Anamika Mishra
[Sub Editor]
Sustainability has become a pertinent issue for businesses, especially in terms of supply chains, as the envelope of critical problems in the world opens up more in the ways of climate change and environmental degradation. The supply chain, covering the entire lifecycle of products-from raw material to end consumer, is responsible for a portion of global carbon emissions, whereby an increasing number of companies have started to place themselves in the direction of reducing the carbon footprint of their supply chains, as well as the corporate social responsibility-internal government it reflects, and more stringent-internal frameworks.
This article is looking at how different businesses across industries adopt sustainable practices to limit their carbon footprint, what benefits accrue from such activities, and the emerging challenges in the course of practice.
Thus, according to the World Economic Forum, it would be the supply chains that account for over 80 % and more in terms of total greenhouse gas emissions of a company. And thus, emissions of the supply chains must be addressed, if the company intends to reach global climate targets. For the greenhouse gas emissions, these primarily ales from freight and logistics; energy consumption in factories, wastes generation, and sources raw material. So, in these major three areas relating to the supply chains, the companies have put this effort to reduce carbon emissions: procurement, transportation, and manufacturing.
Strategies for Reducing the Carbon Footprint in Supply Chains:
Sustainable sourcing is the consideration of materials and suppliers with preferences for environmental conservation, socially responsible production, and fair labor practices. More companies are partnering with suppliers offering low-carbon products or services or using renewables in their production processes.
Unilever is committed to sourcing 100% of its agricultural raw materials sustainably by 2025. Among other initiatives, it works with farmers to prevent deforestation, enhance soil quality, and reduce emissions in agricultural practices. Moreover, the organization aims to achieve carbon neutrality in its entire supply chain by 2039.
In the similar way, IKEA has committed to sourcing 100 percent cotton and wood from sustainable sources such as forest certification schemes like Forest Stewardship Council that ensure materials are coming from responsibly managed forests.
Like it, IKEA is also committed to sourcing from 100 percent sustainable cotton and wood-from forest certification schemes, such as Forest Stewardship Council that guarantee the well-managed forests for the materials.
Manufacturing processes in supply chains are the greatest contributor to carbon emissions, especially where activity involves energy-intensive industries, such as chemicals, steel or cement production. The cure for such has been to adopt energy-efficient technologies and transition to renewable forms of energy.
For instance, Tesla has invested heavily in renewable energy for its factories, including solar power for its Gigafactories. The company is looking to use cleaner energy in powering production and consequently reduce carbon footprint. Further, this principle of sustainability is evident in the electric vehicles manufactured by Tesla as they also serve to curb emissions from the transportation sector.
Microsoft has also been a leader in sustainable supply chains. The company has set a goal to become carbon-negative by 2030. To achieve this, it is transitioning its global data centers to renewable energy sources and working with suppliers to reduce their carbon emissions. Microsoft has also pioneered a “supplier sustainability scorecard,” which helps track the environmental impact of suppliers and incentivizes them to reduce their emissions.
According to the International Energy Agency (IEA), transportation accounts for roughly 14% of emissions from global sources, making such an important part of greening supply chains. "Without it," he believes, "you cannot create green supply chains." Decarbonized supply chains would have a lot of devices through which carbon footprints are reduced from their logistics strategies. About 57% of actual plans or strategies for decarbonizing logistics involve investments in electrification of ports and transportation systems, while, for example, 41% invest in optimizing routes and the reduction of packaging. By 2030, the company plans to add a total of up to 10,000 electric delivery vans, including investments in electric delivery vans, with the aim of going completely electric in its delivery fleet. Amazon will additionally run all its operations worldwide on 100% renewable energy by 2025.Another way is developing a logistics network that will reduce both distance and frequency of shipment. PepsiCo is now using solutions driven by data so that the company can consolidate shipments and optimize routing. This will lead to a reduction in emission and increase its operational performance resulting in cost savings.
Today, most businesses are conscious of the reality that reducing carbon footprints within their supply chains would go hand in hand with working with suppliers and other industry actors. For instance, Walmart has initiated Project Gigaton, which focuses on reducing greenhouse gas emissions by 1 billion metric tons from its supply chain by 2030. This program encourages suppliers to take on sustainable practices, including reducing their emissions, reducing waste, and harnessing renewable energy for their operations.
