“In India, the transportation sector is responsible for around 14% of the country’s total GHG emissions, with freight transportation accounting for nearly 40% of CO2 emissions within this sector. Without intervention or cleaner technologies, transportation emissions are projected to increase by 4-fold between 2016 & 2050, potentially reaching 1.17 billion tons of CO2 by 2050 and would increase the share of transport in total emissions to 19%. To achieve sustainable supply chain management, companies need to work closely with suppliers, customers, and other stakeholders. By working together, companies can create a more sustainable future for all,” emphasizes Dr. Aditya Gupta, COO, Supply Chain Management Centre, Indian Institute of Management, Bangalore (IIM-B), during this exclusive interaction…
How is sustainability going to impact supply chains and how can companies derive value from making the supply chains more sustainable?
Dr. Aditya Gupta
Industry 4.0 or digitalization and sustainability are the two key megatrends which are impacting supply chains of today and tomorrow. There are several ways in which sustainability is reshaping supply chains of tomorrow. I would like to share four ways in which sustainability is impacting the supply chain. The first is decarbonization of supply chain. If we go by the recent news updates, most of the large corporates have declared to go Net Zero by 2040-50. This target just doesn’t include Scope 1 & 2 emissions, they go beyond and in fact focus more on Scope 3 emissions. Under Scope 3 emissions, the supply chain has a major role to play. There’s no escaping the fact that any company that envisions achieving Net Zero target, has to work on its supply chain emissions.
Another big trend that we are witnessing in this space is Circular Economy. We are witnessing shifting sands of change from Linear to Circular economy. In Linear, we talk about Take, Make, Use and Dispose. While in circular, we lay emphasis on closed loop system. There is an increasing pressure on supply chain or procurement officer not to procure virgin material and replace the entire virgin material with either recycled, modular, biodegradable or compostable materials.
The third big impact that we will see is with regards to regulations. There is a greater thrust by the government machinery on environment sustainability and that’s why we are witnessing formation of new policies and rules that mandate sustainability as part of business strategy. I would like to talk about one regulation which I believe will have a significant impact on supply chain – The Corporate Sustainability Due Diligence Directive (CSDDD). On 25 July 2024, the Directive on corporate sustainability due diligence entered into force in Europe. The aim of this Directive is to foster sustainable and responsible corporate behavior in companies’ operations and across their global value chains. The new rules will ensure that companies in scope identify and address adverse human rights and environmental impacts of their actions inside and outside Europe. It will become a law by 2026 in several European countries. This law is also called as Supply Chain Law. It mandates all the large corporates in Europe to perform due diligence of all their supply chain / value chain partners up to Nth level. Such a law is going to have a significant outcome on global supply chains.
The fourth major impact will be the physical risks arising from climate change. The frequency and intensity of extreme weather events are increasing, leading to significant supply chain disruptions. For instance, a supplier may fail to deliver due to a cyclone in their region, a company might struggle to fulfill orders because of warehouse flooding, or manufacturing could grind to a halt due to water scarcity caused by drought near a factory. These scenarios highlight the tangible risks businesses may face in the future as a result of climate change. To sum up, the impact of sustainability on Supply chains will be profound and pervasive.
How can we make transportation as a service sustainable without a lot of impact on cost?
When we talk about decarbonization of supply chain, decarbonization of transportation is the most important element. I hear a lot of supply chain managers discussing the lack of EVs available in the country for freight movement, and this being one of the major reasons for not being able to decarbonize. EV is one part of the solution. There are several other aspects that need to be dealt with when it comes to decarbonization of transportation.
When you outsource this service to a transportation company, there are certain things which can be made efficient but are beyond your control. For instance, driver behavior can have a significant impact on fuel efficiency, but you can’t control that aspect. Hiring efficient vehicles can reduce emissions but not under your control. Route planning can again have an impact on fuel efficiency but still doesn’t fall under your control purview because you have outsourced that service. Use of alternative fuels such as green hydrogen or LNG, also doesn’t come under your control.
There are six key logistics drivers that can be used to influence the environmental impact of logistics: Distance to be travelled, Mode of shipment, Transport Equipment being used, Fuel to power, Load Planning and Operation Execution.
