A recent global emphasis on climate change and the disasters facing our planet has made companies more aware of their carbon footprints. As the urgent need for action and remedies arises, more and more businesses are looking to cut down on their environmental impact. The supply chain offers a unique opportunity – according to a McKinsey study, 40% to 60% of a manufacturing company’s carbon footprint exists in the supply chain, with the figure rising to 80% for retailers.
The way forward is a carbon-neutral supply chain. But what does it mean to create a carbon-neutral value chain and how do you get there?
What is a carbon-neutral supply chain?
A company’s environmental impact is measured by the total amount of greenhouse gas emissions associated with its activities, including its supply chain. This is known as its carbon footprint. The higher the emissions, the larger the carbon footprint, and the more damage done to the environment.
In order to reduce their carbon footprints, companies are seeking to reduce the amount of greenhouses gas emissions associated with their activity. Any residual carbon emissions can be offset by funding an equivalent carbon dioxide saving elsewhere to achieve net carbon neutrality.
Challenges
But this is easier said than done. One of the trickiest aspects of transforming the supply chain into a carbon-neutral one is correctly identifying where in the supply chain the carbon emissions come from and how best to direct carbon-neutralising efforts. Supply chains have been notoriously opaque in the past. As a report by Business for Social Responsibility states: “most suppliers do not track or report carbon emissions data; buyers do not control suppliers’ emissions or have access to accompanying data, and there is disagreement on how to measure and apportion responsibility for supply chain emissions.”
But this hurdle is no longer insurmountable, thanks to technology. As technology has slowly revolutionised the supply chain, it has introduced greater transparency and flexibility. Digitisation and blockchain technology now allow greater clarity and openness regarding how the supply chain works. Artificial intelligence and analytics can help track and analyse where the carbon emissions come from in the supply chain and, therefore, where to direct carbon-neutralising efforts.
Volkswagen: A case study
Several large companies are now pledging themselves to a cleaner and greener future. Volkswagen has committed itself to the Paris Agreement goals and seeks to make its vehicle fleet emissions zero by 2050. Considering the size of Volkswagen, their intended changes could have a major impact on the automobile industry – according to Forbes, it could influence 40,000 direct suppliers, over 10 million global customers, and 94 production plants.
There are several stages to Volkswagen’s plan, including increased transparency in the supply chain and developing new technology to electrify their vehicles. They also plan to implement sustainability as a selection criterion for suppliers that is on par with quality and price. This should provide an incentive for suppliers to work on reducing their carbon emissions.
Working towards a carbon-neutral supply chain
A need for a carbon-neutral supply chain comes from the understanding that climate change will affect the future of the whole supply chain, right from sourcing raw materials to the use of the final products. Working towards a carbon-neutral supply chain, then, means implementing changes across the board. Here are a few steps necessary to see a cleaner and greener environment:
– Manufacturing and overall efficiency should be improved to reduce carbon emissions. This means investing in new, environmentally-friendly processes and technologies.
– Energy usage should be reduced where possible.
– Raw materials and products should be sourced from places close by to reduce transportation costs.
– It’s important to set a carbon-neutral goal that your company can work towards. Define what steps fall within that goal and how they can be implemented.
– Just as Volkswagen made sustainability as important a criterion as price or quality, so must businesses see the move towards a carbon-neutral value chain as necessary for their company and part of their business plan.
– Encourage transparency in your supply chain and consistently evaluate how close or how far you are from your carbon emission goals. It’s important to implement accountability and see sustainability as a valuable business goal that is as important as profit and growth.
It’s worth bearing in mind that achieving a carbon-neutral supply chain has benefits that go beyond the business’ environmental impact. When corporate social responsibility is considered at all stages of the supply chain, businesses can also see an increase in their profit, a positive impact on the brand’s reputation and soaring share prices.
Companies that are more environmentally friendly are the future, and businesses will need to change their way of operating to compete. To learn more about how your business can stay competitive, contact our Managing Director, Armand Brevig, today.
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Congratulations to those businesses who made the list! #worldsmostsustainablecompanies There are some insightful takeaways that we can learn from here too https://t.co/7v6aqhLk2y #businessnews
— Armand Brevig (@ProcurementCube) 5 July 2019
