For many companies worldwide, their carbon footprint is like an iceberg. They think a lot is on the surface and can be calibrated, but in reality there’s much more lurking below unmeasured. Why? Because carbon emissions don’t just stop at the factory gates; they leak out like a fog across all suppliers. So if we’re to tackle the climate crisis, we need to start greening global supply chains.

“The main issue for any company is that their total emissions are on average five times greater than their operational output, but are outside their direct control. The only way to reduce supply chain emissions and stick to a 1.5C future is to engage suppliers and reduce emissions at source,” says Sonya Bhonsle, global director of supply chains at CDP, the Carbon Disclosure Project.

The challenges of decarbonising are as complex and intricate as supply chains themselves. Many companies are starting from ground zero, others source their suppliers based on value for money, which can mean working with less emission-friendly partners. 

Depending on contract sizes, sometimes the level of influence a company has may be very low

“It doesn’t help that creating a baseline for supply chain emissions requires substantial time and effort given sustainability data is often incomplete,” explains Hugh Jones, managing director, advisory, at the Carbon Trust. “Companies also have varying levels of relationship with suppliers. Depending on contract sizes, sometimes the level of influence a company has may be very low.”

This hasn’t stopped corporations taking action. In 2008, 2,300 or so suppliers were asked to disclose their emissions by 19 supply chain members who had signed up to CDP; 634 responded to their customers. The latest data for 2019 shows more than 13,000 requests went out from 125 corporations and almost 7,000 companies replied, detailing their carbon output. Times are changing.

“Every year suppliers disclose to their customers data on their emissions reductions through CDP’s system. In 2018 suppliers reported an annual saving greater than 1 per cent of all global emissions. We’ve seen amazing progress, but there is still a long way to go,” says Ms Bhonsle, whose organisation works with the likes of Walmart, P&G, Tesco and Cadbury Schweppes.

What’s measured gets managed

Energy efficiency, using renewable energy, electrification of transport, reduction of waste, as well as optimising processes and deliveries, are areas where suppliers achieve easy gains when reducing emissions. 

“This involves procurement teams making sure they embed carbon requirements in contracts. It needs to be clearly set out by way of legal obligations,” says Matthew Germain, partner at international law firm Osborne Clarke. 

The pyramid effect is also starting to work. Titans of global industry, spurred on by pressure from investors and the public, are demanding their supply chains decarbonise. For instance, 84 per cent of Dell’s suppliers now have targets to reduce emissions and report on progress, while BT aims to cut supply-chain emissions by 29 per cent by 2030.

“It’s all about data; it means everything when it comes to helping big companies meet ambitious targets along their supply lines,” explains Richard Mathias, senior technology architect, Europe, Middle East and Africa, at LiveArea. “Now specialist analytics firms are springing up to offer data services.” 

Procurement specialists agree that greening supply lines takes leadership. “If there’s no support from the boardroom, the chances of these conversations leading to a successful reduction of emissions are very slim,” says Colm McDaid, head of sustainability for Europe at Fujitsu.

“It’s important that procurement teams and those who know the supply chain best form an active part of the process, setting out the vision. They also must have an opportunity to communicate this to the board, who can then ensure this is reflected across the entire business.”  

Creating a green ecosystem 

Collaboration is another factor when it comes to creating low-carbon supply chains; suppliers and customers cannot exist in silos. “Co-operation also helps drive innovation and fosters sustainability initiatives. For example, Marks & Spencer worked with produce suppliers to decrease water wastage, reducing the risk of low food yields, an effort that helps bring down costs, reduces emissions and boosts green credentials,” says Alex Saric, smart procurement expert at Ivalua. 

The greening of global supply chains is also occurring while they’re digitalising. For some it’s a perfect storm, for others a real opportunity, creating greater visibility of supplier data. This allows better decision-making when it comes to decarbonising. 

CDP says it’s passionate about the power of data to create positive change. Yet integrating the environmental agenda into digitalised supply chains will only happen when everyone sees it as a real opportunity. That’s the issue.

How have companies changed their approach to sustainability?

Quite drastically. What was often something tucked into a corporate social responsibility (CSR) corner, or run as a parallel stream alongside other social issues they had to be wary of, is now increasingly influencing mainstream decision-making around business strategies and supply chains. 

