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What's Driving Supply Chain Sustainability?

February 18, 2022

September 28, 2022

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x min read

Sustainability is a broad concept that gained significant traction as the impacts of pollution, climate change, and economic disparity made their way into the global consciousness. It pushed individuals, corporations, and government agencies to rethink past practices and consider how “business as usual” affects people and the planet. Sustainability forces us to look more holistically at the human influence on nature and society and pushes us to change for the benefit of longevity. 

Supply chain sustainability is no different. It requires companies to evaluate how their supply chains impact people and the planet while maintaining product and profitability. Can these exist simultaneously? Can a company be profitable while also being environmentally and socially responsible? This article explores the growing demand for sustainable supply chains, trends for sustainability in the industry, and how visibility technology is helping companies meet sustainability goals. 

What is Supply Chain Sustainability?

Supply chain sustainability is a strategic corporate commitment to environmental protection and fair labor practices at every link in the supply chain. It is a bottom-up approach that aims to connect the traditional supply chain goals of speed, reliability, optimization, and continuous improvement to environmentally friendly and socially responsible initiatives while simultaneously increasing ROI. It sounds like a lot of buzzwords, but sustainability is an increasingly important topic in the industry and ultimately creates operational efficiencies and cost savings while helping ensure business longevity. 

There are three crucial elements of a sustainable supply chain:

  • Environmental Responsibility – Protecting the environment from harm caused by direct and indirect supply chain activities like production, storage, packaging, and transportation. This is the most recognizable element of supply chain sustainability and includes things like waste, emissions, water treatment, and deforestation. 
  • Social Responsibility – A company’s principles, ethics, and morals determine how people within its supply chain are treated. This applies to fair compensation and safe working conditions at every supplier and level of the supply chain. This also accounts for the business’s impact on the communities where it operates. 
  • Economic Responsibility – The financial obligations and expectations of shareholders, partners, employees, and the communities in which the supply chain operates. This includes objectives to reduce risk and retain profits while maintaining environmental and social responsibilities commitments. 

Sustainable supply chain management requires a combination of processes, policies, and technology to help companies optimize every aspect of a product's journey — from sourcing to distribution. While this sounds like a daunting task, sustainability is rapidly growing traction as a non-financial indicator of performance and a driver of consumer confidence in a brand. 

What’s Driving the Demand for Sustainable Supply Chain Practices? 

In recent years, the global supply chain has come under increased scrutiny amid growing conversations around climate change, human rights, and corporate responsibility. Several key factors drive the demand for supply chain sustainability, including consumer demand, investor pressure, and global legislative agendas

Emerging Consumer Demand 

Consumers are increasingly mindful of where their products come from, what they are made of, and how they are produced. More people are considering how their buying habits impact the world at large and are seeking out eco-friendly, zero-waste products and brands that align with their values. Beyond simply switching brands to support sustainable practices, more consumers are actively and openly boycotting companies that fail to meet environmental or fair labor standards. In the age of social media, boycotts and stories of unfair practices spread quickly and can severely damage a company’s profits and reputation.

Investor Pressure for Sustainable Practices 

As consumer demand for sustainable supply chain practices increases, so does investor demand. The rise of sustainable investing, also referred to as socially responsible investing or ESG investing, highlights that more investors are considering the environmental, social, and corporate governance (ESG) factors of their contributions. Sustainable investing bases decisions on more than a company’s financial success and considers their social capital and commitment to positive change. ESG investing is likely to grow in the coming years as more millennials enter the investment market, making supply chain sustainability increasingly important for corporations. 

Global Eco Agendas

Most countries have established deadlines for achieving carbon neutrality in the next 30 years. Much of this focuses on greenhouse gas emissions in logistics, manufacturing, and agricultural practices, but there are other items on the agenda as well. Single-use plastic, excessive packaging, child labor, and poor working conditions are pressing issues that impact supply chain sustainability and global agendas. 

