Consumers and governments are making sustainability demands

Sustainability is almost always mentioned as one of the top two most important supply chain trends. Yet this topic features remarkably low on boardroom agendas, and investments are lagging behind. This is likely to change now that consumers and governments have started making rules and demands. During Webinar Wednesday, Districon and BigMile explained why companies can best start with transport.

By Marcel te Lindert

Along with digitalization, sustainability is the most important supply chain trend according to a recent Supply Chain Media survey of supply chain executives. However, this high score does not automatically mean that sustainability is top of mind in the boardroom. In fact, the topic ranks only fifth in importance among senior executives. Erwin Faber, Managing Director of consultancy firm Districon, said he blames this on the pandemic: “It has led to a lot of disruption and uncertainty. Companies have focused primarily on their core activities and paid less attention to sustainability.”

The focus on the core business perhaps explains why operational excellence ranks so highly on the boardroom agenda. But ironically, operational excellence and sustainability often go hand in hand. “A better organized supply chain is usually also a more efficient one, with lower costs and lower emissions. Those factors are all interrelated,” stated Jan Pronk, Managing Director of BigMile, the company that won this year’s European Supply Chain Scale-up Contest.

Carbon tax

A recent study by the Massachusetts Institute of Technology (MIT) painted a similar picture as Supply Chain Media’s survey. The renowned Boston-based research institute concluded that 36% of the companies surveyed have increased their focus on sustainability, yet the investments in sustainability have hardly grown at all. Pronk sees examples of this in his own line of work: “We talk to a lot of companies. Everyone is interested in using our tool for calculating, analysing, optimizing and reporting carbon emissions but there is limited willingness to invest, often due to the lack of a clear business case. Nobody makes money from reporting their carbon emissions.”

That will change when carbon tax is introduced, with the first governments likely to start in 2023 according to Pronk: “Companies will then need tools to calculate and allocate emissions down to shipment level.” Faber agreed: “Governments are making more and more demands in terms of sustainability. Companies have to keep up, otherwise their trucks will no longer be allowed in city centres or they will have to pay an extra fee to take their products to market.”

Sustainable delivery options

Besides governments, another important driving force are consumers, who are increasingly asking sustainability-related questions. “In a growing number of web shops, you can select delivery options based on sustainability instead of costs, or you can choose between delivery by van or by cargo bike. Consumers are becoming increasingly interested in sustainable options.” Pronk added: “We’re currently discussing this with e-commerce industry associations. We want to provide visibility into an order’s emissions impact so that consumers can make an informed choice. Do they really need that product today, or can they wait a few days?”

Slowly but surely, sustainability is becoming more than just a marketing tool. Faber: “We see more and more companies taking an integral approach to sustainability, based on the idea that sustainability goes hand in hand with greater efficiency and lower costs. The new generation in particular will be the game changer, because it is made up of people who are intrinsically motivated to save the planet.”

Multi-sourcing

As mentioned above, the pandemic has been a reason for many companies to hold back on investing in sustainability while they focus on supply chain resilience. “That requires a flexible supply chain, which is difficult because for many years it has been drilled into everyone to work as efficiently as possible. Tomorrow’s winners will be the companies that manage to combine efficiency and flexibility.”

However, flexibility is hard to achieve now that all the shortages – of raw materials, computer chips and containers – are making it difficult to find new suppliers. Meanwhile, some approaches to increase flexibility – such as multi-sourcing – are automatically less sustainable. “But on the other hand, multi-sourcing can help companies to sharpen their focus on sustainability requirements, such as by measuring the performance of suppliers and awarding orders to the best ones in reward,” Faber explained.

Start with transport

But where should you start if you want to improve your sustainability? Faber didn’t have to think for long: “Start with transport. That’s where the low-hanging fruit is. Every kilometre you can eliminate contributes to a more sustainable supply chain. Moreover, soon only ‘clean’ transport will be allowed in city centres.”

Transport is the starting point for BigMile too: “We can start with a limited dataset. All we need is a list of all the loading and unloading addresses, supplemented with the volumes that were shipped. That could be the number of TEUs, the number of pallets or the number of cubic metres. As you start to analyse the results, you will soon want to know more. That can be achieved by adding more data. We then make it as convenient as possible for you to share the results with brand owners, manufacturers, logistics service providers and other supply chain partners. We try to make it as easy as possible for everyone.”