Sustainability is more than just a buzzword – it has become vital to a business’s success. Government entities and consumers are placing more emphasis on it, and manufacturers are responding.
President Biden has committed to reducing U.S. greenhouse gas emissions 50-52 percent from 2005 levels by 2030. Nearly 70% of purpose-driven shoppers will pay an added premium of 35% or more for sustainable purchases, such as recycled or eco-friendly goods, according to IBM, and 81% of global shippers have increased sustainability initiatives over the last three years, according to a supply chain management research report.
However, the definition of sustainability can be hard to pinpoint – it often means different things to different people and differs by company, geography and industry as well.
To understand sustainability in terms of transportation and the supply chain, Dr. Chris Caplice, Chief Scientist at DAT iQ, went straight to the expert. For the latest episode of Freightvine, Dr. Caplice spoke to Dr. David Correll, research scientist at the Massachusetts Institute of Technology and the director and program manager of the MIT Sustainable Supply Chains Survey. They discussed supply chain sustainability, where pressure for firms to improve their sustainability is coming from, and what companies can do to be more sustainable.
5 things to know about supply chain sustainability
Dr. Correll’s sustainability survey, conducted jointly by MIT’s Center for Transportation & Logistics and the Council of Supply Chain Management Professionals, just wrapped up its third year. While he and his team are still analyzing the results, Dr. Correll gave Dr. Caplice a sneak peek into the results, which will be revealed in a full report later this summer. Here are some of the takeaways from their conversation.
There’s a lot of focus on sustainability. Even during the pandemic, the survey found that organizations are working toward improving their sustainability. Year two of the survey, which was conducted at the start of the pandemic and results released in summer 2021, found that 82% of respondents said their firm’s commitment to supply chain sustainability stayed the same or increased in the last year. That percentage is still around 80% for this year’s survey. So, even in the face of a crisis like the pandemic, organizations were “undaunted “and felt value in their sustainability initiatives and “they didn’t want to lose ground in what they’ve achieved so far.”
It’s more than environmental. When creating the survey, Dr. Correll and his team chose to use a broad definition of sustainability and based the questions on the United Nations’ established sustainability goals. These incorporate environmental, social and governance (ESG) objectives. As Dr. Correll points out, there has been this switch, over the past decade, for organizations to focus on the triple bottom line – meaning instead of just focusing on generating profit, businesses also must also take into account their environmental and social impact as well. In the third year of the survey, Dr. Correll noted that social sustainability increased in importance for respondents.
It’s good for business. By increasing efficiencies, businesses not only reduce their carbon emissions, but they also reduce spend and improve the bottom line. For carriers, this means looking at fuel efficiency, becoming SmartWay certified, enrolling drivers in eco-driving courses and looking at aftermarket add-ons to increase the aerodynamics of their trucks. For shippers and brokers, they want to choose the most sustainable carriers at the best prices, but they lack the metrics, so it’s looking into how they get that information and measure it during bidding.
Dr. Caplice also noted that DAT looked into how its load board tool helps improve sustainability. DAT found that, on average, carriers can reduce CO2 emissions by 4-12% by using the load board because it helps them reduce empty miles.
There’s myriad pressures to be more sustainable. The focus on sustainability may not just be altruistic, although the greater good definitely plays its part. But transportation companies are being pressured into tracking supply chain sustainability by investors, consumers/employees and government regulators. Investors don’t want to take a risk on a firm that could have a sustainability issue in their supply chain that will blow up and damage their reputation.
Additionally, Dr. Correll notes that “firms also see it’s hard to get the top talent that you want because people are considering the sustainability reputation of their potential employee.” As people become more aware of their personal carbon footprint, they want an employer focused on sustainability as well and want to work for a company with similar beliefs/initiatives.
There’s regional discrepancies when it comes to the importance of supply chain sustainability. According to Dr. Correll, the most recent survey data says definitions of sustainability change over time. Additionally, it changes based on geographic and cultural differences as well. One of the largest discrepancies found in the survey is among respondents in Latin America and the Caribbean versus North America and Europe.
“There were far more respondents who reported ‘my firm doesn’t have a strong commitment to or investment in supply chain sustainability’ in Latin America and the Caribbean,” notes Dr. Correll.
However, they are still analyzing the reasons why – could it be social? Does it have to do with less government oversight? Do they not have the resources because they are smaller organizations? Look to the full report later this summer for the answer.
If there is anything we can take away from Dr. Correll and his sustainability survey, it’s that no matter how you define it, it’s not going away. More companies and governments will continue to increase their focus on sustainability initiatives because it is the right thing to do but also because it’s required by law and by reputation. Plus, it’s good for business.
Drs. Caplice and Correll take a deeper dive into supply chain sustainability’s evolution and where it will go from here in the full podcast. Listen to it in its entirety here.