Supply chain operations data key to tracking sustainability efforts, setting goals

by Jeff Della Rosa ([email protected]) 822 views 

Measuring supply chain operations is an important first step to creating sustainability initiatives as this creates a baseline before looking to make changes, a logistics executive said.

In a recent FreightWaves webinar, Eric Rempel, chief innovation officer for Redwood Logistics, and Andrew Cox, senior analyst for FreightWaves, discussed the results of a sustainability survey focused on shippers, with about one-quarter of respondents in the consumer packaged goods sector. Other respondents were in the manufacturing, retail and electronics sectors.

About 45% of respondents said their sustainability goals have led to creating plans for strategic decisions. Almost 40% said they are redesigning their supply chain network, and more than one-third are marketing initiatives based on sustainability. Only 10% of respondents said they don’t have sustainability goals.

Rempel said companies are in various stages of environmental, social and governance (ESG) initiatives. Companies cannot improve what they don’t measure, he noted, and for those not tracking, it’s difficult to set goals.

More than 20% of respondents are implementing a sustainability strategy, about one-quarter are planning to implement one and 15% are discussing it. Companies looking to develop a strategy can start by measuring existing environmental impacts and establishing initiatives to offset them, Rempel said.

Cox said amid the COVID-19 pandemic the trend accelerated for retailers to establish sustainability initiatives. Rempel said COVID created stress on the supply chain because of strong freight demand, but overall, the trend to set sustainability initiatives has been unrelated to the pandemic. Some of it can be attributed to regulation, and companies must prepare if they are required to meet sustainability goals. He noted the ideal situation would be to have sustainable supply chains that are optimized to meet strong demand.

Nearly three-quarters of respondents are focused on making transportation and logistics more sustainable in their supply chain, while about one-third are looking to make warehousing and distribution more sustainable. About one-quarter want manufacturing and procurement to be more sustainable.

Rempel cited a 2019 McKinsey study showing that about 30% of global carbon emissions can be attributed to supply chain activity, and about half of that can be attributed to freight transportation.

“If you just follow the data, that’s where there’s opportunity,” he said, adding that 20% of freight transportation emissions can be attributed to food and agriculture. “There’s just so much room to follow the data when you look at supply chains. You know the commodity onboard. You can calculate the emissions of the truck, depending on the sector – whether it’s food, construction, fashion or CPG. You can look at the supply chain itself and what products go into it.”

The freight transportation sector comprises the most measured one, he added.

If ocean shipping were a country, Cox said, it would have the sixth-highest carbon emissions in the world.

Half of the respondents said they have or could have implemented a distribution network to make progress in their sustainability goals, according to the survey. More than 40% cited eliminating empty miles to do so, while 30% looked to carbon offsetting. Respondents least sought manufacturing process and raw materials sourcing in reaching the goals.

Rempel said eliminating empty miles can align with a distribution network, and shippers can determine the most efficient way to transport freight through the various transportation modes. He explained that smaller companies might be challenged to reach their goals through the manufacturing process and raw materials sourcing as they might be limited.

More than 45% of respondents said remaining competitive was the most challenging aspect to implement a sustainability strategy. Other challenging aspects included changing company culture, creating a sustainability strategy and communicating strategies with vendors.

Cox explained that sustainability strategies are vital with consumers voting with their wallets. Rempel said the answer is somewhere in the middle, with two sides to every story.

“Consumers certainly vote with their wallets,” Rempel noted. “But on the flip side, it’s a profit game, and these companies need to make money. And they need to make sure they’re around as a business so that they can have a sustainable supply chain.”

Smaller companies running on narrow margins might struggle to implement sustainability goals without raising prices, he explained. The question becomes whether there’s a playbook available to run in which companies won’t have to increase costs to address sustainability issues.

Regarding what technology companies use to meet their sustainability goals, 45% of respondents are using automation, while nearly 30% are partnering with a third-party logistics company focused on using sustainable technology.

Rempel cited having control of company data as important in automation, including with robots and in warehouses. Companies need a data-driven supply chain and connectivity between systems to see benefits with automation, he said.

“Otherwise you’re trying to make decisions off stale data,” he added. “And that makes this a moot point. Optimizing with stale data…doesn’t work.”

The majority of respondents said they haven’t added any new management roles to address sustainability goals. But 10% have added C-level positions, and 20% have added vice president-level positions and director-level positions.

Rempel said Redwood has several people who are responsible for its sustainability initiatives and are led by someone with broad company knowledge. But he doesn’t think adding a position to address them is required. However, he expects more companies to establish sustainability positions. Cox said finding someone passionate about the issue would be a good starting point.

The survey shows that 35% of respondents said they internally created training programs to educate employees and stakeholders about reducing emissions in the supply chain. About one-third of respondents said training hasn’t been discussed or it hasn’t been completed but is planned. Training is important, but it can vary between companies, Rempel said. It can become a part of new employee orientation.

According to the survey, more than 60% of respondents could or have requested from their freight transportation providers carbon reduction initiatives related to freight consolidation, while almost half could or have requested initiatives related to fuel efficiency and reducing empty miles.

More than 60% of respondents said consumer sentiment and demand are expected to have the biggest impact on demand for investments in environmental sustainability over the next five years. Increased government regulation and corporate competition and marketability of stewardship also are expected to play roles in creating demand for investments in environmental sustainability.

“We have an opportunity to help reimagine how our supply chains work in a way that if we do it right means it’s good for the wallet,” Rempel said. “That is something that is very feasible. A lot of folks still today simply look at some of these initiatives, and it’s in the too-hard pile. It’s almost like deer in the headlights of where do I even start. Especially being in the infancy stage of this, a lot of companies who don’t have sophisticated supply chain maturity and are just trying to make sure that they stay in the black and not the red, this is second of mind.”

He expects companies to start having rules to meet their goals within supply chains, but the only way to meet them would be through collaboration with partners to understand their shipping patterns.

“The alignment of ethical goals with financial benefit is where this starts to win,” Rempel said.

Almost two-thirds of respondents said a partnership marketplace with preferred vendors would best help overcome barriers to implement a sustainability strategy. About 15% said outside consultation and 10% said adding staff would help, according to the survey.

Nearly 20% of respondents have made a significant financial investment into sustainability efforts over the past year, while almost 40% have made moderate financial investments. More than 30% have had a time-only investment, and 15% have yet to invest but plan to do so. Slightly more than 5% don’t plan to invest.

In July, Lowell-based carrier J.B. Hunt Transport Services released its first sustainability report, identifying metrics on carbon emissions, empty miles and electric vehicle deliveries. In November, the carrier named executive Craig Harper to the new role of chief sustainability officer.