Interruptions to the global supply chain have been an ongoing issue since the pandemic, however, the development of new climate guidelines and ESG regulations are set to further limit what consumer-packaged goods companies can do to alleviate the strain. According to a report issued in 2022 by the World Economic Forum, companies need to take crucial steps to reduce the impact of their supply chain to net zero emissions.
As the world becomes more accustomed to providing their goods and services in avenues far beyond their local, the supply chain has become a focal point for many environmentalists looking to adapt the economy we are used to into a sustainable future for all. As a result, growing CPG companies are required to measure and report emissions that occur through assets that are not owned or controlled within their supply chain, and the reduction of these Scope 3 emissions has been redefined as a major success if achievable – for not just the company itself, but for everyone in the world.
The steps put forward by the World Economic Forum are easy enough to understand if possibly complicated to achieve. They are:
- Rethink product design
Product design can have complicated elements that are stagnating the supply chain, and so to bring about the changes that are necessary by ESG regulation, a wholesale change to the product itself could be necessary. Optimising their current processes only works for a company if their product has already been designed to be as easy on the supply chain as necessary. If this is not the case, then the company should be encouraged to simplify their design.
- Embrace collaboration
The existing supply chain is complicated enough: simplifying it is a case of collaboration between both large-scale companies and much smaller businesses. By sharing each other’s resources with regard to technology and knowledge, net-zero supply chain is an achievable goal.
- Climate tech investment
A solid background in investment in climate research can aid in developing technology that is better served to fulfill ESG requirements and accelerate a widespread change within supply chain management. However, this is also part and parcel of the collaborative effort stated above, allowing both small and large companies to achieve net zero emissions.
- Develop better data structures
Data is crucial to designing a system that can limit emissions: not only on behalf of the companies themselves, who can monitor their emissions throughout the chain, but also for consumers who might want that data so they can make an educated decision about whether or not to purchase this product.
- Policy and standards should be holistic
Uncertainty in operations will only lead to greater costs, and therefore any policies set out to streamline the supply chain will work better if agreed on unilaterally.
- Financing
All of the above-mentioned implements will take a significant amount of cost and time to achieve, and expecting private companies to work on net zero emission without easier access to financing is unviable. Creating an easier way for companies to access affordable finances will likely encourage more private companies to invest in better supply chain management.
ESG is a noble effort to reduce the amount of strain that a private company can place on an eroding climate, and thus the impact of new governance on supply chains is likely to be significant and will affect everyone within the industry. If both large and small companies decide to work together and co-invest within the supply chain, the impact of ESG efforts will not be as stringent on all companies.
