Tactics for Building Sustainable Supply Chains

In a world still reeling from the impacts of the COVID-19 pandemic, supply chains face a myriad of operational challenges. Raw material scarcity and labor shortages have compounded these challenges, making it imperative for businesses to rethink their strategies. Beyond logistical hurdles, supply chains are a significant contributor to environmental issues, accounting for over 90% of emissions. This has led to increased consumer demand for transparency, along with legislative pushes for climate-related disclosures.

Challenges and Pressures on Supply Chains

Supply chains have long been the backbone of global commerce, but the pandemic has exposed their vulnerabilities. The scarcity of raw materials and labor shortages have disrupted operations, leading to delays and increased costs. These disruptions have highlighted the need for more resilient and adaptable supply chain models.

Additionally, the environmental impact of supply chains cannot be ignored. They are responsible for over 90% of global emissions, making them a critical area for climate action. Consumers are increasingly aware of this impact and are demanding greater transparency in supply chain operations. Legislators are also stepping up, pushing for more stringent climate-related disclosures to hold companies accountable.

The Role of Technology in Sustainable Supply Chains

The integration of technology into supply chain management presents opportunities to enhance sustainability. Smart supply chains, which leverage advanced technologies, are inherently sustainable. They have the potential to significantly reduce carbon footprints through intelligent design and operations. Data-driven supply chains enable end-to-end efficiency, allowing for better resource management and reduced waste.

A key challenge for manufacturers is tracking emissions across different scopes. While Scope 1 emissions relate to direct emissions and Scope 2 to energy consumption, it is Scope 3 emissions—those occurring in the supply chain—that pose the greatest difficulty. Collaborative data-sharing ecosystems can improve the tracking and management of these emissions, contributing to overall sustainability.

Circularity and Reverse Logistics

One of the strategies gaining traction is the focus on the full product lifecycle, which includes developing plans for reverse logistics. This involves creating systems to return products back into the supply chain for reuse, recycling, or proper disposal. Circularity in supply chains can substantially reduce carbon emissions by minimizing waste and optimizing resource use.

Despite its benefits, reverse logistics is a challenging area for manufacturers. It requires careful planning and integration of sustainability data into logistics operations. However, the push from consumers and governments for sustainable practices is driving companies to overcome these challenges.

Regulatory and Consumer Influence

The push for sustainable supply chains is not only consumer-driven but also influenced by government regulations. Heightened sustainability requirements and ESG (Environmental, Social, and Governance) regulations, such as the CSRD (Corporate Sustainability Reporting Directive) and CSDDD (Corporate Sustainability Due Diligence Directive), are compelling companies to adopt more sustainable practices.

Successful supply chain strategies now include strong capabilities in supplier engagement and management, which supports compliance with ESG regulations. Integrated capabilities for compliance and risk management offer end-to-end solutions for ESG and product compliance, assisting complex manufacturers in navigating regulatory landscapes.

"Advancements in AI technology are helping to supercharge creativity in various industries," notes a recent report. While not directly linked to supply chains, these advancements highlight the broader trend of integrating technology to solve complex problems.

As companies strive to incorporate climate action and ethical governance into their operations, the focus on sustainable supply chains becomes more pronounced, driven by consumer expectations and regulatory demands.