Studies find that 80% of a company’s global carbon emissions come directly from their supply chains. With such staggering numbers, how can supply chain leaders work to fight such a rapidly increasing problem while still prioritizing their supply chain’s success? Luckily, a sustainable supply chain is an inherently efficient one, and it isn’t as out of reach as you might think.
As supply chains evolved and became more efficient, the risks in supply chains also evolved. Climate change and global warming have increased the severity of hazards faced by supply chains, especially in ocean freight, where we’ve seen several maritime disasters. These maritime disasters are said to be the result of extreme weather patterns due to climate change, resulting 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.
How to identify your supply chain’s carbon footprint
Supply chains generate a great deal of data relating to the movement of goods through various modes of transport. The industry must harness this data and use it effectively to identify the carbon footprint generated in each area 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 your carbon footprint is by analysing data from your supply chain. 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 from freight.
Based on the data recorded by digital platforms, companies can use data analytics to analyze 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 utilization.
Digital platforms provide actionable insights that predict how the processes in the company’s supply chain can be improved. Based on data analytics, companies can improve pain points in 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.
Modern technologies can be integrated into supply chain platforms which is 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.
Digitizing your space utilization practices
Many supply chain leaders still view sustainability, climate change, and decarbonization as a liability due to the cost involved. They’ve ultimately not made the necessary steps or set targets to reduce their carbon footprint. Even in the process of shipping and logistics, digitalization can assist in monitoring and reducing carbon footprint. For example, optimizing space utilization 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 underutilized or empty on average. This equates to about 61 million TEUs shipped unnecessarily, emitting around 122 million tonnes of carbon dioxide. Not only 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.
The environmental need for more visibility
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 respondents had challenges with lack of supply chain visibility leading to inefficiency and waste, ultimately leading to an increased 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 digitalization with ship operations and vessels powered by alternative fuels to achieve this.
Using data to monitor emissions and carbon footprint
Digitalization plays a big part in the research, design and tracking of:
- alternative fuel options
- ship design
- ship efficiency
- route planning
- weather patterns
- schedule optimization
Using the collated data, companies can develop and monitor supplier KPIs and create benchmarks based on best practices, ultimately acting as benchmarks for GHG emissions to 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 to 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.
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.
More customers are getting acclimatized to climate change issues and becoming more selective in the companies they use or buy from. Sustainability has become a must-have initiative, embedded in the infrastructure of many companies. Not only does it save our environment, but it makes for an improved, more efficient supply chain. Digitalization paves the way for more companies every day in streamlining their supply chain operations, reducing costs, improving operational efficiency, and ultimately reducing their carbon footprint.