However, companies and suppliers should be engaged in this kind of learning as they co-create new technologies. They can further invest in innovation working together to promote their sustainable agendas. This fundamentally adds up to joint action on a bigger scale for a broader change across the whole industry.
Most companies these days are aware of the fact that reducing the carbon footprint in their supply chains would require working with suppliers and other stakeholders from the industry. For instance, Walmart has introduced an initiative called Project Gigaton, aimed at cutting down greenhouse gas emissions by 1 billion metric tons from its supply chain by 2030. This initiative seeks to encourage suppliers to adopt sustainable practices, including cutting their emissions, minimizing waste, and using renewable energy.
Instead, companies and suppliers might learn from each other while developing new technologies and invest together in improving sustainability. This means collective action for a more significant collective change across entire industries.
While the momentum for sustainability is gaining ground, companies face a plethora of challenges in different spheres while applying the above strategies. Some of the major barriers are:
High Upfront Costs: Most of the sustainability projects involve huge costs in purchasing energy-efficient appliances or in a switching process from other energy sources to renewable ones. Small businesses are often unable to easily assume the financial burden of those changes.
Complexity of Supply Chains: In global supply chains, the supply chain has become highly complicated with many tiers of suppliers across different regions. Companies usually are not able to track and influence the entire supply chain for sustainability.
Lack of Data and Transparency: Most companies do not have the necessary data and transparency to make reliable estimations of the carbon footprint of their supply chains. Hence, gathering such data to devise proper strategies for emissions reduction becomes difficult.
Resistance to Change: Some suppliers and other stakeholders tend to show resistance to adopting sustainable practices since it is costlier or they do not understand the gained benefit in time.
Reducing the carbon footprint in supply chains is part and parcel of climate action. As consumers, governments, and investors increase demand for sustainability, businesses are launching various initiatives to render their supply chains more environmentally friendly-from sustainable sourcing and clean energy transitions to circular supply chains and collaboration with suppliers, to mention a few-on the carbon footprint reduction agenda.
There are challenges, such as high costs and complexities in the supply chain, but the advantages, both environmental and financial, are considerable. Therefore, in the future, supply chains are likely to be characterized by lower emissions, greater efficiency, and more responsible attitudes toward production and consumption as businesses continue investing in sustainability.
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Anamika Mishra
[Sub Editor]
In fact, global supply chains already provide a very different model from the one they carried today. It would soon begin to pose a major challenge to offshoring, the traditional manner in which most production was moved overseas. Under pressure to re-organize productivity in response to geopolitical stability, augmented costs, environmental questions, and technological change, enterprises turn towards nearshoring and reshoring for their strategic reinvention. While these two terms are often mistaken for one another, they refer to different practices enabling businesses to reconsider where and how they source and manufacture goods.
Nearshoring refers to transferring business functions like manufacturing to a country next door or relatively close in the same time zone with the home market. For instance: From the USA to Mexico or Central America. This enables reductions in shipping times, lowers costs of logistics, and facilitates clear communication.
However, reshoring refers to the manufacturing and supply chain functions returning back to the home country of the company. Some companies beginning to rethink their operations relative to a return move of production back to the original site have traditionally opted for offshore manufacturing. These include going with rising offshore labor costs; growing importance of and desire to control over production processes; and the domestic economy. Near- and reshoring have become significant, but the difference between them is whether production is transferred to another neighboring country or back to the home country.
The big change in nearshoring again refers to nearshoring within an up in the air time-space dimension.
Nearshoring refers to the practice of relocating business operations, such as manufacturing, to a nearby country, typically one that shares geographical proximity or a similar time zone with the company’s home market. For instance, a company in the United States might shift production to Mexico or Central America. The primary advantages of nearshoring include reduced shipping times, lower logistics costs, and easier communication due to proximity.
Reshoring, on the other hand, involves bringing production and supply chain functions back to the company’s home country. Companies that were once reliant on offshore manufacturing are finding it more feasible to shift production back to their original location. This trend is fueled by a variety of factors, including rising labor costs abroad, the need for greater control over production processes, and the desire to bolster domestic economies.
While both nearshoring and reshoring are gaining traction, the key difference lies in whether the production is relocated to a neighboring country or returned to the home country.
The COVID19 pandemic was a significant catalyst for rethinking global supply chains. The disruption caused by factory shutdowns, transportation bottlenecks, and the unpredictable nature of global trade prompted businesses to consider the vulnerabilities of distant supply chains. Companies found that long and complex supply chains were prone to risk, especially when geopolitical tensions or global crises struck. In response, nearshoring and reshoring offer a more resilient and flexible alternative, reducing dependency on far-flung suppliers.
