How do Net Zero and Renewable Energy Affect Supply Chain Operations?

Supply chains are responsible for around 60% of global carbon emissions. It means that if we want to achieve net zero emissions by 2050, we must transform our supply chains.

Greenhouse gases (GHGs) absorb and re-emit heat, warming the planet’s atmosphere. The primary GHGs are water vapor, carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and ozone. Our mission, as a planet, is to prevent the temperature from rising, as it can cause dire consequences. This is known as the Net Zero initiative.

Why is net zero so important?

Global temperatures must not rise more than 1.5°C above pre-industrial levels to prevent severe climate change consequences. Currently, we’re 1.1°C above late 1800s temperatures with increasing greenhouse gas (GHG) emissions. The Paris Agreement targets a 45% emission reduction by 2030 and net zero by 2050.

One of the most important ways to do this is to adopt renewable energy. Renewable energy can help to reduce emissions from transportation, manufacturing, and other activities in the supply chain. It can also help to improve energy security and reduce costs.

Regulators and investors around the world are chiming in

Regulators around the world are increasingly focused on climate change. The European Union has already implemented several regulations, such as the Sustainable Finance Disclosure Regulation (SFDR – requires asset managers such as AIFMs and UCITS managers to provide prescript and standardized disclosures on how ESG factors are integrated at both an entity and product level) and the Corporate Sustainability Reporting Directive (CSRD – which requires EU and non-EU companies that meet certain EU activity thresholds to file annual sustainability reports), and more are expected to join in the coming years.

In the United States, the Securities and Exchange Commission (SEC) is considering new rules requiring public companies to disclose their climate-related risks and emissions.

These regulations will require companies to understand ESG and SDG better. ESG stands for environmental, social, and governance, and SDG stands for sustainable development goals. These frameworks allow companies to measure their impact on the environment, society, and the economy.

And the money follows, as investors are also increasingly focused on ESG. Institutional investors, such as pension funds and insurance companies, increasingly demand companies disclose their ESG performance. According to the Forum for Sustainable and Responsible Investment, about one-third of institutional investors in the US are implementing ESG. They are also more likely to invest in companies taking steps to address climate change, which translates to “go green = get cash.” Companies are willing to go a long way for investments, especially in times of crisis, as the supply chain and semiconductor halts worldwide.

Businesses that are ESG-conscious are more likely to be rewarded by investors. ESG helps investors and managers reduce risk and improve a company’s financial opportunities. Studies have shown that the cost of equity capital and debt financing is reduced through ESG or information disclosure. These companies are also less likely to be exposed to climate-related risks because a sustainable initiative can build resilience.

If companies don’t embrace net zero soon, they may find themselves with fewer investments and resilience. If enterprises don’t volunteer to care for the planet, regulators may force them into it.

How do companies use renewable energy in their supply chains to reduce GHG emissions?

There are a number of ways that companies can use renewable energy in their supply chains.

They can:

  • Power their operations with renewable energy. It can be done by installing solar panels or wind turbines in their facilities, or by purchasing clean energy credits from the grid.
  • Require their suppliers to use renewable energy. This can be done through contracts or by setting sustainability standards. A green initiative can force clean energy on contractors and subcontractors.
  • Invest in renewable energy projects to help support the development of new renewable energy sources and make them more affordable.

In addition to using renewable energy, companies can also take other steps to reduce emissions from their supply chains. These steps include:

  • Optimizing transportation routes and using electric vehicles can reduce fuel consumption and emissions.
  • Using more efficient and recyclable packaging helps reduce the weight and volume of shipments, reducing emissions and diminishing waste.
  • Recycling and reusing materials. Doing so can help to reduce the need for virgin materials (timber, plastic, and mined/processed metals) and emissions from manufacturing.
  • BOM maintenance. By creating a resilient BOM, and optimizing it accordingly with BOM optimization platforms, like IKIDO, you can save supply chain energy and maintain deliverability.

By taking these steps, companies can make their supply chains more sustainable and help to achieve net zero emissions.

Case Studies

There are a number of companies that are leading the way in using renewable energy and other sustainable practices in their supply chains. Here are a few examples:

Walmart: Walmart is one of the world’s largest retailers and has set a goal of becoming carbon neutral by 2040. The company invests heavily in renewable energy and has installed solar panels in over 5,000 stores and warehouses. Walmart is also working with its suppliers to reduce emissions in their operations.

IKEA: IKEA is another major retailer that is committed to sustainability. The company aims to use 100% renewable energy in its operations by 2025. It does so by installing solar panels and boilers and acquiring Power Purchase Agreements to purchase renewable electricity from the grid. IKEA is also working to reduce emissions from its supply chain, and it has set a goal of having all of its wood suppliers certified by the Forest Stewardship Council (FSC-certified) or used recycled wood. Recent data shows that it has achieved 99.9% recycled or FSC-certified wood.

Unilever: Unilever is a consumer goods company aiming to halve its greenhouse gas emissions by 2030. The company is investing in renewable energy, and it has also set a goal that includes net zero emissions across its value chain by 2039 and zero emissions in its operations by 2030.

Tesla: Tesla is a leading manufacturer of electric vehicles and batteries and is committed to using renewable energy. It has installed solar panels in all its Gigafactories, and they intend to run on a combination of on-site solar, wind, and geothermal sources. Although Tesla advocates for clean green energy, and Model S is the first zero-emission, zero-gas, full-size electric vehicle on the market, it has yet to set a target for Net Zero.

These are just a few examples of companies taking steps to reduce emissions from their offices, suppliers, and supply chains. As more companies embrace sustainability and see its values and benefits, we can expect to see even more innovation in this area.


It’s a brutal struggle. Polluting companies and many more were used to manufacture using 100% fossil fuels. Still, as the benefits for the supply chain and the planet become more apparent, more companies are going green, which helps the earth and their bottom line.

Net zero and renewable energy are essential to the future of supply chain operations. By adopting these practices, companies can reduce emissions, improve energy security, and save money. They can also help to create a more sustainable future for the planet.