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Back to Future of Supply Chain introduction
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Sustainability: why green supply chains are the key to long-term value
▉ Insight 1
The days in which sustainability was widely regarded as a mere “nice-to-have” virtue for a business are long gone.
Environmental, social and governance (ESG) issues today represent far more than subjects that trigger a compliance exercise; they are front-burner topics in boardrooms.
Most of an enterprise’s carbon emissions typically come from the supply chain – primarily in manufacturing and logistics operations – meaning this crucial component of the business is under pressure to meet increasingly ambitious sustainability targets.
▉ Insight 2
A December 2020 EY survey of 200 senior supply chain executives found that 85% of organizations are more focused than ever on ESG targets, and with good reason.
Businesses have an opportunity to reap the benefits of sustainability’s multiplier effect, which can be realized throughout an interconnected and transparent supply chain and can drive more rapid change in the market.
As of 2020, 90% of S&P 500 companies published sustainability reports. That’s up from roughly 20% in 2011, indicating the mammoth growth of corporate sustainability strategy and emissions tracking.1 Some 23% of Fortune Global 500 companies have made a public commitment that by 2030 they will be carbon neutral, up from 6% in 2015.2 These commitments dovetail with the increasing emphasis that the public sector is placing on sustainability.
¹Governance & Accountability Institute, G&A Institute’s 2020 Research Report Shows 65% of Russell 1000® Published Sustainability Reports in 2019, Up From 60% in 2018, ga-institute.com, October 26, 2020
²Natural Capital Partners, Deeds Not Words: The Growth of Climate Action in the Corporate World, naturalcapitalpartners.com, September 2019
▉ Insight 3
A commitment to environmental sustainability is important to consumers and institutional investors.
Companies who aren’t committed to reducing their negative impact risk losing business and capital.
US policies are expected to reflect a renewed commitment to environmental sustainability in the form of expanded climate regulation, mandated emissions reporting, carbon pricing and pledges for further public investment in clean energy. This reverberates around the globe.
Risks such as lost business and investment capital posed by relegating ESG to second-tier status on the corporate agenda are simply too great.
³ Karl Haller, Jim Lee, and Jane Cheung, Meet the 2020 Consumers Driving Change, cdn.nrf.com, January, 2020.
Improving environmental sustainability and overall ESG performance throughout the supply chain can help companies enhance processes and reduce costs.
For example, in 2020, a leading multinational consumer packaged goods company looking to develop a North American logistics decarbonization road map began the journey toward achieving its ambitious zero carbon goal.
90%+emissions reduction
The business used EY consultants to complete the necessary analysis and received guidance in merging technologies and methodologies involving alternative fuel semi-trucks, innovative supplier relationships, utilization and network efficiency improvements. Detailed analysis and scenario planning helped produce a 2025 decarbonization road map that included investment and risk estimates required to achieve a 90%+ emissions reduction. The company received immediate recommendations so that it could rapidly begin implementation.
▉ Insight 5
For companies in the early stages of their ESG journey, seven actions can help address the prevailing supply chain trends and risks that they confront.
