Green Supply Chains, also called Sustainable Supply Chains, have been in the limelight in recent years, with most large organizations having launched ambitious initiatives to make their supply chains green, according to Marine Insight.
Green Supply Chain
Traditional supply chains, which include the international transportation leg, as well as inland transportation, storage, packaging, etc, are essential to global trade and have grown in importance, scale, and complexity as globalization has gained prevalence. Each activity and element of the supply chain contributes to emissions. To take an example, air is the most polluting mode of transport, while water transport is considered the most eco-friendly mode; however given the sheer volumes transported via vessels, the aggregate emissions are extremely high. Likewise, while some vessels now use clean fuels, a large number of vessels, trucks, and other vehicles involved in transportation still use fossil fuels.
Geopolitical factors and military conflicts exacerbate matters. Examples of the former include Western corporations moving manufacturing capacity out of China, which while being a sound supply chain and procurement strategy in itself, is rendered suboptimal because the alternate manufacturing centers (such as Vietnam, Thailand, Mexico, etc) rely on Chinese factories for raw materials and components required to make the final product.
The net effect is that the overall transport distance increases as components are sent from China to various countries, whereafter, the final product is shipped to European and American markets. This in turn increases the amount of emissions. Likewise, the ongoing military hostilities in the Middle East are an instance of the latter, where the elevated threat levels (of attacks on commercial shipping interests) have compelled Carriers to reroute vessels plying the Asia to Europe trade route via the Cape of Good Hope.
Whilst relatively safer, the route is also considerably longer than the traditional route traversing the Suez Canal. The longer distance inevitably involves greater bunker consumption, which increases emissions.
Weather also plays its part, with low water levels at key maritime gateways/ paths such as the Panama Canal or the Rhine River reducing the effective capacity of vessels, which necessitates the infusion of additional tonnage, leading to higher emissions. Even more concerning is a modal shift, whereunder cargo owners shift from the sea route to the land route (using road connections), which emits more greenhouse gasses.
Difference Between Green and Traditional Supply Chain
The fundamental difference between a traditional supply chain and a green supply chain is that while the traditional supply chain focuses overwhelmingly on operational effectiveness and commercial viability, a green supply chain incorporates environmental impact as well and emphasizes reducing the carbon footprint at the aggregate and specific activity levels, by selecting eco-friendly options throughout the supply chain. The scope of Green, Sustainable supply chains is also broader, including reverse logistics, refurbishing and recycling options, and eco-friendly end-of-life-cycle disposal planning. This is also referred to as a Circular Supply Chain.
Steps to Make Supply Chains Green
Mapping supply chains
The very first step in designing green supply chains is to map the current end-to-end supply chain and then evaluate the carbon footprint for each activity/ element with its scope. Thereafter, each activity and emissions attributable thereto need to be analyzed to identify possible opportunities to reduce emissions, whilst taking care to ensure the commercial viability of the proposed changes.
Use biodegradable packaging material
Packaging represents a significant opportunity for reducing carbon footprint, by using eco-friendly or biodegradable packaging material. Besides, packaging techniques can be optimized to reduce the use of packaging material and also avoid the use of plastic.
Use green transport products
In response to increasing demand from customers for logistical and supply chain solutions that are eco-friendly, transport and logistics service providers are now expanding their product offerings to include green options (generally at a premium over the standard product).
This enables them to offer customers who are conscious of their carbon footprint the option of selecting an eco-friendly product, which in turn helps the customer reduce their supply chain’s carbon footprint.
These green transport products could include:
- Sea-air transport: where the commodity is not time-sensitive, exporters could utilize sea-air options rather than the all-air option.
- Inland waterways: where inland transport options are available, exporters and importers could select these instead of road transport.
- Green fuels: Exporters can book their cargo on services or container vessels which use less-polluting green fuels, instead of the traditional HSFO.
Use less polluting transport modes
Exporters and importers can also make a conscious decision to select less polluting transport modes. Maritime transport is the most eco-friendly mode of transport while air transport is the most polluting, wherefore a modal shift from air to ocean can help reduce emissions significantly.
Likewise, for inland transport, the two most common modes are road and rail, where rail emits less pollution. While the decision between road and rail depends on factors such as connectivity, distance involved, and final origin/ destination, buyers and sellers can, where possible, select rail transport – which is not only eco-friendlier but also more cost-effective, especially over long distances.
Using green fuels
Carriers are increasingly biofuels or LSFO as bunkers, instead of the traditional HSFO (which was more polluting). This change is driven partly by legislative mandates making it obligatory to use marine fuel with low sulfur content, and partly by consumer preference for products with a lower carbon footprint.
Green shipping corridors
Green shipping corridors are a relatively new concept, where 2 ports are connected in a manner that facilitates lower emissions through the development of an all-encompassing ecosystem, comprising apposite legislation, financial incentives, and availability of green fuel along the route.
Carbon offsetting
Container Carriers have introduced carbon offsetting programs whereunder the Carrier, on behalf of the customer, invests, donates or allocates an amount enough to offset the carbon emissions generated in the transport of the cargo.
For example, the Carrier might tie up with an organization that plants a certain number of trees that is equivalent to the carbon footprint of the cargo movement.
Future of Green Supply Chains
Growing environmental consciousness amongst businesses and increasingly stringent regulations will drive a steady shift towards green supply chains and eco-friendly transport.
While the International Maritime Organisation has set a target to reach ‘Net Zero’ by 2050, the major container carriers have set themselves even more ambitious targets. Maersk has committed to a 70% reduction in emissions by 2030 and to be completely net zero by 2040. Hapag Lloyd’s goal is to operate a net zero fleet by 2045.
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Source: Marine Insight
