Supply chain sustainability can mean a lot of things to a lot of people. As I have written about before, supply chain sustainability, or the notion of going green, is a hot topic as companies and countries look at their overall carbon footprint and look for ways to be more environmentally friendly. A few ways companies can begin to offset their carbon footprint is to take a deeper look at product packaging, energy efficiency, alternative fuels, route optimization, and returns and recycling programs. However, supply sustainability goes well beyond these initiatives.

I’ve spoken to many supply chain leaders over the last few years and sustainability has consistently come up as a top priority. Looking at sustainability from a supply chain standpoint, the beauty is that sustainability ultimately results in savings. For supply chains, sustainability is symbiotic with profitability. It can take miles out of the transportation journey, air from a carton or box, or reduce trips to a specific neighborhood or house. This means money can be saved. At the same time, these “savings” can reduce greenhouse gas emissions and overall carbon footprints.

That being said, aside from the money-saving aspects of supply chain efficiencies, there are a growing number of companies that are putting the environment first and looking at the Sustainable Development Goals (SDGs) put forth by the UN as well as science-based targets for supply chain sustainability. Here is breakdown of what these goals mean and how companies can implement these initiatives for a more sustainable supply chain.

UN Sustainable Development Goals

The SDGs developed by the UN are a collection of 17 interlinked global goals designed to be a “blueprint to achieve a better and more sustainable future for all”. The SDGs were set up in 2015 by the United Nations General Assembly and are intended to be achieved by the year 2030 and are included in a UN Resolution called the 2030 Agenda. The SDGs were developed in the Post-2015 Development Agenda as the future global development framework to succeed the Millennium Development Goals which were ended in 2015.

The 17 SDGs are: (1) No Poverty, (2) Zero Hunger, (3) Good Health and Well-being, (4) Quality Education, (5) Gender Equality, (6) Clean Water and Sanitation, (7) Affordable and Clean Energy, (8) Decent Work and Economic Growth, (9) Industry, Innovation and Infrastructure, (10) Reducing Inequality, (11) Sustainable Cities and Communities, (12) Responsible Consumption and Production, (13) Climate Action, (14) Life Below Water, (15) Life On Land, (16) Peace, Justice, and Strong Institutions, (17) Partnerships for the Goals.

Each goal typically has 8 – 12 targets, and each target has between one and four indicators used to measure progress toward reaching the targets. The targets are either “outcome” targets or “means of implementation” targets. Most companies do not look to tackle all 17 SDGs; instead, they focus their efforts on a few targets initially.

For example, Mars has been purposeful on where to focus their efforts. The company is prioritizing SDG 1: no poverty; SDG 17: partnerships for the goals; and SDG 13: climate action. Climate action is incredibly important for Mars and its supply chain partners. To that end, Mars started with a commitment to 100 percent renewable energy a number of years ago and is making steady progress. The company has established long-term power purchase agreements at the country level. As a result, Mars has been able to procure renewable electricity to cover the entire business in those specific countries. The next part is to drive progress toward a science-based target that goes across value chain. Mars is working with top suppliers to take action similar to what they have done with renewable energy and launched a “Pledge for the Planet” a few years ago, asking suppliers to join them in a pledge for sustainability.

Science-Based Targets

However, a common critique of the SDGs has been that they are weak on environmental sustainability. This is where the Science Based Targets (SBTs) come into play. Science-based targets provide a clearly defined pathway for companies to reduce greenhouse gas (GHG) emissions, helping prevent the worst impacts of climate change and future-proof business growth. Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C.

Last year, The COP26 global climate change summit took place in Glasgow, where 190 world leaders and thousands of government officials, business representatives, and nonprofit groups made commitments to address climate change threats. While other industries such as oil and gas, coal, cement, steel, aluminum, and automobiles and transportation play a larger role in climate change, retail leaders have stepped up to meet climate change goals. More than three dozen of the largest retailers in the US have set or committed to setting Science Based Targets that provide a clear route to reduce their greenhouse gas emissions.

