What is the future of sustainability in the supply chain?
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Every once in a while I find myself in a bit of a philosophical debate at conferences, and usually, it has to do with sustainability.
"Supply chain sustainability" has been building up steam in recent years, as consumers become more environmentally conscious and look to corporations to do the same. Look at most multinational corporation's web pages today, and you will find dozens of pages on how the company is also looking to make the world a better place. The initiatives stretch throughout the value chain, from packaging to transportation and waste management.
The efforts are laudable; but, more and more I find myself questioning their significance. A single company can set high goals, but to achieve a truly sustainable supply chain, each partner must do the same, too.
In other words, we have been talking about corporate sustainability for years, but the longer I hear about it the more I wonder: when will we reach the tipping point that will make the term a key value rather than a goal? And where are we, today? Here's what our experts think.
Based on the past year, will we see greater progress in 2018 or more of the same?
Cathy Morrow RobersonFounder and Head Analyst, Logistics Trends & Insights
In 2018, we’ll continue to see progress in sustainable supply chains. More logistics providers that are asset-based, for example, are taking sustainability into consideration when purchasing transportation. Fuel savings is typically the biggest goal but environmental responsibility is also a growing goal.
Earlier this year, UPS announced it would add additional compressed natural gas (CNG) fueling stations and add 390 new CNG tractors and terminal trucks and 50 liquefied natural gas (LNG) vehicles to its alternative fuel and advanced technology fleet which has more than 4,400 vehicles. As a result of using more natural gas for its ground fleet, in 2016, UPS decreased CO2 emissions by 100,000 metric tons.
Also, as more inner-city deliveries are made, FedEx, UPS, DHL and other delivery providers are parking their gas guzzling vans and instead are turning towards electric vehicles, boats and bicycles.
Packaging is also becoming more sustainable. Thanks in part to Dimensional weight pricing, there is less wasted space in delivered packages. However, thanks to the growth of e-commerce, package volumes have increased. In fact, the Fibre Box Association estimates that the use of boxes for e-commerce was growing faster than most other market segments. According to one article I came across, because consumers receive more products directly, they recycle less and throw away more — in part because of confusion over what is recyclable. If this is the case, more needs to be done to encourage recycling particularly as e-commerce takes a larger control over customers’ wallets.
Moving forward, I believe we’ll see more emphasis on reusable packaging. DHL, FedEx and UPS all offer reusable packaging but more is needed. In addition, a change in customer mindset needs to occur as well – Reduce, Reuse, Recycle.
Jon SlangerupPresident and CEO, American Global Logistics
There is significant evidence that points to the ongoing greening of the supply chain, primarily driven by technology. Cleaner ships, trains, planes and trucks combined with automation and cleantech introduced into cargo handling and warehousing operations are accelerating. And environmental policies at national and regional levels are driving investment and green compliance on a global scale.
As examples, the recent announcement by the Long Beach/Los Angeles port complex adoption of their last joint Clean Air Action Plan commits a billion dollars to increased on-dock rail infrastructure that will dramatically cut local truck trips and road congestion. Meanwhile, the Chinese central government is mandating the cleanup or shutdown of industrial infrastructure, including the country's major ports and manufacturing centers.
In Europe, Germany and the Netherlands are leading the way with ongoing investments in green transportation and automated ports, matched only by the progress at the LB/LA port complex. And not least, the headlong push into supply chain software solutions is eliminating efficiencies and congestion that directly reduces energy and fossil fuel consumption.
There are no signs that the push for environmental sustainability is slowing down.
Karin BursaExecutive Vice President, Logility
The supply chain is one of the most impactful components of a company’s sustainability efforts. Each year brings more progress as public attention increases and the supporting processes and technologies advance and mature. We have ‘green KPIs’ on dashboards and homepages tuned to measure how well each plan supports company environmental goals.
The most powerful approach is to eliminate or minimize waste before it is created. Today, sustainability is a key factor many companies address as they introduce new products. From product design to the sourcing of materials and packaging to the distribution of goods to the customer, each step along the supply chain has a direct impact on sustainability. Removing waste throughout this process also reduces costs further building the business case for supply chain sustainability initiatives.
In 2018 we expect more companies to digitize their supply chains. By definition, digital supply chains are leaner, help eliminate waste and minimize obsolescence through the use of advanced algorithms to evaluate multiple scenarios and create the optimal plan. Multi-echelon inventory optimization (MEIO), for example, is a significant contributor to sustainability efforts by optimizing the placement of inventory to efficiently and cost-effectively serve customers across broad geographic networks. Customer service improves, costs go down, obsolescence is dramatically reduced, and sustainability goals are achieved. It’s a win-win situation.
Tania SearyFounding Chairman, Procurious
Despite the fact that it has been difficult to gain real traction on sustainability within supply chains, I am confident we will see increased momentum over the coming year.
From a regulatory perspective, the introduction of the UK Modern Slavery Act in 2015 was a key milestone for drawing attention to purity within our supply chains. Other countries are now set to follow this example.
The introduction of the International Standard for Sustainable Procurement ISO20400 this year establishes an important global framework for all to follow.
With such large percentages of spend being consumed by third parties within our supply chains, we are all exposed to the vulnerabilities of poor practices within our multi-level supply relationships.
Following so many high profile sustainability “incidents”, we are all well aware of the significant negative impact poor sustainability practices can have on consumer and shareholder confidence, and therefore corporate value.
Consequently, there is an increasing demand from all parties for improved transparency and accountability. The challenge all supply chain leaders have is securing the resources required to monitor all players within the value chain. They need to find ways to resource this knowledge gap.
What gives me confidence that we will see increased momentum is evidence that the market is responding to this capability gap, with an increasing number of consultancies and technology solutions providing corporations with tools and services to achieve transparency.
Being provocative, I have often suggested that if we moved all the CSR and Corporate Affairs headcount into procurement & supply chain departments, we would have increased monitoring of sustainability risks (protecting our brands) and more “good news” stories (positive PR) to tell about how our organisations deliver value to the community. It could be a better investment in our brand equity to protect shareholder value.
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