As the global push towards net zero intensifies, businesses across all sectors are recognising that decarbonising their supply chains is not just an environmental imperative, but also a strategic necessity. Supply chains, which encompass everything from raw material sourcing to product delivery, are responsible for a significant portion of a company’s total carbon emissions. As a result, transforming these supply chains to be more sustainable is critical for achieving net zero goals. This article explores effective strategies to decarbonise end-to-end supply chains, drawing insights from leading industry practices and the latest research.
The supply chain represents a complex network of activities that are crucial to the production and distribution of goods. For many companies, the majority of their carbon footprint lies within their supply chains, particularly in Scope 3 emissions—those generated indirectly by suppliers, transportation, and product use. According to a report by CDP, supply chain emissions are on average 11.4 times higher than operational emissions. This underscores the critical importance of targeting supply chains in any comprehensive decarbonisation strategy.
1. Supplier Engagement and Collaboration: One of the most effective strategies for reducing supply chain emissions is engaging and collaborating with suppliers. Leading companies are increasingly working closely with their suppliers to help them adopt sustainable practices. This includes setting clear expectations, providing training and resources, and offering incentives for reducing emissions. For example, Unilever’s Sustainable Living Plan has successfully integrated sustainability into its supplier relationships, requiring key suppliers to adhere to strict environmental standards and encouraging them to invest in renewable energy and energy-efficient technologies.
2. Sustainable Procurement Practices: Sustainable procurement is another critical component of supply chain decarbonisation. By prioritising the purchase of low-carbon materials and products, companies can significantly reduce their overall carbon footprint. This involves assessing the environmental impact of raw materials, choosing suppliers who are committed to sustainability, and incorporating life cycle assessments into procurement decisions. For instance, IKEA has committed to sourcing 100% of its wood, paper, and cardboard from more sustainable sources by 2020, significantly reducing the environmental impact of its supply chain.
Transportation is a major contributor to supply chain emissions, particularly in industries that rely heavily on global shipping and air freight. Decarbonising logistics requires a combination of technological innovation, process optimisation, and strategic planning.
1. Route Optimisation and Load Efficiency: Optimising transportation routes and improving load efficiency can substantially reduce emissions. Advanced logistics software can help companies identify the most efficient routes, reducing fuel consumption and emissions. Additionally, increasing load efficiency—ensuring that vehicles and containers are fully utilised—can reduce the number of trips needed, further cutting emissions. Companies like DHL have implemented these strategies as part of their GoGreen programme, which aims to reduce the company’s logistics-related emissions by 50% by 2025.
2. Transitioning to Low-Emission Transport Modes: Shifting to low-emission transport modes is another crucial strategy. This includes increasing the use of electric vehicles (EVs), investing in alternative fuels such as hydrogen, and utilising more sustainable modes of transport, such as rail and sea, where possible. For example, Maersk, the global shipping giant, has committed to achieving carbon neutrality by 2050 by investing in carbon-neutral vessels and exploring biofuel options.
3. Greening the Last Mile: The “last mile”—the final leg of the delivery process—often represents a significant portion of transportation emissions, particularly in urban areas. Decarbonising the last mile involves adopting solutions such as electric delivery vehicles, bike couriers, and urban consolidation centres that reduce the number of vehicles on the road. Amazon, for instance, has invested heavily in its fleet of electric delivery vans and is piloting e-cargo bikes in major cities as part of its Climate Pledge.
Leveraging Technology and Innovation
Technology and innovation are key enablers of supply chain decarbonisation. From data analytics to blockchain, companies are leveraging advanced technologies to enhance transparency, track emissions, and optimise operations.
1. Digital Supply Chain Management: Digital supply chain management tools, such as Internet of Things (IoT) sensors, cloud computing, and big data analytics, enable companies to monitor and optimise their supply chains in real-time. These tools provide valuable insights into energy consumption, emissions, and operational efficiency, allowing companies to identify areas for improvement and make data-driven decisions. Microsoft, for example, uses AI and data analytics to optimise its supply chain, reducing waste and energy consumption across its operations.
2. Blockchain for Transparency: Blockchain technology is increasingly being used to enhance transparency and traceability in supply chains. By creating immutable records of transactions and processes, blockchain can help companies ensure that their suppliers are adhering to environmental standards and that products are sourced sustainably. For instance, IBM’s Food Trust blockchain platform allows companies to trace the origin of food products, ensuring that they meet sustainability criteria and reducing the risk of fraud and mislabelling.
3. Circular Economy Practices: Adopting circular economy practices is another powerful strategy for reducing supply chain emissions. This involves designing products for longevity, reuse, and recycling, thereby reducing the demand for new raw materials and the associated emissions. Companies like Philips have embraced circular economy principles by offering products as a service, taking responsibility for the entire lifecycle of their products and ensuring that materials are reused or recycled at the end of their life.
Governments and regulatory bodies play a crucial role in driving supply chain decarbonisation. In the UK, various policies and regulations are incentivising companies to reduce their supply chain emissions.
1. The UK’s Net Zero Target: The UK’s legally binding target to achieve net zero emissions by 2050 has put pressure on companies to decarbonise their supply chains. This target is driving the development of new regulations, such as the introduction of mandatory climate-related financial disclosures and stricter emissions standards for industries.
2. Carbon Pricing: Carbon pricing mechanisms, such as the UK Emissions Trading Scheme (UK ETS), are encouraging companies to reduce their carbon footprints by making it more expensive to emit greenhouse gases. By integrating carbon costs into supply chain decisions, companies are incentivised to choose lower-carbon options and invest in emissions-reducing technologies.
3. Sustainable Reporting Requirements: Mandatory reporting requirements, such as the Streamlined Energy and Carbon Reporting (SECR) framework, require UK companies to disclose their energy use and carbon emissions. This transparency not only holds companies accountable but also encourages them to take proactive steps towards reducing their supply chain emissions.
Decarbonising supply chains is a complex but necessary endeavour for businesses committed to achieving net zero. By engaging suppliers, optimising logistics, leveraging technology, and adhering to regulatory requirements, companies can significantly reduce their carbon footprints and contribute to global sustainability goals.
As businesses navigate this transformation, the role of consultants and advisors becomes increasingly important. The Net Zero Transition Office is dedicated to helping companies develop and implement effective supply chain decarbonisation strategies, ensuring that they not only meet regulatory requirements but also gain a competitive advantage in a rapidly evolving market. By embracing these strategies, businesses can not only mitigate their environmental impact but also unlock new opportunities for growth and innovation in the green economy.