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The Benefits of Sustainable Supply Chains

By October 25, 2022Uncategorized

Consumption and Emissions – A Growth Story

Global retail sales are expected to grow to $27.3 trillion USD in 2022, up 5.0% from last year. Paralleling this growth in e-commerce is a growth in carbon emissions – parcel deliveries are estimated to increase by 78% globally by 2030, resulting in up to 30% greater emissions.

Companies have many levers to pull to reduce their impact on the environment such as altering the materials used in products, using more sustainable packaging and even reducing business travel. The supply chain, however, offers the most fruitful area for improvement. According to a report from McKinsey, a typical consumer company’s supply chain creates far greater social and environmental costs than its own operations, accounting for more than 80% percent of greenhouse-gas emissions and more than 90% of the impact on air, land, water, biodiversity, and geological resources. For companies to achieve reductions in carbon footprints, they should look to sustainable investments in their supply chains for the greatest impact.

Benefits of Sustainable Supply Chains

Having a sustainable supply chain won’t just reduce costs and emissions. Here are a few key and ancillary benefits that eco-friendly operations can have on a company:

Reduced Environmental Impact: The overarching goal of sustainability is to reduce the impact that people, governments and companies have on the environment. With sustainable supply chains, companies can significantly reduce their carbon footprints, helping to create a better world for tomorrow.

Consumer Loyalty & Satisfaction: Today’s consumers worldwide are increasingly concerned about their own carbon emissions and impact on the environment. Companies that can reduce their carbon footprint and communicate this with consumers can deliver a positive brand image and gain a competitive advantage. Companies that execute on their sustainability initiatives are likely to enjoy increases in consumer loyalty and satisfaction as well as increased total revenues.

Costs & Profitability: Sustainable supply chains are efficient supply chains that achieve more with less. By introducing route optimization, green-vehicle fleets and crowdsourced delivery, companies can reduce the amount of people, fuel and effort required to operate their supply chain. The added benefit? Reduced costs and improved profitability. Companies that actively plan with climate change in mind secure an 18% higher return on investment than companies that do not.

Investor Relations: Both retail and institutional investors are growing more considerate of sustainability initiatives when allocating funds for investment. Companies that are able to promote sustainable practices are becoming more lucrative for investors with sustainability goals in mind. In 2020, sustainable funds, on average, outperformed both their traditional peers and indexes, according to Morningstar’s 2021 Sustainable Funds U.S. Landscape Report. Improved investor branding and increased returns? Sounds like a win-win.

Compliance: Governments around the world are demanding greater supply chain sustainability in an effort to reduce emissions. Both local governments and the United Nations have emission reduction targets in place and are keenly aware of the effects supply chains have on sustainability. Building more sustainable supply chains can help companies comply with these mandates.

Corporate Culture: Hiring and retaining employees traditionally rests on factors such as pay, vacation and work performed. With each new generation, however, a growing focus on corporate responsibility enters the conversation. A survey of US employees found more than 70% of workers would choose to work at a company with a strong environmental agenda, nearly 40% of millennials have chosen a job because of company sustainability, and more than 60% of workers said a strong sustainability plan would affect their decision to stay at a company.

Tech-Enabled Sustainability Solutions

Technology is changing the way supply chains are orchestrated by enabling greater predictiveness, configurability and efficiency, which in turn translates into greater sustainability. Here are a few key tech-enabled innovations that can help companies create leaner, greener supply chains:

Loop Optimization: Leverages driver activity data of historical orders to suggest the optimal number of routes within a geofence.  This results in an unlimited-scale solution that provides multiple optimized loops and pushes the limits of route performance, generating greater delivery efficiency and reduced carbon emissions.

Green Vehicle Route Planning: Enables customers to design and plan last-mile delivery of products with an intelligent mix of green fleets (electric bikes, bikes and foot delivery), to achieve on-time delivery ultimately driving high consumer satisfaction with minimal or zero carbon footprint.

Long-Haul Truck Route Planning: Allows carriers to design optimal multi-day, long-haul trucking routes to minimize idling times, avoid roadblocks and reduce fuel consumption. Carriers can not only achieve sustainability goals but also meet their OTIF targets.

Carrier Allocation System: Helps brands select suitable delivery partners for different types of shipments to improve their first attempt delivery rates, minimize delivery re-attempts and damaged goods deliveries, and avoid repeated transport and corresponding carbon emissions. This goes hand-in-hand with a strong focus on ensuring a higher percentage of first attempt delivery rates to build and sustain a loyal customer base.

Sustainability Dashboard: Provides a visual representation specifically measuring carbon footprint KPIs for the customer, helping them understand carbon emissions breakdown by mode, route, carrier. The dashboards are designed to scale to be granular enough to measure package-level emissions. The dashboard also provides the ability to track and control CO2 emissions across all modes of transportation (road, rail, ocean and air) and benchmark third-party carriers and routes with the least CO2 emissions.

Jorge Lopera is Vice President Latin America & Industry at FarEye. Jorge has over 15 years of global logistics experience in senior roles encompassing customer growth, product management, and strategy. As Vice President, LATAM & Industry, responsible for FarEye’s expansion into the LATAM region, overseeing commercial and operational activities including sales, account management and channel & ecosystem partners. Serves as industry expert, contributing to major publications and supporting analyst relations.

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