Internal Sustainability Initiatives

There are clear external drivers of supply chain sustainability, like consumer expectations and legislative changes, but internal factors also motivate companies to implement better sustainability practices. Sustainable supply chain management helps improve productivity and optimize costs, so a company benefits from these initiatives in many ways:

  • Continuous improvement in the supply chain through ongoing sustainability evaluation
  • Improved company partnerships through shared initiatives
  • Collaborative work culture through common goals and visions
  • Better supply chain risk mitigation and contingency planning
  • Improved brand perception and customer sentiment

Supply chain sustainability is more than a buzzword or publicity stunt — it benefits consumers and businesses, as well as society and the planet.

Sustainable Supply Chain Trends

Supply chain sustainability is not a simple goal one can achieve through a fixed set of practices – it is as complex as the supply chain itself. Companies committed to sustainability should consider evolving global policies and emerging technologies in their supply chain evaluation and continuous improvement initiatives. Sustainable supply chain trends will focus on improving resiliency and agility, decreasing carbon emissions throughout the supply chain, and utilizing technology to enhance transparency. 

Building Resilience in the Supply Chain

COVID-19 disrupted the global supply chain to such a degree that even the largest, most well-equipped companies could not avoid the consequences. Lockdowns in manufacturing-heavy areas and the halt of ocean freight, combined with an unexpected increase in consumer demand for finished products, created chaos in the supply chain and sent freight rates skyrocketing. Suddenly, a supply chain that had been running relatively smoothly for decades was in disarray, highlighting the fragility and instability of the global network. 

We now see that unpredictable external factors like a global health crisis or catastrophic weather events threaten the entire supply chain. In light of this reality, more companies are committed to creating resilience and agility in their supply chains. Supplier diversification, nearshoring, and robust risk management are among the top sustainable supply chain practices to increase resiliency. 

Reducing Scope 3 Carbon Emissions 

Greenhouse gas  (GHG) emissions, or carbon (CO2) emissions, have been a prevalent topic in supply chain sustainability for years as a response to climate change concerns. Most companies have already taken steps to reduce emissions from their facilities and operations (Scope 1) and purchased energy (Scope 2), which are easily within their control. Most have not yet tackled Scope 3 — “the indirect emissions that occur in the value chain of the reporting company, including both upstream and downstream.”  Scope 3 includes CO2 emissions produced by suppliers, transportation and distribution partners, and waste generation represents up to 80% of a company’s total emissions.

Understanding the full impact of Scope 3 emissions is challenging and requires extensive visibility to vendor and provider practices. A company’s partner network needs to be engaged and committed to sustainable supply chain practices to effectively reduce Scope 3 emissions.

Utilizing Technology to Improve Transparency

Transparency is one of the biggest trends and perhaps the most critical component of sustainable supply chain management. Transparency begins with supply chain visibility but is defined by how a company uses visibility insights to take action and manage risks more effectively. It requires an understanding of both upstream activities of suppliers and manufacturers and downstream impacts of distribution and customer engagement. Transparency provides data to improve supply chain resilience and guide sustainable supply chain practices to address issues like emissions and waste.

Technology plays a pivotal role in transparency, allowing companies to visualize data from internal and external sources for a broad view of supply chain participants and risks. This insight is primarily achieved by developing digital twins, which act as virtual replicas of an organization’s supply chain. Digital twins compile real-time data from various visibility technologies to map suppliers, material origins, warehouses, and logistics to analyze supply chain dynamics and identify potential sustainability risks. Digital twins enable companies to predict future obstacles, react quickly to disruptions, and help identify weak links in the sustainable supply chain — vendors or providers that are not in line with the company’s larger goals. This technology informs supply chain resilience efforts and long-term sustainability initiatives.

How to Build a Sustainable Supply Chain 

Building a sustainable supply chain is crucial to a modern company’s success - these four steps can guide the way. 