The SBT process requires businesses to quantify their current emissions, set specific meaningful carbon reduction targets with measurable interim goals, reduce greenhouse gas emissions, report on their progress, and help others along the way. Retailers face a significant hurdle here though, as more than 90 percent of the emissions associated with their businesses occur outside of their direct control as part of their “scope 3” emissions. An example of a company looking to adhere to SBTs is SanMar, the largest wholesaler of apparel into the corporate identity, promotional product, and ad specialty space in the United States.

SanMar is committed to reducing its global greenhouse gas emissions in line with achieving global warming targets of less than 1.5 degrees Celsius. This means the company will need to use much more sustainable fibers and use renewable energy sources. While the company is not sure how it will achieve the goal, it knows that it has to aim high. SanMar’s most successful sustainable product is the re-tee. The re-tee takes recycled cotton that is gathered from cutting scraps, broken down, spun into yarn, and turned into new shirts. The shirt is the color of the scraps, so it is more sustainable since it is never dyed.

Final Thoughts on Supply Chain Sustainability

Supply chain sustainability is incredibly important to the future of our planet. Supply chains are built with a higher purpose, as they exist to serve humanity. And while it can be a money-saving opportunity from a transportation standpoint, there are more important issues at hand. Ideally, the aforementioned SDGs and SBTs will co-exist with a clear vision to reduce greenhouse emissions and make a better future for us all. Thankfully there are thousands of companies that are investing in the future and making supply chain sustainability a priority. We can only hope that it works.

Supply chain sustainability is a higher priority than ever. In MIT’s State of Supply Chain Sustainability 2021, 80% of executives surveyed said the pandemic either had no impact on their commitment or increased it. PwC reports that almost half of assets under management are held by investment firms committed to decarbonization. Investor concern about material risks from climate change have created new reporting frameworks, such as those by the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD). From many different angles, supply chain sustainability matters, so how do we get there and what is the role of planning?

The greenest mile

Years ago, I thought we’d found the perfect rental house and didn’t blink that it was heated with oil, which was rare. It was a rude surprise when I learned it would cost $100 to fill the tank. On our budget then, this felt like a fortune and fueled my interest in energy policy. I was drawn to Hunter and Amory Lovins, who advocated a strategy pairing energy efficiency with renewables, long before its current popularity. After all, what’s the point of installing solar panels only to waste the greener energy produced?

Similarly, UPS has strong commitments to sustainability and invests in many options, such as alternative fuel vehicles, e-cycles in dense cities, and carbon offsets for purchase with shipping. But they’ve also invested in route optimization, which uses algorithms to save up to 10 million gallons of fuel annually by reducing miles driven in the US. UPS saves time and money at a level worth reporting on earnings calls, but they are also more sustainable. As my friend Jack Levis, who led this project until his recent retirement, likes to say, “the greenest mile is the mile not traveled.”

We must plan, source, make, and deliver differently for supply chain sustainability

Leading supply chains tackle sustainability in a variety of ways. For example, confectioner Mars is building deeper relationships with fewer palm oil suppliers to increase their ability to monitor and impact deforestation. Pharmaceutical manufacturer Amgen built a new biomanufacturing plant in Singapore that uses 70% less carbon than traditional facilities. Schneider Electric has committed to convert its 14,000 fleet vehicles to electric by 2030. These examples address the source, make, and deliver areas of supply chain. But what about the role of planning?

Net zero goals require us to transform our supply chains and do different things. But as we do different things to get to net zero – like Mars, Amgen, and Schneider Electric – we must do these different things differently. If we don’t plan better, efforts in procuring sustainable palm oil, making medicine with less carbon, or delivering to customers with electric vehicles can still be built on top of inefficient processes that waste the savings we made. As UPS puts more electric trucks on the road, they are simultaneously planning for those trucks to travel fewer miles. Similarly, increasing the efficiency of planning and reducing waste will lay a firm foundation for greener sourcing, manufacturing and delivery.

