4 ways companies can build low-carbon supply chains
Reading about Sony’s 2001 "Cadmium Crisis" in Daniel Esty’s "Green to Gold" book was my first introduction to the financial gravity of environmental noncompliance.
This incident had cost the company $130 million, which all began as a result of its inadequate supply chain policies. This illustrated the importance of having sustainability integrated into supply chains — and not as an afterthought.
Understanding this context was important and had me questioning how much has really changed in the last 19 years. As such, I was thrilled to attend GreenBiz 20, where I had the opportunity to sit in on the Supply Chain Transparency Summit. Both the summit and the conference were incredibly useful in providing a broader context of current best practices as well as a place to learn about the challenges many companies are facing as they embark on greening their supply chains.
The first thing that became immensely clear was the staggering number of companies that are all increasingly concerned by their supply chain emissions. This is no surprise given the 2019 CDP report (PDF) which found that companies’ supply chains create, on average, 5.5 times as many greenhouse gas emissions as their own operations. Accordingly, as businesses begin to more fully realize the breadth of their supply chain emissions, they are adopting strong supply chain emission reduction targets.
These goals often target material sourcing and procurement policies. For example, handbag maker The Sak recently committed to improve the sustainability of its production and sourcing, including a 2023 goal for 100 percent recycled lining materials in its bags. Elsewhere, spice giant McCormick set a 2025 goal for 100 percent circular plastic packaging. These commitments represent a tremendous opportunity for sustainability managers to adopt and implement cutting-edge policies for sustainable sourcing and materials.
In understanding emission reduction goals, it’s helpful to use the GHG Protocol framework (PDF), which defines the three main "scopes." Scope 1 covers direct emissions from owned or controlled sources, Scope 2 covers indirect emissions from the generation of purchased energy and Scope 3 covers all other indirect emissions that occur in the company’s value chain.
So how should companies tackle their Scope 3 emissions? Below are some ideas to help companies evolve and build their sustainable supply chain strategy.
1. Learn from your peers
When it comes to greening supply chains, many tools are available for companies embarking on this journey.
The first and most important resource available is industry peers. At GreenBiz 20, many companies shared their commitments around supply chain emissions reductions as well as insights for how those initiatives are proceeding.
From McDonald's 2001 commitment to sustainable fish to Walmart’s 2017 Project Gigaton launch, the age of these supply chain journeys ranges widely. This is useful, because it allows for sustainability managers to learn from both pioneers and those that are just starting. Pioneers are critical for teaching others how to avoid common pitfalls.
One such example is Chobani’s Milk Matters program. During a GreenBiz 20 plenary discussion, Chobani President Peter McGuinness spoke about the importance of working with the supply chain department to elevate the financial stability of their farmers and improve sustainability across the value chain. The program includes an "Environmental Stewardship" pillar which tracks the greenhouse gas emissions of supply chain partners, thus creating baseline data that will help for Chobani’s long-term goal of creating a sustainable sourcing roadmap.
Learning from tried and tried programs can provide context on approaches that work while speaking with those who are just getting started can illustrate which strategies and talking points are the most effective for obtaining stakeholder buy-in. Panelists from the Transparency Summit advocated for obtaining stakeholder buy-in by finding specific hooks. For example, Walmart’s Project Gigaton helps to ensure long term stability in their supply chain and can be used in a new marketing strategy to target changing consumer preferences.
2. Work with sector-specific coalitions
Many groups work exclusively on sector-specific supply chain sustainability, such as the U.S. Roundtable on Sustainable Beef or the Sustainable Apparel Coalition. These groups can serve an important role in providing tools and resources to help companies along their journey.
By bringing together both big and small players in the field, these groups help a sector work collectively to tackle a challenge and have a much larger impact than the efforts of any single company.
What’s more, working with a sector group allows for pre-competitive collaboration, another theme discussed during the Supply Chain Transparency Summit. Pre-competitive collaboration allows for a transparent and frank discussion of the work done to date and its success, while also introducing the possibility of collaborating to create industry-wide standards.
By transparently working together, companies can learn about best practices and collectively can raise the bar. What’s more, these groups are critical for innovation and research, essential for surfacing the best strategies and policies to work on supply chain emission reduction. Finally, these groups also can provide members the opportunity to try these untested initiatives without negative recourse from the public — as they’ll be seen as leaders and innovators for trying these new practices.
To sum: sector groups can help with innovation, collaboration and risk minimization.
3. Collaborate vertically down your supply chain
Beyond collaborating with industry peers, collaboration with other organizations up and down the supply chain is equally important. Groups such as the Dairy Sustainability Alliance (DSA) and the Roundtable on Sustainable Palm Oil are multi-stakeholder initiatives that bring together all members of the supply chain and help to create a forum for open dialogue and collaboration.
These groups can determine best practices and provide context for the emission baseline of various members of the supply chain. The DSA’s Dairy Stewardship Commitment (PDF) is one such example of a stakeholder-approved sustainability reporting process that provides a standard tool for all members of the supply chain to use. This allows for stakeholders to gain a better understanding of the expectations and goals of various supply chain strategies.
Groups such as this can also create more effective industry-wide standards, which can set minimum requirements and collectively raise the bar and spread the cost of these initiatives more equitably.
Time and time again, it’s clear that all companies face resource and time constraints. As such, creating uniform standards in the industry can help minimize risk for everyone, while collectively raising standards and reducing costs. Another benefit: these groups are the ideal platform to provide all stakeholders educational information, tools and resources no matter where someone is on their emissions reduction journey.
4. Integrate sustainability professionals into decision-making
Make sure sustainability professionals are integrated within whichever department manages the supply chain. In order for there to be long-term supply chain emissions reduction, it is critical that the staffers making these decisions are always considering the sustainability implications.
While sustainability might not be the first consideration in the decision-making strategy, it should still be considered. This is critical for creating a priority list of which supply chain issues to target first. Nothing is wrong with targeting low-hanging fruit; however, it is also important to strive for constant progress. Companies should avoid falling into the trap of achieving "quick wins" and stagnating afterward due to a lack of strong commitment.
A truly sustainable supply chain is full of obstacles and can be capital-intensive. But sustainability professionals, especially those who have studied the nexus of business and the environment, are well equipped to navigate these challenges and deliver both emission reductions and financial success.
It is prudent that companies have key sustainability personnel in their supply chain departments and recognize that the road to long-term emissions reductions is long. As such, having sustainability professionals in these departments, in positions of power, is critical for long-term success.
While the path towards emissions reductions can be long and winding, plenty of tools, resources and collaborators are available to companies as they set forth on this journey.