What are green supply chain practices? Your guide to supply chain sustainability

Environmentally conscious businesses often ask a critical question: What are green supply chain practices, and what’s the first step to developing a more sustainable strategy? Green supply chain practices incorporate sustainability concepts into traditional supply chain management. The goal is to help industries reduce their carbon emissions and minimize waste while maximizing profit. Every area of the supply chain has room for green improvements—from manufacturing and purchasing to distribution, warehousing, and transportation.

Wondering how to get started? Agility can help. We’re a leader in building green supply chains, with a commitment to helping our customers achieve their sustainability goals. In this article, we’ll cover the fundamentals of achieving a greener supply chain, why it matters, and how you can do your part to drive change.

Importance of implementing green supply chain practices today

Green supply chain management (GSCM) practices offer substantial benefits for the environment. For one, striving for supply chain sustainability by using less energy reduces carbon dioxide (CO₂) emissions and other air pollutants. Produced by activities ranging from industrial work to operating vehicles, CO₂ is one of the main greenhouse gases responsible for global warming. According to the US Environmental Protection Agency (EPA), CO₂ emissions have increased by nearly 90 percent since 1970. And already, climate change has impacted diverse industries that rely on natural resources—from commercial fishing to forestry. By making the switch to more sustainable practices, businesses can do a lot to slow or stop global warming and ensure a bright future for our planet.

In addition, green supply chain practices reduce waste and conserve nonrenewable resources. For instance, when businesses choose recycled paper products instead of plastic, they keep trash out of landfills and fragile ecosystems while also reducing their reliance on petroleum-based products. When they load trucks more efficiently and institute stricter policies for driving speed and idling, they use less fuel. And when they abide by the principles of sustainable agriculture and sustainable forestry, they conserve resources for future generations. In short, implementing GSCM practices is not just important for the health of our environment. It’s critical for sustaining industries and communities into the future.

How implementing a green supply chain can save you money

A fundamental principle of green supply chains is reducing waste and overall energy use. Needless to say, this can lead to big cost savings. According to Inbound Logistics, the office supply retailer Staples saved $3 million in fuel annually, simply by asking its delivery drivers to slow down. By limiting top speed to sixty miles per hour, Staples reduced its fleet’s fuel efficiency from 8.5 miles per gallon (mpg) to 10.4 mpg, equating to 20 percent less fuel. Other ways of using GSCM practices to improve environmental performance and reduce costs include:

• Rethinking your materials: Using recycled materials during the manufacturing process can save money. For instance, it’s now possible to convert waste plastic into 3D printing filament, which manufacturers can use to create new products at lower costs than new plastic. While testing new materials to ensure they meet safety and performance standards takes time, the payoff could be worthwhile.
• Reusing waste or by-products: Think creatively about what your company is throwing away—whether that’s at the manufacturing stage or during distribution. It’s possible to reuse waste you’d otherwise discard or even unlock new revenue streams from recyclable materials. For instance, some food manufacturers supply local farmers with organic waste to use as fertilizer. And with closed-loop recycling, manufacturers can turn recycled products made of materials like glass or metal into the same products without sacrificing quality. So it may be possible to salvage excess materials or broken products from the manufacturing process and use them to make new goods.
• Cutting back on packaging: Switching to streamlined packaging uses less materials and can lead to lower costs. In addition, a more efficient package design could make it possible to ship more units in the same cargo space, lowering transport costs and reducing greenhouse gas emissions.
• Reducing risk to your business. Unsustainable practices inevitably have an end date. When businesses don’t plan for the future, they can find themselves without a cost-effective supplier if environmental or socioeconomic issues cause disruptions to the supply chain. Proactively planning to adopt supply chain practices that are both smarter and greener can help you prepare for a future in which your former practices are no longer feasible. A great example of this is how sustainable forestry helps preserve woodlands for ongoing use, as opposed to clear-cutting trees.
• Redesigning your processes: Have you considered ways that technology could streamline your manufacturing processes or other areas of your operations? Small changes that boost efficiency can lead to big energy and cost savings down the line. For instance, Nike famously used a new kind of knitting technology to reduce labor and materials for a greener, more cost-effective sneaker. Even boosting your team’s productivity by a marginal amount could reduce equipment operation time and lead to less energy use.
• Optimizing transport: Streamlining your transportation logistics offers many ways to save money and shrink your carbon footprint. For instance, you could use load-planning software to not only make logistics planning easier but utilize cargo space more efficiently and reduce the number of trips you must make to transport your products. In addition, making the change from primarily using air freight to shipping goods via another method, such as ocean freight, is better for the environment and easier on your bottom line.

