Is it possible to decarbonise supply chains without compromising performance?

The pull towards more sustainable logistics sometimes seems to be at odds with the constant pressure to ship goods faster, at a lower cost, and without any disruptions – and indeed, supply chain performance and sustainability goals may appear to drive supply chain management in different directions. 

With the right strategies, they can coexist successfully and help businesses thrive – but for this, it’s necessary to define concrete plans to meet both types of objectives. In this article, we will explore the specific steps businesses need to take to align them, and discuss practical approaches to sustainable and performant logistics operations. 

In our white paper, “The performance and sustainability paradox in supply chains: can we have it all?”, we are discussing those questions in detail, to help companies better understand what is at stake and how to can harmonise performance with ESG objectives. 

Supply chain professionals need to constantly deal with competing priorities, market pressures, and systemic challenges, which might make aligning performance and sustainability like an impossible task. 

Customers have high expectations for fast deliveries, which can put a lot of pressure on businesses. 

Prioritising speed might lead to inefficient operations, such as partial truckloads, suboptimal routes, and increased emissions, which might undermine sustainability goals. A logistics model that leverages pooling and sustainable transportation modes might help improve efficiency.

Adopting more sustainable transportation alternatives – such as electric vehicles (EVs) – requires substantial upfront investments, which, for performance-focused businesses, might appear hard to justify. 

However, when the focus shifts from immediate costs to long-term savings and total cost of ownership (TCO), EVs are comparable to diesel or petrol vehicles in many instances – or might even have lower life cycle costs. 

Global supply chains involve multiple stakeholders and varying technological capabilities. Limited end-to-end visibility makes it difficult to monitor and optimise performance and sustainability metrics such as fuel efficiency, emissions, and delivery times. 

Data silos might further hinder businesses’ ability to meet performance and sustainability goals.

Performance might suffer when companies attempt to scale sustainable solutions, such as EV fleets, across regions with inadequate charging infrastructure. This might force businesses to compromise between operational efficiency and compliance with environmental goals, especially in international operations.

So, how can businesses align goals and ensure that sustainability doesn’t come at the expense of supply chain performance? Below are some practical approaches to this paradox. 

However, to get started, a company needs to know where it stands; in terms of performance, this requires looking at KPIs such as on-time delivery rates, inventory turnover, freight costs per unit, and more. As for the carbon footprint of their operations, companies can use our emission calculator to evaluate it. 

Resource-sharing initiatives – known as mutualisation – can enhance logistics operations’ sustainability, cost-effectiveness, and performance. According to our research, 71% of organisations are involved in mutualisation. 

By sharing warehousing, storage, and transportation resources, businesses can reduce underutilisation, optimise efficiency, and pool financial benefits. Mutualisation is especially effective when paired with other energy-efficient practices, because it helps organisations collectively minimise costs, emissions, and waste. In fact, 80% of companies adopting mutualisation cite cost reduction as their primary motivation.

Sustainable warehousing, where recycled or green construction materials are used, and energy-efficient lighting and solar panels are installed up front, can also help drive down carbon footprints; according to research conducted by FM Logistic and NG Concept, 70% of warehouses’ CO2 emissions occur during the construction phase, 27% during the use life and 3% at its end-of-life stage, so using sustainable materials is key. 

Additionally, progressively replacing internal combustion vehicles with electric vehicles in fleets and using telematics and route optimisation tools to reduce unnecessary mileage can further drive performance. 

A well-optimised supply chain improves efficiency, lowers costs, and reduces waste, helping drive performance and meet ESG objectives. Key supply chain optimisation strategies include to: 

This also helps improve visibility across operations and use data for better demand forecasting and to stay more agile. 

To optimise supply chains, it’s necessary to audit supply chains to identify inefficiencies and bottlenecks, invest in digital tools for real-time inventory and demand management, and leverage strategic partnerships with logistics providers like FM Logistic, that have a global reach and a strong commitment to driving both sustainability and performance. 

Energy and waste reduction initiatives often translate to lower operating expenses; cutting costs is, in fact, the main motivator for implementing sustainability initiatives for 56% of supply chain professionals, according to our research.

Organisations that embrace sustainable logistics can also enjoy a better reputation and stronger customer loyalty. Consumers are increasingly prioritising environmentally responsible companies, making sustainability a key differentiator in a saturated market. 

Circular logistics integrates the principles of the circular economy into supply chain operations, focusing on extending the life cycle of materials and products through reuse, refurbishment, remanufacture, and recycling. 

This anti-wastage approach to supply chain management not only reduces waste but also supports more efficient resource use and cost savings. By adopting circular practices, organisations can align environmental goals with operational efficiency, unlocking significant economic potential, estimated at $4.5 trillion globally by 2030.

A key component of circular logistics is the localisation of supply chains to reduce transportation distances, minimise lead times, and mitigate amplifications of demand fluctuations caused by long, complex supply chains.

With the right strategy, sustainability and supply chain performance can actually go hand in hand, even if, at the surface level, they might sometimes seem diametrically opposed. To align these goals effectively, it’s necessary to: 

For a deeper dive into these strategies and exclusive insights from industry experts, download our white paper, “The performance and sustainability paradox in supply chains: can we have it all?”. FM Logistic can help you harmonise operational efficiency with ESG goals and lead your business towards a more sustainable future.