Can industry lead the green transition? With A.I., it might.
For the green transition of industry, optimizing supply chains should be a top priority - and A.I. can help. Why focus on supply chains?
Well, did you know that a company’s supply chain generates 11.4 times more emissions, on average, than direct operations? Indeed, supply chains are responsible for a disproportionately large share of the world's carbon emissions..
Here's what McKinsey has to say on the matter :
The typical consumer company’s supply chain creates far greater social and environmental costs than its own operations, accounting for more than 80 percent of greenhouse-gas emissions and more than 90 percent of the impact on air, land, water, biodiversity, and geological resources. Consumer companies can thus reduce those costs significantly by focusing on their supply chains.”
It seems clear that in order for industry to remain the engine of prosperity - and quite frankly in order to help keep the planet alive - it simply must lead the green transition!
Green targets for industry
The worldwide sustainability targets set by the Paris Agreement indicate that industry must remove about half of its carbon emissions by 2050. These goals, and the urgency of attaining them, have given rise to the notion of "Industry 5.0", which imagines a version of industry that not only assumes its environental reponsabilities, but leans into its wider ecological contribution to society, and for which respecting the production limits of the planet is a top-line objective.
The purchasing of renewable energy is one way to save on emissions. In fact, according to CDP’s Supply Chain: Changing the Chain environmental report for 2019 and 2020, industry could save up to one gigaton (one billion metric tons... which is a lot) of emissions by increasing their renewables purchasing by a mere 20%.
But what else can be done?
Are there ways in which to reduce the footprint of supply chains in particular, given that they operate on such a large scale and that their impact appears to be disproportionately large?
This is where Artificial Intelligence comes in!
Reducing the supply chain's carbon footprint with A.I.
There are a variety of ways in which a company can reduce the carbon footprint of its supply chain. But all are based on the same idea : making them more efficient and reducing waste.
Whether it's optimizing shipping and handling, or rethinking the materials that are used in packing, any improvement begins with a strategic analysis. First we must understand the current carbon footprint, and measure the impact of each steps of the supply chain. Making the entire supply chain measurable and actionable is the first step towards reducing its footprint.
With bottlenecks identified and understood, one can begin to build the kinds of solutions that will continue to drive industry for the years to come.
A few examples:
- More accurately predicting demand and supply can enable better and more pro-active planning. This helps cut down emissions by strongly optimizing operations even under unforseen circumstances. Creating more optimized warehouse solutions is an important part of such efforts ;
- Optimizing last-mile delivery is another avenue for creating strong efficiencies, especially when combined with a switch to electric vehicles ;
- Reducing the length of supply chains and switching to local alternatives may be needed to achieve the highest impact on emissions. Novel sourcing and distribution challenges will need to be solved as part of such a transformation.
Whichever avenue of improvement is chosen, deployment as part of an impactful transition plan remains challengen. But with stakes that have never been higher, we may have no choice but to succeed!
Over the next 20 years, industry must lead the green transition.