By considering these drivers, it is possible to design greener logistics systems. Following are some of strategies which the companies may use to make their logistics greener:
Modal Shift: The first thing I would like to draw all the supply chain planners’ attention is towards modal shift. As a practice, we must switch to a more sustainable route of transport from air to road, from road to rail and from rail to water, wherever it is feasible.
Load Consolidation: The second important aspect is in terms of load consolidation. For instance, if you are sending two 10-ton trucks, instead of that, if you move a one 20-ton truck, then you are reducing your emissions by almost 30-40% upfront. By consolidating cargo and shifting to higher payload vehicles, it is possible to significantly reduce emissions.
Vehicle Space Utilization: Maximizing the cube of the vehicle and utilizing every single inch of the vehicle for transportation is also one of the efficient ways to reduce emissions.
Network Redesigning: Another aspect that the supply chain professionals need to work towards is network redesign. The redesign of the distribution network to place distribution centers where demand is highest can help reduce the total weight-distance travelled, without compromising customer service.
Secondary Packaging Optimization: As logistics professionals, we can influence the secondary packaging also. Minimizing the use of secondary packaging materials, light weighting them, using eco-friendly materials, and promoting the reuse and recycling of packaging materials.
Choosing Right LSP partners: As we do not directly influence the route, vehicle type and the driver behavior, it is essential to choose right transportation partners who are making efforts to reduce their emissions.
EV in the last mile: EV options may not be easily available for the mid mile, but there are three and four-wheeler EV options available for last mile delivery. Companies must explore them to deliver to retail outlets or directly to customers.
Measurement: The first step in any improvement exercise is the Measurement. Companies must start measuring their emissions even if they are not able to reduce them to begin with.
Green Warehousing: Implementing energy-efficient lighting, insulation, and heating systems, using renewable energy sources, and reducing waste and water consumption.
If you don’t know that root cause of emissions, you can’t take the right measures to solve them. To achieve sustainable supply chain management, companies need to work closely with suppliers, customers, and other stakeholders. By working together, companies can create a more sustainable future for all.
Are there any tools available to measure & report emissions?
In India, the transportation sector is responsible for around 14% of the country's total GHG emissions, with freight transportation accounting for nearly 40% of CO? emissions within this sector. Without intervention or cleaner technologies, transportation emissions are projected to increase by 4-fold between 2016 & 2050, potentially reaching 1.17 billion tons of CO? by 2050 and would increase the share of transport in total emissions to 19%.
Another important aspect is that the transportation emissions factors that are available in India are incomplete, dated, and limited. Accurate measurement is the critical first step toward mitigating these emissions. Organizations need robust tools to measure their emissions before they can take meaningful action to reduce them.
In response to the escalating call for decarbonization of value chains and the imperative to manage scope three emissions, IIM Bangalore has established the TCI-IIMB Supply Chain Sustainability (TCI-IIMB SCSL) Lab. This dedicated lab is designed to assist organizations in their journey towards achieving net-zero goals. The TCI-IIMB SCSL Lab represents a significant initiative aimed at propelling sustainability in logistics and supply chain management to the forefront.
We take pride in stating that the TCIIIMB Supply Chain Sustainability Lab has become the first organization in India to achieve ISO 14083 certification for its groundbreaking digital platform, the Transportation Emissions Measurement Tool (TEMT). ISO 14083, developed by the International Organization for Standardization (ISO), provides a global standard for quantifying GHG emissions from transport operations.
Applicable to road, rail, air, maritime, and inland waterway transport, it covers fuel combustion and electricity consumption. The standard outlines calculation methods, data requirements, and reporting guidelines, offering a standardized framework for tracking emissions and enabling organizations to make informed decisions on emissionreduction strategies.
The certification underscores the platform’s ability to accurately quantify and report greenhouse gas (GHG) emissions from freight transportation activities, helping organizations to measure, manage, and ultimately reduce their transportation-related emissions in line with regulatory requirements and sustainability goals. The emission factors API is now available on ULIP platform. TEMT is a comprehensive online platform designed to measure emissions across all modes of transportation.
TEMT, with its certified emissions factors across multiple transport modes, empowers organizations to quantify and report emissions accurately, setting the stage for effective emission-reduction strategies.
