How can you increase the sustainability and profitability of your supply chain? Here are some ways to reduce costs and improve the environment. Read on to learn about the benefits and challenges of using green logistics in your supply chain. In addition, you’ll discover how you can achieve net-zero emissions from your supply chain. This will enable you to make more informed decisions regarding your company’s supply chain strategy. The benefits of using green logistics are numerous, but how do you implement them?
Eco-efficiency
Sustainability is becoming more important than ever, and with that comes increased customer expectations. Consumers today want retailers and brands that care about the environment. In fact, 57% of consumers are willing to change their buying habits for companies that care about the environment. Companies are responding by changing their logistics systems and supply chains to meet these demands. Additionally, more CEOs are placing sustainability at the top of their corporate priorities.
Whether or not a company uses green logistics, the traditional supply chain can still be green. It’s only a matter of breaking down the processes and finding environmentally-friendly alternatives. Traditional warehouses are often large and drafty, requiring significant amounts of energy to heat and cool them. The heating and cooling processes create significant CO2 emissions. Location matters, too. Often, warehouses are located far from distribution centers, requiring more ground transportation.
Cost reduction
In the quest for increased profitability and sustainability, companies must consider the environment’s impact on the entire supply chain. Achieving this balance is not an easy task, and casting sustainability as an ideological struggle is too simplistic. It is a difficult balance to strike when considering the demands of running a business, providing employment, and improving the communities in which we live. To demonstrate the benefits of green logistics, consider how aluminum producer Alcoa achieves these goals. In 2011, it implemented over 650 initiatives to reduce its energy consumption. The company saved over $100 million on its energy bill.
One of the major challenges facing businesses is ensuring that they maintain compliance with the increasing number of environmental regulations. Companies can reduce their costs and increase their profitability by implementing green logistics. The benefits of green logistics extend beyond the bottom line. Ultimately, it is a matter of increasing productivity, and partnering with partners that support environmental goals. As a result, companies can remain one step ahead of their competitors and meet their environmental goals while improving their bottom line.
Environmental impact
As consumers demand more sustainable products, companies will work to reduce their carbon footprint. In fact, 57% of consumers say they would change their purchasing habits to support a company that practices eco-friendly logistics. Changing supply chains and logistics systems to accommodate this demand is a key part of meeting consumers’ rising expectations. More CEOs are placing sustainability higher on their corporate priorities. And the benefits of green supply chain management are not limited to the environment.
A sustainable logistics management system can help companies reduce their carbon footprint and increase customer affinity. Green technologies provide live tracking of freight, which identifies service interruptions and improves systems for the future. Companies that adopt green logistics can reduce fuel costs by switching to more fuel-efficient vehicles. Sustainability and efficiency are also linked to higher profits. By investing in new technologies and implementing a sustainable logistics management system, companies can reduce their carbon footprint and improve their supply chain’s overall profitability.
Barriers to achieving net-zero emissions
To reach net-zero emissions in the supply chain, companies must reduce their production emissions and Scope 3 emissions – indirect upstream and downstream emissions that are more than ten times larger than Scope 1 and 2 combined. These emissions also require supplier buy-in, transparency, and engagement. In fact, only 16 percent of companies report being at an advanced level. In addition, the process of measuring and reporting Scope 3 emissions is extremely complex. In addition, transparency, education, and technical advice are key to the successful implementation of net-zero emissions in the supply chain.
HSBC’s survey of its clients found that nearly half of companies in the automobile and textile production sectors had plans to achieve Net Zero but that fewer than half of SMEs reported having any plan. The lack of awareness, resources, incentives and the costs of data collection are all factors that may be holding back companies. Further, many SMEs are under-resourced and will require about $2.8 trillion annually over the next decade to achieve net-zero emissions.
Challenges of implementing green logistics
While many companies are performing environmental audits and implementing rules of conduct, the most effective green supply chain initiatives work by sharing knowledge with suppliers and customers. By sharing this knowledge, customers and suppliers can enhance their own performance while sharing the social license to operate. In addition, green supply chain sustainability efforts must be driven by the originating manufacturer. As a result, most successful green supply chain initiatives involve the originating manufacturer and supplier networks.
Improving business sustainability has become increasingly important as the general public becomes more aware of its effects. Regulations like IMO 2020, which restricts the amount of sulfur that can be released by ships, as well as increased fuel costs, are causing many logistics companies to look for sustainable alternatives. While the green supply chain implementation process may seem challenging at times, it’s actually possible to integrate tools and methods that improve sustainability, maintain profitability, and preserve the environment at the same time.
