There is no ignoring the trend – ESG (environmental, social, and governance) issues are on the agenda of most businesses today, from multinational corporations to small local businesses. So, what’s behind the growing scrutiny on this subject, and why now?
There are many factors driving the growing focus on ESG, including government commitments to reduce carbon emissions, as well as stricter regulations and activists who are advocating for net-zero policies. And changes aren’t occurring solely at the policy level either – consumers are increasingly prioritizing ESG performance when choosing a product, and even investors are using ESG criteria in business evaluations. In the changing landscape, companies have to up their ESG game to remain competitive. But that’s easier said than done – there isn’t always a blueprint for achieving ESG excellence, especially for companies with complex operations and global supply chains
Supply chain sustainability is key to achieving ESG goals
According to the CDP Global Supply Chain Report in 2020, supply chains often account for more than 90 percent of an organization’s greenhouse gas (GHG) emissions. The high emission levels are due to storage in warehouses and at ports – things like electricity for cooling, alarms, security, etc., and to transportation – including trucks, trains, ships, cranes, etc. Their impact is so significant that any plan to reduce carbon emissions has to include a company’s supply chain.
One of the key challenges facing businesses striving for ESG excellence in the supply chain is reporting and transparency – it’s extremely difficult for organizations to measure and manage carbon emissions at every point of the supply chain, at every location. The challenge is compounded when 3PLs, who don’t use the same systems and aren’t focused on the same targets, are involved.
The Contguard solution
Recognizing the challenge, Contguard set out to make it easier for companies to manage and measure carbon emissions and other ESG criteria throughout the supply chain. Using a proprietary platform called CGI (Contguard Insights), companies can measure, monitor, and analyze the carbon emissions of a specific cargo item throughout the supply chain, and better understand and improve their performance.
Contguard’s unique algorithm calculates carbon emissions taking several factors into account, including the weight of the container, its size, and the mode of transportation or storage.
The system can automatically identify the energy source (diesel or electric), as well as other factors that are relevant to the carbon emissions calculation. CGI uses the GLEC methodology as a basis for the calculations and makes it easy for companies to understand how and where they can reduce carbon emissions.
The benefits of reducing carbon emissions aren’t only ideological – they can translate into real profits, even in the short term. That’s because governments have realized that simply penalizing companies for polluting isn’t enough – they also need to incentivize companies for adopting more environmentally sound practices. The EU, the US, China, and other countries are now issuing regulatory credits to companies to cover their carbon emissions. However, if a company does not utilize all the regulatory credits it has been allocated, it can sell them to other companies for a profit. Tesla, whose electric cars are emission-free, has famously boosted its profits in this way.
ESG standards are becoming the norm, and a critical element of government regulations, consumer demand, investment evaluations, and even a way to boost profit margins.
Adopting advanced mechanisms like Contguard’s CGI for measuring and managing carbon emissions in the supply chain can be a key factor in hitting ESG goals.
Book your CGI demo now