Jagadish Turimella, chief operating officer and co-founder of GEP, offers some best practices that companies can adopt for ensuring that their supply chains are prioritizing sustainability.

As the world emerged from the COVID-19 pandemic, the focus of supply chain officers moved away from resilience to that of cost and sustainability, Turimella says. The emphasis on the former is understandable, but the latter has “surprisingly taken a front seat, both in Europe and the U.S.”

The reason is a spate of new regulations, including the European Union’s Carbon Border Adjustment Mechanism (CBAM), Germany’s Supply Chain Due Diligence Act (LkSG), and a California climate disclosure law that will affect nearly 10,000 companies in the next two years. All of it amounts to “an accelerated journey toward focusing on sustainable supply chains.” 

At the center of these new rules is Scope 3 carbon emissions — that those emanate from supply chain partners over which the purchaser of products or services has no direct control. They are also the hardest to identify and track.

Business’s dual focus on cost and sustainability might seem like a contradiction, given the upfront expenses involved in pursuing the latter. But it’s not just a matter of complying with regulations, Turimella says. Additional pressure for making progress on environmental performance is coming from investors and consumers. Carbon emission levels from a range of products are being disclosed for all to see. And that’s likely to influence the buying habits of an increasing number of shoppers.

Companies are pursuing supply chain sustainability on multiple fronts, including the use of renewable energy, ethical sourcing and creation of the “circular economy,” whereby waste destined for the landfill is dialed down to zero.

Among the biggest challenges to adopting environmental, social and governance (ESG) practices is gaining access to the data needed to meet compliance targets, Turimella says.