Net Zero is an emerging concept in the field of Supply Chain Management that is gaining traction in the business world. It involves making a commitment to reducing the overall emissions of an organisation or business to a net zero level, or near zero level, over time. The goal is to reduce the amount of carbon dioxide and other greenhouse gases that are released into the atmosphere from the production and transportation of goods and services. By introducing the concept of Net Zero into their supply chain, businesses can reduce their environmental impact and help create a more sustainable future for all. With the current climate crisis, it is more important than ever for businesses to adopt Net Zero strategies and reduce their carbon footprint. By doing so, they are not only helping the environment, but also helping their bottom line as well. With the potential for improved cost savings, increased efficiency, and a healthier planet, introducing Net Zero into the supply chain is a win-win for everyone.
What is Net Zero?
Net Zero' refers to creating a balance between the quantity of emissions generated and those removed from the atmosphere in order to prevent global warming.
Net zero allows for certain emissions to be balanced out elsewhere to reach net zero carbon worldwide emissions. Rather than striving to decrease carbon emissions to zero, the net zero emissions objective permits certain sectors to function with positive rather than negative emissions.
Supply chains are often the largest source of carbon emissions in a business, and they are critical in the fight against climate change. Measuring Scope 3 emissions is particularly difficult, with just 16% of businesses capable of doing so at an advanced level. Companies are also looking for innovative strategies to deal with the increased disruption caused by climate change.
The supply chain finance is essential in the battle against climate change. Because they account for almost 60% of all global carbon emissions. So ensuring supply chain sustainability is a vital step toward net zero.
Challenges of introducing Net Zero into the Supply Chain
The majority of businesses are clearly dedicated and have a strong desire to progress toward a Net Zero future. However, there are significant challenges involved, and it can be tough to know where to begin and how to go. In order to work effectively toward Net Zero, we feel it is essential to understand these various problems and how to best address them.
- Knowledge: It is extremely difficult to know where to begin without first understanding where your emissions are generated and what methods would assist decrease them. It may be difficult to express how diverse business processes can have significant influence on CO2 levels, and with technology constantly advancing, it is essential for businesses to maintain training and guidance up to speed.
- Funding: The first step is always to look at low-cost, high-impact energy-saving alternatives, such as LED lights. Once this is handled, we may begin to consider more expensive possibilities, such as funding models – There is the option to lease renewables such as solar, as well as several PPA types. This allows you to begin conserving energy with no outlay of funds. In addition, incentives and grants are available, particularly for SMEs, such as interest-free loans or government support for initiatives like electric car chargers.
- Geographical location: Many prospects, such as solar electricity, may not be available in more remote places, thus other choices, such as wind power, must be considered. This emphasizes the need of doing extensive feasibility assessments and having a Plan B. It is critical to strike a balance between investing in new technologies and verifying that they are fit for your specific use case.
Benefits of introducing Net Zero into the Supply Chain
Addressing supply-chain emissions allows many customer-facing businesses to impact a volume of emissions several times greater than they could if they focused solely on decarbonizing their direct operations and power consumption – and achieving a net-zero supply chain is possible with very little additional cost.
Below are some financial benefits of Net Zero and decarbonisation investment:
- Improving the value, prestige, and expansion of a company's brand.
- Supplying low-carbon products and services as per consumers demand.
- Boosting the recruitment and retention of top talent.
- Ensures improved financial decisions and operational cost reductions.
- Ensuring a long-term sustainability supply chain at the time of purchasing decisions.
- Meeting the expectations of stakeholders, investors, and funders.
- Ensuring that the company continues to expand in a sustainable manner.
- Protecting future performance, market share, and revenue.
Steps to Implementing a Net Zero Supply Chain
The energy industry contributes significantly to the GDP of both established and emerging nations. Carbon emissions will be considerably decreased if cleaner energy is invested in and renewable energy sources such as wind and solar power replace coal, gas, and oil-fired power. This will need education, a phased shift, and global transformation.
Here are the steps to implement a Net Zero supply chain:
- Rethink product design
- Embrace collaboration
- Build the capabilities needed for change.
- Invest in climate tech.
- Develop better data structures.
- Think about policy and standards holistically.
- Enable financing.
Contribution of Technology in Achieving Net Zero
Digitalization is one of the most important facilitators of climate change mitigation. Innovations from the Fourth Industrial Revolution, such as 5G, the Internet of Things (IoT), and Artificial Intelligence (AI), are not only critical enablers in business.
Indeed, on the road to climate neutrality, they may enhance climate protection, improved air quality, and biodiversity preservation through increased data collection and openness, cooperation, control, and informed decision making. The magnitude of the potential impact on our climate objectives will be heavily influenced by how digitalization is handled, what we make of the technologies, and how well we utilize them. In order to make an impact, Digitalisation must be incorporated through:
- Organisational procedures
- Business models
- Human behaviour
- Political action.
The Future of Net Zero in Supply Chain Management
The rethinking of net zero energy transition-related supply chain strategy has already begun for companies. Improved net zero supply chain resiliency, collaborative supplier relationship management with a focus on emission metrics in procurement, alternative strategic sourcing of rare earth minerals, fully integrated supply chain model, and supply chain decarbonization are some of the measures that energy companies must take to achieve net zero targets in the most efficient way possible.
Companies require money and insurance to manage physical and transition risks, thus there is no path to a net-zero economy without financial services. Financial services businesses require clear, forward-thinking plans for sustainable finance and their involvement in the net-zero transition. Greening the economy has enormous potential upside and may be the largest commercial opportunity of our time, therefore the correct strategy is critical.
The importance of Net Zero in the current climate crisis
Decarbonization of supply chains is a massive untapped opportunity for worldwide climate action. It allows enterprises with relatively tiny direct-emissions footprints to have a worldwide influence. And it does so with only a minor effect on final product pricing. Most sectors do not face significant cost barriers to attaining net-zero supply chain emissions.
Conclusion
Making supply chains more sustainable by pursuing net-zero aims may benefit a company's profit line as well as the environment. Greater efficiencies save money and the environment, and in an unpredictable economic climate influenced by climate risks and disruptions, they may be a crucial factor in developing resilience as well as a component of competitive advantage and brand image.
In the long term, it makes sense for enterprises to pursue net-zero ambitions not only for the planet but also for shareholders. And, with technologies now accessible to assist businesses to do so more successfully than ever before, there's no reason to wait any longer.
