June 12, 2023 | Supply Chain Strategy
In 2021, more than 13,000 companies representing over 64% of global market capitalization disclosed their environmental data as well as emissions impacts and reduction plans through the Carbon Disclosure Project (CDP).
Yet, despite all their efforts, many of these companies haven’t made much progress in reducing their environmental impact.
In most cases, their failure stems from the inability to assess and measure this impact. First, they aren’t sure of the different types of emissions. They also do not know where these emissions originate and cause the maximum damage.
Not surprisingly, 81% of executives suggest that businesses should make greater efforts to protect the environment. Currently, they are too focused on short-term goals and fail to look at the bigger picture. And with regulatory authorities scrutinizing businesses more closely than ever, there isn’t much scope for evasion.
The bottom line is that businesses must act now, set measurable goals and regularly review progress.
Here are a few steps businesses can take to lower their environmental impact:
Gaining visibility into your company’s environmental performance is the first step to achieving your goals. In fact, for comprehensive tracking of environmental impact, there is a need to look beyond your own business and production processes. Emissions from your supply chain, also known as scope 3 emissions, usually account for more than 90% of a company’s total emissions. More than internal processes, companies should therefore focus on suppliers and other stakeholders in the supply chain.
Businesses must quantify their environmental goals. They must establish measurable goals for reducing their environmental impact. For example, set a target for energy consumption from renewable sources. Likewise, set clear goals for emission reduction.
Identify strategic suppliers that can influence the company’s environmental impact targets to a large extent. Engage with these suppliers and check if they have environmental programs in place. Alternatively, look for hotspots or categories that contribute a major share of emissions. Transportation and logistics, for example, are major sources of emissions and should be addressed by the business first.
Establish the reporting metrics for suppliers that are aligned with the company’s sustainability strategy. These metrics will not only help measure environmental impact across the supply base but also help benchmark and compare supplier performance. Further, they can unravel new opportunities to reduce environmental impact.
Deploy automated reporting software to accelerate data collection and processing, measure and compare supplier performance and identify areas of improvement. The use of technology can also help improve data accuracy and quality.
Include more of your incumbent suppliers in the program over time. Such expansion can drive change across the entire supply chain. Help your suppliers’ suppliers understand the importance of mitigating environmental impact as well as the metrics needed to report and assess performance.
Review supplier performance periodically. Identify suppliers that need more assistance to achieve their targets. You may also need to adjust targets while expanding the program.
Changing consumer preferences have also made it imperative for companies to immediately focus on their environmental impact. 32% of consumers in the U.S. prefer to buy from companies that are actively taking steps to reduce their environmental impact while 68% of consumers are stepping up their efforts to identify brands reducing their environmental impact. In doing so, they look at company values as well as manufacturing and supply chain practices.
All this suggests that now is a crucial phase for companies to put their environmental plans into practice. If they fail to do so, they are at a huge risk of losing out to competition.