Helena Joyce
Supply chains are fundamental to the economy, but their operations cause environmental and climate injustices, labor violations, and infringements on human rights and dignity. Up to 90% of companies' environmental impacts come from supply chains, with carbon-intensive supply chains caused by emissions drivers such as land use, heavy industry, transportation, and packaging. Climate change also poses a significant threat to supply chains, with extreme climate events such as flooding, drought, and wildfires leading to disruptions, delays, and loss of profitability. As a result, there is a growing emphasis on improving the sustainability of supply chains, with large multinational corporations prioritizing the use of suppliers who adhere to social and environmental standards.
| Characteristics | Values |
|---|---|
| Percentage of companies' environmental impacts that come from supply chains | 90% |
| Percentage of global trade products transported in oceans and waterways | 90% |
| Supply chain emissions | A substantial part of a company's carbon footprint |
| Supply chain disruptions due to climate change | Flooding, drought, heatwaves, wildfires, hurricanes, etc. |
| Negative externalities of supply chains | Environmental, climate, and labor justice concerns |
| Supply chain operations | Linear economy or "take-make-dispose" process that leads to pollution and social injustices |
| Solutions to supply chain sustainability challenges | Developing technological systems, scoring suppliers, making public targets, inter-industry collaboration, etc. |
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What You'll Learn
Transportation and logistics
To reduce the environmental impact of transportation in supply chains, companies can adopt several strategies. One approach is to optimize transportation routes by selecting the shortest, most fuel-efficient modes of transport, such as rail or sea freight, which have a smaller carbon footprint. Route optimization software can assist in choosing the most suitable route, reducing fuel consumption and pollution. Additionally, consolidating shipments by maximizing product loads per container can prevent excessive pollution and costs.
The type of vehicles used in transportation also plays a role in pollution. While electric trucks and hybrid vehicles are still not widely adopted for large-scale transportation, they are becoming more popular and offer a greener alternative when powered by renewable energy sources. Companies can also explore using biofuels, such as Bio-natural gas (CNG) and Bio-liquefied natural gas (LNG), which have lower emissions than traditional diesel.
Warehousing and packaging are other aspects of logistics that contribute to pollution. Warehouses consume significant energy and produce greenhouse gas emissions. To mitigate this, companies can implement energy-efficient lighting, heating, and cooling systems, as well as optimize warehouse layouts to reduce transportation distances. Additionally, using recyclable or biodegradable packaging materials, such as paper, glassine, and seaweed envelopes, can reduce the environmental impact of packaging waste.
Climate change poses a significant threat to supply chains, and companies are under increasing pressure to reduce their carbon footprint. By adopting sustainable practices and considering the environmental impact of their transportation and logistics operations, companies can play a crucial role in mitigating climate change and creating a greener future.
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Fossil fuels and energy infrastructure
Fossil fuels, such as coal, oil, and gas, have been the dominant energy source globally for centuries. However, their use has had severe environmental and health impacts, with fossil fuels being the largest driver of global climate change and a major contributor to air pollution. The burning of fossil fuels releases carbon dioxide (CO2) and nitrogen oxides into the atmosphere, leading to global warming, smog formation, and acid rain. Additionally, the processes of unearthing, processing, and transporting fossil fuels damage landscapes and ecosystems, and the infrastructure required for these processes, such as wells, pipelines, and access roads, further contributes to environmental degradation.
The transition to low-carbon energy sources is crucial to mitigate climate change. However, this transition is hindered by global competition, geopolitical tensions, and supply chain disruptions. Upstream minerals and bulk electric supply goods, such as transformers and parts, are in increasing demand as the world moves towards renewable energy sources. The supply chains for these materials face challenges due to a lack of trained workers, inflation, and other constraints.
To address these issues, strategies are emerging to secure critical energy development supplies. While this transition is necessary, it is important to recognize that supply chains themselves contribute significantly to pollution. The linear economy model, where goods are created and disposed of, leads to waste and pollution. To create more positive externalities, a circular economy model that reduces waste and reuses materials should be adopted.
Furthermore, the fossil fuels that power supply chains contribute significantly to climate change and environmental degradation. As such, re-envisioning supply chains to include protections for those who live and work in areas affected by industrial processes is essential. This includes advocating for community interests and finding ways to hold suppliers accountable for their environmental impact.
Overall, the current energy infrastructure, heavily reliant on fossil fuels, is polluting and unsustainable. The transition to low-carbon energy sources is crucial, but it must be accompanied by a transformation in supply chain practices to reduce their environmental impact and contribute to a more sustainable future.
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Climate change and extreme weather
Extreme weather events, such as storms, floods, and heatwaves, can cause physical damage to infrastructure and disrupt transportation and distribution networks. For example, flooding can damage roads and bridges, making them impassable and disrupting the flow of goods. Storms and high winds can cause power outages, affecting the refrigeration of perishable goods and disrupting manufacturing processes. Heatwaves can also impact worker productivity and increase energy costs for cooling. These events can have a cascading effect on supply chains, causing delays, disrupting just-in-time production systems, and leading to financial losses.