It has advanced from being a peripheral concern to something very central to the value a company creates for its customers and shareholders.

What trends have made sustainability so important?

Growing numbers of consumers will turn their backs on companies that do not demonstrate sustainability. As younger generations, who rank sustainability most highly, become more influential purchasers, this issue will determine which companies succeed.

Also, a recent survey by Swytch found that three quarters of millennial workers would be willing to accept a smaller salary to work for an environmentally responsible employer. Four in ten millennials said they had chosen a job because of company sustainability. 

I recently read a survey by CDP of 8,000 suppliers that sell to 75 large global companies. Of those, 72 per cent said climate change presents significant risks that could hugely impact their operations, revenue and expenditures. 

Put simply, the idea that CSR goals are disconnected from revenue, or a block to efficient business, is a thing of the past. 

How has this impacted company supply chains?

Let’s think about it in relation to the consumer goods industry. Around 80 per cent of the greenhouse gases in most consumer goods categories are in their supply chains, according to McKinsey. Therefore, to make any kind of impact on sustainability initiatives, supply chains must be transformed.

Sustainability has made supply chain a more critical function than ever. Supply chain has always been able to reduce costs through operational efficiency, but if companies can reduce inventory, while maintaining customer service levels, then they can also reduce waste. For example, by reducing the number of high-tech products or pharmaceuticals that go into landfills, businesses can not only save money, but also reduce environmental toxins. 

Parallel to this, supply chains are where many of the higher operational costs lie. As climate change introduces increased risk, this brings additional costs, as supply chains can be slow to adapt to such a fast pace of change. 

We need only look at what happened to many global companies after Hurricane Irma hit North America in 2017. Many were unable to move or adjust their supply chains in time and as a consequence were forced to announce losses to Wall Street, which is not something any chief financial officer wants to do. 

For all of these reasons and more, it is imperative that supply chains become more agile to adapt to a more volatile world, to keep up with trade tariff changes, increased regulation and increasing speed of change. Supply chain transformation is becoming a board-level topic to help navigate rough seas, embrace new market opportunities and drive more sustainability. 

What’s the best way to start building a sustainable supply chain?

Visibility and agility are vital. The time that is wasted in decision-making creates both waste and cost. When it comes to eliminating waste, it is imperative to know sooner and act faster. Only a complete view of the supply chain will allow intelligent decisions to be made that help balance the need for operational efficiency, increased shareholder value and a reduced carbon footprint.

Building a sustainable world also means complying with local and international regulations.  Corporations need not have to make trade-offs between profitability and regulatory compliance. For example, the automotive industry is bound by several emissions regulations. Planning vehicle sales and production volumes to meet customer need, while concurrently factoring in regulatory limits, is imperative and possible. Kinaxis helps one of its customers do exactly that.

With predictive analytics and market intelligence come improved consumer forecasts, and better demand and supply balancing. By applying this to inventory, businesses can optimise freight and reduce waste. 

When we think of sustainability, we often think of better packaging to reduce the plastic companies release into the world, circular supply chains to reduce waste, or ways to consume products more efficiently, such as refillable shampoo bottles or ice cream being trialled right now in France and the UK by Loop (TeraCycle). These are all great examples that are pleasing to see. 

However, for me the big and more immediate gains can be achieved if companies develop more resilient and agile supply chains. They could manage climate-induced disruption more efficiently, enhance operations and product life cycle, while at the same time driving towards becoming a more sustainable company with strong shareholder value. 

How does Kinaxis help companies achieve this vital visibility and agility?

Kinaxis’s supply chain planning software helps companies decide exactly what to produce and ship, how much, when and where. Every such recommendation or prescription that Kinaxis serves up helps companies be as efficient and frugal with their resources, whether it’s producing just enough or avoiding a rush-shipment.

Designed from the bottom up, Kinaxis provides these organisations with visibility, control and agility in their supply chains. We help them to optimise time, thereby reducing the waste and cost inherently built into the more traditional supply chain. 

This removes the risk of people making decisions that may benefit their own function, but inadvertently damage progress on broader business and sustainability goals. 

