By Danny Hudson, Director of CPG & Retail, FarEye
ESG or environmental, social, and governance – is no longer a buzzword bandied around in corporate circles, it’s steadily become a guiding principle behind how companies worldwide are shaping their business strategy.
Climate change and social unrest have made companies realise that they can no longer operate in isolation. Businesses are working on policies and programmes focused on achieving sustainability and diversity, equity and inclusion (DEI) goals.
The push toward ESG is driven by regulators, investors, customers, shareholders, and governments. A Deloitte survey revealed that 98% of consumers think that brands have a responsibility to make the world better, while 71% of the CXOs surveyed felt investor pressure to act on climate change.
Focusing on the E in ESG
The Intergovernmental Panel on Climate Change (IPCC) projections reveal that greenhouse gas (GHG) emissions will rise beyond 2025 leading to median global warming of 3.2 degrees Celsius by the end of the century. And to put brakes on rapid climate change and reach net-zero by 2050, GHG emissions must reduce by 45% by 2030.
Some of the biggest culprits behind rising emissions and climate change are global supply chains. A CDP report says that supply chains are responsible for more than 90% of the total GHG emissions of organisations. Therefore, to be ESG compliant, organisations must make investments in building a more sustainable supply chain.
Global companies going green
Top global companies are taking various initiatives to meet their sustainability targets. For instance, Amazon, Ikea, and Unilever have recently signed an agreement to partner with ocean carriers that use zero-carbon marine fuels by 2040. National Grid has brought down its emissions by 70% and is aiming to reach net-zero by 2050. The electricity and gas utility multinational is focused on decarbonising the energy system by installing assets that will cut close to 100 million tonnes of CO2 emissions by 2030.
PepsiCo pledged to cut GHG emissions in its supply chain by at least 40% by 2030. Apple is working towards being carbon neutral by 2030 by doubling the number of suppliers committed to using 100% clean energy. Two of Volvo’s plants are climate neutral, while FedEx’s decarbonization plans include using electric vehicles and sustainable energy.
Research firm Gartner recently announced a list of the best global supply chains in the world. Supply chains were rated on various parameters with ESG weighted 20% in the rating process.
“Nineteen companies achieved the highest possible environmental, social and governance (ES G) score this year, reflecting the growing importance supply chain leaders assign to these initiatives,” said VP, Team Manager in the Gartner Supply Chain practice.
How technology can help meet ESG goals
Technology plays a critical role in helping organisations be more sustainable. According to an Accenture report, 53% of companies say that investing in sustainable technologies plays a big role in achieving ESG targets. Enterprises looking to meet their ESG targets must invest in modernising their supply chain by using technologies like:
Artificial intelligence and Machine Learning
With artificial intelligence (AI) and machine learning (ML) capabilities, organisations can accurately predict consumer demand and do effective capacity planning, thereby reducing unnecessary wastage of energy and resources.
AI is reshaping supply chain and logistics by unlocking the benefits of route optimisation. Last-mile deliveries are done more efficiently and quickly, reducing fuel consumption. By using ML technologies, enterprises can harness big data and use it to improve supply chain visibility. End-to-end supply chain visibility empowers companies to identify areas where they can minimise emissions and reduce their carbon footprint.
AI use in supply chain is predicted to grow at a CAGR of 45.3% from 2019 to 2027 to reach $21.8 billion by 2027.
The IoT Advantage
From smartphone-based applications and GPS-enabled sensors on delivery vehicles, the internet of things (IoT) is proving to be a gamechanger in helping companies meet their ESG objectives.
Every smart device and software being used in the global supply chain serves as a source of data. This data, once gleaned by data analytics platforms, helps enterprises optimise every key aspect of their operations and reduce energy wastages.
Automation and Robotics
Automation plays a key role in making supply chains more sustainable. When manual, repetitive tasks are automated it not only helps improve productivity, it also enables less wastage of energy resources.
Automated storage and retrieval systems (SRS) help in efficient warehouse management. Temperature-controlled warehouses can be efficiently managed with automation leading to energy savings. Warehouses powered by ASRS use much less space than a traditional warehouse, reducing the environmental impact to an area.
The use of autonomous mobile robots (AMR), and automated guided vehicle (AGV) in warehouses is also helping in driving toward a cleaner and greener supply chain.
ESG is no longer seen as a corporate social responsibility (CSR) obligation but as the core of an organisation’s operations. Enterprises can meet their ESG objectives only if they invest in technologies and software that can make their carbon emissions net-zero in the future.
Business leaders must use technology to drive growth and build a better and more sustainable future for the world.