Mar 04 2024

Innovative Solutions for Supply Chain Decarbonisation: From Renewable Energy to Circular Economy



Innovative Solutions for Supply Chain Decarbonisation: From Renewable Energy to Circular Economy

The global supply chain is the backbone of our modern economy, enabling companies to source, produce, and distribute goods and services to customers around the world. But it's also a major contributor to climate change, accounting for around 80% of global greenhouse gas emissions when considering the full lifecycle impacts of products.

As the world races to limit global warming to 1.5°C and avoid the worst impacts of climate change, decarbonizing the supply chain has become a critical imperative for businesses of all sizes and sectors. But it's not just about reducing emissions - it's also about building resilience, mitigating risk, and creating long-term value for all stakeholders.

The good news is that a new wave of innovative solutions is emerging to help companies tackle the challenge of supply chain decarbonization. From renewable energy and energy efficiency to circular economy and regenerative agriculture, these solutions offer a pathway to a more sustainable, low-carbon future for supply chains.

Here are a few of the most promising areas of innovation:

Renewable energy and energy efficiency
One of the most straightforward ways to decarbonize the supply chain is to switch to renewable energy sources, such as solar, wind, and hydro power. By generating their own clean energy or purchasing it from renewable suppliers, companies can significantly reduce the carbon footprint of their operations and value chain.
For example, the global furniture giant IKEA has committed to becoming climate positive by 2030, which means reducing more greenhouse gas emissions than the IKEA value chain emits. To achieve this goal, IKEA is investing heavily in renewable energy, with plans to generate more renewable energy than it consumes across its operations by 2020. This includes installing solar panels on its stores and factories, as well as purchasing wind energy from suppliers.

But renewable energy is just one piece of the puzzle. Companies can also achieve significant emissions reductions by improving energy efficiency across their supply chains. This can include everything from upgrading to more efficient equipment and machinery, to optimizing logistics and transportation networks, to implementing energy management systems and behavioral change programs.

For example, the global shipping company Maersk has set a target to reduce its carbon emissions by 60% by 2030 compared to 2008 levels. To achieve this goal, Maersk is investing in a range of energy efficiency measures, such as improving the design and operation of its ships, using digital technologies to optimize routing and speed, and exploring alternative fuels such as biofuels and hydrogen.

Circular economy and waste reduction
Another key area of innovation for supply chain decarbonization is the circular economy - a model of production and consumption that aims to keep resources in use for as long as possible, minimize waste and pollution, and regenerate natural systems.
By designing products and packaging for reuse, repair, and recycling, companies can reduce the carbon footprint of their supply chains while also creating new sources of value and customer loyalty. For example, the outdoor gear company Patagonia has long been a leader in circular economy practices, offering repair and recycling services for its products and using recycled materials in its designs.

But the circular economy is not just about product design - it's also about rethinking entire business models and value chains. For example, the French food services company Sodexo has launched a "wasteLESS" program that aims to reduce food waste across its global operations by 50% by 2025. The program includes measures such as smart menu planning, portion control, and food donation partnerships, as well as employee training and engagement.

Another example is the Dutch company Mud Jeans, which offers a "lease a jeans" model where customers pay a monthly fee to rent a pair of jeans, which are then returned and recycled at the end of their useful life. This model not only reduces waste and resource consumption, but also creates a new revenue stream and customer relationship for the company.

Sustainable sourcing and regenerative agriculture
A third area of innovation for supply chain decarbonization is sustainable sourcing and regenerative agriculture. By working with suppliers to promote sustainable farming and land management practices, companies can reduce the carbon footprint of their raw materials while also supporting biodiversity, soil health, and water conservation.
For example, the food and beverage giant Danone has set a goal to source 100% of its agricultural raw materials sustainably by 2025, using a combination of certification schemes, direct supplier engagement, and regenerative agriculture partnerships. One such partnership is with the French farming cooperative Terre de Liens, which helps farmers transition to organic and agroecological practices that sequester carbon in the soil and improve soil health.

Another example is the fashion company Kering, which has launched a "regenerative fund for nature" to support projects that restore and protect ecosystems in its supply chain, such as regenerative cotton farming in India and sustainable cashmere production in Mongolia. By investing in these projects, Kering not only reduces its environmental footprint but also creates positive social and economic impacts for local communities.

Collaborative innovation and stakeholder engagement
Finally, a critical enabler of supply chain decarbonization is collaborative innovation and stakeholder engagement. Given the complexity and scale of the challenge, no single company or solution can drive the transformation alone. It requires a collective effort across the value chain, involving suppliers, customers, policymakers, investors, and civil society.
One example of this collaborative approach is the Transform to Net Zero initiative, a cross-sectoral alliance of global companies committed to accelerating the transition to a net-zero economy. The initiative brings together companies from diverse industries, such as Microsoft, Nike, Unilever, and Maersk, to share best practices, develop tools and resources, and advocate for supportive policies and investments.

Another example is the Sustainable Apparel Coalition, a multi-stakeholder initiative that brings together brands, retailers, suppliers, and other partners to develop common tools and standards for measuring and improving sustainability performance in the apparel and footwear industry. By collaborating on initiatives like the Higg Index, a suite of tools for assessing the environmental and social impacts of products and supply chains, the coalition is driving greater transparency, accountability, and innovation across the industry.

The road ahead

As these examples show, the path to supply chain decarbonization is paved with innovation and collaboration. From renewable energy and circular economy to sustainable sourcing and stakeholder engagement, companies have a range of powerful tools and strategies at their disposal to drive impact and value across their operations.

But the journey is not without its challenges. Decarbonizing the supply chain requires significant investments in new technologies, processes, and partnerships, as well as a willingness to challenge entrenched systems and ways of thinking. It also requires a long-term, holistic approach that balances environmental, social, and economic considerations, and engages all stakeholders in the process.

For companies that are just starting out on this journey, the key is to start small but think big. Begin by mapping your supply chain emissions hotspots and identifying the most material opportunities for reduction and innovation. Engage your suppliers, customers, and other partners in the process, and look for ways to collaborate and scale up successful initiatives over time.

And remember, the benefits of supply chain decarbonization go far beyond just reducing emissions. By embedding sustainability into your operations and value chain, you can also drive efficiency, resilience, and long-term value creation for your business and stakeholders.

As a sustainability and innovation professional, I have seen firsthand the power of these solutions to transform supply chains and create positive impact at scale. From renewable energy projects that power entire factories, to circular economy models that turn waste into valuable resources, to regenerative agriculture partnerships that restore ecosystems and communities, the possibilities are endless.

But I have also seen the challenges and barriers that companies face in trying to implement these solutions - from lack of data and tools, to misaligned incentives and short-term thinking, to complex and fragmented value chains.

Overcoming these barriers will require a collective effort and a sustained commitment from all stakeholders. It will require new forms of collaboration and partnership, as well as supportive policies and investments from governments and financial institutions.

But the prize is worth the effort. By decarbonizing our supply chains and building a more sustainable, resilient, and inclusive economy, we can not only tackle the urgent crisis of climate change, but also create a world of shared prosperity and well-being for all.

The time to act is now. The solutions are at our fingertips. The only question is, will we rise to the challenge and seize the opportunity?

I believe we can, and we must. The future of our planet and our economy depends on it.


Related Articles

Tool and strategies modern teams need for sustainability roadmap.