11-08-2024
Manufacturers are increasingly prioritizing sustainable supply chains due to shifting consumer sentiments, technological innovations, and evolving supply chain dynamics. Notably, about 20% of the world’s largest companies have committed to net-zero emissions, influenced by regulations like California's Climate Corporate Data Accountability Act and the SEC’s climate disclosure rules. Supply chains contribute approximately 75% of a company’s emissions on average, making them a critical focus for decarbonization. However, challenges such as complexity and limited visibility, difficulties in quantifying indirect emissions, and the need for collaboration with suppliers and consumers can be costly and resource intensive.
Despite these challenges, decarbonizing supply chains offers significant benefits. Companies often realize cost savings through efficiency improvements, which also help in avoiding future costs by identifying and mitigating risks. Furthermore, new data sources from sustainability efforts can enhance analytics and profitability, while aligning with consumer preferences for sustainable products.
To achieve sustainability goals, companies should begin with a thorough assessment of their current operations to identify areas for improvement. A holistic approach is essential, focusing on the entire value chain to prioritize goals and metrics. Engaging stakeholders is crucial; securing buy-in from suppliers and customers, standardizing frameworks, and building supplier engagement programs can drive progress. Investing in data and reporting is vital, as digital transformation facilitates the management and reporting of data to meet regulatory standards. Leveraging technology, such as digital tools for data centralization, automation, and integration, supports the decarbonization process.
In conclusion, decarbonizing supply chains is critical for meeting regulatory and consumer demands. While there are challenges, significant returns are expected through cost savings, risk mitigation, and new profit avenues. Companies should develop a strategic roadmap to guide their sustainability efforts effectively. For more information, please read a more detailed article on this topic here.
Matt Bauke is a 2016 Daniels School of Business graduate and is currently a principal in West Monroe’s Operations Excellence practice, specializing in supply chain management, transportation and fleet execution, sustainability, and process improvement.
