It doesn’t matter whether you’re a Fortune 500 giant or a small, local business. There is a good chance your supply chain is responsible for most of your carbon footprint. But why is reducing your carbon footprint important for your business?
Your carbon footprint describes the total volume of greenhouse gasses that your daily business activities generate. Greenhouse gasses, like carbon dioxide and methane, are major contributors to global warming, pollution, and climate change.
In other words, they cause significant environmental harm. Plus, they impact your finances, brand reputation, and revenue potential.
Before we delve into some best practices to help you reduce your carbon footprint, let’s quickly understand how to calculate it.
How to Calculate your Carbon Footprint
To calculate your carbon footprint, you need to quantify the business activities that generate carbon emissions. This includes collecting data on Scope 1, 2, and 3 emissions.
- Scope 1 emissions: Direct, company-owned greenhouse (GHG) emissions, such as fuel burning, company vehicles, and industrial processes.
- Scope 2 emissions: Indirect GHG emissions, such as water, electricity, and gas consumption.
- Scope 3 emissions: Indirect emissions within your supply chain, including the purchasing and transportation of goods, end-of-life disposal of sold goods, and employee commuting.
Online tools can help you calculate your carbon footprint, whether you want to focus on your logistics operation using a tool like Ceva Logistics or explore the possibilities of integrations like Sage Earth as they become available for your region, and look at your entire operation.
Once you’ve done it, you can pinpoint areas for change and implement the best practices we’ll go through together. But first, why is reducing carbon footprint important in supply chain management?
Exploring the Importance of Carbon Footprint in Modern SCM
Let’s explore why you should pay attention to your carbon footprint in SCM—to benefit the environment and your business.
Consumer Trust
Consumers want to know that companies follow ethical and sustainable practices—but there’s a growing lack of trust in the authenticity of brands’ claims. It’s not enough to just say you’re eco-friendly—you must prove it.
A recent EY survey found that 52% of consumers trust companies publicly sharing their long-term ESG (environmental, social, and governance) initiatives and goals. A well-defined and communicated sustainable SCM strategy can help close the trust gap.
Environmental Sustainability
The carbon emissions from unsustainable supply chain practices have a severely adverse environmental impact. Businesses can reduce their carbon footprint through a range of initiatives—for example, by purchasing sustainably produced goods from local suppliers or using net-zero data centers—to protect the environment.
Employee Engagement
Employees are more likely to feel connected and motivated when working for an organization prioritizing sustainable conduct. By fostering supply chain transparency, fairness, and a sense of purpose, businesses empower employees to be advocates for positive change, driving engagement and productivity.
Supply Chain Resilience
A sustainable supply chain fosters resilience by mitigating risks associated with resource scarcity and environmental disruptions. Conversely, resilient supply chains enhance sustainability by adapting to challenges and promoting efficient resource utilization, thus contributing to long-term environmental and social viability.
Business Impact
And what about the business impact? Why is reducing your carbon footprint so vital to your company’s longevity?
Cost Savings
Reducing your carbon footprint can save you money.
Investing in energy-efficient equipment and locally sourced materials can save long-term costs and boost bottom-line profit. A recent study by McKinsey found that high-performing sustainability reduces costs by 5-10% and boosts growth and valuation margins by 10-20%.
You can employ cloud-based accounting software here. Customized reporting delivers the data you need to identify inefficiencies and reduce spending. You can calculate how green investments save you money and get clear insights into how different choices make an impact.
Appeal to Environmentally Conscious Consumers
Consumers actively seek businesses with sustainable SCM practices. According to the EY survey previously mentioned, 74% of high-income consumers—and 54% of lower-income consumers—make purchase decisions based on the company’s alignment with their sustainability values.
Integrating sustainability and social responsibility into your company’s core messaging can appeal to environmentally conscious customers and boost your business revenue and growth.
Resource Management
Supply chain processes use—and waste—resources in abundance. The implementation of green procurement policies and practices, such as energy-efficient appliances, paperless initiatives, and sustainable product sourcing, can help you use resources more efficiently to reduce waste.
6 Strategies For a Greener Supply Chain
If you want to implement sustainable practices in SCM but aren’t sure where to start, here are six strategies to get you going.
1. Develop Green Procurement Practices
Green procurement practices guide your business toward the sustainable acquisition of materials, supplies, and services. They help businesses prioritize purchasing products that do minimal environmental harm and have a positive social and human health impact.
- Using energy-efficient appliances, lighting, equipment, and vehicles.
- Investing in renewable energy, such as solar, wind, or hydro energy.
- Purchasing building materials that are recycled, upcycled, or recyclable.
- Omitting the use of non-eco-friendly products (single-use plastics, toxic cleaning products, styrofoam containers, etc.) and replacing them with sustainable alternatives.
