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7 Ways to Improve Your Supply Chain Sustainability in 2024

7 Ways to Improve Your Supply Chain Sustainability in 20247 Ways to Improve Your Supply Chain Sustainability in 2024

A sustainable supply chain is an important part of improving a company’s environmental, social, and governance (ESG) score which have an impact on attracting more customers and investors (see Figure 2). Supply chain activities are responsible for the bulk of scope 3 GHG emissions of a company. Additionally, corporations that source raw materials or intermediate items from developing nations could unintentionally abuse their suppliers’ employees who work in inhumane conditions. 

Supply chain executives have difficulties to make their operations greener. According to EY’s 2022 survey, the main challenges of supply chain managers are:

  1. Nearly 40% of businesses struggle to identify and reach ESG targets to improve supply chain sustainability, and 20% of businesses are completely clueless about improving supply chain sustainability.
  2. Nearly 60% of executives complain about a lack of end-to-end supply chain visibility, which makes it difficult to understand the supply chains’ financial and environmental performance.

In this article, we will look at 7 best practices with examples that can help supply chain managers overcome their main obstacles to creating more equitable and ecologically friendly supply chains.

Figure 2: Expected benefits of sustainable supply chains.

What is a sustainable supply chain?

A sustainable supply chain tries to transmit goods as cheaply and quickly as possible to the upstream supply chain or end customers while reducing or eliminating negative environmental and social impacts. Three pillars make up a sustainable supply chain:

Financial or economic sustainability

Because longevity is linked to sustainability, a company with a sustainable supply chain should be able to deliver a satisfying income to all of its stakeholders, including owners, investors, and employees.

Environmental sustainability

A sustainable supply chain should release as few GHG as possible. Scope 3 emissions (GHG emissions related with supply chain, usage and disposal) constitute the majority of GHG emissions for consumer products firms, accounting for more than 80% of their overall GHG emissions (see Figure 2). Because the global population and GDP are both increasing, total consumption is also increasing. Thus, sustainable supply chains are a powerful tool for reducing our carbon footprint

Social sustainability

A sustainable supply chain respects human rights through the value chain. A responsible firm works with companies that do not use child or forced labor. Despite the humanitarian side of the situation, a supply chain that is unconcerned about social sustainability may produce brand image distortions. Last year, for example, it was revealed that Starbucks’ coffee bean suppliers recruited children under the age of 13 to cut expenses.   

Top 7 sustainable supply chain practices with examples

In this section we will present top 7 best practices that will improve your corporate supply chain’s sustainability.

1. Find the current pain points of your supply chain

Each products’ carbon footprint varies from one supply chain to another. Therefore, calculating your product carbon footprint must be the first step of finding the current pain points of your supply chain. By calculating PCF you’ll be able to identify which operations need to be improved and begin developing an effective supply chain sustainability strategy. 

Scope 3 GHG emissions account for around 80% of the overall product carbon footprint of manufacturing, food, electric-electronic, and textile companies (see Figure 3). 

Figure 3: Breakdown of the scope of some sector’s emissions:

This image shows a bar chart showing a breakdown of the impact of scope 1, scope 2 and scope 3 emissions in the manufacturing sector, food sector, electronics & electrical equipment sector, and textile, apparel, and shoes sector.
Source: McKinsey

Depending on the industry, the most significant source of scope 3 emissions could be at different stages of the product life cycle. For non-electric automobiles, for example, around 80% of scope 3 GHG emissions occur while the vehicle is in use. For textile products, on the other hand, the majority of scope 3 GHG emissions occur during the distribution transportation and disposal stages.

Firms in the same industry also have distinct business practices and operating regions. As a result, each business and product has its own carbon footprint.

Read our article on the Top 7 Carbon Footprint Calculator Software/Tools for Businesses to learn about the best carbon footprint calculators.

2. Optimize transportation

Transportation operations accounted for about 30% of US GHG emissions in 2019 (see Figure 4). Companies can emit less GHG by:

  • Distribute products from nearby distribution locations to the final destination.
  • Load trucks/ships to the point where there is no more space available.
  • Adopt electric vehicles, especially in areas where renewable energy provides the majority of electricity.

Many technological options are available to assist you in reducing transportation-related carbon emissions. For example, you can use 3D truck loading software to fill most of your cargo space. Similarly, traffic and route optimization techniques ensure that distribution emits as few GHG as possible. IoT (smart devices) can help you to minimize the environmental cost of transportation by nudging drivers to drive with low rpm.

To learn more about digital transformation and sustainability you can read our Top 4 Digital Technologies that Improve Corporate Sustainability article.

