Wanted: Low Carbon Supply Chains

Supply Chain
November 19, 2019
By Laurie Toupin

As businesses the world over examine ways to reduce their carbon footprint from cradle to grave, supply chains naturally come under closer scrutiny.

Companies are asking their supply chains to strategically use low-carbon initiatives, in order to help lower the business’ overall greenhouse gas impact.

This is not a new concept.

From a Stockholm Environment Institute 2010 supply chain study, the authors wrote: “The UK aims to reduce Kyoto greenhouse gas emissions by at least 20-24 billion tonnes by 2050. In order to achieve this goal, urgent action needs to be undertaken to cope with unsustainable supply of energy and the need to reduce carbon footprint from a new perspective, based on a holistic supply chain approach.” (https://www.sei.org/projects-and-tools/projects/low-carbon-supply-chain/)

Although the above study mentioned is currently inactive, several recent studies have been published where international scholars look at their own country’s businesses to determine how much of an impact this could actually have.

For example, authors Chiranjit Das and Sanjay Jharkharia, both from the Department of Operations Management, Indian Institute of Management Rohtak, Rohtak, India, recently published their paper, “Effects of low carbon supply chain practices on environmental sustainability: An empirical study on Indian manufacturing firms”, in the South Asian Journal of Business Studies.

The purpose of their paper was to examine the relationships between low carbon supply chain practices and environmental sustainability and the economic performances of businesses.

Using a questionnaire-based survey, the authors interviewed 83 Indian manufacturing firms and found a positive relationship between low carbon practices and environmental sustainability.

Specifically, “carbon governance is a strategic imperative for the adoption of low carbon supply chain practices. Similarly, low carbon product and process design (LCPPD), manufacturing and logistics lead to improved environmental sustainability. In addition, low carbon purchasing is positively related to the adoption of LCPPD, manufacturing and logistics.”

However, the study found no significant relationship between the adoption of low carbon supply chain practices and a firm’s economic performance.

Moving on to China

Cheng Qian, Shenghui Wang, Xiaohong Liu and Xueying Zhang, argue in their paper, “Low-Carbon Initiatives of Logistics Service Providers: The Perspective of Supply Chain Integration”, that focusing on low carbon supply chain integration (SCI), can in fact “be an effective approach to achieve the goals of environmental and financial performance simultaneously.”

The authors define low-carbon supply chain management (SCM) as “a strategy that integrates CO2 or CO2 equivalent or greenhouse gas (GHG) emissions, either as a constraint or as an objective in supply chain design and planning.”

While SCI refers to “the degree to which a manufacturer strategically collaborates with its supply chain partners and collaboratively manages intra- and inter-organization processes.”

The authors interviewed 124 3PLs (Third-party logistics) in Guangdong, China, one of the most developed industrial provinces in South China, and asked a series of questions to determine how attention to Supply Chain Management played out, in relation to Logistics Service Providers (LSPs). The majority of which were small LSPs and medium-sized enterprises (SMEs) with less than 200 employees and a turnover of less than 20 million yuan.

At one time, LSPs just helped companies with transportation, warehousing, order processing, and related IT support, but LSPs have morphed. They are now taking on “a more proactive manner for customers by organizing networks, sharing information, managing assets, and reducing inventory.”

The authors set out to prove several inter-related hypotheses:

  • As customer environmental requirements increase, LSPs’ low-carbon SCI increases.
  • As LSPs’ corporate environmental responsibility increases, LSPs’ low-carbon SCI increases.
  • As LSPs’ low-carbon SCI increases, LSPs’ environmental performance increases.
  • As LSPs’ low-carbon SCI increases, LSPs’ financial performance increases.
  • As LSPs’ environmental performance increases, LSPs’ financial performance increases.

Their findings proved all five hypotheses. They wrote: “LSPs’ corporate environmental responsibility was a critical internal driver of LSPs’ low-carbon SCI. From the relational view, corporate environmental responsibility represented voluntary commitment to sustainable development and a long-term relationship with the stakeholders, which lead to more environmental collaborations, including low-carbon SCI.”

Also, the more social responsibility LSPs have, the more they value environment sustainability, and hence the more willing they are to commit to environmentally friendly activities.

In addition, customer environmental requirement is an important external driver of LSPs’ low-carbon SCI.

They also found that LSPs’ low-carbon SCI was positively related to LSPs’ environmental performance as well as their financial performance, indicating that by implementing low-carbon SCI, it is feasible for LSPs to achieve the goal of improving environmental and financial performances simultaneously.

Ultimately, both studies show that with the right attention and management of low carbon supply chain practices — the environment, corporations, shareholders, and supply chains win.

And organizations today can benefit from sustainability software that help to measure and reduce their carbon footprint in the supply chain and in their operations.

 

Author

Laurie Toupin