Our ability to provide that visibility of information, and also to enable people to collaborate across functions, is an incredibly powerful force. Our technology is flexible enough to adapt as people grow and allows businesses to pivot their choices and direction quickly.

How does this empower businesses to build a more intelligent and responsible supply chain?

You can’t change what you can’t see, particularly if you can’t see it coming. If the world is moving faster than the information you have, you cannot know how your decisions will affect the environmental impact of the business or shareholder value. 

Only through this visibility can we expect planners and supply chain professionals to make the strategic choices required to be both profitable and environmentally responsible.

This November, the environmental services sector launched a Pledge to Net Zero, an industry commitment requiring credible science-based approaches from signatories to tackle greenhouse gas emissions within their organisations.

Industry-wide and collaborative, this initiative both demands an assumption of direct responsibility and supports an integrated approach to decarbonising the supply chain, all of which aligns with the urgency of addressing the climate emergency.

Tackling climate science, though, calls not only for technical targets, but also cultural change. Customers and clients must be unequivocal in communicating the importance of the issues and associated expectations for suppliers, says Martin Baxter, chief policy adviser at IEMA (Institute of Environmental Management and Assessment), one of the bodies leading the pledge.

“Tell them you recognise this is a transition to a low-carbon future and you want them to be a big part of your solution, but also that you won’t continue to work with those who steadfastly remain part of the problem,” he says.

Demanding data on the carbon footprint of products and services helps make it a de facto condition of supply, he adds. “It’s all too easy for suppliers to point to corporate reports giving high-level figures, but get them to provide specific data relating to your purchases and make it clear you’re looking to procure on the basis of both low cost and low carbon,” says Mr Baxter.

Data exchange to drive supplier engagement is a fundamental issue, says Jens Roehrich, professor of supply chain innovation, at University of Bath School of Management.

“Information-sharing to drive transparency, mitigate risk and obtain a clear understanding of a company’s supply chain needs to be done on a regular basis, with all key partners,” he says.

Too often, however, it only attracts attention reactively, when concerns or even crises arise, for instance when brands are reeling from reputational big hits on the scale of a horsemeat scandal or a child-labour exposé.

Feeling the heat

Even with activism rising around climate emergency, public and press scrutiny of carbon impacts is still proving inconsistent; not all sectors feel the heat the same, adds Professor Roehrich. 

“Some industries, such as airlines, receive a lot of external pressure through regulations and customers, so it is a must to address their carbon footprint to stay competitive,” he says. “For other industries, external pressure is less relevant. Here, companies may use information about their activities to reduce carbon emissions as a means to gain competitive advantage.”

Customers with exacting standards and expectations have the power to push supplier companies in new directions that are then viewed favourably and followed by others or even adopted as standard practice.

However, opportunities to influence differ. Some require innovation and support, in areas such as logistics optimisation or energy efficiency, where the business case is obvious. Others, such as plastics reduction, might only happen if a customer mandates change to achieve a particular aim.

Team up to get tough

From streaming movies on screen to boosting competence on site, decarbonising the supply chain can result in responsible business getting into bed with NGOs, even rival companies.

The rewards are impactful, but what of the risk? The summer film release by WWF of Our Planet: Our Business saw the NGO talking positively about how global business can be a powerful force for action. The tone was collaborative and engagement constructive. Inspired by the Netflix series Our Planet, the documentary lists five principles for a sustainable future, of which zero carbon comes first.

Tell them you won’t continue to work with those who steadfastly remain part of the problem

Featured in the film, Dave Lewis, chief executive of Tesco Group which has a presence across Europe and Asia, says of the retailer’s long-term collaboration with the NGO: “Partnering with WWF will help us make our customers’ shopping more sustainable. Our shared ambition is to reduce the environmental impact of the average basket by half.”

Collaboration counts, literally. When faced with fear of a climate emergency, a sense of shared responsibility can translate into perceptions of reduced risk, explains Shaun McCarthy, chair of the Supply Chain Sustainability School.

He says: “Collaboration brings massive rewards and very little risk. We have 94 partners in construction working together to support over 200,000 small and medium-sized enterprises to improve their competence; 94 have much more leverage than one.”