How implementing a green supply chain can impact your public image and marketing

Today’s consumers value companies that make the effort to go green. In fact, Boston Consulting Group found that 70 percent of consumers are willing to pay a 5 percent price premium for sustainable goods. After all, green supply chain practices don’t just help to preserve the planet for future generations. They make communities better now, in part by reducing emissions that impact air quality and worker health. And as consumer values shift, demand for green products will keep growing. According to the US Small Business Association, four out of five consumers buy environmentally friendly products and services.

What does that mean for you? For one, communicating your green values could boost your public image and marketing efforts, helping you win over customers who are looking for sustainable solutions. For two, opting not to get on board with the demand for green supply chain practices could ultimately harm your brand. As we collectively seek solutions for pressing climate issues, environmental consciousness is growing. Overhauling your supply chain practices now will help ensure your company stays at the forefront of positive change.

Types of green supply chain practices

Green supply chains use ethical and environmentally sound practices at every stage, with the goal of reducing air, water, and waste pollution. Needless to say, designing a sustainable supply chain requires different practices at each leg of your product’s journey from initial concept to your customer’s home:

• Green purchasing: Green purchasing, which means finding suppliers with environmentally sustainable products and services, is just as important as greening your own operations. After all, sourcing your materials sustainably is the foundation on which the rest of your supply chain rests. For some brands, seeking recycled or remanufactured materials is the way to go. Others will need to find sustainably harvested raw materials, such as lumber from suppliers that take steps to conserve wildlife habitat.
• Green manufacturing: Green manufacturing focuses on using fewer nonrenewable natural resources, reducing pollution and waste, and keeping emissions to a minimum, among other green practices. The most critical component of going green at this stage is reducing energy use. Everything from powering equipment and lighting to keeping your factory warm or cool requires significant energy output. Fortunately, alternative energy sources like hydropower, wind energy, solar energy, and biofuels can help reduce your reliance on fossil fuels. Newer manufacturing technologies and even changes as simple as installing light-emitting diode lights can also make a big difference in your energy usage.
• Green packaging: Green packaging considers every phase of a package’s life cycle. That includes everything from how your supplier sources materials to how consumers dispose of the packaging. Using boxes and packing materials made of postconsumer recycled materials is a good start. You’ll find many varieties of recycled paper and corrugated cardboard filler on the market. Another option is biodegradable packing material. Made of everything from corn to mushrooms, this material will easily decompose in consumers’ gardens—or in a landfill, if it comes to that. Which leads to another point: it’s important to instruct consumers on how they can recycle packaging. Don’t expect your customer to know that those cornstarch packing peanuts are dissolvable in water and compostable in the backyard.
• Green warehousing: Green warehousing focuses on ensuring warehouses run more efficiently, reducing waste and energy use. One big challenge is that warehouses grow obsolete quickly. Logistics Management reports that about 11 percent of US warehouses are over fifty years old, and just 4 percent have construction dates more recent than 2008. Older warehouses tend to be less energy efficient, leading to more CO₂ emissions. Fortunately, renovations can help make warehouses greener. Installing installation, using alternative energy sources like hydro and wind power, and adding windows to maximize natural light are just a few ways to improve your facility. And today, many organizations work with a third party to take advantage of managed warehouses in strategic locations. The closer your warehouse is to key distribution hubs, the less energy you’ll need to expend when transporting goods.
• Green transportation: According to the EPA, transportation caused 28.2 percent of 2018 greenhouse gas emissions—more than any other source. Fortunately, there are ways to make transportation greener, such as consolidating goods to minimize your total number of air freight shipments or truck trips. You can also invest in electric trucks or those that run on alternative fuels. These options have improved significantly in recent years, becoming a viable option even for longer hauls. And don’t overlook rail transportation, which offers an efficient and eco-friendly solution. Trains carry far more cargo than trucks, use less fuel per ton-mile, and tend to cost less. And finally, choose a freight forwarder that prioritizes green transportation. At Agility, we’re committed to working with our partners to make transportation greener, and we invest in solutions such as electric and double-trailer trucks that reduce overall emissions.
• Life cycle management: Green product design always considers the complete life cycle of the item. For example, say you design backyard playground equipment for children. If the material is sturdy enough, your customer can pass on the playground equipment to another child after the first child outgrows it. And if the playground consists of recyclable materials, such as wood, those materials can have a second (and third, and fourth) life as outdoor furniture, paper, or mulch after the original product is no longer in use.

