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Let’s say you are a C-level manager for B2B or B2C enterprise products. Your sales leader suggests taking part in green, building an eco-conscious brand image, and reconsidering a long-term product direction in terms of sustainability. Does that make you cast doubt? Do you worry about how environmental care will affect your company’s overall image? Do you doubt that additional expenses on sustainability will prove profitable in the long run? If yes, please read on.
A simple definition of green logistics
A green supply chain, or green logistics, represents a set of practices that aim to preserve the environment in the integrated network of supplies, in order to minimize the use of natural resources and increase the use of the reuse of materials.
Nowadays, more and more companies are adopting green logistics strategies to make their contribution to environmental care. They use advanced technologies and strive to adhere to the following principles:
- Efficient use of energy resources.
- Efficient use of raw and material resources.
- Minimization of production-related raw materials, products, and energy, as well as distribution and management of goods after consumption.
- Effective planning and creation of logistics system capacities; timely modernization of existing logistics system capacities; minimization of harmful impact on the environment.
Why the increasing demand for eco-friendly initiatives?
IBM Research Insights report showed that 57% of consumers are ready to change their shopping habits – if only it helps to reduce their environmental impact. In turn, companies are adjusting their supply chains and logistics systems to meet these new expectations. That transition is slowly happening, as more CEOs place sustainability higher in their corporate priorities.
The more business owners place sustainability higher in their strategic priorities, the faster transition goes. Their clients are actively pushing them toward green initiatives. 28% of consumers conduct profound research before buying goods or services to ensure their purchase is “environmentally conscious.” And if it doesn’t fully reflect consumer sentiment – 88% of respondents stated that they will be more loyal to businesses that take sustainability into account.
Top 5 benefits of green logistics
Following consumers’ demands, companies are seeking ways to implement green initiatives into their workflow. At the same time, making a difference and remaining compliant with environmental and social standards can become beneficial both for nature and business. Here are the top benefits of a green supply chain for business.
1. Improved continuity of supply
Diversification of the supply chain helps to avoid over-reliance on a single link in the chain. During the COVID-19 outbreak, there have been many issues recently when suppliers were unable to fulfill a service or product. This led to knock-on effects for their companies. Having multiple suppliers in different parts of the world can help improve the continuity of goods and services. Moreover, it can prevent costly downtime.
2. Increased competitiveness
Companies can increase their competitiveness by developing more efficient, responsive supply chain processes. This is evident from the massive efforts that automotive, chemical and other companies are expending to implement enterprise resource planning (ERP) systems and to change their relationships with both suppliers and customers.
3. Cost reduction
Many companies discovered that environmental accounting techniques help substantially reduce supply chain costs. Such a method allowed companies to systematically identify environmental costs throughout the supply chain. These costs are associated with the management of hazardous materials, which are not captured through conventional accounting methods. After making changes, some companies realized significant financial benefits through more effective resource utilization.
4. Better brand reputation
Today’s information-rich environment is fertile ground for boosting brands – if only you know how to use that information. A company’s brand identity based on sustainability instills trust and loyalty among the target audience and society at large. Consumers gradually become more aware of the harmful global warming effects, therefore they expect businesses to reduce waste and carbon footprint. Consequently, they want to deal with eco-friendly companies and would stop patronizing companies that aren’t taking action against climate change.
5. Building partnerships
Striving for a sustainable supply chain provides an opportunity to build environmental credentials. Eco-friendly positioning makes the organization a suitable prospect for other businesses looking for a partner with similar values. In addition, partnerships lend more credibility to a company in the eyes of the target audience.
Obstacles on the road
However good the offered green initiative may be, switching to a progressive supply chain model can be quite costly in the beginning. It is necessary to consider expenses on new equipment and staff training. The existing tools and equipment may become obsolete with new protocols, which may cause a lot of physical waste.
Moreover, the more new protocols are implemented, the more associated risks can be created. The resultant errors may cause unnecessary resource waste and poor transportation planning. Also, optimizing supply chain management will entail a considerable increase in recycling, and for now, the biggest challenge for businesses is to be crystal clear about the green logistics implementation strategies.
In a nutshell
People are becoming more and more conscious of their health and ecology. Since the pandemics, this trend has only accelerated. This is why companies should make a proactive effort to incorporate environmental considerations into decision-making processes and generally target climate-positive initiatives.
Supply chain management functions such as planning, demand management, and fulfillment should be based on sustainable business strategies. And as new technologies are adopted, improved insights will be discovered, leading to further digital transformation and advancement.