Multiple nudges make for a big push. Mr McCarthy concludes: “We are asking suppliers to measure their carbon emissions using a common portal and collaborate to drive carbon out of the supply chain. It is time to get tough.” Getting tough on carbon is a team game.

1. Flat-packed wine

The flat letterbox-friendly design of Garçon Wines bottles generates space-saving benefits of around 40 per cent. Each 100 per cent post-consumer recycled PET plastic bottle is also 87 per cent lighter than an average glass equivalent, potentially saving more than 500g of CO2.

The Garçon Wines ten flat bottles case significantly cuts carbon and costs still further. Instead of just four regular, round glass bottles, it fits ten full-sized, flat ones. This spatially efficient, lightweight, durable and sustainable packaging means a loaded pallet could carry 1,040 bottles, not just 456, slashing logistics costs and supply-chain emissions some 60 per cent.

2. Mushroom-based glue

Furniture giant Ikea has stated that the glue it previously used in its particleboard furniture comprised 6 per cent of the business’s carbon emissions. To reduce its damage to the planet, Ikea replaced the glue with a biodegradable, mushroom-based alternative that has a lesser impact. 

Ikea Group has vowed to spend over $1bn in the next ten years on reducing its carbon emissions, including redesigning every one of its 9,000 products to include new material and construction techniques, with a view to cutting emissions by 15 per cent by 2030.

3. End of the road

In something of a double-whammy for suppliers, prestige German automaker Daimler has announced that for the first time in the history of the century-old marque, it currently has no plans to develop any next-generation combustion engines.

Electric powertrains are the future for the global brand and in a flagship move, the parent company unveiled a Mercedes-Benz EQ racing team on the start grid of the Formula E electric grand prix season.

The new emission-free EQC SUV signals the way forward and implications stretch far beyond simply waving goodbye to petrol; this is the clean and green supply-chain highway.

4. Shopping for net zero

Some property firms are bigger than others, but with 24 million square feet worth £13.4 billion, including Bluewater shopping centre, Landsec is a giant.

It is huge news for supply chains then that Landsec has promised to align carbon reduction to a 1.5C science-based target. This will cut emissions 70 per cent by 2030, against 2014 baselines, with all future developments net zero.

Hugh Jones, managing director of The Carbon Trust, says: “Landsec is taking a comprehensive approach, combining carbon reduction targets with ambitious plans for energy efficiency and renewable energy.”

5. Seagrass on the line

The Emitwise Machine Learning platform aggregates hundreds of data sources to map out real-time carbon footprints of supply chains and estimate CO2.

It does not grow seagrass. However, its contacts now do. In its telephone research, Emitwise promises to plant 5 square metres of seagrass every 30-minute call. The target is to contribute £20,000 and 1,000 square metres towards Project Seagrass, planting one million seeds off the Welsh coast. Seagrass can store carbon 35 times faster than tropical rainforests. 

6. Car manufacturing compliance

A leading Europe-based global automotive manufacturer found that its supply chain was the best way to reduce its fleet’s emissions, and comply with strict Clean Air for Europe (CAFE) regulations. Optional features such as paint color and wheel size could alter a vehicle’s emissions by as much as 30 percent. If planners had the ability to track these features, and plan their production volumes and mixes correctly, they could adjust their market availability and reduce emissions to comply with CAFE. 

Harish Iyer, VP industry and solutions marketing at Kinaxis, explains: ‘Using Kinaxis’s market-leading planning platform and applications powered by unique concurrent planning technique, this company is able to meet customer demand, subject to parts and capacity limitations, profitably while complying with strict and punitive regulations’. 

With predictions of hefty emissions-related fines for the automotive industry, the company’s leaders now feel confident they can reach future European emissions targets.

Since the birth of the Industrial Revolution, the global economy has been linear. From the mining of raw materials through to processing, manufacture, being used and then thrown away, products have been made and consumed this way for so long that we don’t even notice it.

But it is a model that implies an infinite level of resources, in a world whose finite boundaries are becoming ever clearer. We need to change to a system that is more efficient, reuses products and materials, reduces waste and limits our impact on the planet. 

