An Increasing Focus on Sustainability in the Supply Chain

There are many reasons why companies adopt green supply chain initiatives, such as a sense of corporate responsibility, the high costs of energy, and the importance of complying with government regulations. These initiatives help to reduce energy consumption, lower greenhouse gas (GHG) emissions, and in some cases, can reduce costs.

Intertwined with the concept of “green” supply chains is the notion of Green Supply Chain Management, (GSCM). This theory focuses on considering environmental impacts of operations, and taking action along the supply chain to comply with regulations, and communicating this priority to customers and partners.

In this blog, we’ll go over some important green initiatives in the supply chain space.

Manufacturing: Sourcing Green Materials

Many companies are shifting to materials which require less power or water to work with, or which are renewable. Examples include cork, lyocell, recycled materials, and locally-sourced materials which require less fuel to transport. Additionally, modifying manufacturing processes to increase efficiency and use less water or chemicals is also a significant trend.

Similarly, eco-friendly packaging is a reliable option. It can include packaging made of recycled materials. Another option is to reformulate products to be more concentrated, and therefore take up less space.

While sometimes creating a product out of green, ethically-sourced materials can be more costly, and studies show that many customers don’t mind paying a premium for them. A November 2019 study published in Canadian Manufacturing suggests that most consumers are willing to pay the increased costs. The study found that “4% of Canadians consider sustainability an important factor when making purchases. This trend was particularly reflected in food packaging where a majority of Canadian adults (62%) were willing to pay more for products packaged in sustainable materials, with 40% saying they would be open to paying up to 10% more.” (Original Study Source: Asia Pulp and Paper via Newswire). 

Shipping and Delivery: Reducing Fuel Use/Emissions

Logistics Viewpoints notes that “reducing miles and fuel consumption is a key part of supply chain sustainability.” 

Systems like our Delivery Management System (DMS), an enhanced Transportation Management System, can help companies save on travel distance and fuel by displaying the best route for each vehicle.

Additionally, Inbound Logistics points out that large companies have been able to reduce mileage by using technology to limit vehicles’ top speeds, saving millions of dollars for one international office supply retailer.

In a late 2019 article, Supply Chain Brain also notes that businesses looking to enhance their supply chain’s greenness are also looking into alternative fuel sources and the establishment of localized supplier and manufacturer relationships.

In this area, many experts have noticed that in addition to helping the environment, these more sustainable practices also result in significant cost savings.

Warehousing: Increasing Energy Efficiency

There are many opportunities for increased energy efficiency in a warehouse, ranging from more energy-efficient lightbulbs and motion-sensing lights, smart thermostats, and more efficient air-conditioning systems to bigger steps like installing photovoltaic panels on warehouse roofs.

An Industry Canada report notes, “ The most common GSCM [Green Supply Chain Management] practice is implementing energy-efficient improvements in distribution activities, such as the use of low-voltage conveyors and motion detector lights in distribution centres.”

These changes can bring significant improvements. According to a case study in Modern Materials Handling, a 615,000-square-foot warehouse in North Bergen, N.J found that when they “installed new LED lighting and lighting controls that have reduced energy consumption by 75% and will save $14,000 per year lighting maintenance in the first year.”

A Collective, Global Approach To Greener Supply Chains

According to a recent article in the Harvard Business Review, there is still work to do in terms of making entire supply chains green. For example, they point out that even in cases of supply networks headed by “sustainability leaders”, suppliers of those leaders did not adhere to the standards which they were expected to, and that the anticipated “cascade effect” of sustainability was not happening. 

The report states that some reasons for these failures included over-ordering on the part of those “sustainability leaders”, and a lack of incentive to adhere to the requirements in cases where the sustainability leader only made up a smaller percentage of that supplier’s business. These suppliers then did not encourage their suppliers to adhere to all sustainability requirements.

The HBR suggests that “MNCs should set convergent sustainability goals and align the incentives for all functions that interact with first- and lower-tier suppliers.” They added that companies “ must reward [suppliers] for hitting all three Ps—that is, not just cost, quality, and delivery goals but also social and environmental ones.” They also suggest that MNCs could educate procurement personnel about sustainability requirements, or engage top executives at first-tier suppliers. 

The Importance of Measuring Goals

Due to the increased cachet of “green” and “eco-friendly” businesses, initiatives, and products, some have expressed there is a risk of companies simply “greenwashing” their operations. One Medium article bluntly stated, “Using environmental and social initiatives to enhance a brand’s value doesn’t warrant a green labeling. A truly green supply chain is a supply chain that implements strategies and actions to improve performance in areas-otherwise damning to people, planet and profit.”

Similarly, Industry Canada notes that “Despite the large number of businesses that understand the importance of GSCM, the number of firms that actually engage in such practices is significantly lower.” However, they note that since many of these green procedures don’t come with high costs, businesses of all sizes can adopt them.

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Is your company considering making your supply operations greener? Have you already implemented procedures to create a more environmentally-friendly supply chain? Let us know your thoughts! 

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