Global Regulatory Changes: Shifting to Green Supply Chains
As governments worldwide raise the bar for sustainability and CO2 emissions reductions, organizations have to prepare for significant changes in their supply chains.
New legislation in the E.U. aims to set the bloc on a path to reach "net-zero" emissions by 2050, a move that will have profound impacts on every industry including shipping, transportation, and cross-border commerce. By preparing now and enhancing their supply chain visibility and planning capabilities with a robust business spend management platform, organizations can make decisions that enhance their supply chain capability and meet new regulations.
New global implications for carbon producers
The global ecosystem around us is continually changing and under increasing threat from global warming.
The summer of 2020 was the hottest on record for the contiguous United States, according to the National Oceanic and Atmospheric Administration.1 Researchers recently noted temperatures above freezing 500 miles north of the Arctic Circle for the first time. And in September, a United Nations report found even if all countries meet their current commitments for emissions reductions, the rise in global average temperatures is still likely to lead to deadly heatwaves and rising sea levels that threaten coastal cities.2 The pressure to act is now greater than ever.
As scientists and the public raise more awareness about global climate change, governments worldwide are also instituting tighter policies around sustainability, pollution, and emissions.
This summer, European Union policymakers unveiled a highly ambitious plan, ‘Fit for 55,’ to tackle climate change and drive greater sustainability in the coming decades. This plan will lead the E.U.’s 27 countries to a collective goal of reducing greenhouse gas emissions by 55% by 2030 and to net-zero by 2050.
While the European Union has already cut emissions by 24% from its 1990 levels, these initiatives will take things further. 'Fit for 55' will force businesses to include the societal cost of carbon for transport, manufacturing, and heating. It will also create new taxes for high-carbon aviation and shipping fuels while instituting the world's first carbon border tax for imports like steel, aluminum, and cement. The tighter emissions standards for vehicles are expected to end the production of new petrol and diesel automobiles in the E.U. as early as 2035.
While the legislation will impact all areas of the economy, one of the biggest targets will be transportation and energy supply. Transportation alone accounts for approximately 25% of all the E.U.’s greenhouse gas emissions, according to the European Environmental Agency,3 and the European Commission has a target of decreasing these emissions by 90 percent by 2050.
It may take up to two years for member states and the European parliament to negotiate and approve the legislation. However, it looks likely that in its final form, ‘Fit for 55’ will have ripple effects around the globe and encourage other regions to act. Even for organizations that don’t have direct business in the E.U. may find impacts through upstream suppliers. In the United States, the governors of both California and New York have enacted executive orders to end the sales of new internal combustion cars and trucks by 2035. The Biden Administration has also announced a target for the U.S. to achieve a 50–52% reduction from 2005 greenhouse gas levels by 2030.
Preparing for the carbon neutral future
In the near future, organizations will not only have to consider the quality and cost of goods in their supply chain but also emissions and how their products and business model impacts the world around them. Governments will specifically target industrial transportation to adopt more sustainable methods and business practices. As a result, supply chain leaders need to prepare themselves now for a future of ambitious sustainability goals, modern climate legislation, and tighter regulation.
Fortunately, new technologies and processes will enable companies to adapt to these new regulations and discover efficiencies and cost savings in the process. With source-to-customer supply chain visibility and a means to identify, estimate, and select transport options based on their CO2 emissions, supply chain leaders can make the most optimal decisions.
Some companies are already ahead of the curve and are using emissions reduction as a catalyst for new business models. For example, supply chain and pallet company CHEP launched a Zero Waste World initiative in 2019 to eliminate packaging, eradicate empty transport miles, and increase operating efficiencies in their network. The company is not only reducing emissions but pioneering new circular economy business methods in the process.
Compagnie de Saint-Gobain, a global manufacturing corporation headquartered in Paris, France, also has a net-zero carbon initiative to reach carbon neutrality by 2050. Saint-Gobain uses a Transport Control Tower to optimize transportation routes, create synergies across business units, and measure its impact on CO2 emissions in its Latin American operations.
While supply chain leaders will face new challenges in the coming years related to environmental sustainability, it doesn't necessarily have to impede operations or profits. Coupa can help plan and design supply chains for the future that enable leaders to make optimal decisions that meet regulations and benefit their bottom line.
By using supply chain modeling tools alongside Coupa’s Business Spend Management platform, organizations can understand the impact of new tariffs, technologies, and emissions targets on their business, and ultimately be more confident in navigating the path to net zero.
1 "Northern Hemisphere just had its hottest summer on record," National Oceanic and Atmospheric Administration (NOAA), 14 Sep 2020.
2 "Nationally determined contributions under the Paris Agreement," United Nations, 17 Sep 2021.
3 "Greenhouse gas emissions from transport in Europe," European Environment Agency, 26 Oct 2021.