
Vorto has announced a new platform powered by artificial intelligence that it says eliminates costly supply chain inefficiencies in procurement, logistics, and back-office activities. The platform, Reload, automates virtually every supply chain function, including demand forecasting, product procurement, scheduling, carrier logistics, driver dispatching, and invoicing. Designed to be industry-agnostic, Reload enables companies to save upwards of $400 million per year while reducing the environmental impact of inefficient supply chains, Vorto says.
The bottom line is that viewing your supply chain as a partner in your success instead of a transaction can help improve efficiency and bring about cost savings, writes Forbes.