Consumers have increasingly prioritized preserving the earth's environment over the last few decades. Every day, we see individuals and organizations moving towards a more sustainable and eco-friendly way of doing things. This affects supply chain management as the impact of a company's supply chain on supporting human rights, labor rights, environmental growth, and pro-government policies makes it a more desirable option to consumers worldwide.
But an important question remains: where should supply chain leaders direct their focus first to monitor their organization’s effectiveness in working towards sustainability goals?
The answer lies in using Key Performance Indicators (“KPIs”). KPIs identify trends and report performance in core areas. It is with this information that supply chain leaders determine whether or not they are meeting their objectives and can make adjustments as needed to reach their goals.
5 KPIs for Supply Chain Sustainability
Sustainability KPIs should be an integral part of any company's ESG initiatives. The degree of specificity for each category being evaluated may vary by industry; however, below is a list of five overarching KPIs that should be at the forefront of all supply chain leaders’ sustainability strategy.
1. Supply Chain Waste
You may only consider the waste that results directly from production. But waste emanates at each stage of the supply chain. Traceability, done ideally every 3-5 years from the starting point of manufacturing till the product consumption, allows you to spot ecological blindspots, if any. With this insight, you can partner up with agencies that specialize in waste reduction to improve stages within the supply chain that did not reach company-wide goals.
2. Recycling Rates
Recycling rates allow you to assess and determine the level at which a brand can minimize pollution and waste.
One can analyze their company's recycling rate in terms of the components used in production, along with the rates at which consumers recycle their packaging and the commodity itself.
3. Greenhouse Gas Emissions
By measuring greenhouse gas emissions, like carbon dioxide (CO2), pollutants, and CFCs, you can discover how your company contributes to the emissions that raise concerns of global warming.
Greenhouse gases can be monitored in three scopes: scope 1, scope 2, and scope 3.
- Scope 1: These greenhouse gases are emitted directly from source materials managed or owned by an establishment, such as work vehicles and amenities.
- Scope 2: These gases are released as a result of implicit use, through the consumption of electricity, steam, heating, and cooling.
- Scope 3: These gases are indirect, resulting from things like purchased goods and services, transportation and distribution, employee commuting, end-of-life treatment of sold products, and waste generated in operations.
By tracking your carbon footprint, you can effectively find ways to decrease it. While the goal should always be net-zero energy, it is important to prioritize consistent advancements and pinpointing specific areas of improvement within the supply chain.
4. Energy Consumption
This refers to the total amount of power and energy used during production. This can take many forms depending on the primary energy source used to fuel operations, and strategies to reduce energy consumption will need to be tailored based on the energy source used.
There are many digital tools that can be utilized at each stage of the production process that assist in determining the intensity of current consumption. From there, it is important to consider alternative energy sources or ways to reduce energy consumption through current energy drivers. Not only is this environmentally-friendly, but being more mindful of energy consumption also generates major cost savings as well.
5. Water Consumption
Water is easily the most overlooked element of a company’s sustainability strategy, as it is easily accessible and (as of now) relatively abundant. Despite this, recycling water for further use often consumes significant amounts of energy to make it clean from any contamination during production.
The key metrics to measure for your business's water usage include the following:
- Total water consumption
- Percent of water that is reprocessed
- Total amount of water wasted
- Total amount of uncontaminated water returned to the environment
Frequently evaluating total water usage and water contamination helps gain visibility into this aspect of a company’s total ESG initiatives and will help highlight ways to improve all facets of water usage.
The increased development of high-performing, high-tech devices that can track each of these initiatives can significantly help supply chain leaders around the globe measure and evaluate their sustainability performance. Utilizing these devices to gain real-time, accurate data through key performance indicators throughout the production process is imperative to ensure long-term strategy goals are met. Whether it's measuring the rate at which water is used, total energy consumption per minute, categorizing emissions of greenhouse gases during operations – these metrics are imperative in understanding true environmental impact.
At Parq, our platform provides visibility into sustainability initiatives through highlighting total spend per vendor, and providing enriched profiles that evaluate each vendor against standardized sustainability initiatives. Having transparency about the impact of vendor relationships on your carbon footprint is important, and carries forward to overarching ESG strategy. Using Parq’s vendor ecosystem, your team can quickly evaluate current vendors’ environmental impact and locate alternative vendors that better meet company goals. Parq will allow you to oversee all of your supplier relationships in a single place for simple traceability and transparency. To learn more, reach out to our team.