According to a recent report from the IPCC, human beings have a little more than a decade to cut greenhouse gas emissions by half or face unprecedented environmental consequences. The report created a ripple effect through the media when it was released, along with renewed public pushes for substantive change.
Nowhere is that need for change more evident than on the supply chain. The average company’s supply chain produces 5.5 times more greenhouse gasses than its operations, according to researchers at CDP. Consumer pressure on companies to adopt carbon neutral production methods is mounting, as is pressure on government to regulate emissions from industry. When a company looks to cut emissions, they’ll see their supply chain as a major contributor.
The Winds of Change
“To make and sell goods,” writes Anne-Titia Bové and Steven Swartz for McKinsey, “consumer businesses need affordable, reliable supplies of energy and natural resources, as well as permission from consumers, investors, and regulators to do business.”
The balance described here has begun to shift. Now, it’s time for the supply chain to anticipate evolving needs, both to protect profits and meet changing expectations. But is there a big change around the corner?
Big players in retail, ecommerce, and agriculture have already started shopping around for more sustainable partnerships. According to Forbes, only fourteen companies participated when CDP’s Supply Chain Disclosure program launched a decade ago. Last year, 115 of the world’s largest companies took part, requesting environmental information from more than 5,500 suppliers. Those suppliers reported CO2 emissions reductions of 633 million tonnes, totalling “more than the emissions of South Korea in 2017.” (The collective cost savings from these reductions? A staggering $19.3 billion USD).
A sustainable supply chain does more than help protect the environment. Companies are realizing that better sustainability can boost long term profitability by improving efficiency, streamline compliance with shifting regulations, and much more. With a little foresight and planning, everyone from big players in supply chain infrastructure to fledgling startups can carve out a place in the coming sustainability boom.
|McKinsey identified three key steps to improving supply chain sustainability:
Beyond your supplier and vendor relationships, new technology and shifting consumer trends can help companies prepare for new supply chain expectations.
The recent launch of the Norwegian-designed Yara Birkeland, which started regular service last year, is one of the most exciting technological debuts in recent years. This is the world’s first autonomous, fully-electric container vessel. It could very well signal a coming sea change (no pun intended) in transoceanic container shipping.
That’s only the start. By 2020, the Yara Birkeland will be loaded and unloaded using a matching zero-emission automated straddle carriers and other equipment, making it the first “fully digitalised and electric supply chain, with all operations, including loading, unloading and sailing conducted in a fully autonomous manner with zero emissions,” according to Tove Andersen, EVP Production at Yara.
Widespread adoption of existing technology is underway as well. Advanced intermodal technology can reduce the number of trucks on the road, which reduces the supply chain carbon footprint enormously. Diesel freight trains produce between three- and five-times less CO2 than semi trucks, while also minimizing wear and tear on public roads (repairing roads also produces a lot of CO2).
In the next year, GE and BNSF will be debuting a battery-electric freight locomotive in California to minimize the power derived from diesel engines by 15% or more on a stretch between Stockton and Barstow.
Regional warehousing is another trend that may minimize the carbon impact of your supply chain by using the simplest reduction methodology – driving less.
Consider the following example: you receive cargo at the Port of Los Angeles that’s destined for a brick and mortar retailer in nearby Culver City. Using traditional supply chain logic, that cargo is unloaded and shipped over the Gerald Desmond Bridge to a regional fulfillment center, usually located in a distant exurban area. When needed, that cargo is then shipped back to the urban core to a retail store. That’s a lot of wasted driving.
Regional warehousing keeps product closer to its entry point — which, in most instances, is coincidentally closest to the highest concentrations of prospective buyers. Less time spent on big rigs equals less carbon output. Easy, right?
Strategic 3PL transloading and port-side warehousing partnerships can enable a number of carbon cutting strategies near major ports across the country.