The process of decarbonisation alone involves several steps and investment of a great deal of capital. It requires high levels of business strategies for it to be successful. Along the way, the challenges that come are far more complex
While fighting climate change is the current motto, there’s no doubt that the road ahead is not an easy one to take. While many companies are engaging in different ways to reduce carbon footprints, decarbonisation of the supply chain has an impact on both logistics and global trade.
Treaties like the Paris Agreement and the Copenhagen Accord are measures in the right direction that will ensure effective methods are undertaken to reduce carbon emissions. Different countries are taking the initiative to become carbon-neutral in their sustainable plans.
Active supply-chain decarbonisation is becoming a license to operate for businesses, but companies aiming to be role models in the fight against climate change must overcome roadblocks along the way. Let us deep-dive into making decarbonisation a priority for all.
Why is supply chain decarbonisation important?
The main goal of any logistics company is to reduce as many carbon emissions as possible. When it comes to the supply chain, the entire operation contributes a great deal to greenhouse gases. Thus, it becomes crucial throughout the process to take counter measures to reduce carbon footprints.
Consequently, many international organisations, governments and other bodies have implemented agreements upon a specific number of emissions to reduce the production of these greenhouse gases. This is because approximately 75 per cent of the emissions are generated by the supply chain operations in any industry.
These processes are also significant because they often include optimising operations which makes them cost-effective and helps reduce wastage. This also ensures all processes are streamlined and run in an optimal manner in the long term.
With so many challenges coming our way due to climate change, decarbonisation has several benefits for companies. However, maintaining and following these steps in itself is challenging.
There are several factors that have an impact. One of the most important factors when it comes to any company’s tracking of greenhouse gases (GHGs) is the amount of carbon emissions they each emit. The rise in carbon emissions today is a big worry. According to McKinsey, carbon is traded at €50 per metric ton on the EU Emissions Trading System. Thus, it only makes it imperative to have firm carbon accounting strategies in place.
Carbon accounting is the process of tracking down the total number of these emissions.
It is important to evaluate carbon emissions because it is one of the crucial factors when it comes to decarbonisation. When companies do not have a healthy foundation for carbon-accounting, then it becomes a problem.
A strategically developed framework will help address this challenge with the collaboration of different stakeholders and organisations to help establish efficient carbon accounting foundations.
Many companies these days use data analysis to develop such frameworks and strategies. And a lot of them rely on secondary data instead of getting first-hand information directly from the relevant sources.
When second and third party sources are used to gather data, there's always a chance of a lack of authenticity. Not all data is always reflective and reliable. ‘
Thus, it becomes important to collect data from primary sources through different cloud-based, data sharing systems and platforms. These sources will help companies make better decisions by implementing strategies to reduce emissions in those areas that emit more.
Additionally, when it comes to data, estimates are always different when taken into account by different companies. This makes it difficult to come to one conclusion. Getting data directly from the supplier thus becomes important.
Forging alliances in this matter becomes important because suppliers, customers and all other parties are involved. This also helps in achieving common sustainability goals. However, one important factor here is that companies cannot work alone to achieve a competitive feat. Additionally, different alliances have different value systems that need to be looked after.
Thus, when it comes down to alliances, it is important that different stakeholders are engaging with commitments to reduce as many emissions as they can. While communication is the key aspect in this case, a shared understanding becomes important when it comes to similar goals. It creates room for a collaborative problem-solving process to take place.
The process of decarbonisation alone involves several steps and investment of a great deal of capital. It requires high levels of business strategies for it to be successful. Along the way, the challenges that come are far more complex.
To steer through these challenges, addressing these issues become pertinent for efficient sustainable practices. These processes, despite their challenges provide room for innovation and development.
(Dilip Sharma is chief operating officer, ProConnect Supply Chain Solutions.)