Evolution of Sustainability in Global Supply Chains

Summary

Sustainability in global supply chains has evolved significantly, shifting from regulatory compliance and public concerns to a comprehensive focus on climate change and emissions reduction. Initially overlooked in international climate treaties, the transportation sector, particularly shipping, is now under scrutiny due to its significant CO2 emissions. International agreements and regional regulations, such as the EU Emissions Trading System, are pushing for reductions. Companies are also now required to report Scope 3 emissions, reflecting the environmental impact of their supply chains. Sustainability is rapidly becoming a critical factor in business strategy and success.

Takeaways

• 😀 Sustainability in global supply chains has evolved from being reactive to being an essential part of business strategy.
• 😀 Companies initially focused on regulated areas and issues with high public awareness, like labor conditions and chemical use.
• 😀 Climate change, particularly greenhouse gas emissions from transportation, has become a critical area of concern for companies.
• 😀 In 1992, the United Nations Framework Convention on Climate Change was signed, marking a global acknowledgment of climate change.
• 😀 The shipping industry, despite being a significant contributor to climate change, was not explicitly addressed in early climate treaties.
• 😀 In 2016, the aviation industry agreed to a global climate deal, and in 2018, the International Maritime Organization (IMO) pledged to reduce shipping emissions by 50%.
• 😀 The ocean freight sector alone emits more CO2 than Germany, highlighting the importance of addressing its environmental impact.
• 😀 International logistics, including freight, wasn't initially included in climate treaties due to challenges in tracking emissions and determining responsibility.
• 😀 Regions and countries now set their own regulations to meet climate goals, such as the EU Emissions Trading System for transportation sectors.
• 😀 Sustainability reporting has evolved, with companies now required to report Scope 3 Emissions, which include indirect emissions from activities like transportation.
• 😀 Sustainability has shifted from being a 'nice-to-have' feature to a success factor that affects a company's bottom line.

Q & A

What was the initial focus of sustainability efforts in global supply chains?

Initially, companies focused on what was regulated and directly under their control, such as the use of certain chemicals in their own production sites and addressing labor conditions in their suppliers' facilities.

How have stakeholder expectations influenced the evolution of sustainability programs?

Stakeholder expectations, along with changes in regulation, have driven companies to evolve their sustainability programs to address broader issues beyond what was previously regulated or publicly known.

How has the recognition of climate change impacted transportation sustainability efforts?

The issue of climate change has significantly impacted sustainability in transportation, particularly shipping, which contributes to greenhouse gas emissions. Companies have begun to evaluate and address their carbon footprint from shipping in response to this growing concern.

Why did it take so long for companies to start addressing the carbon footprint of shipping?

The carbon footprint of shipping was not addressed sooner due to a lack of international agreements on how to account for emissions from logistics, with debates over whether the countries where ships were registered should bear responsibility.

What was the role of international treaties like the United Nations Framework Convention on Climate Change in shipping emissions?

The United Nations Framework Convention on Climate Change, signed in 1992, acknowledged the danger of greenhouse gas emissions but did not explicitly address international logistics, leaving the shipping industry largely unaffected by early climate treaties.

How was the issue of shipping emissions eventually addressed at the international level?

The issue was delegated to the International Maritime Organization (IMO) for ocean freight and the International Civil Aviation Organization (ICAO) for air freight, both of which began developing strategies to address shipping emissions and contribute to global climate goals.

What is the significance of the 2018 IMO climate strategy for international shipping?

The 2018 IMO climate strategy was a pivotal moment, with the organization pledging to reduce total annual greenhouse gas emissions from international shipping by at least 50%, helping to formalize the industry's role in global climate change mitigation.

How do regional regulations like the European Union's Emissions Trading System impact transportation emissions?

The EU Emissions Trading System includes certain parts of the transportation sector, requiring airlines operating in Europe to monitor and report their emissions and incentivizing emissions reductions through allowances that decrease year over year.

What are Scope 3 emissions, and why are they important in sustainability reporting?

Scope 3 emissions refer to indirect emissions caused by a company's activities, such as emissions from transportation. These are now part of sustainability reporting, as companies are being asked to account for emissions not directly under their control.

How has sustainability evolved from being a 'nice-to-have' to a critical factor in business success?

Sustainability has become a critical success factor as companies increasingly recognize that sustainable practices contribute directly to their bottom line, making it an essential part of corporate strategy moving forward.