The term "green supply chain” describes the concept of integrating sustainable environmental processes into the traditional supply chain. The traditional Supply chain includes processes such as product design, material procurement and selection, manufacturing and production, operation, and lifespan management.
Green Supply Chain doesn’t just mitigate the environment impact but it also drives value creation to reduce environmental impact. The general goals of Green supply chains are to reduce the CO2 emissions, however, other goals include lesser waste production, better efficiency of resources, reuse of raw materials, increased profitability etc.
There has been a non-exhaustive list of Green Supply chain from D.Kannan et al. (https://en.wikipedia.org/wiki/Green_supply_chain_management). However, he calculated the importance of criteria by taking three decision makers responses. Based on the statistics, “Commitment of Senior Management” stood at the top to achieve the Green Supply Chain goals. This is followed by “Product Designs that reduce, reuse, recycle, or reclaim materials, components, or energy” and then “Compliance with legal environmental requirements and auditing programs”.
As per the IPCC report 2021, if the emissions continue the same way, below are the temperature changes expected. The Temperature will increase further up to 2 degrees by 2042.
Moving further, the Greenhouse emissions are classified into three Scopes by widely used international accounting tool, the “GHG Protocol”. These scopes are important to analyse the sources of GHGs, to improve transparency and to guide the organisations in understanding the impact of emissions on the Earth. Scope 1 and Scope 2 are designed so that only one organization can consider GHG emissions. This helps preventing doubling accounting and achieving accuracy. Below is a brief about Scope 1,2 and 3 Emissions.
Scope 1: Direct Emissions – These are the emissions from the company's own operations that should be controlled by the company itself. Some examples are Direct CO2 emission from the heating process in the steel plants, chemical emissions from the Tyre industries etc.
Scope 2: Indirect Emissions – These are the emissions associated with the electricity purchased by the company, or the emissions brought into the boundaries of the organization. Scope 2 emissions occur at facilities that generate electricity.
Scope 3: Other Indirect Emissions –These emissions source from all the direction which are outside the organization boundary and are added in the value chain process of organization by different set of company in term of supplies, vendors, purchasers etc. Scope 3 emissions are the result of company activity, but come from sources that the company does not own or control.
With the help of these scopes, companies can easily justify and identify emissions within their supply and value chains. Looking around the world, we can find different industries in different areas that enable sustainability in our daily supply and value creation processes.
One such company is Continental AG (one of the leading manufacturers of auto parts). Continental AG has an ambitious interim goal of not only identifying emissions in the supply chain, but also correcting mistakes, aiming for 100% carbon neutrality by 2050 at the latest – with ambitious intermediate targets. Across its value chain, Continental’s CO2 balance accounts to greater than 125 million metric tons. However, the CO2 generation by their production and purchase of electricity accounts to 3.2 million metric tons. For achieving carbon neutrality, the organisation has phased a three step process.
From the end of 2020, all electricity purchased for production sites were switched to green electricity.
By 2040, the entire production is planned to be made carbon neutral.
Entire value chain to be made Carbon neutral by 2050.
Continental AG has also established the independent Science Based Targets initiative (SBTi) at the end of 2020 to help them monitor their climate protection target and also to achieve the Paris Agreement norms.
As per the Paris agreement, the organisation must be Carbon Neutral latest by 2050. Net Carbon Neutral means you still have CO2 emissions, but at the end of 2050 we have the same amount of negative CO2 produce. This can be achieved by investing in technologies which will be absorbing CO2 for achieving net zero.
Furthermore, the organisations must assess the GHG emissions across their value chain which is very complex. The GHG protocol provides information that is not contained in Scope 3 standards like methods of calculating GHG emissions for each of the 15 categories of Scope 3 emissions like distribution and transportation, purchased goods and services etc.
Continental AG has calculated their GHG emissions for 9 out of the 15 categories and planned to achieve its net Carbon neutrality by 2050. Above are the calculated categories represented diagrammatically.
For the 125+ Million Metric tons of CO2 produced, they have calculated the above 9 figures. With this categorisation, the company was already aware of where the major contributors of CO2 to the environment is coming from. Some major points to be noted are,
In purchased goods, the company came up with a strategy of manufacturing its tires with renewable recyclable materials. This will massively reduce material consumption thereby optimising footprint based product design.
From the logistics perspective, much optimisation of routing has been done, suppliers are planned to be closer to production locations, using Emission free vehicles for transport routes etc.
Operations are planned to be optimised by switching to renewable energy sources for fuels, steam and heat.
End of use is to be taken care for which organisations ramp up the use of renewable material, product reuse and recycle strategies.
Similar to this organisation, there are a lot of other organisations striving to achieve Net Zero CO2 emissions at the earliest. This has been the agenda for sustainability in many organisations. It is not only a specific organisation or a group of individuals, but all the organisations must implement this Green Supply chains to ensure that the net carbon emissions are balanced.
With the implementation of these Green supply chains, the World will turn into a better place for living and organisations can sustain.
References:
IPCC Report: https://www.ipcc.ch/report/ar6/wg1/
GHG Protocol: https://ghgprotocol.org/
Continental AG: https://www.continental.com/en/
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