The frequency and intensity of extreme weather events is expected to increase due to climate change, exacerbating these challenges. Rising temperatures and changing precipitation patterns can also impact the availability of resources and raw materials. For instance, water scarcity can affect agricultural production and impact industries that rely on water as a key input, such as food and beverage manufacturing and textile production. Additionally, changes in temperature and weather patterns can affect the suitability of certain regions for specific crops, impacting agricultural supply chains and the availability of raw materials for processed goods.
To build resilience against climate change and extreme weather events, supply chain managers need to adopt adaptive strategies. This includes diversifying supplier bases and sourcing materials from multiple regions to reduce reliance on a single area vulnerable to specific climate risks. Developing contingency plans and alternative supply chain routes is also crucial to ensure the uninterrupted flow of goods in the event of disruptions. Investing in sustainable and resilient infrastructure, such as renewable energy sources and climate-resilient transportation networks, can also help mitigate the impacts of extreme weather events.
Additionally, supply chain transparency and collaboration are key. Businesses should work closely with suppliers and logistics partners to understand their climate risks and develop joint strategies to mitigate them. By sharing data and forecasts, organizations can better anticipate and plan for potential disruptions. Finally, building climate resilience in supply chains requires investment in new technologies and innovations. This includes the use of predictive analytics to forecast demand and identify potential disruptions, as well as the development of more efficient and resilient transportation and storage systems.
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Negative externalities on communities
The operations of supply chains cause pollution, labour violations, and infringements on human rights and dignity. Fossil fuels used in supply chains are a driving force of the climate crisis, filling the atmosphere with greenhouse gases, disrupting natural systems, and exposing people to health risks.
Supply chains are fundamental to the economy, but they also contribute significantly to environmental degradation and social injustices. The linear economy model of the supply chain, where goods flow downstream and end up as waste, needs to be transformed into a circular economy where resources are reduced, reused, and recycled.
Climate change poses significant threats to supply chains, with extreme weather events such as flooding, droughts, and wildfires causing disruptions, delays, and losses. These disruptions impact the quality of life and security of communities, often inequitably. For example, supply chain disruptions in the pharmaceutical industry can put public health and safety at risk, as seen during the pandemic.
Additionally, supply chains are responsible for up to 90% of companies' environmental impacts, with carbon-intensive sectors, land use, raw material extraction, heavy industries, and transportation contributing to air pollution and waste.
To address these negative externalities, companies are increasingly adopting sustainable practices and holding their suppliers accountable through initiatives such as supplier scorecards and collaboration. However, challenges remain in monitoring complex supply chains and finding the expertise to assess suppliers' sustainability practices.
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Upstream mineral and material sourcing
Supply chains are fundamental to the economy, but their operations also cause pollution and other environmental and social injustices. Upstream mineral and material sourcing is a critical aspect of supply chains, encompassing the range of activities needed to produce a product or service.
The apparel, accessories, and footwear industry, for instance, relies on raw materials such as cotton, leather, wool, rubber, and precious minerals and metals. The main environmental impacts of this industry's sourcing practices include water depletion and pollution, deforestation, and soil degradation. Cotton production, in particular, requires large amounts of water, land, and pesticides, and can accelerate desertification if not properly managed. Forestry products are responsible for a significant portion of global deforestation, leading to biodiversity loss and species extinction.
The building products and furnishings industry is another sector where upstream mineral and material sourcing can have significant environmental impacts. This industry's heavy reliance on wood and various materials like plastics, aluminum, and steel contributes to deforestation and land disturbances from metal mining.
The transition to low-carbon energy sources is increasing the demand for upstream minerals and materials for energy infrastructure and technologies. However, global competition, geopolitical tensions, and supply chain disruptions hinder the development and deployment of these technologies.
To address these challenges, there is a growing interest in responsible sourcing and sustainability throughout supply chains. Companies are adopting CSR strategies and integrating sustainability into their practices to reduce their environmental impacts and improve their reputations. Scoring suppliers, making public targets, and collaborating across industries are some of the approaches companies are taking to hold their suppliers accountable and improve sustainability.
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Frequently asked questions
Supply chains represent a substantial part of a company's carbon footprint, with McKinsey estimating that 90% of companies' environmental impacts come from supply chains. This includes emissions from land use, raw material extraction, heavy industries, transportation, and packaging.
Climate change poses risks to supply chains, threatening the quality of life and security of people and businesses. Climate hazards such as flooding, drought, and wildfires can cause disruptions, delays, and loss of profitability. For example, the 2022 European heatwaves caused factories in China's Sichuan province to shut down, disrupting supply chains for the automobile and semiconductor industries.
To reduce the environmental impact of supply chains, companies can improve sustainability across their suppliers by developing technological systems, scoring suppliers, setting public targets, collaborating across industries, and giving awards. Multinational corporations can also prioritize working with suppliers that adhere to social and environmental standards, creating a cascade of sustainable practices throughout the supply chain.
