By Danny Hudson, CPG & Retail Director, FarEye
ESG or environment, social and governance – no longer a buzzword in corporate circles, it has gradually become a guiding principle behind how companies around the world shape their business strategy.
Climate change and social unrest have made businesses realize that they can no longer operate in silos. Companies work on policies and programs focused on achieving sustainability and diversity, equity and inclusion (DEI) goals.
The push towards ESG is driven by regulators, investors, customers, shareholders and governments. A Deloitte survey found that 98% of consumers believe brands have a responsibility to make the world a better place, while 71% of CXOs surveyed felt pressure from investors to act on climate change.
Focus on the E in ESG
Projections from the Intergovernmental Panel on Climate Change (IPCC) reveal that greenhouse gas (GHG) emissions will increase beyond 2025, resulting in median global warming of 3.2 degrees Celsius from here at the end of the century. And to curb rapid climate change and reach net zero by 2050, GHG emissions must be reduced by 45% by 2030.
Some of the main culprits for rising emissions and climate change are global supply chains. A CDP report indicates that supply chains are responsible for more than 90% of organizations’ total GHG emissions. Therefore, to be ESG compliant, organizations need to invest in building a more sustainable supply chain.
Global businesses go green
Leading global companies are taking various initiatives to achieve their sustainability goals. For example, Amazon, Ikea and Unilever recently signed a partnership agreement with shipping carriers that use carbon-free marine fuels by 2040. National Grid has reduced its emissions by 70% and aims to reach net zero by 2050. The multinational electric and gas utility is focused on decarbonizing the energy system by installing assets that will reduce nearly 100 million tonnes of CO2 emissions by 2030.
PepsiCo is committed to reducing GHG emissions in its supply chain by at least 40% by 2030. Apple is striving to be carbon neutral by 2030 by doubling the number of suppliers committed to use 100% clean energy. Two of Volvo’s factories are climate neutral, while FedEx’s decarbonization plans include the use of electric vehicles and sustainable energy.
Research firm Gartner recently announced a list of the best global supply chains. The supply chains were scored on various metrics with a 20% ESG weighting in the scoring process.
“Nineteen companies achieved the highest possible environmental, social and governance (ES G) score this year, reflecting the growing importance supply chain leaders place on these initiatives,” said Vice President, Team Leader of Gartner’s Supply Chain Practice.
How technology can help achieve ESG objectives
Technology plays a vital role in helping organizations be more sustainable. According to an Accenture report, 53% of companies say that investing in sustainable technologies plays an important role in achieving ESG objectives. Companies looking to achieve their ESG goals should invest in modernizing their supply chain using technologies such as:
Artificial intelligence and machine learning
With artificial intelligence (AI) and machine learning (ML) capabilities, organizations can accurately predict consumer demand and perform efficient capacity planning, reducing unnecessary waste of energy and resources.
AI is reshaping supply chain and logistics by unlocking the benefits of route optimization. Last mile deliveries are made more efficiently and quickly, reducing fuel consumption. By using ML technologies, companies can harness big data and use it to improve supply chain visibility. End-to-end supply chain visibility allows companies to identify areas where they can minimize emissions and reduce their carbon footprint.
The use of AI in the supply chain is expected 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 apps and GPS-enabled sensors to delivery vehicles, the Internet of Things (IoT) is proving to be a game-changer in helping companies achieve their ESG goals.
Every smart device and software used in the global supply chain serves as a source of data. This data, once collected by data analytics platforms, helps companies optimize every key aspect of their operations and reduce energy waste.
According to a new global study, 72% of companies are increasing their investments in industrial IoT specifically to meet sustainability goals.
Automation and robotics
Automation plays a key role in making supply chains more sustainable. When manual and repetitive tasks are automated, it not only helps improve productivity, but also reduces the waste of energy resources.
Automated storage and retrieval systems (SRS) contribute to efficient warehouse management. Temperature-controlled warehouses can be managed efficiently with automation resulting in energy savings. ASRS-powered warehouses use much less space than a traditional warehouse, reducing the environmental impact on an area.
The use of Autonomous Mobile Robots (AMR) and Automated Guided Vehicles (AGV) in warehouses also helps foster a cleaner and greener supply chain.
ESG is no longer seen as a corporate social responsibility (CSR) obligation but as the core of an organization’s operations. Companies can only achieve their ESG goals 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, more sustainable future for the world.