Sustainability Strategies in Business – Decarbonizing Supply Chains
Each business has unique challenges when it comes to reducing its impact on the environment, whilst keeping commercial benefits in mind. LiveArea’s Senior Technology Architect Richard Mathias outlines sustainability strategies for businesses to consider.
December 19, 2019
Author: Richard Mathias
Decarbonizing supply chains has become a priority, with the potential to reduce an organisation’s exposure to climate-related risks, which are now a major and urgent concern for all businesses. Throughout supply chains, end consumers and investors now expect more from manufacturers, distributors, and retailers.
Firstly, let’s start by looking at the impact of shipping. Carbon emissions from global shipping are 1.1bn tonnes – an increase of 35% from 2015. Even if we could reduce reliance on coal and oil and move towards electricity and LNG, we’re still looking at 0.9bn tonnes.
And we can’t ignore the impact of climate change itself on global industries. Physical risks, including extreme weather and climate patterns, impact supply links and incur greater insurable losses. Those looking to ‘greenwash’ to boost reputations must be careful. Huge reputational damage and legal costs can be incurred, for example the Volkswagen emissions scandal. Impacts to a brand’s reputation can also hurt deals with suppliers and market share.
But, let’s be clear. Decarbonizing is good for business. The UK climate leadership has positioned our businesses to take advantage of the greatest investment opportunity of the century: an estimated £17.5 trillion worth of low carbon investment in emerging economies between now and 2030, whilst 39% of the global economy have committed to cut carbon emissions by 80-95% on 1990 levels by 2050.
From this, our opinion is that decarbonization should be a concern for every board member, across operational, marketing, finance, legal, and HR, and every board member should consider how it impacts their metrics and KPIs, and factor actions and policy in line with reducing exposure to risks.
The first thing to do would be to perform an initial analysis of supply chain and drafting a view of the organisation’s carbon footprint. Specialist analytics firms are springing up to offer data services to allow companies to meet and exceed analytics targets: BT and Dell, for example, are using data to help meet ambitious emissions targets.
BT is aiming to cut supply- chain emissions by 29 per cent by 2030. 84 per cent of Dell’s direct suppliers (against a target of 95 per cent by 2020) now have greenhouse gas (GHG) emissions reduction targets and publicly report their emissions inventory. Also, coffee firm Nespresso, for example, has committed to planting 10 million trees among its suppliers’ farms and surrounding ecosystems by 2020.
Once this has been drafted, identifying and prioritising opportunities for carbon reduction, and setting achievable targets and implementation plans. This needs to be put against a climate of lean inventory and escalating demands for faster, tighter delivery scheduling from customers and suppliers.
Disruptors are looking at techniques such as grouping together as buying organisations in order to both take advantage of purchasing at scale and reducing the carbon cost of the delivery.
Service organisations are gaining insight into customers’ purchasing and work breakdown patterns to more effectively group together deliveries to reduce both spend and carbon cost.
Disruptors such as Metapack are offering shipping consolidation services and delivery intelligence.
Manufacturing and aerospace firms (Airbus, Rolls Royce) are turning to big data and IoT to understand more about parts lifecycle and failure modes, to be able to design parts that have more predictable resilience and be able to optimise scheduling of large maintenance jobs
The sooner an organisation’s board can draft up a list of targets and KPIs that include a strong focus on decarbonization and mitigating climate-related risks, the greater the advantage it will have over its rivals, not just in terms of mitigating risks and meeting decarbonization targets, but also in terms of operational and strategic efficiency in the supply chain.
Sustainability in Retail – Brands Leading Change
The Swedish furniture maker sources close to 50 per cent of its wood from sustainable foresters. Also, all of its cotton now comes from farms that meet the Better Cotton standards, which mandate includes reduced use of water, energy, and chemical fertilisers and pesticides. It’s commitment to sustainability isn’t limited to the supply chat, with more than 700,000 solar panels now powering its stores, and plans to start selling the panels to customers in the UK.
The American outdoor clothing brand are actively encouraging people to not buy things they don’t need (even their own products) and implemented a program to repair rather than replace their products. Wetsuits are made of natural rubber and plastic bottles are turned into parkas. Patagonia also recognises the importance of political action on the environment and has made voting for eco-friendly leaders a cornerstone of its sustainability message.
Nike diverts more than 1 billion plastic bottles per year from landfills to create yarns for new jerseys and uppers for Flyknit shoes. The Reuse-A-Shoe and Nike Grind programs convert waste into new products, playgrounds, running tracks and sports courts.
The Japanese electronics giant moved its HQ to reduce employees commutes, in-turn reducing their carbon footprint. Panasonic has also committed to creating smart towns centred around sustainability. Energy will come from solar power generation systems and storage batteries to manage energy use for efficiency. Carbon footprint will be reduced by mobility services, including electric vehicles and electric bicycles.
Richard Mathias, Senior Technology Architect, LiveArea EMEA
Richard started his career at British Steel in Port Talbot, and is an experienced IT and commerce professional, having previously worked in strategy, consulting, technology and operations services provision. Richard specialises in bringing people, process, technology and innovation together to help B2C and B2B companies achieve measurable success.