  1. Identify sustainability issues: Technology and historical data can bring to light shortcomings in the supply chain pipeline and identify areas of risk. Each step and every partner in the supply chain should be evaluated for their impact on environmental, financial, and social responsibility.
  1. Adopt circular supply chain practices: Circular supply chain embraces the idea that “once is never enough” by seeking opportunities to recycle products and reuse them in manufacturing. Finding a balance where inputs are equal to outputs is an efficient and practical answer to reducing supply chain waste.  
  1. Address fuel consumption and CO2 emissions:  Minimizing CO2 emissions and fuel consumption is a no-brainer for companies committed to supply chain sustainability. Empty miles, route planning, reverse logistics, and final-mile data are critical for improvements in this area. 
  1. Engage suppliers: Sustainable supply chain management requires visibility and participation at every level of the supply chain. Engaging suppliers with standardized codes of conduct and sustainability toolkits help establish expectations, while regular audits and evaluations boost accountability and drive long-term change.

How Real-Time Shipment Visibility Supports Supply Chain Sustainability

Supply chain sustainability starts with visibility. After all, it is difficult to define sustainability goals without a clear understanding of where and how the supply chain is impacting environmental, social, and economic metrics. As companies make strides toward sustainability in easily-visible aspects of their supply chains, identifying less obvious issues becomes crucial for maintaining momentum and making continuous improvements. Real-time location and condition visibility provides data on in-transit shipments to support sustainable supply chain practices. 

Real-time shipment tracking is important to supply chain teams for many reasons, most often as it applies to incoming purchase orders to replenish materials and inventory or the delivery of outbound customer orders. However, shipment tracking has more to offer for visibility into sustainability metrics as well. Real-time shipment location and condition visibility provides valuable data to improve supply chain transparency and minimize carbon emissions.

Improving Supply Chain Transparency

Supply chain transparency requires visibility into the practices of upstream suppliers and downstream distribution. Real-time shipment visibility offers data for both. Monitoring the movements of supplier shipments allows an organization to evaluate transportation efficiencies and environmental practices to ensure that upstream partners are in line with sustainability goals. Downstream shipment visibility offers insight into direct carbon emissions (more on that in a moment) and also provides customers with the updates they expect to manage their businesses effectively. Upstream and downstream, real-time location tracking supports environmental and economic sustainability initiatives.

Reducing Scope 3 Carbon Emissions

Real-time shipment location tracking is essential for meeting environmental goals and minimizing Scope 3 carbon emissions on various levels of the supply chain. Shipment tracking technology supports supply chain sustainability by providing insight to critical metrics, including:

  • Empty Miles and Deadhead: Heavy-duty trucks account for 57% of carbon emissions in the logistics industry, yet these trucks are running without freight nearly 40% of the time. This imbalance creates problems for each level of sustainability. Socially, truck drivers are dissatisfied because they are not paid for the empty miles that are not hauling freight. Financially, shippers pay more on freight costs as drivers attempt to make up for money lost to empty miles. Environmentally, carbon emissions increase due to inefficiencies of load planning and resulting deadhead miles. 

Shipment visibility technology helps eliminate unnecessary empty miles by identifying round-trip opportunities within a company's network. This means drivers have pre-determined reloads nearby and run fewer empty miles, helping companies control costs and minimize harmful greenhouse gas emissions. 

  • Dwell Times: Detention and dwell times may not seem to directly link to supply chain sustainability, but they ultimately impact profitability and carbon emissions. From a financial perspective, detention charges are expensive and inefficient for shippers, who pay $50 to $100 an hour to drivers held longer than the average two hours for loading or unloading. Environmentally, trucks that are idling in extreme weather or refrigerated trailers hauling temperature-sensitive commodities require fuel and, therefore, increase carbon emissions during dwell times. 

Real-time shipment visibility allows companies to identify bottlenecks in their supply chain - for example, warehouses and facilities with extended dwell times. This information provides an opportunity to address issues and minimize the costs and environmental impacts of lengthy detention and dwell times.

Tive Solutions for Shipment Visibility and Supply Chain Sustainability 

Shipment location and condition visibility drives the sustainable supply chain. Tive’s proprietary trackers and advanced transportation visibility software identify issues through real-time tracking and robust historical reporting, giving companies the information they need to improve upstream and downstream sustainability practices. Make the move toward a more sustainable chain - schedule a demo with Tive today.

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