First things first: Climate change is real. What is also real is the impact it has on supply chains. In fact, it will not be a stretch to say that climate change is currently the biggest threat that global supply chains are facing today and is responsible for shortages and disruptions in several industries. These are challenges that will only become more threatening if they are not curbed, paying strict attention to supply chain sustainability.
While the COVID-19 pandemic brought down CO2 emissions by 5 percent—to 34.81 billion metric tons—the emissions have rebounded in 2021 and 2022. Economic growth bears a direct relation to carbon dioxide emissions and emission intensity can be an effective measurement of that.
A slow-moving crisis
While the COVID-19 pandemic caused a sudden upheaval for businesses all over the world, the impact of the climate crisis has been slower and insidious. It is worth noting that North America has a much higher emission intensity than sub-Saharan Africa, despite Africa being significantly larger and housing more countries. In 2021, the global atmospheric carbon dioxide levels reached a high of 416.45 parts per million, in comparison to the 1960 levels of 316.91 parts per million.
Source: Statista.com
Rising temperatures, glacial ice-caps melting, rise in sea-levels, and extreme weather conditions are all a result of this and bear serious consequences for global supply chains. Decarbonization, which means reducing the amount of carbon in greenhouse gas emissions, can help in improving our present condition.
A series of unfortunate events
Several effects of this have shown up in the last year alone, with hurricanes, floods and wildfires damaging infrastructure and extreme weather conditions shaking up the global economy:
- The Texas Freeze in 2021 was the worst blackout in the history of the United States as the state shivered in temperatures 40 degrees below average. It forced three semiconductor plants to shut, causing a microchip shortage for the auto industry and severing the state’s vital supply chain links for three days.
- Hurricane Ida struck the Gulf of Mexico in August 2021, destroying industrial installations for pharmaceuticals and plastics. Transportation was redirected to be used in providing first aid, leading to supply chain bottlenecks, shortages and price hikes.
- The Rhine River, which is also Europe’s most important commercial waterway, first witnessed heavy rainfall and snowmelt in February 2021 and then a drought in April. The latter was so severe that cargo ships had to run at half their usual capacity. Both inbound and outbound delivery flows were affected.
- Wildfires have been an ongoing affair in British Columbia since June 2021, claiming acres of forest area and severing railroad and highway links to the largest port in Canada. This was followed by heavy rainfall that flooded which caused lumber companies to scale back production, leading to a rise in the prices of wooden products in the United States.
Fighting climate change with green logistics
The dangers posed by climate change are grave but not impossible to combat. Sustainability in the supply chain, while tricky to practice, is possible. Production and transportation activities are energy-intensive, which also means the potential for implementing greener practices lay here.
By establishing the concept of eco-friendliness in your supply chain, a green logistics system can be introduced. This can be done by defining what exactly ‘going green’ means for your business, and setting goals accordingly. Once a clear long-term plan is developed, it is important to get the support of your workforce from the ground up and instill the sense that working towards a green supply chain is a permanent business value.
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Three stages of building a sustainable supply chain
- Planning: Processes are designed to reduce emissions and meet demand with ethical sourcing. More time and energy is spent on forecasts to reduce inventory that is no longer in use. Circular supply chains are supported, and end-of-life scenarios are predicted. Planning processes beforehand helps in visualizing the supply chain and preventing delays. Once the cycle is complete, the processes can be compared with the plan to locate areas of improvement.
- Manufacturing: An essential aspect of sustainable supply chain manufacturing is monitoring energy consumption as a function of production volume. Safety management ensures a sustainable workforce.
- Logistics: Supply chain logistics help track, measure, and even optimize CO2 and energy consumption. It helps opt for resources that are energy efficient and CO2 neutral. A sound logistics and supply chain management system optimize the various legs of the process.
Putting sustainability into practice
A number of multinational corporations have dedicated themselves to working with only those suppliers that adhere to social and environmental sustainability standards. Effective measures must be taken to optimize each activity to reduce the overall ecological impact to make end-to-end green logistics implementation possible.
- Ethical sourcing of goods
Ethical and sustainable sourcing of materials and products has gained a lot of importance in eco-friendly supply chain management in the last few years. Businesses evaluate their supplier relationships and partner with only businesses that are dedicated to the human, animal, and environmental wellness. In the case of manufacturers, it means procuring green and sustainable raw materials. For retailers or e-commerce sellers, it means promoting sustainably manufactured products and using green materials for packaging and deliveries.
- Sustainable warehousing
Although often overlooked, warehouses and storage centers use huge amounts of energy in supply chains. For companies that aim to implement greener practices, sustainable warehouse management is an important area to consider. This can be done by investing in lighting and equipment that reduce energy consumption and maintenance costs without compromising productivity. Where the warehouse is located is also important. Building warehouses in cities instead of outskirts can reduce the need for additional infrastructures such as water and electricity connections, as well as bring increased proximity to urban customers.
- Green packaging
One of the biggest challenges faced by the shipping and logistics industry, especially by e-commerce, 3PL, and courier service providers in the management of the waste produced due to packaging. The modern customer is environment-conscious and demands orders to be delivered in eco-friendly packages that use minimal plastic and non-biodegradable materials. According to a report, 72% of Americans are likely to purchase products in packaging that is easily recycled or reused—a promising figure and a great incentive for businesses to take sustainability efforts seriously. Several companies are now using recycled cardboard and wrapping sheets, recycled plastic, and eco-friendly fillers to ensure eco-friendly and sustainable packaging of goods.
- Network optimization
Transportation is an energy-intensive activity in logistics. With the help of strategic network designing for distribution and delivery operations, supply chain companies can reduce fuel usage and fuel costs significantly while reducing the time taken in transporting goods from one point to another. With the help of network optimization, businesses can ensure the accurate placement of supply chain nodes, warehouses, and distribution hubs as well as multi-echelon inventory optimization across the supply chain, thus improving distribution efficiencies and reducing energy consumption for businesses.
- Route Optimization
Day-to-day logistics involve route planning and executing innumerable deliveries on time. AI-driven route optimization solutions help in planning daily dispatches and delivery routes, taking into account real-world constraints such as zone-based restrictions, traffic conditions, and rider preferences. All of which results in faster deliveries, lesser miles driven and fuel cost savings.
Achieving a zero-carbon economy is a herculean task, but not impossible. It demands an economic transformation in favor of a safe and stable climate. Businesses, policymakers, and financial institutions need to work together to bring about a socially inclusive, environmental evolution for a healthier, happier planet.
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