Sustainability initiatives require intentional action plans

Given the current state of disruption in many industries, a looming question is whether or not sustainability strategies will take a backseat as executives focus on surviving in the short term. Do we have time and funds for sustainability when we have “real” business problems?

Events of the past several years paint a mixed picture. There was a general deprioritization of sustainability following the 2008 financial crisis, yet the Covid-19 pandemic brought a renewed focus on sustainability strategies. Then during 2022, the Russian invasion of Ukraine created renewed supply chain and energy disruption.

Counter to what some companies think, sustainability strategies actually provide organizations resilience in times of crisis. According to Gartner research, this was particularly true in 2022, with 83% of the business leaders surveyed agreeing that sustainability activities directly create value, helping the organization to recover from disruption impacts.

Much of this value appears to be driven by better management of energy in the supply chain. Fifty-eight percent of business leaders report that their sustainability program mitigates cost from supply chain-related energy consumption. This implication makes sense. When energy is scarce and expensive, those who have invested in efficiency and renewable energy at their sites and with their suppliers are better positioned to withstand these shocks.

Setting action-oriented goals

In the year ahead, CSCOs must set goals that deliver impact and resiliency, while balancing the constraints that come with energy uncertainty and constant threat of recession. This can be achieved through a holistic, strategic approach to managing energy in supply chain operations and the broader value chain.

Energy is required to run almost all businesses. However, in recent years, sustainability strategies have focused heavily on renewable energy, neglecting the need to reduce energy demand in the first place. Both are essential to near-term resilience and a net zero future.

Companies can optimize energy consumption by assessing projects and capital investments based on future energy costs, financial savings and enablement of decarbonization objectives. This is achieved by integrating sustainability factors into such business processes as sales and operations planning (S&OP) and transportation routing, where environmental improvements can be made directly.

Additionally, leverage digital tools to drive visibility of emissions and energy performance in the enterprise to enable stronger decision making. By installing energy management and optimization solutions across sites, organizations can gain access to data that can be analyzed to drive performance, maintain equipment and identify projects.

Lastly, assess how the enterprise can meet some, or all, of its own energy needs and review site potential for renewable energy. This strategy transforms a linear energy supply system into a network of distributed supply and microgrids.

Address value chain emissions

Value chain emissions have an outsized impact on our energy consumption and GHG emissions. Organizations can reduce the energy consumed in production processes and better leverage the energy embodied in goods through circular economy activities.

Addressing value chain emissions can be challenging, since many energy- and carbon-intensive processes result from raw materials extraction and production, which are high up in the value chain. Engaging with ecosystem partners can help to unlock leverage and visibility to address these upstream impacts. Support direct suppliers to reduce energy and emissions by providing supplier incentives and embedding decarbonization goals into decision-making processes.

In addition, look to identify and reduce energy consumption in the supply chain by transitioning to materials with lower-intensity production. This can include embedding circular economy principles into material selection criteria to assess use and reuse. Also, extend the useful life of products and better utilize embodied energy by leveraging the “inventory” of materials currently in circulation via the reverse supply chain.

Finally, supply chain decarbonization is complex and requires strategy, goal setting, metrics and a method to track progress. Use dedicated software solutions to embed these efforts into supply chain processes. Leverage technology to measure Scope 1, 2 and 3 emissions; set specific carbon reduction goals; track progress; and collaborate with suppliers to address their goals.

With the current state of disruption, it is tempting to consider halting sustainability efforts. However, CSCOs must manage current pressures to ensure supply chain resilience by maintaining focus on transformational priorities, while managing tactical pressures.

Laura Rainier, Senior Director Analyst, Gartner Supply Chain Practice Photo credit: Gartner

Laura Rainier is a Senior Research Director in the Talent and Sustainability team at the Gartner Supply Chain Practice. Laura’s research interests include sustainable supply chain, circular economy, responsible sourcing and supply chain climate strategies. She helps Gartner clients to understand and apply sustainability principles within the supply chain in alignment with their organizational requirements and goals. Her work aims to show how effective sustainability strategies can enable supply chain leaders to achieve their mission-critical goals and enhance profitability, while improving environmental and social impact. Laura can be reached at: [email protected].

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