What is the difference between green and sustainable supply chain practices?

Green supply chain management and sustainable supply chain management share many features in common, but the two fields are not interchangeable. Whereas green supply chain practices have the goal of improving environmental health, sustainable supply chains focus on reducing their impact across many areas of life to ensure industry can continue to operate into the future. Naturally, environmental concerns factor into sustainability. But organizations also have to consider areas of social responsibility that include fair trade, ethical labor practices, and the effects of industry on surrounding communities. They also need to consider economic issues, like managing sustainable growth.

Leading examples of green supply chain practices, such as actively working to switch to biofuels, incorporate recycled materials into the manufacturing process, and reduce energy use, are also sustainable. But not all sustainable supply chain practices are explicitly green. For example, instituting better labor practices and fair pay for workers helps promote a higher quality of life, overall. But these practices don’t have a direct impact on the environment.

Factors affecting green supply chain practices

Green supply chain practices are critical to the health of our planet and the continued sustainability of industry. In addition, they lead to competitiveness and economic performance in several ways: by increasing cost efficiency, reducing waste, and meeting consumer demand for green products. That said, the leading factors advancing adoption of green supply chain practices can also hinder the process of going green, if not managed properly. Let’s take a look at some of these factors and what businesses can do to develop and promote GSCM practices:

• Leadership commitment: When managers and executives are all fully on board, it’s much easier to develop a unified approach to creating a green supply chain strategy. On the other hand, when decision makers disagree about what practices to adopt, contradictions can arise throughout the supply chain. Potential challenges include issues with supply chain performance, quality control, and overall effectiveness of green initiatives.
• Technology: A variety of software applications and advanced technology support green supply chain management at various steps of the process. These could range from warehouse management systems (WMS) that boost warehouse efficiency to new manufacturing technologies that use less energy to make products or reduce the quantities of hazardous materials involved in the manufacturing process. When employees learn and readily adopt technology that enables green supply chains, organizations tend to see good results. When there’s employee pushback or poor adoption, it can be harder to implement lasting changes.
• Brand image and company culture: When going green has positive implications for your brand and your culture supports these changes, introducing new green practices throughout your supply chain tends to go smoothly. In addition, involving your human resources team in recruiting green supply chain experts drives positive results. If corporate culture is less supportive of green initiatives, and if consumer demand isn’t strong enough to drive change in your industry, that can negatively impact your success.
• Cost: Depending on your business and industry, developing a green supply chain may initially seem cost prohibitive. The expense of investing in overhauling your infrastructure and equipment may be daunting. That said, these investments can lead to long-term savings. For example, the addition of photovoltaic solar panels to your green warehouse roof can help you generate alternative energy that reduces your reliance on fossil fuels and lowers the overall costs of powering your facility. Though the initial investment is steep, you’ll recoup your outlay and then some.
• Knowledge: Participants’ expertise stands to have a big impact on supply chain performance at every stage. Involving green architects, consultants, and other green supply chain experts can help companies make the best use of green resources, implement sustainable solutions, and optimize results. For instance, involving Agility in planning a green logistics solution can take the guesswork out of sustainable distribution. Conversely, not involving the experts can reduce the overall effectiveness of your strategy.

Trends in green supply chain practices

Green supply chain practices are working themselves into the greater consciousness because they’ve arisen in response to pressing need. Each year, measurable human demand and activity exceed the regenerative capacity of the planet’s natural ecosystem. It’s a phenomenon known as “ecological overshoot.” In 2020, for example, overshoot occurred on August 22. For the rest of the year, human activities operated in ecological deficit, drawing on resources needed for the future. Now that most individuals and organizations recognize the detriment of overshooting nature’s capacity to support its occupants, finding sustainable solutions has gained momentum. This drive has led to a variety of green innovations in recent years, particularly when it comes to supply chains.

