ENVIRONMENTAL SUSTAINABILITY IN THE SUPPLY CHAIN

The discussion about the planet's environmental sustainability is on the agenda of governments and executives around the world. Global warming, environmental accidents, diseases caused by pollution and lack of control over waste disposal are among the topics discussed.
Economic development, if carried out in an uncontrolled manner, can further affect the environment, causing irreversible and large-scale damage. In Brazil, due to the strong prospects for economic growth, there is great concern, as the country is one of the largest emitters of greenhouse gases into the atmosphere.
Government, companies and society have key roles in directing actions that will lead the country to be less aggressive towards the environment.

Large Brazilian industries have already acted, even if incipiently, to improve the environmental impacts of their businesses. At the same time, the Government has also been more active in its regulatory role, as well as society is more demanding with regard to issues related to the environment.

Research carried out by the ILOS Institute¹ shows that more than half of the country's large companies are already feeling increased pressure from the Government, demanding that they be more sustainable (see Figure 1). Companies are also feeling increased demands from customers, who are already starting to prioritize eco-friendly companies when choosing which products to buy (see Figure 2).

In this context of increased concern with environmental issues, new requirements related to logistical activities are also included. Increasingly necessary to support the country’s growth, logistical functions – such as transport, storage and product return management, among many others – are among those that can make a difference in reducing the environmental impacts caused by the country’s economic development .

Research carried out by ILOS shows that, in the large industries operating in Brazil, the logistics area figures as one of the most active in decisions related to the company's environmental sustainability. It was recorded that 76% of large companies involve the Logistics and Supply Chain area in actions that seek to reduce the organization's environmental impacts.

This area is just not as involved in issues related to the environment as the Purchasing/Supply department and the Production area (see Figure 3).

Again, both the Government, companies and society must seek to act so that environmental improvements in the supply chain are actually achieved (see Figure 4).

Among the government actions that can directly impact the reduction of emissions in logistics activities, we can mention: the provision of infrastructure that enables less polluting transport; the improvement of environmental legislation related to fuels, engines and waste return; the concession of incentives and financing that encourage actions favorable to the environment in logistics activities, such as incentives for fleet renewal (Figure 5).

The role of society in reducing emissions from logistics activities is to demand effective actions, both from the Government and from companies, prioritizing the consumption of products and packaging that are less harmful to the environment and helping in the selective disposal of waste generated (Figure 6).

In turn, companies have countless opportunities to reduce emissions caused by the logistics activities they manage.

Many of these actions can even bring benefits that go beyond the environmental issue.
So that companies can lead a change process that culminates in the reduction of emissions in the supply chain, they need to: implement direct actions that reduce emissions in their logistics activities; organize yourself internally to generate team involvement and commitment; and change the form of relationship with third parties, both service providers and other links in the supply chain (Figure 7).

Among the actions of companies that directly influence logistical activities, which can reduce their environmental impacts, two groups stand out: those that involve improvement in the management of activities and those that involve investment in assets.

As an example of direct actions that reduce emissions and that involve improvements in the management of logistical activities, one can mention the replanning of routes, increased consolidation of cargo and use of space in vehicles, which are actions that seek to optimize transport activity.

In general, these actions that change the way activities are planned and managed bring the benefit of reducing fuel consumption, reducing the emission of harmful gases into the atmosphere and also reducing the costs of companies.

It is worth noting that these actions have long been typical activities of those responsible for the Logistics area in companies. What is new is the way of seeing the benefits that these actions provide. These benefits, which previously exclusively encompassed cost reduction or improvement in service levels, now also include the reduction of emissions, which makes the actions even more relevant for organizations.

As well as improvements in the management of activities, companies can also reduce emissions by investing in new facilities and equipment that are less harmful to the environment.

Among the assets that can make a difference to the environment, trucks with less polluting engines, lower emission forklifts, in addition to distribution centers/factories/installations built within environmentally correct standards, being planned to reduce water consumption. , energy and use more environmentally friendly materials and construction techniques.

These solutions, which involve financial investments by companies, as well as solutions involving improved management of logistical activities, can also bring economic benefits to the companies that implement them.
These gains, in general, are achieved in the longer term, and can be measured mainly by saving energy and reducing fuel consumption in activities.

