Step-by-step guide: how to reduce the carbon footprint in your supply chain

One of the trends in 2024 we've already mentioned in our previous blog post, 'Top 5 supply chain trends in 2024,' is sustainability. With the introduction of new ESG (Environmental, Social, and Governance) regulations, an increasing number of companies are becoming concerned about the importance of sustainability in the supply chain.

Businesses are searching for solutions to reduce the carbon footprint in supply chains, also known as CO2 emissions, with minimal losses. This is where optimization comes into play. In this blog post, we will discuss ways to reduce carbon emissions in your supply chain and show how to do it step-by-step using anyLogistix software.

Contents:

1. Importance of sustainability
2. Strategies to reduce carbon emissions
3. 6 steps to reduce CO2 using anyLogistix
4. Final thoughts

The importance of sustainability in supply chains and business operations

Why should companies care about sustainability in supply chains? The answer is simple – not only does it impact environmental responsibility, but in fact, it can positively affect sales.

In recent research done by McKinsey, it was found that 60% of respondents would pay more for a product with sustainable packaging. Moreover, according to a NielsenIQ study, 78% of U.S. consumers say that a sustainable lifestyle is important to them. Indeed, consumers nowadays tend to choose products or services based on whether the company is sustainable, and that's why it is important for businesses to keep up.

Carbon footprint of supply chains

Global supply chains are vast and complex, contributing significantly to carbon emissions worldwide. Did you know that nearly 60% of all global carbon emissions are generated by supply chains? In fact, the research done by Accenture indicates so.

Connecting the two dots, there is no doubt that consumers highly value green and sustainable supply chains.

But what makes your supply chain sustainable? Of course, ensuring low CO2 emissions in all stages of the supply chain, especially in manufacturing and transportation, two of the most significant sources of carbon emissions, is vitally important. Reducing the carbon footprint of supply chains is not only beneficial for the environment but also a step towards sustainability and efficiency for businesses.

Strategies to reduce carbon emissions in the supply chain

But the question remains: how can you actually reduce the carbon footprint in your supply chain? Here are some of the strategies:

1. Sustainable suppliers

It's important to choose suppliers who prioritize sustainability, as this can significantly reduce your supply chain's environmental impact. Therefore, it may be worthwhile to reconsider the suppliers you work with, especially if you recognize that they don't share the same values as your business.

Moreover, you might look for local suppliers to cut down on carbon emissions produced from transportation.

2. Eco-friendly and compact packaging

You might also consider implementing eco-friendly and compact packaging. This approach reduces not only the energy consumption and waste associated with packaging but also saves more space when transporting products. This, in fact, will positively impact both sustainability and your company's profit.

In addition, the availability of eco-friendly packaging will influence the consumer's choice in selecting the product they want to buy.

3. Efficient transportation and logistics

According to PwC research, electric-powered trucks are expected to largely replace conventional hydrocarbon-fueled trucks in much of the world within the next 15 years. With an eye to the future, you might want to postpone purchasing gasoline-driven trucks and wait until the market offers more opportunities to buy electric vehicles.

However, what you can do now is optimize your supply chain, which can dramatically reduce carbon emissions. It's one of the most important steps in achieving a sustainable and green supply chain today, and we're here to help you make it happen. By using anyLogistix software, you can not only optimize your supply chain in terms of profit but, at the same time, significantly reduce CO2 emissions.

6 steps to reducing the carbon footprint in your supply chain

Now let's look at how you can minimize the carbon footprint in your supply chain using anyLogistix. This guide will walk you through supply chain optimization, aiming not only for profit but also CO2 reduction.

Step 1: Understand dual objectives

The network optimization experiment in anyLogistix traditionally focuses on maximizing profit. However, it's crucial to incorporate environmental objectives, such as minimizing carbon emissions. This dual-objective approach ensures your supply chain is optimized for profit while also being sustainable.

Step 2: Set up your scenario

For this demonstration, we use a scenario with one factory and several distribution centers and sites processing customer orders. Vehicles of two different capacities are involved, each contributing differently to CO2 emissions.

Setting up a scenario to reduce the carbon footprint in your supply chain (click to enlarge)

Step 3: Conduct the base experiment

Initially, run the experiment focusing solely on profit to understand the optimal earnings your supply chain can achieve. For instance, in our scenario, the supply chain generates $442,370 in profit without considering CO2 emissions, which equals 72,926 units. Note that CO2 emissions in anyLogistix are measured in the abstract CO2 measurement unit.

Results from the initial network optimization experiment (click to enlarge)

Step 4: Add a new objective

To reduce the carbon footprint in your supply chain, you need to:

1. Acknowledge that minimizing CO2 emissions may impact profits. So, set a new profit target that considers environmental goals. For example, in our case, we aim for $400,000, a figure that balances both profitability and sustainability.
2. Use the custom constraints feature in anyLogistix to define this new profit objective. Select the relevant objective members and adjust the coefficients to reflect your supply chain's specific costs and revenues.

Adding a new objective using custom constraints (click to enlarge)

For setting a new profit constraint:

1. Create a new constraint that tells the software exactly how to calculate profit based on the unique aspects of your supply chain.
2. Select the elements of your supply chain that affect profit. This includes every cost and revenue source.
3. For costs, set the coefficients to negative one (-1). This means you're subtracting these costs from your revenue, the standard way to figure out profit.

Setting up the coefficients for each variable (click to enlarge)

Step 5: Adjust objective members

In the experiment's objective function, disable all previous objective members except for the CO2 emissions. This shift makes carbon footprint reduction in your supply chain a primary goal, alongside maintaining the profit level defined in the previous step.

Adjusting the objective members to reduce the carbon footprint in your supply chain (click to enlarge)

Step 6: Run the network optimization experiment

With both objectives now set, run the experiment again.

In our example, the supply chain achieved the targeted $400,000 profit while significantly reducing carbon emissions to 12,656 units, compared to 73,926 units in our first experiment. This, in fact, shows a successful balance between profitability and environmental responsibility.

Results of the second network optimization experiment run show a significant reduction in CO2 (click to enlarge)

Conclusion: ending on a green note

Our planet is facing an unprecedented environmental crisis, largely caused by carbon emissions. That's why the need to reduce the carbon footprint in the supply chain has never been greater.

In this blog post, we've discussed the importance of sustainability in supply chains nowadays. We have also outlined actionable strategies: choosing sustainable suppliers, implementing eco-friendly packaging, and optimizing transportation. Most importantly, we've shown how anyLogistix software can help you achieve a greener supply chain while at the same time maximizing your profit.

Whenever you have doubts about how to reduce the carbon footprint in your supply chain using anyLogistix, you can always refer to this guide. Moreover, we have a how-to video that can help you understand the process even better. Note that the interface in the video may differ slightly from the interface in the latest version of anyLogistix.

Download the anyLogistix software for free and try to repeat these steps in your supply chain project.