How green supply chains can reduce companies' carbon footprint

As climate change accelerates, everyone, including businesses, suppliers, and distributors, strives to do their part in minimizing their environmental impact. A study by the SME Climate Hub found that 60% of small to medium-sized businesses want to reduce their carbon footprint. However, two-thirds of business owners in the same survey were unsure how to get started.

One of the best ways businesses can get started is by analyzing their supply chain. In some industries, supply chain emissions make up 90% of a business’s carbon footprint. Businesses can help fight climate change just by reassessing their supply chain and finding ways to reduce their environmental impact.

What Is a Green Supply Chain?

A green supply chain is exactly what it sounds like — it’s more environmentally friendly. During every stage — from product design and material sourcing to manufacturing, logistics, delivery, and end-of-life recycling — sustainability is a priority. The goal is to minimize ecological impact while maintaining operational efficiency and economic viability.

Unlike traditional supply chains, which often prioritize speed and cost-efficiency without considering long-term environmental consequences, green supply chains balance business needs with environmental responsibility. Traditional models may rely heavily on fossil fuels, generate excessive waste, and lack transparency in sourcing and labor practices. In contrast, green supply chains seek to reduce greenhouse gas emissions, eliminate waste, and create a more circular product lifecycle.

Green supply chains are also a part of the greater scheme of environmental, social, and governance (ESG) — a criteria that measures a business’s social and environmental impact through investments and other operating standards. With a higher ESG rating, you’ll become known as a sustainable brand, improving your brand reputation, susceptibility to risk, and more. Green supply chains can be the key to earning a higher ESG rating.

Why Green Supply Chains Matter

While businesses naturally gravitate toward green supply chains for sustainability purposes, there are various other reasons, including:

Environmental Benefits

As the name implies, the primary function of green supply chains is to benefit the environment. For example, if you use electric or hybrid vehicles to transport your products, you can reduce the amount of carbon released into the atmosphere that contributes to global warming. If you design a product with a longer “cradle-to-grave” life cycle, you’ll reduce waste your company may be responsible for. These reductions not only protect ecosystems but also contribute to broader climate goals at local and global levels.

Business Benefits

Greener supply chains don’t just benefit the environment. They can benefit your business as well. Companies that actively reduce their environmental impact can strengthen their brand reputation, positioning themselves as leaders in sustainability. This is particularly important in a landscape where consumers are more conscious of their purchases and increasingly seek brands that align with their values. One Google Cloud survey found that 82% of consumers prefer brands with similar values, and 52% prioritize sustainable brands. If you make sustainable changes, you can show your audience that you align with their values and sustainability goals.

In addition, as governments worldwide adopt stricter environmental regulations, businesses with sustainable supply chains are better equipped to meet evolving compliance standards and avoid costly fines or disruptions. Green supply chains may attract more investors, indicating that your business may fare better against risky decisions and uncertainty.

Financial Benefits

Beyond environmental and brand advantages, green supply chains can deliver real financial gains. Companies that invest in energy-efficient operations, optimized logistics, and innovative technologies often see lower operating costs over time. For example, as fossil fuel costs rise, opting for green fleet management can easily trim down on gas costs in the long term.

In addition, businesses that implement green practices may be eligible for government tax incentives, grants, and rebate programs that promote sustainable development. These financial perks can help offset initial investments in greener infrastructure and technologies.

Strategies Companies Use to Build Greener Supply Chains

A green supply chain doesn’t develop with a single change in a business. Since the supply chain involves various steps and business operations, it involves conscious decisions in every area of your business, including:

Sourcing Eco-Friendly and Ethical Materials

Sustainability starts with the first step of the supply chain: production. Instead of opting for materials that involve excess waste, fossil fuel usage, and other practices that could affect the environment, companies use eco-friendly raw materials, such as:

• Recycled plastics;

• Biodegradable textiles;

• Sustainably harvested wood;

• Organic fibers.

All of these materials have a smaller environmental toll than traditional materials.

To find these materials, you’ll need to find a trustworthy supplier that has vetted ethical and environmental practices. Organizations like Fair Trade USA, the Forest Stewardship Council (FSC), and the Global Organic Textile Standard (GOTS) provide lists of certified suppliers that adhere to environmental and social guidelines, helping you make your supply chain greener.

Transportation Optimization

While some companies have the budget to make their fleet greener by replacing all vehicles with hybrid or electric vehicles (EVs), smaller businesses may not have the budget. Instead, they make their supply chain greener by:

• Route planning: Even something as small as taking a shorter route can help reduce the carbon emissions a fleet produces. Many companies use smart route planning systems that can consolidate shipments and avoid unnecessary mileage.

• Local sourcing: Whenever possible, seek out local suppliers over global ones. This can reduce the travel time and gas needed and support local economies.

• Opt for lighter vehicles: Opt for smaller vehicles that can deliver the same amount of materials as heavier ones. These vehicles often require less gas.

Transportation can be one of the most significant contributors to supply chain emissions. Companies that make these small changes can significantly improve their carbon footprint.

