Resilient Supply Chains: Sustainability

In the previous part of this blog series, you learned about Supply Chain Quality Management – what it is, how it works and why it matters.

In this third and final part of the resilient supply chains blog series, you will learn about the importance of sustainability in supply chains, and what steps you can take to make your supply chains more sustainable…

On February 23, 2022, the European Commission presented its proposal for a new supply chain law. This law, now known as ‘The EU Supply Chain Act’ or ‘Corporate Sustainability Due Diligence Directive’ (CS3D), is not yet in effect at the time of writing. However, once brought in, C3SD is intended to address the sustainability problems faced (and caused) by modern supply chains.

In the next few years, C3SD and similar legislation will force many companies to modify their supply chains. Companies must make preparations now.

The temperature is rising and the pressure is on

The pressure on corporations to master their environmental impacts is probably highest in consumer goods industries, where each consumer is also a citizen of a world that increasingly feels the effects of climate change. But this pressure to change is being felt in sectors everywhere, and it will continue to grow as companies are required to become more sustainable.

However, focusing on sustainability is unfeasible if we only look at a company’s direct emissions (ie. scope 1 and 2) as, on average, 80% of the global equivalent dioxide of carbon (‘eCO2’ or ‘CO2e’, a measure created by the United Nations’ Intergovernmental Panel on Climate Change) is generated by inbound and outbound supply chains (scope 3).

To succeed, your business needs a more detailed perspective on its supply chains

Because of the complexities of calculating supply chain carbon, integrated sustainability criteria in selecting, developing, or removing suppliers from the portfolio are critical (scope 3 Category 1&2).

Implementing these criteria begins by asking procurement teams to:

• Monitor the current eCO2 of each supplier by commodity use, eg. oil
  
  
• Maximize eCO2 calculation from ‘mass/product-based’ models – ie. stoichiometric calculation; an approach that measures which elements enter and exit a system. This is in contrast to ‘spend-based’ models, which measure a company’s financial priorities, not its eCO2 output
  
  
• Identify supplier technology levers to optimize their emissions, using the ‘Three Horizons’ framework – a McKinsey growth strategy approach for planning in uncertain times
• Contact suppliers to obtain their commitments to sustainability (eg. their sustainability roadmaps) and establish tools to report on their progress

Further insight can be obtained through a global environmental social governance (ESG) evaluation – which provides a detailed evaluation of your organization’s performance against various sustainability metrics, in addition to environmental impact. Capgemini’s partnership with Ecovadis (a leading ESG ranking company) can streamline this process.

More sustainability levers to pull

Another lever is to optimize the logistical connections between suppliers and delivery centers (scope 3, categories 4 and 9). For example, real time localization of parcels (including  critical parameter tracking, eg. humidity or temperature, if needed) allows route optimization and the maximization of logistic volume (for example, how efficiently packed shipping containers are).

Through these steps, combined with our sustainable packaging offers that optimize weight and remove low recyclable materials (like moving from plastic to carton), we have helped our clients to save about a hundred thousand kilotons of eCO2 to date.

Conclusion: ‘going green’ is its own kind of resilience

These efforts (which are undoubtedly considerable) go beyond eco credentials. The reputational enhancement, improved regulatory compliance and potential cost efficiencies offered by increased sustainability will all contribute to the resilience of supply chains.

Indeed, the lion’s share of the carbon that companies are responsible for driving down is in their supply chains (scope 3), but, due to the complexity and scale of these supply chains, a sophisticated analysis and remediation strategy is required.

A company that calls itself sustainable without integrating its inbound and outboard supply chains is either misinformed or dishonest. And, either way, the consequences for failing to do this work will only get worse as time goes on…

This concludes our three part series on resilient supply chains.

A variety of stakeholders, international organizations and industry bodies will continue to require increasing sustainability commitments from companies. Anticipating the required changes is not just risk mitigation, but a competitive advantage – those who better understand can better adapt in a quickly changing regulatory (and planetary) environment. Need some help with your supply chain sustainability efforts? Choose a leading international partner with years of expertise across a range of industries. Find out how we can help you – contact our expert.