Climate change is something that concerns everyone. To reduce the impact that climate change has on our planet and our future, everyone must work towards reducing greenhouse gas (GHG) emissions and carbon footprint as best they can.
The world emits around 50 billion tonnes of greenhouse gases each year [measured in carbon dioxide equivalents (CO2eq)].
- Our world in Data
The transport sector, which is part of the supply chain, accounts for around 16.2% of the Energy sector, which accounts for approximately 73.2% of global GHG emissions.
Global trade has many moving parts in the shipment of goods from various geographies across the world. Supply chain is a complex system with many moving parts to enable global trade and is present in one form or other n the movement of goods from point A to point B.
As supply chains evolved and became efficient and quicker, so did the risks in supply chain. Climate change and global warming have increased the severity of the hazards faced by supply chains, especially on the ocean freight leg, where there have been several maritime disasters recently. These maritime disasters are said to have been caused by extreme weather patterns due to climate change and has resulted in several containers falling off at sea, leading to severe losses of cargo and revenue. Such disruptions interrupt manufacturing and production schedules, increase costs, reduce revenue and profit margins, leading to job losses and other related socio-economic issues.
The value of global trade in goods and services is forecasted to reach US$ 6.6 trillion in the second quarter of 2021.
How can supply chain help in reducing carbon footprint
Supply chains generate a lot of data relating to the movement of goods across the world and various modes of transport. The industry must harness this data and use it effectively to identify the carbon footprint generated in each leg of the supply chain, including procurement of raw materials, manufacturing/production, warehousing/distribution, consumer use, and disposal/recycling.
The best way of identifying and monitoring carbon footprint is using supply chain data analytics from all the data generated. A BCG report on climate action in transportation and logistics identified that transportation-related to aviation, trucking and ocean shipping accounted for roughly 95% of all GHG emissions. And as of 2019 the emissions have exceeded more than 4 gigatons of carbon dioxide (Gt CO2) and is expected to hit 7 Gt CO2 by 2050 if there is no remedial action.
Digital advances like artificial intelligence and machine learning can shape and drive data analytics in supply chain which can arrive at ways to improve and achieve fuel and operational efficiency. In turn, helping companies reduce their carbon footprint and environmental impact.
Based on the data recorded by digital platforms, companies can use data analytics to analyse cargo volumes moved, the mode of transport used, and the distance the cargo travels, operational disruptions, ineffective routes, inefficient modes of transport, and improper space utilisation.
Digital platforms provide actionable insights that predict how some of the processes in the company’s supply chain can be improved. Based on data analytics, companies can improve processes within their supply chain, such as altering delivery schedules to avoid routes with traffic congestion or changing delivery days to avoid empty backhauls and replacing them with full loads.
These new-age technologies integrated into supply chain platforms can be helpful in monitoring and predicting better routes based on traffic patterns, weather conditions, historical data on delivery times, and help monitor, predict, and reduce emissions and carbon footprint for the company.
A survey done by BCG identified that the impact of end-to-end supply chains on emissions is more than 5 times that of the company’s direct operations.
Many customers still view sustainability, climate change and decarbonisation as a liability and burden due to the cost involved. They have not taken the necessary steps or set targets to reduce their carbon footprint. Even in the process of shipping and logistics, digitalisation can assist in monitoring and reducing carbon footprint. For example, optimising space utilisation within a container or a truck can avoid additional shipments which involves additional transportation which will increase emissions.
In a survey done by Forbes Insights and DS Smith, 69% of supply chain executives said that at least 25% or more of container space is underutilised or empty on average. This equates to about 61 million TEUs shipped unnecessarily emitting around 122 million tonnes of carbon dioxide. Not just in shipping containers, but empty space is a problem in trucks and in the actual packages received by the end-user all of which impact the carbon footprint.
Digital platforms can help in optimising space utilisation through strategic analysis of the data generated and collated.
Supply chain visibility is a key factor in sustainability. When companies are limited in terms of visibility, they do not see critical aspects such as
- which vendors and suppliers are used,
- what their carbon footprints are,
- when and how often stock replenishment is required,
- real-time predictive analysis to anticipate risks and prevent losses.
With an integrated digital platform, companies no longer need to work in silos as data intelligence can be shared across all areas of operation.
A study by McKinsey revealed that most of the environmental impact associated with the consumer sector is embedded in supply chains accounting for more than 80% of GHG and 90% of natural resources. An IBM survey found that as much as 84% of the C-Suite respondents had challenges with lack of supply chain visibility leading to inefficiency and waste, leading to an increased carbon footprint.
Digitalisation of supply chains can significantly reduce waste, save cost, and reduce carbon footprint. Sustainable digital technology will pave the way for companies to manage their waste, differentiate service offerings, ensure customer satisfaction, and control their carbon footprint.
There is a concerted effort by ship operators to achieve the objectives of the IMO to cut GHG emissions in the shipping industry at least by 50% by 2050 through decarbonization. Many new ship builds combine digitalisation with ship operations and vessels powered by alternative fuels to achieve this.
The Marine Environment Protection Committee is committed to trying to help cut maritime shipping carbon emissions by 40% compared to 2008 levels by 2030.
Using data to monitor emissions and carbon footprint
Digitalisation plays a big part in the research, design and tracking of:
- alternative fuel options,
- ship design,
- ship efficiency,
- route planning,
- weather patterns,
- schedule optimisation,
Companies can use digital platforms to collect environmental data both upstream and downstream activities and collaborate with suppliers and customers to create a comprehensive approach to managing and controlling the supply chain's carbon footprint.
With the awareness created around climate change, global companies are under pressure to work together with all stakeholders to reduce their carbon footprint and create a sustainable future.
Using the collated data, companies can develop and monitor supplier KPIs and create benchmarks based on best practices which can act as a benchmark for GHG emissions and improve sustainability in the supply chain.
Integrated digital platforms can assist in calculating the carbon footprint of a product right from the raw material production stage till the end of life of the product. This visibility will allow the company to create a strategy to manage and reduce the product's carbon footprint across the value chain.
The combination of IoT, Big Data, AI and Machine Learning assists companies interested in leveraging the benefits of these technologies. Companies that adopt these technologies have a keen competitive edge from a sales perspective and a social responsibility perspective, such as managing climate change and controlling carbon footprint.
As more awareness is created in the market about the environmental impact of various products, companies have grown interested in adopting technologies that assist them in monitoring and helping them reduce their carbon footprint.
Customers are getting acclimatised to climate change issues and are becoming choosy in the companies they use or buy from. There is an increasing focus from the customers on the companies that are serious about climate change and reducing carbon footprint.
Sustainability has become a must-have initiative and has become a part of the infrastructure of many companies. Digitalisation paves the way for interested companies in streamlining their supply chain operations, reducing costs, improving operational efficiency, and reducing their carbon footprint.