The more hurricanes, floods, droughts, and heat waves we see, the more apparent it becomes that climate change is no longer a distant worry; it is a pressing emergency demanding immediate and bold action. Over 1 billion citizens in 2,335 jurisdictions across 40 countries now recognize climate change as an emergency, making it all the more urgent for businesses to address this pressing issue through initiatives like supply chain decarbonization.
There is some hope. New decarbonization technologies are changing the shipping industry, which handles almost 90% of global trade. These advancements help with tracking carbon emissions and creating more sustainable supply chains. Moreover, McKinsey estimates that fuel efficiency can help achieve half of the decarbonization goals.
However, implementing a greener future demands significant time, effort, and capital. UBS estimates indicate an annual cost of $257-317 billion for shipping decarbonization, a figure encompassing $70-95 billion for alternative marine fuel infrastructure and onboard equipment, an extra $196-261 billion for higher-priced fuels, and potentially $17-70 billion more in carbon taxes. This intimidating figure could reach $266-356 billion annually.
Yet, compared to the projected $120-160 trillion for overall energy decarbonization, it is a manageable challenge. Like the successful implementation of SOX regulations, history has proven the industry’s capacity to adapt. Amid global efforts to combat climate change, the emergence of decarbonized supply chains is an inevitable reality, offering considerable environmental, economic, and reputational rewards.
Why Go Green? The Benefits of Supply Chain Decarbonization
In the face of escalating climate crises, supply chain decarbonization has become essential for businesses worldwide. The pressing realities of climate change have shifted decarbonization from a luxury to a vital service. As a result, the question for importers, exporters, and carriers is no longer why but how and when to embrace supply chain decarbonization. Given the scale and complexity of global supply chains, leveraging decarbonization as a service becomes a sensible and efficient pathway to a greener future.
Environmental Advantages
Supply chain decarbonization offers extensive environmental benefits, pivotal in tackling global climate change. This process significantly reduces greenhouse gas emissions, a critical factor in global warming. Furthermore, decreasing harmful pollutants like sulfur dioxide and nitrogen oxides enhances air quality and protects public health.
This decarbonization strategy also promotes the efficient use of essential resources like water and energy, benefiting businesses and the environment. In addition, it protects our ecosystems by reducing deforestation and pollution, which is crucial for preserving biodiversity. Notably, supply chain decarbonization boosts operational efficiency, supporting recycling and resource reuse, reducing waste, curbing pollution, and safeguarding wildlife habitats.
Business Advantages
Decarbonization strategies aren’t merely an ecological obligation but a route to strategic business advantages. Deploying decarbonization technology enables resource optimization and energy efficiency, paving the way for substantial cost savings. For instance, a recent Oxford University Study cites a potential $12 trillion in savings by 2050 through moving away from fossil fuels.
Decarbonization nurtures operational efficiency and innovation, further boosting profitability and imparting a competitive edge. It fosters waste reduction and promotes novel, sustainable business models. Moreover, it buffers businesses against market volatility and accelerates the transition towards sustainable fuels.
Finally, it plays a crucial role in risk mitigation. A decarbonized supply chain reduces exposure to climate change risks, regulatory changes, and supply chain disruptions, enhancing business resilience.
Reputational Advantages
As consumer awareness grows, sustainability has taken center stage in the market. An increasing number of consumers, led by Gen Z, are making conscious choices favoring brands that prioritize environmental sustainability. A recent report produced by First Insight and the Baker Retailing Center at the Wharton School of the University of Pennsylvania corroborates this, revealing that nearly 90% of Gen X consumers will pay more for sustainable products, a substantial increase from just a few years ago. Supply chain decarbonization, therefore, presents businesses with a unique opportunity to connect with these environmentally conscious consumers and boost their reputation.
However, Forbes identifies a disconnect between the perceptions of retail executives and the burgeoning consumer demand for sustainability. For example, while 100% of surveyed retailers believed that consumers prioritize brand name over sustainability, only 56% of consumers concurred.
Forward-thinking businesses can bridge this gap and better align with consumer preferences through decarbonization efforts, technology, and improved logistics.
Regulatory Advantages
The decarbonization of supply chains serves as a response to environmental imperatives and a catalyst for regulatory benefits. Amid heightened ESG (Environmental, Social, and Governance) compliance standards, a proactively decarbonized supply chain offers a gateway to meeting these requirements and drawing in conscientious investment, laying the groundwork for sustainable business growth.
Lower compliance costs stand as a direct advantage of early decarbonization. In addition, with governments tightening greenhouse gas emission regulations, companies already on the decarbonization trajectory evade the financial burdens associated with future compliance, such as fines tied to emissions violations. Thus, companies that mitigate these risks by reducing their carbon emissions now before future regulations take heed become more attractive to environmentally responsible investors, with better market access and broader appeal.