Minimizing Waste in Packaging and Processes

While many businesses use things like paper and plastic to protect products in boxes and minimize damage, many of these materials can stack up when it comes to a business’s overall waste. In a 2018 study, the EPA found over 17.2 million tons of paper or paper-based products like cardboard in landfills. They also found 27 million tons of plastic in landfills. In an ideal world, customers would recycle all these materials, which others could reuse. However, to minimize as much waste as possible, it’s best to use reusable, recyclable, and compostable materials from the start.

Internally, companies can utilize lean manufacturing principles to eliminate waste in production. This means identifying inefficiencies, reducing overproduction, and improving quality control to avoid discarding defective products.

Leveraging Technology

Modern technology is playing a pivotal role in accelerating supply chain sustainability. Artificial intelligence (AI) helps companies forecast demand more accurately, optimize inventory levels, and make real-time decisions that prevent overproduction and excess inventory — both significant sources of environmental waste.

Another key innovation is automated rebate management software that tracks incentive programs between manufacturers, distributors, and retailers. By digitizing and automating this complex process, companies can reduce administrative waste, improve transparency in pricing agreements, and reinvest rebate savings into sustainable initiatives.

How To Optimize Sustainability Processes

Building a green supply chain isn’t just about implementing one-time changes — it’s about creating a system that continually improves, evolves, and adapts to new challenges and opportunities. If businesses, suppliers, and distributors have a constantly evolving attitude toward a sustainable supply chain, their efforts are less likely to fall flat.

Conduct a Comprehensive Supply Chain Audit

The first step in optimizing sustainability is understanding where the greatest environmental and operational impacts occur. You can do this best by completing an audit evaluating every aspect of the supply chain. In it, map out inefficiencies, bottlenecks, and potential areas for high emissions. You can also use carbon footprint assessments, lifecycle analysis, and financial performance reports to decide which materials, processes, or partnerships contribute to environmental and economic waste.

Set Measurable Sustainability Goals

Once you’ve established areas where your business can improve, you can start setting concrete sustainability goals to help you stay accountable. This may look like establishing key performance indicators (KPIs) like reducing greenhouse gas emissions by 10% in five years, or improving your water efficiency by 25% in ten years. You can even use financial KPIs like profit per unit to decide if the operating costs associated with a sustainable change have the desired effect on your business, for a better understanding of the benefits.

Automate Data Collection and Reporting

Accurate, real-time data is essential for managing sustainability initiatives. By implementing automated data collection platforms, companies don’t have to work as hard to understand current data points such as energy use, emissions, waste output, and resource consumption. For example, tools like Phocas, a financial analysis data collection platform, help organizations tie sustainability efforts directly to operational and financial performance by analyzing trends in procurement spending and supply chain inefficiencies.

In addition to financial platforms, dedicated ESG software tools, such as EcoVadis or Benchmark Gensuite, can provide environmental-specific dashboards that track compliance, emissions, and waste.

Continuously Review and Adapt Processes

Green supply chains don’t happen overnight. Even after implementing any of the changes mentioned above, your business may evolve, and so should your sustainability initiatives to keep up with any inefficiencies or waste. In addition, changing regulations, evolving technologies, shifting consumer demands, and financial objectives may warrant a new approach to your green supply chain. As such, you’ll need to perform regular audits on sustainability and financial KPIs, and consult your stakeholders to keep your organization as environmentally friendly as possible.

While climate change accelerates, businesses, suppliers, and distributors can make the future brighter by minimizing their impact. At this point, green supply chains aren’t negotiable. They’re key to a successful business and a thriving planet.

Resources for Reducing Your Carbon Footprint

If you are a business owner, distributor, or supplier and want to know what you can do to minimize your environmental impact in the supply chain, use these resources:

Government and International Organizations

• U.S. Environmental Protection Agency (EPA): Offers strategies, case studies, and frameworks to help businesses build environmentally sound supply chains.

• U.S. Department of Energy – Better Plants Program: Supports manufacturers in improving energy efficiency and reducing emissions throughout the supply chain.

• United Nations Global Compact – Supply Chain Sustainability Guide: Encourages companies to align supply chains with sustainable and ethical practices globally.

Sustainability and ESG Reporting Tools

• World Resources Institute – Greenhouse Gas Protocol: Provides global standards for measuring and managing emissions, including Scope 3 supply chain emissions.

• Global Reporting Initiative (GRI): Offers sustainability reporting frameworks widely used to disclose environmental and social supply chain impacts.

• SASB (Sustainability Accounting Standards Board): Provides industry-specific standards to guide ESG disclosure, including supply chain performance indicators.

• Phocas Software: Offers analytics and financial software to help track the financial benefits of sustainability efforts.

Certifications and Labeling Programs

• Cradle to Cradle Certified™: Certifies products that meet strict standards for sustainability, including material health and circular design.

• Forest Stewardship Council (FSC): Ensures responsibly managed forest products and certifies wood and paper-based supply materials.

• Fair Trade USA: Certifies supply chain practices that support ethical labor, fair wages, and environmental sustainability.

• ENERGY STAR for Industry: Helps manufacturers optimize energy use across facilities and supply networks.