As corporations become increasingly focused on ESG initiatives, their supply chain and logistics partners respond with tools and services designed to help them grow sustainability and other goals.
Supply Chain Helps Meet ESG Goals
Jun 13, 2022
Interest in environment, social responsibility, and governance—or ESG—initiatives is growing among businesses of all sizes across the country, thanks in large part to widespread changes in the United States and abroad.
Some changes are environmental—greenhouse gas (GHG) emissions and other factors contribute to climate change and an increase in severe weather events that impact the supply chain. Others are societal. Social pressure from the Black Lives Matter and Me Too movements are prompting organizations to evaluate their workforces and corporate cultures.
There’s also increasing stakeholder pressure to do business in a more sustainable, socially responsible way. Nearly two-thirds of businesses responding to the 2020 Gartner Sustainability Survey said they were pressured by customers to invest in sustainability initiatives while 48% said pressure was coming from investors and 48% cited regulators.
The largest year-over-year increase in pressure in 2021 came from investors, governments, and international governing bodies, according to The State of Supply Chain Sustainability 2021 study from The MIT Center for Transportation & Logistics.
In addition, the pandemic disrupted the supply chain in ways unheard of before, while supply chain globalization has made it difficult for companies to monitor their suppliers’ environmental impact and labor practices.
At the same time, many companies realize that more sustainable transportation efforts not only protect the environment, but they also save shippers money, enhance carrier profitability, and improve truck driver conditions. These factors are strong motivators for change, which is currently focused on transportation, procurement, and supplier requirements and monitoring.
Here’s how many companies are turning to their supply chains to meet their ESG goals.
REDUCING EMISSIONS FROM TRANSPORATION
Transportation generates the largest share of GHG emissions in the United States at 27%, according to the Environmental Protection Agency. That’s why reducing emissions is a logical starting point for many companies, especially since Scope 1 and Scope 2 emissions are within their control. (Scope 1 emissions come from a company’s owned or controlled sources; Scope 2 covers indirect emissions generated by electricity, steam, heating, and cooling purchases; and Scope 3 includes all other indirect emissions in the supply chain such as those produced by suppliers.)
Technology has a significant impact on reducing carrier GHG emissions as developers work to create tools that reduce the number of empty and wasted miles, minimize idling while waiting to load, and optimize loads.
Leaf Logistics Inc. is at the forefront as it builds a data-driven, multi-party network that lets shippers, carriers, and freight brokers connect more efficiently.
CEO Anshu Prasad compares what his firm is creating to a power grid. “If you had something comparable to a utility grid for logistics that connected all the parties, you could move the same amount of freight that you move today with 80% of its capacity,” he says.
One of the technology company’s efforts reduces empty miles and keeps drivers earning when they’re behind the wheel by creating driver loops. Prasad cites an example where the system’s data has enabled a driver to run the same loop for almost two years. The driver is happier and the carrier’s margins have improved.
DROP AND HOOK
Leaf Logistics also utilizes its network to expand use of the “drop and hook” concept, where drivers drop a full container at a facility and hook their tractor to a pre-loaded trailer waiting for them.
It doesn’t happen a lot, says Prasad, because the process is too cumbersome when it’s not automated. His company wants to change that for both shippers and carriers because “it means that their drivers get in and out in 15 minutes rather than four hours,” he says.
The company is also using $24 billion of shipping-level data from more than 400 large consumer packaged goods companies to knit together network moves that improve efficiency and reduce emissions.
“A broker working with one load at a time would need 19,000 customers to see the number of moves we see with just four shippers,” says Prasad.
BlueGrace Logistics, a transportation management-focused third-party logistics (3PL) provider, also uses proprietary technology to reduce GHG emissions by eliminating empty legs and optimizing loads, among other things.
In addition to stressing the importance of the network size it can achieve as one of the largest 3PLs in the United States, “You also need to have a unification point for the different parties in your network to work within,” says Azad Ratzki, the company’s chief technology officer.
Because multiple parties come to us, we’re able to view both sides of the coin and optimize how goods are delivered.
With visibility into both shipper and carrier systems, BlueGrace is positioned to maximize efficiency. “Because multiple parties come to us, we’re able to view both sides of the coin and optimize how goods are delivered,” Ratzki says.
“We can eliminate a leg of the journey or any number of stops and make sure that transportation is fully used,” he adds. “If shippers or carriers were doing it separately, they would have a much larger environmental footprint.”