“The linear economy is recognised as a market failure,” says Richard Kirkman, chief technology and innovation officer at Veolia, a waste management company. “There is the cost of carbon emissions, pollution and ocean plastics, as well as the loss of valuable commodities. About £29 billion of value is being lost in the linear economy that we can recover if we go circular.”

The supply chain is crucial to making the change to a more circular way of doing business. “Businesses know it’s now imperative to start thinking about making their supply chains circular,” says Jonquil Hackenberg, head of C-suite advisory and managing partner at Infosys Consulting. 

“To achieve this businesses need to move from an ‘out of sight, out of mind’ production model, like making shampoo and shipping it in a plastic bottle, to taking accountability for their end-to-end supply chain, of suppliers as well as of packaging and logistics providers, for every single product. Moving supply chains from linear to circular models is crucial to achieving this.”

Technology will play a crucial role. Ms Hackenberg adds: “Circularity is not only about returns, it refers as much to the front end of the supply chain, procurement, provenance and ethical sourcing. Using artificial intelligence and machine-learning as part of the supply chain infrastructure means they work as the eyes and ears of the supply chain. 

“Connecting physical technology like smart sensors and cameras to back-end systems will be the lifeblood of the circular supply chain. It will introduce ‘guaranteed’ transparency, making provenance and ethics visible. Machine-learning can increase demand accuracy, which in turn makes supply more efficient, reducing unnecessary production, because it is not demanded, and thereby reducing waste.”

Moving mainstream

We’re already starting to see signs of circularity becoming more mainstream. Growth of the sharing economy, through the rise of businesses such as Uber and Airbnb, encourages a more efficient use of resources, while companies such as Signify, formerly Philips Lighting, have moved to an as-a-service model. For instance, Schiphol Airport in Amsterdam now buys the service of lighting from Signify rather than lights. Signify owns the lights and the fittings, is responsible for maintenance during their use and their disposal at end of life.

Corporations such as IKEA are starting to lease products such as furniture as well as selling them, says Osvald Bjelland, chief executive of sustainability consultancy Xynteo. The company “will design all new products using circular design principles, meaning it will be intentionally designed to be repurposed, repaired, reused, resold and recycled”. 

However, becoming circular can be difficult for businesses to do because “the transition to circular business models depends on a revamp of the underlying organisation itself”, says Mr Bjelland. 

If you’re no longer selling products, but retaining ownership of them, there are consequences for your cash flow, because revenues are spread out over years rather than coming all at once when you sell the product. There are also issues with contracts because you are now the owner of, and responsible for, the product throughout its life and beyond. 

Efficient interfaces

“Given that circularity depends on efficient interfaces with other value chains, team capabilities would require an update, for instance a shift from competition within silos to collaboration across systems with a range of partners, including businesses from other industries, startups, academia, research institutions and governments at all levels,” says Mr Bjelland.

But such a system should encourage companies to design and build products that are more sustainable because they last longer, are more energy and resource efficient, and easier to recycle and reuse.

Closing the loop to ensure materials and resources, such as energy and water, are not lost is a key challenge. “Organisations need to task the supply chain with closing the loop, but this requires the ability to understand the total cost to serve and to understand the trade-offs throughout the chain,” says Gavin Bowen-Ashwin, director at 4C Associates, a European procurement and supply chain consultancy.

Such a system should encourage companies to design and build products that are more sustainable because they last longer, are more energy and resource efficient, and easier to recycle and reuse

For many companies, a focus on reducing their waste is the starting point. Many automotive companies, such as GM and Ford, have zero waste-to-landfill targets, while Hewlett Packard Enterprise (HPE) encourages its customers to ship their old or unused hardware and technology back to the company so it can either extend the life of the product through reuse or recycle it more sustainably. 

More than four million units went through HPE’s Technology Renewal Centre in Scotland during 2018, with a value of around £58 million. Of these units, 89 per cent were resold and the remaining 11 per cent were recycled. Only 0.4 per cent of the tech ends up in landfill.

“The shift to circularity makes not just social and environmental sense, it represents serious economic value,” says Mr Bjelland. “It could add €900 billion to Europe’s GDP by 2030 and increase household income by €3,000 a year, while halving CO2 emissions compared with 2015 levels.”