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Toward Net Zero Supply Chain

At this point, immediate action is necessary to avoid further global warming severity. In order to accomplish this, the world must strive to reduce about half of its CO2 emissions by 2030 and reach net zero emissions by 2050. Various companies have pledged to attain net zero emissions and the key to achieving this is holding businesses accountable for their entire supply chain, including suppliers. However, involving suppliers in this issue has proven to be a critical challenge for many organizations. As such, how can businesses effectively streamline their supply chain processes while still delivering the best environmental impact in the meantime?


Given that supply chains contribute up to 80% of a company’s total carbon emissions, they play a vital role in fighting against climate change. In recent years, sustainability efforts have made significant progress in the corporate sector. While reporting Scope 1 and 2 of corporate emissions are mandatory for businesses, tracking Scope 3, which encompasses the carbon footprint of suppliers and service providers, remains voluntary due to its monitoring difficulties.


Businesses need to improve their performance by developing stronger relationships with their suppliers through frequent communication and cooperation throughout their supply chain. Nevertheless, several organizations may encounter a situation where suppliers operate on an "order by order" basis or when the fulfillment of requests instantly marks the end of duties. As a consequence, this leaves the companies uncertain about their commitments when paying for the products or services. To resolve this concern, organizations must prioritize an understanding of their own operations, including their internal processes, before delving into those of their suppliers. This approach will enable them to accurately identify areas for improvement and leverage strategies to address any issues, thereby fostering better communication and collaboration with suppliers. In return, this will also reduce the risk of supply chain disruptions and enhance overall performance. Apart from that, businesses must ensure the well-being of their suppliers in light of climate change's impact as well as their access to sustainability initiatives such as renewable energy.


Sime Darby Plantation Berhad (SDP), the world's largest producer of certified sustainable palm oil, acknowledges that minimizing Scope 3 emissions created by third-party suppliers represents the GREATest obstacle on the path to achieving net zero emissions. Therefore, SDP has committed to engaging its suppliers in order to ensure that its measures are not only replicated within its own operations but also across its entire value chain. In 2021, 71 percent of SDP's supply chain aligned with its earlier goal of becoming deforestation-free. In addition, SDP has pioneered the industry's zero-burning replanting process to remove old and unproductive palm fields without using fire and producing emissions while simultaneously enhancing soil quality to prolong sustainable practices in its production. . By optimizing their entire supply chains for a net zero footprint, firms could enhance their operations' effectiveness while elevate their reputation among consumers, whose expectations for sustainable businesses continue to rise. Consequently, this surges the likelihood of attracting the support from investors, who are also increasingly demanding positive environmental and social governance.


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