It integrates India-specific emission factors, validated through ISO 14083 certification, ensuring data accuracy and relevance. The tool allows users to calculate emissions for both past and future shipments and compare emissions between different transport modes for a given origin-destination pair. It also offers users the flexibility to build customized transportation chains, with all past entries securely stored in the cloud for easy monthly tracking and year-over- year comparison. The platform is commodity-agnostic, meaning it applies to all types of shipments, and outputs are available in PDF and CSV formats for ease of reporting and analysis.
How does the lab compare to global standards in terms of research, innovation, and implementation of sustainable supply chain practices?
The lab is still in its nascent stage and has just embarked on its journey. Since it was established at IIM Bangalore, our goal is to make it truly world-class. However, the lab’s focus is on the Indian perspective. We aim to make supply chains in India more sustainable. We have already developed tools with a wide reach and national impact. We are conducting research in collaboration with various government institutions. Our stakeholders include multiple government and private agencies, NGOs, educational institutions, and more. We are creating white papers and case studies to disseminate sustainable supply chain knowledge to the global community. While our standards align with global practices, our primary focus is on the national context.
The lab’s primary focus areas include the measurement, mitigation, and management of supply chain emissions. The crucial first step in this journey is measuring emissions, and we are developing tools for this purpose. For example, the Transportation Emissions Measurement Tool (TEMT) is already live and measures emissions from freight transportation across all modes. We have also developed a carbon accounting tool to measure scope 1, 2, and 3 emissions for the MSME sector. The next step involves mitigation, where we focus on solutions such as energy efficiency, decarbonization of transportation, the circular economy, green packaging, design for the environment, sustainable procurement, and more to mitigate emissions from supply chains. Lastly, we are concentrating on building and sustaining sustainability programs within organizations, providing training, and fostering a culture of sustainability.
Would you like to cite a successful example of sustainability by Indian company?
While the examples are many going by the sustainability trends that are shaping up in the country, one of the first examples that comes to my mind is of Kalyani Steel – the company came up with the first green steel in India. Saarloha Advanced Materials Pvt. Ltd. (Saarloha), a Kalyani group company, launched first of its kind in India, green steel under the brand “KALYANI FeRRESTA”. This makes Saarloha the first supplier of Made in India green steel. KALYANI FeRRESTA steel products are manufactured in an Electric Arc Furnace using electricity from 100% of renewable energy sources and more than 70% recycled scrap material with zero GHG footprint. KALYANI FeRRESTA PLUS has Net Zero GHG emissions per ton of Crude steel whereas KALYANI FeRRESTA has very low GHG emission of <0.19 tCO2e per MT of Crude Steel.
Added to that, customers purchasing KALYANI FeRRESTA & KALYANI FeRRESTA PLUS steel products will get Green Steel certificates jointly issued by DNV Business Assurance India Pvt. Ltd. & Saarloha, which they can use to claim their Scope 3 emissions reduction.
Ethical & sustainable procurement is getting priority across the Indian companies and MNCs. What are your suggestions on making procurement sustainable?
When we talk about sustainability in procurement, it involves two key aspects: making the product more sustainable and making the supplier more sustainable.
Making the Product More Sustainable: When we refer to the "product," we mean the raw materials, components, or packaging that a company procures. This is the more challenging aspect of sustainable procurement. Identifying sustainable alternatives requires extensive research and development (R&D) and often involves significant trade-offs. For instance, replacing conventional steel with green steel comes at a premium, creating cost implications. This is both an R&D and supply chain challenge.
However, leading companies are investing heavily in finding innovative, low-carbon alternatives for materials, signalling that significant progress is being made in this area.
Making the Supplier More Sustainable: The second aspect, making suppliers more sustainable, is largely a supply chain management challenge. Companies can follow several actionable steps to address this:
Step 1: Implement a Supplier Code of Conduct: A supplier code of conduct sets clear expectations regarding environmental and social standards. Many leading companies already adopt this practice. A prime example is IKEA's IWAY Supplier Code of Conduct. Before supplying to IKEA, a supplier must meet specific baseline standards. Over the next 12 months, IKEA works with them to progress to higher levels, eventually reaching advanced sustainability standards. This collaborative approach drives continuous improvement.