Supply Chain Decarbonization is Easier Said Than Done
While the goal of achieving supply chain decarbonization is clear and crucial for a sustainable future, it has challenges. For instance, it’s difficult to unravel the intricate network of supply chain operations, and limited container tracking and visibility hinders tracking carbon emissions. Additionally, balancing sustainability and efficiency can take time and effort. Here’s why in further detail.
Untangling the Complex Web of Supply Chain Operations
A supply chain, by its very nature, is a complex network of interdependent entities – from manufacturers and distributors to retailers and consumers. Supply chains are like a puzzle, and understanding and managing these puzzle pieces becomes a complex challenge when aiming for decarbonization.
Firstly, emissions data is scattered across various supply chain stages, hindering a complete view of the carbon footprint. Then, there’s the hurdle of transparency. Some businesses do not disclose their emissions data, obscuring the true carbon impact.
Furthermore, accurately measuring emissions takes work. With sources spread across transportation, manufacturing, and waste disposal, gauging the total emissions becomes difficult.
Finally, as we aim to untangle the complex web of supply chain operations and shift towards a more sustainable supply chain, we face significant costs from new technology, processes, and fuels. UBS estimates that the total cost of complete shipping decarbonization between 2030-2050 will be around $70-95 billion, amounting to $1.4-1.9 trillion over two decades. Moreover, opting for alternative fuels could double the current expenditure, adding another $196-261 billion annually.
Peering Through the Fog: Measuring Carbon Emissions
Measuring carbon emissions within supply chains is a complex endeavor, further compounded by the intricacies of global logistics and varying emission standards. In addition, supply chain Scope 3 emissions, which include all indirect emissions in a company’s value chain, often lack transparency without a uniform measurement system.
Data availability and quality pose a significant challenge, with many suppliers unable to provide accurate or comprehensive information. Furthermore, the heterogeneity in emissions data across different supply chain stages makes comparison and aggregation an uphill climb.
The dynamic regulatory landscape for carbon emissions adds to the complications, creating uncertainty for companies striving for decarbonization.
Striking the Right Balance: Sustainability and Efficiency
In the path of supply chain decarbonization, striking the right balance between sustainability and efficiency poses a unique challenge. Companies must strive to reduce emissions while simultaneously maintaining business efficiency.
Incorporating renewable energy, enhancing energy efficiency, and reducing waste are steps toward a greener supply chain. Yet, these initiatives often bring substantial costs and disruptions, which may affect operational efficiency.
So, the crux of the matter is not just choosing to decarbonize but how to do it strategically.
The 5 Best Practices for Decarbonizing Your Supply Chain
Supply chain decarbonization is a complex challenge. However, it’s an achievable goal with strategic planning and the proper practices in place. These five best practices can help steer your decarbonization efforts in the right direction, leading toward a sustainable and resilient future.
1. Facilitate Supplier Engagement and Sustainable Procurement
To reduce your carbon footprint, focus on sustainable procurement and supplier engagement. You can achieve supply chain decarbonization by collaborating with suppliers, understanding their environmental impact, and inspiring them to adopt greener practices. After all, according to McKinsey, 80% of a company’s ecological impact comes from its supply chain.
However, the rewards don’t stop at environmental benefits. Sustainable procurement also brings a host of business advantages. For instance, it paves the way to financial savings by opting for suppliers who employ renewable energy sources and prioritize waste reduction. Moreover, as global decarbonization efforts amplify, working with eco-friendly suppliers aids in navigating tightening climate regulations.
This approach enhances brand credibility and resilience, secures a competitive edge with eco-conscious customers and talent, and prepares for climate-induced disruptions better.
2. Drive Energy Efficiency and Renewable Energy Adoption
Energy efficiency and the adoption of renewable energy are integral pieces of supply chain decarbonization. Introducing energy-efficient systems and appliances can substantially lower emissions to the point where The IEA projects that energy efficiency could account for 40% of the emissions reduction required by 2040 for net-zero goals.
Equally, harnessing renewable energy such as wind and solar provides a clean, zero-emission power solution, aligning your operations with global decarbonization objectives.
Although the initial investment is costly, these steps also offer financial benefits. Long-term energy savings offset the upfront costs, and with the affordability of energy-efficient and renewable technologies on the rise, businesses are finding these practices increasingly cost-effective. This balance of sustainability and economy makes them essential to decarbonize your supply chain.