Buffering creates waste

Information trade-offs made to absorb unpredictable volatility force supply chains to buffer. While buffers provide optionality, they also serve only in bad times, not good, and can create waste. Siloed planning, information latency, disconnected processes, and lack of transparency all illustrate problems with poor information. When teams lack the information needed to collaborate, can’t get access to it in a timely manner, and are incentivized based on what’s good for their silo and not the entire supply chain the result is poor planning.

Technicolor, which makes high tech equipment for the connected home, found their sales team drove the business but created havoc by entering new requirements or cancelling them too late for operations to keep up, so inventories grew. Concurrent planning gets rid of silos, connects functions together, gives them a platform upon which to collaborate, and helps them see the impact of any decision upon the whole supply chain. Using this approach, Technicolor was able to forecast more accurately for Q1/22 and bring inventory down by $120 million.

Reducing inventory saves money but also reduces waste, because obsolete inventory becomes another problem. Proper disposal can cause downstream issues. Regulatory standards govern disposal in many industries, because of toxicity in the raw materials, controlled substances in drugs, counterfeiting, etc. This end-of-life disposal is time-consuming and expensive, so reducing waste that must be managed matters.

Moving from linear to circular planning to go beyond incrementalism

Better planning saves money, reduces waste, and is the foundation upon which we must start, but it is not enough. With the foundation built, we can collaborate more effectively end to end with both suppliers and customers to make better, more sustainable decisions. We must measure our progress against commitments like fewer expedites or inventory that must be destroyed so we can do better. And best yet is moving toward the circular economy. The greenest miles in planning are those not driven but also scarce raw materials we didn’t use, expedites we didn’t make, obsolete inventory we didn’t have to dispose, hours we didn’t waste.

To get to these greenest miles and achieve the changes necessary to combat climate change we must transform our supply chains to a circular model. Planning for circularity makes good business sense, because it mitigates risk from the scarcity of raw materials, volatile prices of those materials, and regulatory restrictions on disposal, among others. But it also turns the tables from managing risk to building stronger, longer relationships with customers, such as by building an item once but selling it many times, as circular economy expert Sandy Rodger explains.

The circular economy involves flows familiar to supply chain planners but done in new ways, which calls for new ways of working together. Some ways are internal, because too many companies have their sustainability efforts siloed from their supply chain. As we use fewer and/or renewable materials at the beginning of the process all the way to planning more effectively for returns at the end we will need cross-functional cooperation. But for circularity to scale we will also need new markets, which means commitments between customers and suppliers and potentially even coopetition. Accenture argues that the circular economy represents at least a $4.5 trillion economic opportunity, so there is money on the table for those willing to do differently.

The work needed to do different things and to do them differently is not for the faint-hearted. But climate change is not for the faint-hearted either. And those of us in supply chain planning, accustomed to putting out fires and getting yelled at, are the opposite of faint-hearted. The last year has shown the kind of courage, drive, and commitment we have within us. Supply chain leaders have signaled this kind of commitment to supply chain sustainability, and planning has a key role in making that happen, in driving us toward the greenest miles.

Polly Mitchell-Guthrie is the VP of Industry Outreach and Thought Leadership at Kinaxis, the leader in empowering people to make confident supply chain decisions. Previously she served in roles as director of Analytical Consulting Services at the University of North Carolina Health Care System, senior manager of the Advanced Analytics Customer Liaison Group in SAS’ Research and Development Division, and Director of the SAS Global Academic Program.

Mitchell-Guthrie has an MBA from the Kenan-Flagler Business School of the University of North Carolina at Chapel Hill, where she also received her BA in political science as a Morehead Scholar. She has been active in many roles within INFORMS (the Institute for Operations Research and Management Sciences), including serving as the chair and vice chair of the Analytics Certification Board and secretary of the Analytics Society.

