The manufacturing and distribution of goods by consumer businesses requires access to affordable, reliable energy and natural resources, as well as permission from consumers, investors and regulators. Companies cannot take these enabling factors for granted any longer, however. The scientific consensus, coupled with pledges by government and business leaders, calls for dramatic improvements in sustainability performance. Companies must reduce greenhouse gas emissions significantly to achieve global climate goals while meeting growing demand.
Supply chains have the greatest room for improvement to meet sustainability goals, with emissions coming from multiple sources, according to the Center for Climate and Energy Solutions: electricity and heat, transportation, manufacturing, agriculture and forestry. According to McKinsey Sustainability research, by 2050, consumer product companies “must reduce their GHG emissions by 92%, relative to revenues.” Those interested in pursuing careers in supply chain management should consider the importance of these figures and how their field affects sustainability.
Impact on Greenhouse Gas Emissions
McKinsey Sustainability reports that supply chain impacts account for more than 80% of greenhouse gas emissions when accounting for their overall climate impacts. According to the CDP Global Supply Chain Report 2021, 11.4 times more emissions come from a company’s supply chain than its direct operations.
“Eight global supply chains account for more than 50% of annual greenhouse gas emissions,” according to Boston Consulting Group (BCG) research. Scope 3 greenhouse gas emissions are particularly important to meet supply chain climate goals. These are indirect upstream and downstream emissions, such as those created by suppliers and customers. Carbon emissions are a primary cause of climate change, yet many companies struggle to quantify carbon emissions, especially in the supply chain.
To reduce emissions, BCG recommends the following steps, among others:
- Establishing an emissions baseline
- Exchanging data with suppliers
- Setting ambitious reduction targets
- Publicly reporting progress
- Designing the value chain and sourcing strategy for sustainability
These are essential actions to take, considering the influence of the supply chain on sustainability, including its effect on natural habitats and resources.
Influence on Biodiversity and Geological Resources
Supply chain systems affect every step of the circle of life. McKinsey Sustainability reports that supply chain impacts account for “more than 90% of the impact on air, land, water, biodiversity, and geological resources.”
The supply chain’s effects on biodiversity can be both direct and indirect. Direct impacts include the destruction of habitat due to clearing land for agricultural production, the introduction of invasive species, overharvesting and the application of harmful pesticides. Indirect impacts include the introduction of air and water pollution, soil erosion and climate change. These impacts can have devastating effects on biodiversity and lead to species extinction — which also affects resource supply.
To reduce the impacts of the supply chain on biodiversity, businesses should focus on reducing their environmental footprint and supporting conservation efforts. They must also strive to work with suppliers to improve their environmental performance and seek to collaborate with other companies in their sectors to develop joint solutions to biodiversity issues.
The raw materials supply chain can have a significant impact on geological resources. Potential adverse effects on the environment and worker safety complicate efforts to recover critical minerals from unconventional sources, such as deep sea beds and tailings from processing plants. A primary cause of environmental impacts along raw materials supply chains is the use of natural resources, such as those used to produce corrugated cardboard and the emission of pollutants to the environment.
Where the Potential for Improvement Lies
Reducing the carbon footprint of supply chains will go a long way toward reducing environmental impact. Making “green” changes doesn’t always involve a complete business overhaul, but committing to being more sustainable can inspire more companies to do the same.
Strategies for reducing the carbon footprint of a company’s supply chain include:
- Increasing efficiency and reducing waste
- Reusing and recycling resources
- Ensuring transparency and communication between partners
- Finding like-minded suppliers
- Setting sustainability targets
- Reviewing and overhauling logistics
- Advancing planning and adaptability
Electrifying vehicles to move away from burning fossil fuels for transportation and consumers choosing sustainable goods are two examples of ways to reduce the carbon footprint.
What the EPA Is Doing to Address These Issues
The Environmental Protection Agency (EPA) is taking steps to address the supply chain’s carbon footprint by introducing the Greenhouse Gas Reporting Program. This program helps businesses track and report their greenhouse gas emissions, providing them with valuable insights into the sources of their emissions and helping them identify areas for improvement. The EPA also encourages businesses to invest in energy-efficient technologies and practices and develop strategies to reduce their carbon footprint. Furthermore, the EPA is developing partnerships with suppliers and other stakeholders to foster a more sustainable supply chain.
University of Wisconsin-Parkside’s online Master of Business Administration (MBA) with a Concentration in Supply Chain Management program examines techniques for managers to enhance decision-making for better supply chain management, including a reduction in carbon footprint. Students can complete the program in as few as 12 months and learn to implement effective strategies related to supply contract methods, inventory management, network planning and distribution.
Learn more about the University of Wisconsin-Parkside’s online MBA with a Concentration in Supply Chain Management program.