3. Strive for Optimal Transportation and Logistics Management
Transportation and logistics management is central when pursuing supply chain decarbonization, given that a significant portion of emissions comes from this segment. The focus should be on integrating fuel-efficient vehicles, designing routes to minimize travel distance, and consolidating shipments for reduced trips to reduce emissions.
Intermodal transportation, the strategic blending of different transport modes for a single shipment, significantly bolsters efficiency, underlining its importance in decarbonization strategies. In addition, route optimization, achievable via advanced software or carrier partnerships, contributes markedly to decreased fuel use.
Switching to more sustainable transportation methods, notably rail or shipping, offers a path to reduced emissions, given their superior fuel efficiency. Additionally, the selection of sustainable packaging, improved loading methods, and lighter materials all provide further opportunities for decarbonization.
Lastly, focusing on warehouse operations and enhancing efficiency through automation, optimal inventory management, and conscious energy use streamlines operations and curtails emissions.
4. Leverage Streamlined Data Collection and Analytics
Effective supply chain decarbonization necessitates precise, actionable data, underscoring the importance of streamlined data collection and analytics as a top decarbonization strategy. Businesses can use decarbonization technology to pinpoint emission sources, set realistic, data-informed targets, and track decarbonization progress.
A comprehensive view of energy consumption, transportation, and other emission-intensive activities, provided by extensive data collection, reveals the most impactful areas for emission reduction. This information forms the basis for tailored decarbonization strategies.
The merits of this approach are manifold:
- It promotes visibility, exposing the emission sources and their business implications.
- It boosts efficiency, leading to cost savings and higher profitability.
- It helps track progress, motivates the team, and verifies that the business is on track to achieve its emission reduction goals.
- It also drives innovation by identifying new opportunities to reduce emissions, potentially fostering new technologies, procurement practices, or transport routes optimization.
5. Ensure Enhanced Collaboration and Communication
Finally, achieving supply chain decarbonization lies in nurturing collaboration and communication with all supply chain stakeholders. This practice illuminates a company’s Scope 3 emissions and highlights potential areas for reduction. For example, open sharing of sustainability progress and key data can lead to strategic collaborations with suppliers to minimize transport-related emissions.
This collaborative approach facilitates informed decision-making and boosts operational efficiency. With precise emissions data, stakeholders can make strategic choices, such as opting for sustainable transport providers or using recycled packaging materials. Coordinating delivery schedules with suppliers further refines efficiency, curtailing truck idling and its associated emissions.
By promoting innovative decarbonization technology and renewable energy sources, it collaborates with suppliers to lower operational emissions. Doing so helps turn the abstract goal of reducing carbon footprints into a tangible reality and supports global decarbonization efforts.
The Path to Supply Chain Decarbonization Begins with the Right Partner
The journey to decarbonizing supply chains, while pivotal, is not a solitary endeavor. A collaborative approach, underpinned by the right partner, can significantly accelerate progress towards sustainability.
Setting Goals and Establishing a Roadmap for Decarbonization
When looking for a partner to help with supply chain decarbonization, choosing someone to help you set specific, measurable goals based on a clear roadmap is essential. The main objectives should be identifying the main sources of carbon emissions, setting targets for reducing them, and developing strategies to achieve those goals. Working with a company with experience in decarbonization strategies and technology can be extremely helpful in creating and implementing such a plan.
Engaging Stakeholders and Fostering a Culture of Sustainability
Partners should help create a culture of sustainability in your organization. They can engage stakeholders like employees, suppliers, and customers to raise awareness about reducing carbon emissions in the supply chain. By leveraging their knowledge and experience, partners can drive these cultural shifts and improve your brand’s reputation and customer loyalty.
Continual Improvement and Innovation in Sustainability Practices
Decarbonization is a dynamic process that requires constant refinement. Therefore, your partner should assist in establishing initial decarbonization measures and foster a culture of continual improvement and innovation. Using advanced decarbonization technology, partners can help measure progress, analyze results, and suggest strategy adjustments.
Embrace Greenabl and the Future of Decarbonization
The transformative potential of supply chain decarbonization is undeniable. Businesses can leverage environmental advantages by integrating decarbonization strategies while enhancing operational efficiency.
Greenabl, a front-runner in this green revolution, can help navigate these changes, providing a comprehensive platform for measuring, mitigating, and offsetting emissions.
The urgency of the matter is clear. By committing to decarbonization, companies contribute to a greener future, build resilient supply chains, prepare for stricter regulations, and meet evolving customer expectations.
Bolstered by cooperative procurement and advanced technology, Greenabl catalyzes industry-wide decarbonization. It’s time to embrace this transformative movement towards a sustainable economy and a healthier planet. Embark on your decarbonization journey with Greenabl today – every step forward signifies progress to a brighter future.
