Sustainable supply chain programmes

At the 2024 Sustainable Supply Chain Exhibition, part of IntraLogisteX, Benjamin Foster, president and founder of Fosterra, gave a keynote speech on how we can make supply chains more sustainable. Foster discussed some of the challenges of implementing sustainable supply chain programmes and shared some inspiring success stories.

This blog summarises the highlights, including:

• Primary supply chain concerns
• Market drivers of sustainability from a revenue perspective
• Regulatory drivers
• Addressing Scope 3 in Sustainability Programmes
• Case examples of successful supply chain sustainability programmes

What are the primary supply chain concerns?

• Understanding climate risks in supply chains
• Regulatory issues
• Calculating accurate footprints
• Actions – finding ways to reduce an organisation’s environmental footprint

Market drivers: how do you look at sustainability through the lens of revenue?

Carbon claims help to create brand value for end consumers and large customers or retail channels, many of which have set their targets for near-term reductions by 2030 and long-term Net Zero reductions by 2050.

“This means they have to tackle the emissions, sustainability requirements, and goals in their operations and supply chains.”

Selling to, white labelling for, or manufacturing for these companies means ensuring your supply chain lives up to their environmental claims, he said.

Regulatory drivers

The new CSDDD and CSRD (Europe’s corporate sustainability due diligence) are beginning to affect the biggest companies. ESG disclosures are growing in importance to investors and large trading companies. Local requirements also arise in different countries. Singapore, for instance, or the State of California, have their own regulations.

Local regulations can affect businesses if they have operations there – if they sell through these locations, sell through companies there, or if manufacturers are based there. Voluntary frameworks are being used as a point of reference. “Whether it’s science-based targets (SPT), Global Reporting Initiative (GRI), or others, these are the regulatory frameworks that are being set up.”

Understanding how they impact your business and supply chain is imperative. “Last month in the US, the New York State Attorney General sued the largest beef producer in the world based on their environmental claims and the fact that they’re out of sync with what they believe is likely to occur.”

“There are lessons to be learned here – there are pathways to avoid this sort of risk.”

According to the lawsuit against JBS USA Food Company and JBS USA Food Company Holdings (JBS USA), they did not have a credible, detailed Scope 3 inventory, a detailed plan to achieve the goals by Net 40, or any demonstrable project progress towards that. They had also previously been warned of greenwashing.

“It’s interesting to see how those risks are materialising, but also that there are things that can be done to avoid them.”

How do you set up a programme and targets to address Scope 3?

For those in manufacturing, related industries, or retail, 80 to 95% of emissions come from Scope 3 or the supply chain. “That’s why it’s so important to tackle these different areas.”

It is essential to consider the supply chain. There are risks and opportunities. So how do you set up a programme? Your procurement team will have many questions because it drives a different way to interact with your suppliers.

Different areas/questions to consider include:

1. What are the targets?
2. How do they link to the things we are already doing?
3. How are we going to measure those?
4. How will we be seen externally?
5. How does this fit into the risk assessment we’re already doing?

There’s already a lot to figure out about what’s happening in your supply chain, like the availability of product price or product sourcing, so organisations must work out how sustainability fits into that and if there will be a cost implication.

Operationally, there is already an extensive list of metrics for supply chain partners, which may already include environmental compliance requests.

“If you increase sustainability targets, how does that change what you’re doing? How can you engage throughout from the raw materials to logistics? It’s not just about the manufacturing and supply chain. And then internally, when you put a programme in place, who will manage it and how? What experience is required? These are important questions and considerations to address as sustainability and environmental impact programmes are implemented.”

Case example: a consumer-packaged goods company

This example is about a seventh-generation business that makes cleaning products for home and personal use as a division of Unilever. The challenge was to ensure that all decision-making focused on sustainability.

Scope 1 and 2 (their internal operations) were relatively small for them. Most of their emissions and sustainability impacts are driven by suppliers and co-manufacturers of raw ingredients and packaging.

They established an aggressive goal to reach specific targets.

1. They upgraded how they collected data because it is hard to take action and advocate without knowing what is happening in all facilities and with all suppliers.
2. They set a target of implementing 100% Green Power for all of their supply chain facilities worldwide.
3. They launched a sustainable supplier engagement programme that went down to individual facility levels, not just suppliers.

The result? They discovered a 60 per cent improvement in the accuracy of data collection, including timeliness and completeness, compared to before. They reached all their green power targets and saw dramatic reductions in energy use through green power purchases.

Case example: New Belgium Brewing

For New Belgium Brewing, sustainability was a big part of their efforts from the outset. They have been collecting, gathering and refining their GHG emissions data for ten years or more, and are way ahead of the curve on what’s required.

Now, they have created a website, drinksustainably.com, to offer resources to anyone in the brewing community who wants to learn from their example and adopt the model and tools that they developed. It’s a solid branding effort.

In addition to taking action on Scope 1 and 2, they leaned into sustainable supply chain programmes, working with their packaging suppliers. They are now recognised as experts in this space on a national basis. Many small and medium-sized brewers around the US are using this as a good tool set.

Sustainability programme takeaways

Foster explained that a key takeaway from these examples is in target setting and not just to say at a high level what you’re going to do, but also “how you will get there.”

“Do that in an integrated way with different scenarios and risks – and assess the risks of action versus non-action.”

The risk of non-action is plain to see. “Internal actions are important, so make sure you walk the walk. Businesses must speak from an area of authority with suppliers if they’re asking them to do something within the supply chain. Think about it as a partnership and not as a requirement.”

In addition to setting targets for partners and suppliers to reduce their footprint, you must ensure that you’re adding value. “How do you partner with your suppliers so they can learn what to do because sustainability targets may not be part of their core mission? They need to learn how to do that.”

Celebrating success is also essential. “You will get early wins, and you’ll find some things you can accomplish that are easy to talk about and build momentum with. Beyond that, be honest about the hard things so that you can tackle those head-on.”

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