Corporations are actively seeking sustainability advances in their supply chains - but many need to improve the business metrics they use in this area to realize more progress, according to a new report by MIT researchers.
During a time of shifting policies globally and continued economic uncertainty, the survey-based report finds 85 percent of companies say they are continuing supply chain sustainability practices at the same level as in recent years, or are increasing those efforts.
"What we found is strong evidence that sustainability still matters," says Josué Velázquez Martínez, a research scientist and director of the MIT Sustainable Supply Chain Lab, which helped produce the report. "There are many things that remain to be done to accomplish those goals, but there's a strong willingness from companies in all parts of the world to do something about sustainability."
The new analysis, titled " Sustainability Still Matters ," was released today. It is the sixth annual report on the subject prepared by the MIT Sustainable Supply Chain Lab, which is part of MIT's Center for Transportation and Logistics. The Council of Supply Chain Management Professionals collaborated on the project as well.
The report is based on a global survey, with responses from 1,203 professionals in 97 countries. This year, the report analyzes three issues in depth, including regulations and the role they play in corporate approaches to supply chain management. A second core topic is management and mitigation of what industry professionals call "Scope 3" emissions, which are those not from a firm itself, but from a firm's supply chain. And a third issue of focus is the future of freight transportation, which by itself accounts for a substantial portion of supply chain emissions.
Broadly, the survey finds that for European-based firms, the principal driver of action in this area remains government mandates, such as the Corporate Sustainability Reporting Directive, which requires companies to publish regular reports on their environmental impact and the risks to society involved. In North America, firm leadership and investor priorities are more likely to be decisive factors in shaping a company's efforts.
"In Europe the pressure primarily comes more from regulation, but in the U.S. it comes more from investors, or from competitors," Velázquez Martínez says.
The survey responses on Scope 3 emissions reveal a number of opportunities for improvement. In business and sustainability terms, Scope 1 greenhouse gas emissions are those a firm produces directly. Scope 2 emissions are the energy it has purchased. And Scope 3 emissions are those produced across a firm's value chain, including the supply chain activities involved in producing, transporting, using, and disposing of its products.
The report reveals that about 40 percent of firms keep close track of Scope 1 and 2 emissions, but far fewer tabulate Scope 3 on equivalent terms. And yet Scope 3 may account for roughly 75 percent of total firm emissions, on aggregate. About 70 percent of firms in the survey say they do not have enough data from suppliers to accurately tabulate the total greenhouse gas and climate impact of their supply chains.
Certainly it can be hard to calculate the total emissions when a supply chain has many layers, including smaller suppliers lacking data capacity. But firms can upgrade their analytics in this area, too. For instance, 50 percent of North American firms are still using spreadsheets to tabulate emissions data, often making rough estimates that correlate emissions to simple economic activity. An alternative is life cycle assessment software that provides more sophisticated estimates of a product's emissions, from the extraction of its materials to its post-use disposal. By contrast, only 32 percent of European firms are still using spreadsheets rather than life cycle assessment tools.
"You get what you measure," Velázquez Martínez says. "If you measure poorly, you're going to get poor decisions that most likely won't drive the reductions you're expecting. So we pay a lot of attention to that particular issue, which is decisive to defining an action plan. Firms pay a lot of attention to metrics in their financials, but in sustainability they're often using simplistic measurements."
When it comes to transportation, meanwhile, the report shows that firms are still grappling with the best ways to reduce emissions. Some see biofuels as the best short-term alternative to fossil fuels; others are investing in electric vehicles; some are waiting for hydrogen-powered vehicles to gain traction. Supply chains, after all, frequently involve long-haul trips. For firms, as for individual consumers, electric vehicles are more practical with a larger infrastructure of charging stations. There are advances on that front but more work to do as well.
That said, "Transportation has made a lot of progress in general," Velázquez Martínez says, noting the increased acceptance of new modes of vehicle power in general.
Even as new technologies loom on the horizon, though, supply chain sustainability is not wholly depend on their introduction. One factor continuing to propel sustainability in supply chains is the incentives companies have to lower costs. In a competitive business environment, spending less on fossil fuels usually means savings. And firms can often find ways to alter their logistics to consume and spend less.
"Along with new technologies, there is another side of supply chain sustainability that is related to better use of the current infrastructure," Velázquez Martínez observes. "There is always a need to revise traditional ways of operating to find opportunities for more efficiency."
