When business faces crisis or uncertainty, there is inevitably handwringing around what this means for sustainability. Will sustainability strategies take a backseat, as executives focus on staying afloat in the immediate term? Recent history is mixed: there was a general deprioritization of sustainability following the 2008 financial crisis, yet the COVID crisis brought a renewed focus on sustainability strategies.

2022 was not immune to questions around sustainability’s value and future, as the Russian invasion of Ukraine delivered new supply chain and energy disruption. Do we have time and funds for sustainability when we have real business problems?
The Supply Chain Sustainability Strategy Provides an Umbrella in a Downpour
This question is flawed, of course. Sustainability strategies, in fact, provide an organization resilience in times of crisis. Our research is showing this to be particularly true in 2022: 83% of the business leaders we surveyed agreed that sustainability activities directly create value, helping the organization to recover from disruption impacts. Much of this value appears to be driven by better management of energy in the supply chain; 58% of business leaders report that their sustainability program mitigates cost from supply chain-related energy consumption (see figure below). This implication makes logical sense: when energy is scarce and expensive, those who have invested in renewable energy at their sites and with their suppliers are better positioned to withstand these shocks.

As the Chinese proverb goes, “The best time to plant a tree was 20 years ago. The second-best time is now.” To mix metaphors, if you didn’t pack an umbrella, now is the time to invest in one.

So, how should supply chain leaders approach their sustainability goals in 2023? They must take action that delivers impact and the resilience described above, while balancing the constraints that come with energy uncertainty and constant threat of recession. This can be achieved through a holistic, strategic approach to managing energy in supply chain operations and the broader value chain.
Treat Energy as a Precious Asset in Supply Chain Operations
Energy is required to run almost all businesses. Yet, in recent years, sustainability strategies have focused heavily on renewable energy, neglecting the need to reduce energy demand in the first place. Both are essential to near-term resilience and a net zero future.

Optimize energy consumption. Assess projects and capital investments based on future energy costs, financial savings and enablement of decarbonization objectives. Aim to integrate sustainability factors into such business processes as sales and operations planning (S&OP) and transportation routing, where environmental improvements can be made directly in the supply.
Digitize. Drive visibility of emissions and energy performance in the enterprise to enable stronger decision making, by leveraging digital tools. Install energy management and optimization solutions across sites. Use data to drive performance, maintain equipment and identify projects.
Generate. Assess how the enterprise can meet some, or all, of its own energy needs and review site potential for renewable energy. A linear energy supply system is transforming into a network of distributed supply and microgrids.

Uncover and Reduce Embodied Energy in the Value Chain
Value chain emissions have an outsized impact on our energy consumption and GHG emissions. Reduce the energy consumed in production processes and better leverage the energy “embodied” in goods via circular economy activities.

Engage Ecosystem Partners and Suppliers — Many energy- and carbon-intensive processes result from raw materials extraction and production, which are high up in the value chain. Leverage ecosystem partnerships to unlock leverage and visibility to address these upstream impacts. Support direct suppliers to reduce energy and emissions by providing supplier incentives and embedding decarbonization goals into decision-making processes.
Reduce Embodied Energy — Identify and reduce energy consumption in the supply chain by transitioning to materials with lower-intensity production. Embed circular economy principles into material selection criteria to assess use and reuse. Extend the useful life of products and better utilize embodied energy by leveraging the “inventory” of materials currently in circulation via the reverse supply chain.
Leverage Technology — Supply chain decarbonization is complex and requires strategy, goal setting, metrics and a method to track progress. Use dedicated software solutions to embed these efforts into supply chain processes. Leverage technology to measure Scope 1, 2 and 3 emissions; set specific carbon reduction goals; track progress; and collaborate with suppliers to address their goals.

Laura Rainier
Sr Director Analyst
Gartner Supply Chain
Laura.Rainier@gartner.com

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Source: Gartner Hybrid Cloud