Seeking to structure themselves for this new challenge, many companies internally created organizational units responsible for sustainability actions.

Carrying out an inventory of emissions, measuring the carbon footprint and establishing reduction targets linked to the payment of bonuses to executives are among the changes that have increased the importance of the topic within organizations and have allowed companies to better structure themselves to implement the necessary actions in favor of the environment.

Especially with regard to the actions to be carried out by the companies, it is known that, for them to be really effective, it is necessary to guarantee the commitment of the team, mainly of the higher-level executives, responsible for the decisions and implementation of the actions.

To ensure this involvement, it was found that, in Brazil, several companies are rewarding executives who achieve environmental goals established by the organization. In general, this reward comes in the form of a financial bonus.

The survey carried out by ILOS identified that in 43% of the country's large companies, executives already have part of their remuneration linked to the fulfillment of environmental sustainability goals. In the specific case of Logistics and Supply Chain executives, this percentage is slightly lower (26%), as shown in Figure 8.

For this type of bonus to be implemented, the company must establish metrics capable of measuring the results of the actions carried out. One of the ways adopted internationally by companies from different sectors to measure the environmental impacts of their businesses is by carrying out a carbon emissions inventory. In Brazil, 61% of large industries carry out such an inventory, and another 18% intend to carry it out in the near future (Figure 9).

It is also worth mentioning that the reduction of emissions must be considered for the entire supply chain and not just internally in the company. Thus, it is the role of organizations to also make changes in the relationship with suppliers, service providers and even with companies from other segments and competitors.

These changes involve, for example, the choice of suppliers located closer to the factories, to reduce the need to travel. The involvement of suppliers in environmental actions carried out by companies through the implementation of supplier development programs or through contests, awards or sanctions can also work as an incentive for the implementation of environmental actions.

The evaluation and choice of logistics service providers based on environmental criteria has also been a way of increasing the importance of the topic and encouraging the development of environmentally correct initiatives. Finally, actions involving the relationship between companies should seek collaboration along the supply chain, thus seeking important gains in scale to reduce waste caused, for example, by trucks running empty.

A LONG WAY AHEAD

Although there are numerous initiatives, companies, government and society still have a lot to evolve to reduce impacts on the environment. The first difficulty faced by companies in implementing measures in favor of environmental sustainability is the cost of actions.

In Brazil, 84% of executives indicate that this factor is an important barrier that reduces the speed of the measures to be implemented.

The good news for Logistics and Supply Chain executives is that, although costs are indicated as a major obstacle, several of the actions in this area bring direct financial return to companies, together with the reduction of environmental impacts. Improvements in logistical efficiency contribute to cost reduction and also bring reductions in emissions, especially actions that culminate in reducing fuel consumption.

It is also worth noting the problem of the lack of knowledge and expertise of executives working in organizations to implement the necessary sustainable actions.

The lack of internal training is a deficiency recognized by 48% of Brazilian companies. However, this is one of the points in the development and training plan of most companies in the country.

Finally, on the government's side, action also needs to be intensified. Legislation and inspection actions are in progress, such as the solid waste law, the rules related to the production of less polluting engines and the consumption of cleaner fuels.
But companies criticize the difficulty in obtaining government incentives to implement environmental actions (81% indicated that this is a barrier in Brazil). There are also still few investments in infrastructure that enable the use of less polluting modes, such as railroads, waterways and pipelines.

BIBLIOGRAPHIC REFERENCES

Panorama – Green Logistics: Environmental sustainability initiatives of companies in Brazil 2011. ILOS Institute: www.ilos.com.br.
Rogers, D. Sustainability is Free: An Approach to a Sustainable Supply Chain. Tecnologística Magazine, March 2010.

¹ ILOS – Instituto de Logística e Supply Chain – conducted interviews with 109 executives working in the largest industrial companies in Brazil (large companies on the list of the thousand largest in terms of revenues in the country). The work was sponsored by companies: Natura, Unilever, JSL and Knapp. The complete results of the survey can be found in the Panorama ILOS collection report: “Green Logistics: Environmental sustainability initiatives by companies in Brazil 2011”.