Corporate sustainability is now regarded as deeply intrinsic to the long-term success of a business. In fact, KPMG’s most recent CEO Outlook found that CEOs rank climate change risk amongst the top three challenges to growth, while 30% are planning to invest more than 10 percent of their revenues in becoming more sustainable. But in the race to ensure greener credentials, how well do businesses understand the complete sustainability picture?
When we talk about sustainability, we tend to place a lot of emphasis on the need to reduce carbon emissions. After all, carbon net zero has become the rallying cry of governments around the world, against a backdrop of stringent targets and timelines. This has led to the reduction of fuel combustion from transport becoming a top priority for businesses, alongside purchased electricity and steam. However, while these emissions do fall under the Scope 1 and 2 umbrella of the Greenhouse Gas (GHG) Protocol, they are highly obvious in nature and unlikely to be missed. A laser focus on just a small piece of the puzzle may be blinding businesses to a much bigger picture, which is why supply chain planners must now take a broader view of sustainability.
Out of sight, out of mind?
Sustainability in the supply chain sector can be compared to an iceberg. Scope 1 and 2 emissions only account for around 20% – forming the iceberg’s tip. A much more substantial section, covering Scope 3 emissions, forms the remaining 80% of the iceberg, hidden under the water and out of obvious sight. The impacts of Scope 3 are much more tightly interlinked with elements of the wider supply chain, including purchased goods and services, business travel, waste disposal and transportation and distribution.
Scope 3 emissions occur along the value chain and are – by nature – outside of a business’s direct control. This could well be why the ‘hidden 80%’ is quietly escaping the radar of organisations. Worryingly, a recent survey reveals that one-third of companies are claiming to be measuring supply chain sustainability, but less than half of them are factoring in Scope 3 emissions. For supply chain planners, it’s time to address this oversight – but they will first need claim their rightful place at the table. Currently, 80% of supply chain managers report having little to no involvement in planning for sustainability, or even being unaware of their corporate strategy for it.
The supply chain covers the flow of goods for source to customer, as does all the associated environmental impacts. Therefore, planners need transparency across the entire network to make better sustainability decisions. Stepping back to take in the bigger picture will enable thinking to extend far beyond emissions, instead including levels of water usage, rare raw material consumption and renewable energy and materials.
Furthermore, supply chain planners must find their voice at the top table and take a pivotal role in educating key members of the board, so that a broad range of targeted sustainability objectives can be met as part of a wider strategy.
Proactive planning using tech
Once awareness has been increased, sustainability must then become embedded into everyday supply chain planning, otherwise efforts to improve can easily be counteracted by poor daily decisions. Without proper planning and control, the complete system can fall in on itself, rendering all efforts inefficient, costly, and wasteful.
Technology is the enabler to efficient planning. Modern supply chain tech solutions leverage a holistic approach, helping to collapse silos to nurture strong enterprise-wide collaboration. Data is harmonised to deliver real-time insights and simulate events for an agile response, helping to ensure visibility for the whole breadth of operations. Crucially, these digital solutions can be applied against Scope 3 emissions, enabling planners to evaluate the supply chain for improvement areas and align with organisational goals.
Effective planning and identification of opportunities has already seen successful for some well-known businesses, including Carlsberg Marston’s Brewing Company. The UK brewer undertook in-depth assessments into its emissions across the entire value chain, in order to set science-based targets in alignment with the 2017 Paris Climate Agreement. This included leveraging technology to collect data on its Scope 3 emissions, with a more recent analysis including primary data from suppliers covering its value chain from raw materials to point of sale. This has enabled them to set and work towards meaningful targets that fully incorporate the entirety of the iceberg, from Scope 1 to Scope 3.
Towards a more sustainable supply chain
Supply chains are the lifeblood of most businesses today, but they are also in service of humanity. This means that sustainable planning can no longer be a ‘nice to have’. Fortunately, more businesses than ever are now taking ownership of their Environmental, Social and Governance (ESG) responsibilities. But to realise their goal of developing the truly sustainable supply chains of the future, planners will need the help of technology.
Innovative digital solutions that utilise machine learning (ML) and artificial intelligence (AI) are already playing a key role in empowering supply chain planners to turn corporate commitments into tangible action. Crucially, this technology helps to place Scope 3 emissions on an equal footing with Scopes 1 and 2, enabling sustainability objectives to be incorporated throughout the wider value chain. This, in turn, strengthens the efficiency of the supply chain, increasing the likelihood of its ongoing growth over the years ahead. In the here and now, however, the first crucial step towards a sustainable supply chain is to remember the iceberg and take a broader view.