The latest green supply chain practices

The following supply chain trends and practices are helping organizations achieve greener operations and promote a more sustainable future for our planet:

• Minimizing air freight: Shipping by air is extraordinarily efficient in terms of transporting goods quickly. Unfortunately, it’s far from energy efficient. More organizations are seeing the value of using air freight to meet only immediate demand, while relying on ocean freight and rail transport to meet planned ongoing needs. Developing the right freight and transportation mix helps ensure you’re equipped to meet customer demand while minimizing your environmental impact.
• Investing in transportation infrastructure: Improvements to ports, railways, and roads, especially in emerging markets like Southeast Asia, are enabling more efficient transportation. That, in turn, has led to fewer carbon emissions. The next step? Building more charging stations for heavy electric trucks. The West Coast Electric Highway, a network of electric vehicle fast-charging stations that crosses California, Oregon, and Washington, is a good start in North America. But experts say that this infrastructure needs to develop at a faster pace throughout the world to keep up with demand for green trucks.
• 3D printing: Every day, 3D printing gains new applications across a range of industries—from aerospace to medical device manufacturing. What’s more, 3D printing is more energy efficient and cost efficient than other equipment and processes used in the manufacturing industry. Why? For one, 3D printers are precise and lead to almost no material waste. For two, they enable manufacturers to create products on demand, reducing the chance of overproduction. By minimizing energy use and waste, 3D printers help lower carbon emissions. It’s even possible to turn recycled materials into new products using a 3D printer.
• Circular supply chains: Circular supply chains focus on recovering and recycling waste materials to turn them into saleable products. This approach can take many forms—from refurbishing old products for resale, as Apple does with its iPhones, to reprocessing old components to make brand-new products. Needless to say, adopting the circular economy model reduces waste and helps keep valuable materials out of landfills. And it can also be quite profitable for companies.
• Carbon emissions trading: Carbon trading is the process of exchanging carbon credits among nations to minimize CO₂ emissions. Each country has a cap on the amount of CO₂ it can release. Nations with higher carbon emissions can then buy carbon credits from countries with lower carbon emissions, gaining the right to release more CO₂ into the atmosphere. Individual companies can also engage in trading. The idea behind this system is that using fossil fuels comes with many hidden costs—from environmental degradation to health care needs resulting from poor air quality. Putting a price tag on the right to emit carbon gives nations and corporations a financial incentive to reduce their emissions. In fact, emissions trading systems around the world are growing in number.

Technology developments that are impacting green supply chain practices

The advent of supply chain technology innovations makes it easier to achieve green results by optimizing efficiency at every leg of a product’s journey:

• The Internet of Things (IoT): IoT enables organizations to monitor equipment, inventory, and energy use in real time. For example, sensors can track the temperature and lighting inside a warehouse, making it possible to control these aspects from afar. Organizations gain greater awareness of energy waste, overstocking, and other missteps. That leads to a clearer picture of what needs to change throughout the supply chain.
• Digitization of the supply chain: Improved digital tools, such as smarter WMS, make it possible to increase supply chain efficiency and automate processes—from stock reordering to optimizing warehouse picking paths. This helps supply chain leaders increase accuracy, avoid rush orders that require expedited shipping solutions like air freight, and prevent overordering. In turn, these improvements help reduce waste and energy use.
• Artificial intelligence (AI): AI helps automate processes, boost efficiency, and prevent human error. These capabilities are useful throughout the supply chain—from streamlining manufacturing processes to using data to forecast product demand to analyzing delivery routes and planning the quickest journey. By helping people work faster and more accurately, AI leads to less wasted effort and resources. For example, say route optimization tools enabled by AI help shave an average of a few minutes off each truck haul. Over the course of a year, that could add up to a significant reduction in fuel expenditure and CO₂ emissions.
• Robotics: Robots hold great potential for streamlining operations throughout the supply chain—particularly when it comes to logistics. For example, drones could one day make small deliveries much more efficient than large vehicles. In addition, self-driving trucks could automate traffic decisions, optimizing everything from delivery route to fuel efficiency.
• Materials engineering: In recent years, advances in materials engineering have led to greener and more efficient manufacturing and product packaging. For example, new processes make it easier to turn recycled materials into durable products or develop new materials that are lightweight but strong. In addition, life cycle planning tools help organizations optimize products for a future beyond their initial use.