Traditionally, offshoring was an attractive business model due to the low labor costs in countries like China, India, and Vietnam. However, over the past decade, wages in many of these countries have increased significantly, eroding the cost advantages of offshoring. Additionally, rising transportation costs, especially in the aftermath of global shipping disruptions, have made it less economically viable to rely on distant suppliers. As a result, nearshoring and reshoring offer a more cost-effective solution for companies seeking to minimize production and logistics expenses.
Automation, robotics, artificial intelligence (AI), and other advanced manufacturing technologies are making it possible to reshoe and nearshore production without sacrificing efficiency or increasing costs. The advent of smart factories and more agile production systems means that businesses can bring manufacturing back closer to their customers while maintaining the scale and cost advantages that once existed only in offshore production. These technologies enable companies to maintain quality while reducing the reliance on low wage workers, making reshoring and nearshoring viable even in developed economies.
Trade wars, tariffs, and shifting international relationships have made global supply chains more uncertain. The U.S. China trade war, for example, led many American companies to rethink their dependence on China for production. Political uncertainty in other regions, such as Southeast Asia and Latin America, has further reinforced the need for companies to diversify their manufacturing bases and reconsider the risks associated with offshoring. Nearshoring and reshoring allow businesses to mitigate the impact of these geopolitical risks by reducing their reliance on single source foreign suppliers.
The fast-growing demand for sustainable business practices also calls for the reshaping of the supply chain strategy, where transporting goods across distances would not just incur huge carbon footprint but also face a continuous wave of recession from consumer pressure and increasing regulation in dealing with environmental impact. All these factors, therefore, tend to push companies to bring production closer to home. Reduced carbon footprints resulting from nearshoring or resourcing combined with localized production would mean fewer transport emissions, both transport environmental tolls, and the overall contribution to a sustainable world from localized production and lower transportation emissions.
Fast delivery time, maximum product availability is what customers expect in an ecommerce era. Although indeed, companies are focusing on a minimum lead-time in order to promote the mentioned aspects. Nearshoring or reshoring creates a certain proximity to the customer, and such ways make it easy for businesses to respond to the shifting demand of the consumer and ensures that products are made available within a very short time. This is crucial in a number of industries, including fashion, electronics, and automobile manufacturing-the faster a business can respond to changing trends or consumer preferences, the greater its competitive advantage over others.
Such practices have multifarious benefits, which can uplift the operational efficacy of a business; some of these are: Now that production is being relocated, goods may now reach the market within the shortest possible time frame. Some of the advantages of lower transportation and logistics can really represent cost savings for an industry. More significant monitoring of production operations ensures better quality control. A highly localized supply chain is better poised to withstand global disruptions. Reshoring and nearshoring may create job opportunities and spur local economies, especially with companies investing in setting manufacturing plants close to consumers.
As the global supply chains react toward their challenges and opportunities, nearshoring and reshoring trends are expected to continue. Increasingly integrating advanced technologies while keeping pace with the evolving customer expectations will heighten the requirement of supplying resilience, efficiency, and sustainability. In addition, the ongoing changed geopolitical picture, for example, revamped trade policies and pushes for deglobalization, will probably continue to be a fruitful "usage area" for trends like these.
This is indeed a conclusion: nearshoring and reshoring are not merely buzzwords. They are essential strategies for building supply chains that are increasingly making themselves more resilient, efficient, and sustainable. There are challenges to overcome, but the ranges of benefits, from logistics to quality control, make these alternatives worth consideration to companies’ future-proofing their operations in an increasingly connected yet unpredictable world economy.
neighboring country or back to the home country.
The big change in nearshoring again refers to nearshoring within an up in the air time-space dimension.
Nearshoring refers to the practice of relocating business operations, such as manufacturing, to a nearby country, typically one that shares geographical proximity or a similar time zone with the company’s home market. For instance, a company in the United States might shift production to Mexico or Central America. The primary advantages of nearshoring include reduced shipping times, lower logistics costs, and easier communication due to proximity.
Reshoring, on the other hand, involves bringing production and supply chain functions back to the company’s home country. Companies that were once reliant on offshore manufacturing are finding it more feasible to shift production back to their original location. This trend is fueled by a variety of factors, including rising labor costs abroad, the need for greater control over production processes, and the desire to bolster domestic economies.