The global supply chain is routinely beset by challenges, both large and small, but the past couple of years have delivered a string of significant logistics disruptions that have threatened to upend the tightly choreographed dance of global freight transportation. The coronavirus pandemic is the most obvious of these hurdles, but everything from the threat of tariffs to the temporary blockage of the Suez Canal (and even the ongoing closure of the I-40 bridge in Memphis) could have had lasting ramifications for global commerce.

These disruptions, which will only get more frequent in the coming years as major weather events wreak havoc on freight transportation, have supply chain stakeholders scrambling from crisis to crisis. There’s been little room for long-term planning, and supply chain sustainability has mostly been an afterthought, a “nice-to-have” initiative that is not of critical importance. That’s starting to change. More and more large U.S. companies, both inside and outside of freight transportation, are pledging to become carbon-neutral operations. The airline lobbying group Airlines for America announced in March that its member carriers will all go green by 2050.

Customers are asking companies to make supply chain sustainability a priority, and younger logistics employees are making the push from the inside. Potential employees want to make sure they work at an environmentally conscious supply chain technology provider. Regulations may be more of a driver in the future.

In fact, in its 2020 report on supply chain sustainability, the MIT Center for Transportation & Logistics and the Council of Supply Chain Management Professionals found that sustainability is becoming a mandate at the corporate level, with more than 80 percent of the 1,100 industry stakeholders surveyed saying sustainability is now an important issue. More than 45 percent of respondents said they were under pressure to adopt supply chain sustainability practices. Though corporations are starting to pay attention to supply chain sustainability, less than half of those surveyed in the CSCMP report know how to make their processes more sustainable.

How can companies hit the ground running on creating a sustainable supply chain? Including CO2 emissions as a key criterion for carrier selection and using logistics technology to reduce or eliminate empty miles are the biggest opportunities to make an immediate difference.

Working with a strong supply chain technology provider with a holistic digital operating platform is key. These companies are fueled by creating innovative solutions that allow stakeholders to weigh the carbon emissions of transportation modes against service and cost. This thinking can also shift how companies view freight transportation in general. In many organizations, freight shipping has become static: companies use air cargo because that’s what they’ve always done. With advanced planning, these same organizations can start dynamically selecting freight transportation routes and modes based on their current needs, bleeding carbon emissions from their supply chains in the process.

Supply chain digitization can also offer more direct solutions to creating sustainable freight transportation processes. In the U.S., empty miles are a significant driver of increased supply chain costs and carbon emissions. Reducing empty miles from the supply chain will help drive down the $1 trillion in waste throughout the global supply chain and help make the industry more green. This can be done through street turn matching, which reduces empty miles that generate significant carbon emissions. For rail users, domestic reload solutions enable steamship lines to reduce or eliminate the cost of returning containers via rail from inland ports by allowing shippers to use the container for a domestic move. This eliminates repositioning empty boxes – quite literally, shipping air.

For retailers, supply chain sustainability is part of the conversation about inventory. Just-in-time inventory levels have helped retailers and other shippers grow without holding vast amounts of inventory in their warehouses, but I-need-it-now shipping practices prioritize speed at all costs. If shippers work to better balance customer demand and inventory levels, they can choose more sustainable, slower freight transportation options. Selecting service levels and modes with an eye toward supply chain sustainability, and not solely based on price, will help turn supply chain sustainability from a concept to an engrained practice.

Supply chain sustainability isn’t a passing fad, and there is a more mainstream acknowledgment of the costs of doing nothing than ever before. Every freight transportation user should be asking: Am I accounting for my carbon footprint when balancing logistics costs with inventory costs? This is part of the social and environmental responsibility of supply chain stakeholders.

Glenn Jones is global vice president of product strategy and marketing for carbon-neutral supply chain technology provider Blume Global. He has a proven track record of growing businesses by building and leading R&D and product marketing organizations to define, develop, position and sell highly innovative and high value enterprise solutions delivered in the cloud. He was formerly the COO of Sweetbridge, the CTO of Steelwedge Software and also held leadership positions at other supply chain software companies including Elementum, E2Open and i2 Technologies.