Figure 4: U.S GHG emissions by sector. 2019:

This image has a pie chart showing the distribution of GHG emissions by sector in the United States. The sectors include Agriculture 10%, commercial & residential 13%, industry 23%, electricity 25% and Transportation 29%.
Source: U.S Environmental Protection Agency

3. Collaborate with sustainable suppliers

Your business may operate in the most environmentally friendly and socially responsible manner possible. If your business partners, on the other hand, are not, they will have a detrimental influence on your company’s GHG emissions, human rights compliance, and brand image.

Many corporations, particularly those in rich countries, buy raw materials or intermediary goods from developing countries because they sell cheaper in the absence of environmental and social regulations. For example, some businesses located in these regions are unconcerned about using rivers as a disposal site for their chemical waste or employing child labor to save money.

There are many international standards you can demand from your suppliers to be sure whether or not they are responsible business partners. For instance, Global Reporting Initiative (GRI) 408 and 409 or Sustainability Accounting Standards Board (SASB) human capital practices represents the global standards concerning the issues of child and forced labor. ISO 14001 is a standard that shows the environmental measures of companies. Similarly, you can demand ESG reports, carbon footprints and PCFs of companies that are verified by third parties to make business.   

To learn about what are the key metrics you should include in your ESG report; you can read our 3 Types of Metrics CEOs Must Use in ESG Reporting article.

4. Minimize inventory

Warehouses account for about 13% of all supply chain-related GHG emissions. They are large cement structures that consume energy due to heating/cooling & lightning and emit a specific amount of GHG with respect to breakdown of energy sources in the region (green, coal).

Firms need inventories for two reasons: they may use them as distribution centers, or they may struggle to estimate demand precisely. Companies can now more precisely forecast demand thanks to big data, behavioral analytics, and deep learning models. So, they can supply according to demand and eliminate the need for a large warehouse. 

You can also use smart HVAC and lighting systems to reduce the GHG emissions of your smaller warehouse. 

5. Reuse waste or by-products

Your trash could be used as a raw material by another company. For example, beverage bottle wastes from bars, restaurants, and residences can be recycled and used as raw material by beverage firms. Bars and restaurants can make small profits from the container deposit fees, but more importantly, they contribute to the reduction of GHG emissions caused by waste disposal significantly.

The limit is set by your company’s ability to innovate. A 19-year-old, for example, was motivated by the fact that she threw too much food into the basket. In her search for a means to reduce food waste, she came across organic fertilizer made from food waste. Your organization might find an efficient approach to dispose of its by-products.

6. Use environmentally friendly packaging materials

According to the European Union, only 1% of plastics are biodegradable. The majority of GHG-emitting products are petroleum-based. The typical plastic’s effective recycling rate is low. They are resistant, so they may live in the wild for a long time and frequently penetrate the food chain, posing a hazard to the environment and human health. Despite their well-known drawbacks, firms frequently utilize them as packing materials since they are cheap.

Biodegradable packaging materials should be used by companies aiming for a sustainable supply chain. The Higg index gives information on material-specific average GHG emissions, which businesses can use to select ecologically friendly packaging materials.

It’s also a good idea to budget R&D for developing new packaging materials and methods, especially for consumer goods companies, because they have a larger negative environmental impact in this category. Coca-Cola started such an initiative where they aim to use at least 50% recycled material for packaging by 2030.​

What really happens to the plastic we throw away

7. Nudge regulators and consumers

Consumers, investors, politicians, and non-governmental organizations (NGOs) are more engaged and responsible than ever before in combating our social and environmental issues. Firms, on the other hand, can further nudge policymakers and customers to accelerate the transition to a truly sustainable economy.

80% of scope 3 GHG emissions of cars related to usage stage of their product life-cycle. So, especially in the regions where the electricity is heavily produced by green sources, automobile companies that produce hybrid or electric cars can request municipalities-politicians to encourage their vehicles for public transportation/private purposes etc. For instance, in Stockholm electric vehicles are used as taxis for a while to aim to reduce GHG emissions. If politicians reject such requests, then firms can publicly expose their governments’ action via online media and hope to impact public opinion. 

Consumer behavior is also influenced by businesses. Many coffee shops, for example, give discounts to clients who bring their own cup. By implementing such approaches, Starbucks hopes to reduce single-use plastic consumption by 50%. Many stores also charge a fee to decrease the use of nylon bags. Perhaps, in the near future, we will be able to bring our own bottles to buy detergents or beverages and receive a discount.

You might also want to look at our lists of supply chain software and supply chain suites where we identify top vendors.

We can assist you in making your supply chain more sustainable.

Find the Right Vendors

This article was drafted by former AIMultiple industry analyst Görkem Gençer.

Access Cem's 2 decades of B2B tech experience as a tech consultant, enterprise leader, startup entrepreneur & industry analyst. Leverage insights informing top Fortune 500 every month.
Cem Dilmegani
Principal Analyst
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Cem Dilmegani
Principal Analyst

Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.

Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.

Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.

He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.

Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.

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