Tips for building an environmentally sustainable supply chain

It is estimated that 90% of a company's climate emissions originate from their supply chain

The WMO report State of the Global Climate 2021 is a defeating read. 2021 set new records for multiple critical climate change indicators, such as greenhouse gas concentrations, sea level rise, ocean heat and ocean acidification. If we want to reach the 1,5-degree goal, and take combating climate change seriously, we need to begin thinking about our supply chains in a new way. McKinsey reported that up to 90% of a company’s climate emissions can originate from their supply chains.  

How can we then go about building environmentally sustainable supply chains? Here, we present 5 tips for where to begin.

I. Think beyond cost.

A cost mentality can make it difficult to focus on the environmental performance of a supply chain. Many supply chains are built around the cheapest or most economically efficient way to procure and transport goods. An environmental focus need not disregard this aspect but requires us to account for other metrics as well. We need to balance “What is the most effective supply chain strategy?” with “What is the greenest supply chain strategy?”  

In doing this we need to shift our focus from cost to product fulfilment. What is the most reliable, effective, and green way to receive the goods needed to complete the end-sale? Shifting focus from costs to reliable fulfillment allows us to consider a broader scope of criteria for supply chain operations – both environmental and economic considerations are part of this.

Does your shipping logistics travel over areas which are important for marine life? Slower ship speeds can help lessen the negative impact shipping has on marine life
II. Assess the ecosystem impact

When planning for environmentally sustainable supply chain operations, we need to account for more than just affected stakeholders. We also need to include the impact on the environment of these stakeholders – the local ecosystems. A sustainable supply chain is sensitive to the impacts it has on local ecosystem processes and functions. What modes of transport does your supply chain make use of? Through which areas are the main paths of travel for a product? Which ecosystems to they travel through? How does this transport impact the local ecosystem? How do your suppliers impact their local ecosystems?

It is important that we are aware of the integrity of local ecosystem functions when planning our supply chains. For our operations to be truly sustainable, we cannot simply look at the overall emissions of operations, because local ecosystem impacts can vary wildly in their severity and importance.

III. Build responsiveness

Environmentally sustainable supply chains cannot solve all supply chain woes overnight. Because of this we need to pair impact assessments and mitigations of current issues with the implementation of effective processes for responding to future problems. Supply chains need to be responsive to future environmental issues. Establishing routines and strategies for this at an early point will make it easier to integrate it as a normal part of supply chain operations. The wide-ranging, and contextual, effects that business operations might have on the environment and ecosystems require that supply chains be able to quickly and flexibly respond if new issues are noticed.

IV. Set sustainability KPIs

Setting sustainability KPIs that reflect your sustainability goals, while helping you better plan and focus your supply chain operations. Focus on a broad range of factors aside from CO2, based on the context of your business operations. Consider, for example, if your supply chain impacts biodiversity? Does it impact local water pollution levels? Or might even your supply chain create environmental benefits? Such questions might lead to quantifiable KPIs to assess the environmental performance of your supply chain operations. Setting clear environmental impact goals will help you better plan for an environmental supply chain.

Setting clear KPIs can help you better set goals for reducing your environmental impact. Even better, aligning and informing your KPIs with the Science Based Target Initiative (SBTI), can help you ensure that your goals have a definite positive impact on the climate
V. Continual improvement

Lastly, keep track of the sustainable performance of your supply chain, and work to improve it every year. Using KPIs, continually assessing other impacts, and setting new environmental goals can help you keep improving your operations beyond your expectations!