- Partnering with local, sustainability-focused suppliers.
Green procurement doesn’t just consider the immediate environmental impact of products and services. It takes a holistic approach, aiming to understand every purchase’s short- and long-term ESG implications.
2. Choose Sustainable Suppliers
McKinsey’s research found that two-thirds of a company’s ESG footprint is tied to suppliers. So, sourcing suppliers demonstrating the same commitment to reducing their carbon footprint should be foundational to your sustainability initiatives.
Gather your selection criteria and vet suppliers to make sure they meet your sustainability requirements. For example, consider whether the supplier:
- Uses sustainably harvested raw materials or better yet, recycled or upcycled material.
- Has an environmentally friendly method of transporting materials.
- Uses eco-friendly packaging or minimal packaging.
- Has sustainability strategies, policies, guidelines, and metrics that are in place.
- Is a local supplier (opting to use local suppliers and micro-suppliers reduces carbon emissions from transportation).
3. Build Strategic Partnerships for Long-Term Savings
By fostering strategic, collaborative partnerships with like-minded businesses, you can work together to implement long-term environmental and cost savings.
From a carbon footprint perspective, working with your suppliers to reduce emissions is called insetting. This process is recognized as a very positive business practice.
The initial costs of implementing sustainable practices (such as energy-efficient technologies or higher-priced sustainable materials) often deter businesses from going green. However, long-term, investing in sustainability can result in significant cost savings and revenue gain. Adopting energy-efficient appliances, for example, reduces energy bills.
Sustainable raw materials from local suppliers might be more expensive than the alternative. However, you benefit from reduced travel expenses and improved operational efficiency, both of which have a positive long-term financial and environmental impact.
Plus, with the help of sustainable suppliers and other strategic partners, you can unlock new perspectives and insights for reducing your carbon footprint.
Partnering with sustainable shipment and delivery services, for example, can help you optimize routes so products are transported using the minimal amount of fuel required. They can also set up real-time shipping notifications to guarantee that deliveries are successful on the first delivery attempt.
And don’t forget about digital solutions. Not only are they cheaper than power-hungry legacy systems, but 91% of executives surveyed by Google agreed that digital technologies make sustainability possible. Among the biggest benefits are their potential to enable sustainability-boosting automation and reduced carbon footprint from remote working.
4. Prioritize Regulatory Compliance
Being environmentally conscious is more than just a legal obligation—but remaining compliant with regulations should be a priority nonetheless. Regulations hold you accountable and guide you to develop and improve better sustainability practices.
For example, the Inflation Reduction Act rewards businesses with tax redundancies when they implement certain sustainable practices, such as buying carbon capture and storage systems. However, it also fines businesses that don’t abide by specific environmentally conscious practices, like exceeding the federal limit on methane.
Some businesses must obtain environmental permits from their local or state agency and make sure their activities align with the conditions laid out by the regulators. Local and state environmental regulations cover hazardous waste management, water pollution control laws, and air quality regulations.
5. Implement Monitoring Systems
Monitoring sustainability across your supply chain is vital for tracking emissions over time. Even as you scale and your supply chain grows more complex, maintaining visibility at each stage of the chain should remain a priority.
Retail accounting software centralizes your data, providing clear insights across all your retail channels so you can identify areas for improvement. This kind of system also boosts efficiency by helping you automate order processing and inventory management, minimizing wastage, and giving you firm control over your stock.
You can build on this by implementing monitoring systems that specifically track your environmental metrics.
Sustainability software solutions enable performance tracking across various sustainability metrics. This includes energy usage, waste generation, greenhouse gas emissions, plastic reduction, water consumption, and more.
These solutions automate data collection across your business and streamline analysis and reporting to generate speedy reports and insights. Stay updated with the latest sustainable technology developments to take advantage of other useful software.
6. Minimize Wastage Across Your Business
Waste reduction strategies minimize the volume of non-decomposing landfill waste and emissions. So, implement waste reduction strategies across your entire business—from your offices and warehouses to your shop floors and kitchens.
- Compost food waste.
- Recycle and upcycle leftover materials and old equipment.
- Adopt double-sided printing (or even better, use digital alternatives).
- Reduce packaging by buying in bulk—and only buying what you need.
- Use reusable items instead of single-use items.
Final thoughts
Let’s cycle back to our earlier question: why is reducing carbon footprint important?
Preserving and protecting the environment is at the heart of sustainable business initiatives—but there are other perks to going green. Adopting sustainable best practices, such as choosing sustainable suppliers and implementing green procurement practices, also gives you a competitive advantage.
Save money, attract new customers, and improve your reputation—all while doing your part to save the planet.
Disclaimer: The author is completely responsible for the content of this article. The opinions expressed are their own and do not represent IEEE’s position nor that of the Computer Society nor its Leadership.
