Why supply chains should work on carbon footprint reduction

The worldwide concern on environmental sustainability is rising like never before. The IPCC climate change report for 2021 has rung alarm bells for businesses, consumers and governments. As supply chains play a major role in greenhouse gas emissions, businesses have become interested in tracking, monitoring and minimizing their carbon footprint. 

There are three important reasons why companies are willing to work seriously on their carbon footprint reduction. 

Adapt to the recent emergence of green logistics 

Freight delivery is responsible for 85% of emissions and congestions caused by commercial vehicles. Cities are responsible for 70% of global emissions, to which delivery vehicles – both trucks and vans – add disproportionately high amounts compared to passenger cars. – World Economic Forum, Future of Last-mile ecosystem, Jan 2020. 

The World Economic Forum ‘Future of Last-Mile Ecosystem’ report of 2020 states that delivery transportation is a major driver of greenhouse gases worldwide. This makes it essential for environment-conscious businesses to rigorously analyze the environmental impact of their logistics processes.  

A sustainable logistics and transportation strategy with the right fleet mix and minimal fuel consumption is crucial towards minimizing carbon footprints. Companies should work with suppliers and transportation modes that are environmentally friendly. 

A proper fleet management software enables businesses to monitor the fuel consumption of fleets. It provides optimal route plans for the fleet after factoring in delivery constraints, business constraints, delivery requirements and business goals. It helps fleet managers to effectively allocate delivery schedules and downsize their fleet requirements. 

Moving closer to consumers 

If there is anything that businesses are seriously working on, it is to move closer to consumers. A question pops up in your mind as to what this involves. For businesses with a logistics or delivery component, it involves keeping their warehouse setups at the last-mile closer to consumer destinations to deliver products faster. But with huge rent costs in dense urban areas, how can this be possible? Efforts to answer this question led to the creation of a new trend of setting up micro-fulfillment centers. 

Micro-fulfillment centers are mini-distribution warehouses that are set up in densely populated areas. These mini-warehouses being nearer to customers can effectively implement sustainable transportation alternatives like electric vehicles, etc. This reduces the logistics costs incurred while delivering products to consumers from central warehouses and makes logistics eco-friendly. Implementing this eco-friendly logistics deliveries helps businesses earn a significantly greater revenue. E-commerce marketplaces like Amazon and retail giants like Walmart have already understood their significance and started to create such centers. 

The supply chain network plays a crucial role when a business wants to move its logistical operations closer to their consumers. Network optimization software helps businesses to optimize their warehouse locations for last-mile delivery. It takes into account all business goals, consumer demand and constraints to design the optimal supply chain network. It conducts scenario planning to help businesses find out the best location for setting up their mini-fulfillment warehouses or mega-distribution centers, and reduce carbon emissions in the process. 

Fulfill the growing sustainability demands of consumers

Around two decades ago, the market for eco-friendly products was miniscule. But this has changed now. Consumers, especially millennials and gen z ones, are establishing their product preferences on their ecological impact. They are willing to pay more for buying and consuming eco-friendly products. This has pushed businesses to rework their logistics models and turn them eco-friendly for consumers. 

This change in consumers’ preferences has forced businesses to team up with like-minded suppliers and 3PL partners who want to reduce their carbon footprints. Business giants or emerging companies are now deciding the purchase of SaaS products or tech tools based on how much of their carbon footprint they might reduce in their logistics and supply chain operations. 

The change in consumers’ preferences has even accelerated the investment of electric vehicles, internet of things, drones, autonomous vehicles, parcel lockers, robots, virtual reality, and augmented reality in logistics operations. Implementing these sustainable transportation alternatives can contribute towards reducing the carbon footprint considerably and turn the supply chain greener for eco-friendly consumers. 

Conclusion

With the whole world still in uncertainty in 2022 due to the Omicron virus scare, businesses are re-analyzing  their supply chain consolidation decisions. They are reviewing whether to switch suppliers or change tech partners to minimize the number of deliveries and carbon emissions resulting from it. 

Though it is difficult for all businesses to reduce their carbon footprint, improving the flexibility of logistics and planning the logistics operations in advance may help businesses build greener supply chains. 

However, reducing carbon footprints is just a step towards reducing the environmental impact. Sustainability in business is not about doing a complete overhaul of supply chain and logistics activities. It is also their commitment towards planning, building, and economically executing collective sustainable practices. 

References

1. https://www.zurich.com/knowledge/topics/climate-change/closing-the-gap-on-climate-action
2. https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_Full_Report_smaller.pdf 
3. https://www3.weforum.org/docs/WEF_Future_of_the_last_mile_ecosystem.pdf 

About the author

Elsa is a senior content specialist and editor at Locus. She writes about logistics, supply chain, and SaaS technology. She loves to read books, take long walks and cook in her free time.