Climate-aware consumers and new regulations are driving businesses to actively work toward net-zero plans and decrease emissions. As these changes take hold, meeting new environmental objectives means significant changes to the way companies operate.
In particular, this pushes the need for sustainable supply chains to the forefront of strategic planning. Supply chains account for nearly 80% of an organisation’s carbon emissions, according to a McKinsey report. Additionally, Supply Chain Brain cited going green as one of the top ways that supply chains will change this year.
Although decarbonising your logistics is increasingly necessary for future-proofing a business, prioritising action on it can be fraught with challenges. This is especially true if cutting carbon is seen as conflicting with cutting costs. But making sustainable changes doesn’t have to be expensive.
Cost is the biggest barrier to supply chain sustainability
Businesses are still struggling to marry their environmental goals with their commercial goals. In research carried out by the Economist Intelligence Unit (EIU), 38% of companies responded that the cost of change was their biggest barrier to decarbonising supply chains. Other factors, like difficulty monitoring complex logistics and challenges with internal expertise or customer interest, served to compound their struggle to go green but were eclipsed by cost.
The good news is that transitioning to a greener supply chain doesn’t need to cost as much as many businesses fear. Although long term investment into lower-emitting fleets can be a worthwhile long-term solution, there are ways to make your current supply chain run in a way that is more carbon efficient.
At 7bridges, our AI is dedicated to optimising supply chains. But that doesn’t just mean a focus on cost. LEO, our Logistics Engine for Optimisation AI, can also optimise for reducing carbon emissions or for a balance of both to help you meet more of your business goals.
Read more: The Green Ratio - the optimal path to a sustainable supply chain
Balance carbon and costs with the Green Ratio
We recently ran a simulation in our proprietary AI to uncover the point at which commercial and environmental goals could be optimised for equally. For the simulation, we looked at an averaged representation of a European pharmaceutical company, but the concept holds true for everyone even if the exact ratio shifts with business needs.
Read all about the simulation here.
The simulation showed us that balancing your carbon reduction with cost savings is achievable. Optimising your existing supply chain for carbon reduction alone could decrease your emissions by 36% immediately. That means no waiting for greener transportation solutions, no relying on nature-based offsets with inconsistent measurement, just direct emissions reduction.
If you want to optimise your supply chain for sustainability and cost equally, you only need to sacrifice 7% on either side from full optimisation. For our simulated company, we uncovered a clearly defined ratio of carbon to cost, which we call the Green Ratio. This optimal ratio is 129 kgCO2e : £1000. That means for every thousand pounds that a company spends, its carbon emissions should be limited to 129 kilograms of carbon dioxide equivalents.
This number, though created for pharmaceutical companies in the simulation, is a perfect starting point for any business looking to strike an equal balance between sustainability and profitability. We also explored the five critical areas that impact a company’s ability to reduce carbon emissions in their supply chain. Your business could see an overall emissions reduction of 51% through immediate, high-impact changes in those areas when our AI aligns them to your ideal ratio. You can learn more about the Green Ratio in our latest whitepaper.
Download The Green Ratio: the optimal path to a sustainable supply chain
A happy medium between profit-only and planet-only goals exists and we can get you there. Using artificial intelligence and aligning it to your specific objectives can deliver you high-impact results that start delivering right away. Discovering your Green Ratio and optimising for both carbon and cost could be a best-case scenario for people, planet and profits. Download your copy of the whitepaper and optimise your way to a more sustainable supply chain.
Embark on the optimal path to decarbonsing your supply chain with the Green Ratio. Get your copy now!