What You Need To Know
Supply chains are experiencing a shift towards sustainability, driven by pressure from customers, investors, and employees. Companies must now focus not only on their own emissions (Scope 1 and 2) but also on the emissions produced by their suppliers and other operators in their supply chains (Scope 3).
This poses challenges as decarbonizing the entire value chain is a complex task, requiring investment and the sourcing of green raw materials. However, technology and digital tools can help companies in their sustainability efforts. For example, Schneider Electric (OTC: SBGSF) is working with its top suppliers to reduce carbon emissions by using digital tools to measure emissions and implement strategies for energy waste reduction and efficiency improvement.
Collaboration and decarbonization efforts are key because supply chains in industries such as food, construction, and fashion account for more than 50% of global greenhouse gas emissions. By integrating energy management and process automation through digital technology, companies can improve efficiency and sustainability.
This approach is exemplified by Schneider Electric's factory in Kentucky, which has reduced energy consumption and costs through the use of its own EcoStruxure solutions. With the right help and technology, companies can significantly reduce emissions and operate more sustainably.
Why This Is Important for Retail Investors
Increased transparency: Companies that prioritize sustainability in their supply chains are often more transparent about their environmental impact. This enables retail investors to make more informed decisions about where to invest their money, aligning their investments with their own values and sustainability goals.
Risk mitigation: Supply chain sustainability is closely linked to risk management. Companies that have sustainable supply chains are better positioned to mitigate risks related to climate change, regulatory changes, and reputational damage. For retail investors, this means investing in companies with sustainable supply chains can potentially lead to more stable and resilient investments.
Brand loyalty and customer demand: With the growing awareness and concern for sustainability, customers are increasingly favoring brands that prioritize sustainable practices. Retail investors who support companies with sustainable supply chains may benefit from increased brand loyalty and customer demand, which can result in higher sales and revenue growth.
Long-term value creation: Companies that incorporate sustainability into their supply chains are more likely to create long-term value. By focusing on reducing emissions, improving efficiency, and investing in green technologies, companies can achieve cost savings, minimize resource waste, and ultimately drive profitability. Retail investors who recognize this potential may see higher returns on their investments over the long term.
ESG considerations: Environmental, Social, and Governance (ESG) factors are important for investors. Sustainable supply chains directly contribute to companies' ESG performance, particularly in the environmental aspect. Investors who consider ESG factors in their investment decisions can enhance their portfolios by selecting companies that demonstrate a commitment to sustainability, potentially leading to improved financial performance and risk management.