Step 2: Integrate Sustainability into Supplier Selection Criteria: Sustainability should be embedded into supplier evaluation processes alongside traditional metrics like Quality, Cost, and Delivery (Q, C, D). The new framework should emphasize Q, C, D, and S (Sustainability). This ensures that suppliers’ environmental and social performance becomes a critical consideration.
Step 3: Adopt Whole-Life Costing (Lifecycle Costing): Rather than focusing solely on the upfront cost of acquisition, companies should evaluate the total lifecycle cost of a product. This includes operating costs, maintenance costs, and end-of-life costs. For example, compare a diesel forklift with an electric forklift or a standard motor with a Variable Frequency Drive (VFD) motor. When lifecycle costs— including carbon costs—are considered, the sustainable option often provides better long-term value.
Step 4: Collaborate with Suppliers on Decarbonization: Supplier decarbonization is not a singles match; it’s a doubles game where the company and the supplier are on the same side, working together against carbon emissions and environmental challenges.
Companies need to actively engage with suppliers to help them measure and reduce their emissions.
Tools such as carbon accounting software can be shared with suppliers to enable accurate tracking.
Providing technical support and sharing best practices on decarbonization creates a partnership-driven approach to sustainability.
Step 5: Build Internal Capabilities: To drive sustainable procurement, a company’s internal teams must be trained and empowered.
Sustainability Key Result Areas (KRAs) should be embedded into their objectives.
Teams must understand how to engage suppliers, evaluate lifecycle costs, and implement decarbonization strategies effectively.
How is technology helping organizations in their sustainability journey?
I will only address the supply chain part of the sustainability journey. There are 5 facets of supply chain sustainability, and we will address use of technology in each of them – Procurement, Transportation, warehousing, Circular Economy and Packaging.
Procurement: Digital tools like SAP Ariba and EcoVadis help assess suppliers' environmental and social performance or ESG ratings, helping businesses make informed decisions and drive improvements. Blockchain technology can track products from origin to consumer, ensuring ethical sourcing, fair labor practices, and reduced environmental impact. Implement electronic contracts and documentation to minimize paper usage and streamline procurement processes. Leverage predictive analytics to forecast demand, reducing the need for carbon-intensive modes of shipments like Air.
Transportation: Companies may implement route optimization software to reduce fuel consumption, lower emissions, and improve delivery efficiency. They may invest in electric vehicles to minimize carbon emissions and enhance safety. They can now utilize digital freight marketplaces to optimize capacity utilization, reduce empty miles, and lower emissions. IoT devices can track vehicle performance, fuel consumption, and emissions in real-time, enabling datadriven decisions to optimize operations. AI-powered solutions maximize vehicle capacity utilization, reducing trips and emissions.
Warehousing: Companies may install energy-efficient lighting and material handling equipment to reduce energy consumption and lower emissions. Implement WMS to optimize inventory management, reduce waste, and improve operational efficiency. Though costly invest in AS/RS can minimize energy consumption, reduce labor costs, and enhance inventory accuracy. Large warehouses may implement Energy Management Systems for realtime monitoring of warehouse energy consumption which optimizes HVAC, lighting, and equipment usage to lower emissions. Companies may install solar panels at roof tops to generate renewable energy and reduce overall carbon footprint.
Circular Economy: Companies may conduct a detailed Life Cycle Assessment using LCA tools to evaluate the environmental footprint of their products and then use it to design products for recyclability, reuse, and repair, extending product lifespans and reducing waste. Technology can streamline the process of collecting, sorting, and recycling used products, promoting a circular economy. Company may use sharing Platforms to facilitate product-sharing or reuse opportunities, extending product life cycles and reducing raw material needs. Digital Twins is another way to model product lifecycles to assess how materials can be reused or recycled efficiently.
Green Packaging: Companies may use design and simulation Software to design and simulate packaging with minimal material usage, recyclability, and biodegradability in mind. AI can analyze packaging data to identify opportunities for reducing material usage and improving efficiency.
By embracing technology, businesses can significantly reduce their carbon footprint, improve resource efficiency, and build more sustainable supply chains.
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