While both nearshoring and reshoring are gaining traction, the key difference lies in whether the production is relocated to a neighboring country or returned to the home country.
The COVID19 pandemic was a significant catalyst for rethinking global supply chains. The disruption caused by factory shutdowns, transportation bottlenecks, and the unpredictable nature of global trade prompted businesses to consider the vulnerabilities of distant supply chains. Companies found that long and complex supply chains were prone to risk, especially when geopolitical tensions or global crises struck. In response, nearshoring and reshoring offer a more resilient and flexible alternative, reducing dependency on far-flung suppliers.
Traditionally, offshoring was an attractive business model due to the low labor costs in countries like China, India, and Vietnam. However, over the past decade, wages in many of these countries have increased significantly, eroding the cost advantages of offshoring. Additionally, rising transportation costs, especially in the aftermath of global shipping disruptions, have made it less economically viable to rely on distant suppliers. As a result, nearshoring and reshoring offer a more cost-effective solution for companies seeking to minimize production and logistics expenses.
Automation, robotics, artificial intelligence (AI), and other advanced manufacturing technologies are making it possible to reshoe and nearshore production without sacrificing efficiency or increasing costs. The advent of smart factories and more agile production systems means that businesses can bring manufacturing back closer to their customers while maintaining the scale and cost advantages that once existed only in offshore production. These technologies enable companies to maintain quality while reducing the reliance on low wage workers, making reshoring and nearshoring viable even in developed economies.
Trade wars, tariffs, and shifting international relationships have made global supply chains more uncertain. The U.S. China trade war, for example, led many American companies to rethink their dependence on China for production. Political uncertainty in other regions, such as Southeast Asia and Latin America, has further reinforced the need for companies to diversify their manufacturing bases and reconsider the risks associated with offshoring. Nearshoring and reshoring allow businesses to mitigate the impact of these geopolitical risks by reducing their reliance on single source foreign suppliers.
The fast-growing demand for sustainable business practices also calls for the reshaping of the supply chain strategy, where transporting goods across distances would not just incur huge carbon footprint but also face a continuous wave of recession from consumer pressure and increasing regulation in dealing with environmental impact. All these factors, therefore, tend to push companies to bring production closer to home. Reduced carbon footprints resulting from nearshoring or resourcing combined with localized production would mean fewer transport emissions, both transport environmental tolls, and the overall contribution to a sustainable world from localized production and lower transportation emissions.
Fast delivery time, maximum product availability is what customers expect in an ecommerce era. Although indeed, companies are focusing on a minimum lead-time in order to promote the mentioned aspects. Nearshoring or reshoring creates a certain proximity to the customer, and such ways make it easy for businesses to respond to the shifting demand of the consumer and ensures that products are made available within a very short time. This is crucial in a number of industries, including fashion, electronics, and automobile manufacturing-the faster a business can respond to changing trends or consumer preferences, the greater its competitive advantage over others.
Such practices have multifarious benefits, which can uplift the operational efficacy of a business; some of these are: Now that production is being relocated, goods may now reach the market within the shortest possible time frame. Some of the advantages of lower transportation and logistics can really represent cost savings for an industry. More significant monitoring of production operations ensures better quality control. A highly localized supply chain is better poised to withstand global disruptions. Reshoring and nearshoring may create job opportunities and spur local economies, especially with companies investing in setting manufacturing plants close to consumers.
As the global supply chains react toward their challenges and opportunities, nearshoring and reshoring trends are expected to continue. Increasingly integrating advanced technologies while keeping pace with the evolving customer expectations will heighten the requirement of supplying resilience, efficiency, and sustainability. In addition, the ongoing changed geopolitical picture, for example, revamped trade policies and pushes for deglobalization, will probably continue to be a fruitful "usage area" for trends like these.
This is indeed a conclusion: nearshoring and reshoring are not merely buzzwords. They are essential strategies for building supply chains that are increasingly making themselves more resilient, efficient, and sustainable. There are challenges to overcome, but the ranges of benefits, from logistics to quality control, make these alternatives worth consideration to companies’ future-proofing their operations in an increasingly connected yet unpredictable world economy.
Explore the latest edition of Journal of Supply Chain Magazine and be part of the JOSC Daily News Bulletin.
Discover all our upcoming events and secure your tickets today.
Journal of Supply Chain is a Hansi Bakis Media brand.
