Businesses are actively pursuing innovations in sustainability within their supply chains — however, many must enhance the business indicators they utilize in this domain to achieve greater advancement, as per a recent report by researchers from MIT.
In an era of changing global policies and ongoing economic unpredictability, the survey-based report indicates that 85 percent of organizations claim they are maintaining supply chain sustainability initiatives at the same level as recent years or are amplifying those efforts.
“Our findings provide compelling evidence that sustainability continues to be significant,” states Josué Velázquez Martínez, a research scientist and head of the MIT Sustainable Supply Chain Lab, which contributed to the report. “There are numerous tasks that still need to be fulfilled to reach those objectives, but there’s a robust willingness from businesses worldwide to address sustainability.”
The fresh analysis, titled “Sustainability Still Matters,” was disclosed today. This marks the sixth annual report on the topic compiled by the MIT Sustainable Supply Chain Lab, a segment of MIT’s Center for Transportation and Logistics. The Council of Supply Chain Management Professionals also participated in this initiative.
The report is founded on a worldwide survey, with feedback from 1,203 professionals across 97 nations. This year, it delves deeper into three main issues, including regulations and their influence on corporate strategies regarding supply chain management. A second primary issue is the management and reduction of what industry experts refer to as “Scope 3” emissions, which originate not from a company itself, but from its supply chain. The third focal point is the future of freight transport, which independently contributes to a significant portion of supply chain emissions.
Broadly, the survey shows that for European firms, the main motivator for action in this realm remains governmental mandates, such as the Corporate Sustainability Reporting Directive, which obligates companies to release periodic reports detailing their environmental impact and associated societal risks. In North America, company leadership and investor preferences tend to be more pivotal in shaping a firm’s initiatives.
“In Europe, the pressure mainly arises from regulations, whereas in the U.S., it largely comes from investors or competitors,” Velázquez Martínez remarks.
The survey findings concerning Scope 3 emissions disclose numerous opportunities for enhancement. In terms of business and sustainability, Scope 1 greenhouse gas emissions are those produced directly by a company. Scope 2 emissions refer to the energy it has acquired. Scope 3 emissions encompass those generated throughout a firm’s value chain, including the supply chain activities related to producing, transporting, utilizing, and disposing of its products.
The report indicates that approximately 40 percent of firms closely monitor Scope 1 and 2 emissions, yet significantly fewer analyze Scope 3 emissions in an equivalent manner. And despite Scope 3 emissions potentially comprising around 75 percent of total firm emissions in aggregate, about 70 percent of firms surveyed report lacking sufficient data from suppliers to effectively calculate the complete greenhouse gas and climate impact of their supply chains.
Indeed, calculating total emissions can be challenging when a supply chain encompasses multiple layers, including smaller suppliers that lack data capabilities. Nevertheless, companies can enhance their analytics in this domain as well. For instance, 50 percent of North American firms still rely on spreadsheets for calculating emissions data, often making rough estimates correlating emissions to basic economic activities. An alternative involves life cycle assessment software that delivers more refined estimates of a product’s emissions, from material extraction to post-use disposal. In contrast, only 32 percent of European firms continue to use spreadsheets instead of life cycle assessment tools.
“You get what you measure,” Velázquez Martínez points out. “Inadequate measurement leads to poor decisions that likely won’t drive the reductions you anticipate. Hence, we focus a great deal on this particular concern, which is crucial for shaping an action plan. Companies pay significant attention to metrics in their financials, but in sustainability, they often default to simplistic measurements.”
Conversely, the report illustrates that companies are still wrestling with the optimal methods for minimizing emissions in transportation. Some regard biofuels as the most promising temporary alternative to fossil fuels; others are investing in electric vehicles; while some are waiting for hydrogen-powered vehicles to gain popularity. Supply chains commonly involve long-distance trips. For firms, similar to individual consumers, electric vehicles are more feasible with an extensive network of charging stations. Progress is being made in this area but further efforts are necessary.
That said, “Transportation has advanced considerably overall,” remarks Velázquez Martínez, noting the growing acceptance of innovative vehicle power modes.
Even with emerging technologies on the horizon, however, the sustainability of supply chains does not solely rely on their adoption. A contributing factor driving sustainability in supply chains is the incentives companies have to reduce costs. In a competitive market, spending less on fossil fuels typically results in savings. Furthermore, companies can often identify ways to modify their logistics to consume and spend less.
“In addition to new technologies, there is another aspect of supply chain sustainability linked to more effective utilization of the existing infrastructure,” Velázquez Martínez observes. “There is always a necessity to reassess traditional operating methods in order to uncover opportunities for increased efficiency.”