Over the past 20 years, sustainability has gone from nice-to-have to a more important area of focus for companies. While some industries have already done a lot of work in this area, more companies have gained interest as the impacts of global warming are increasingly evident. Though attention has been given to transportation and manufacturing, like how to offset CO2 emissions with electric vehicles or carbon neutral factories, 80% of CO2 emissions are Scope 3, which come from the wider supply chain. This has highlighted the importance of supply chain planning to meet sustainability goals.
But how can supply chain planning tackle sustainability in an impactful way?
In our most recent Big Ideas in Supply Chain video podcast, Stefano Picasso, former VP of Integrated Supply Chain at Carlsberg, speaks with Matt Spooner, Industry Thought Leader at Kinaxis, about the importance of sustainability and how to operationalize it. Specifically, what role supply chain planning can play in helping companies improve sustainability to reduce environmental impacts, meet customer needs, and attract and retain talent.
Here are some of the key takeaways from their discussion.
Bringing sustainability metrics into supply chain planning
Many people working in supply chain don’t have the expertise to tackle sustainability. So, although supply chain planning can have an important role to play, it hasn’t previously been part of the job description.
To help supply chain experts operationalize sustainable practices, Stefano suggests there are two ways that the industry can approach sustainability: CO2 emissions and how to make impactful long- and short-term decisions.
With CO2 footprint generation, major contributors are materials and landfill usage. So, to minimize emissions, companies must eliminate obsolete parts and goods, which can happen during planning. Another major generator comes from transportation of goods. Here, there is a role for supply chain planners to maximize transport loads in terms of weight and volume. Finally, with manufacturing, the right supply chain planning capabilities can help reduce water consumption and minimize environmental impact.
The second approach Stefano highlights is long- and short-term decision making. In the short-term, planning can help make different decisions about inventory, like where to produce goods, where to store them, and when to move them. He suggests planners need to be asking questions like, “Can we get electricity costs down during a certain moment of the day? Can we get more green electricity available?” In the long-term, a company may need to change its global physical footprint to allow more efficient use of roads and trains to reduce CO2 impact.
Though traditionally supply chain planners have had to balance costs, inventory, and service, Stefano suggests that “tomorrow, we’ll have to balance costs, inventory, service and sustainability.”
Leading the way in sustainability
From Stefano’s perspective, supply chain planning shouldn’t just contribute to meeting sustainability goals, it must play a leading role. He attributes this need to three things.
- First, because of the scale of supply chains’ environmental impacts, their sustainability initiatives are essential for making global impacts quickly.
- Second is the need to satisfy new customers who are demanding greener practices from companies.
- Finally, when trying to attract and retain talent, more and more employees are asking about environmentally friendly practices and weighing that in their decision of where to work.
For these reasons and more, sustainability needs to be part of long-term strategic planning and decision-making at every organization, which means including initiatives in integrated business planning and sales and operation planning. Stefano says there also needs to be government involvement to ensure a fair playing field, so companies aren’t at a disadvantage for prioritizing sustainability.
How technology can help
Because of the impact of global warming, many organizations will suffer from major disruptions over the next decade. This will increase the need for companies to react fast to understand when there’s a disruption and what impact it has on their global supply chain. This can only happen with more efficient tools, like digital twins. When you’re dealing with overwhelming disruptions and multitudes of data it becomes a necessity to automate processes to be more reactive.
There’s also opportunity to leverage existing technology for sustainability-focused means. Current planning solutions have improved visibility into the manufacturing and transportation of goods, ensuring planners can achieve reliable day-of delivery for customers. The same monitoring can help measure the CO2 impact of transporting goods. “This visibility into transport will help us in customer satisfaction and in sustainability, enabling us to reach our sustainability targets,” says Stefano.
Reason for optimism
Stefano is optimistic about the potential for supply chain planning to improve sustainability. He believes that by elevating sustainability into bigger organizational discussions, sustainability will improve across the board. By balancing costs, inventory, service and sustainability, organizations will be able to create a brighter future for themselves and the planet.