May 12, 2022

How Supply Chain Leaders Can Balance Opposing Priorities

Q&A with Sarah Watt

Disruption doesn’t stop for supply chains. The Russian invasion of Ukraine  further increased pandemic-caused shortages and added rising energy costs and security concerns. At the same time, the climate crisis is looming, requiring immediate attention and massive investments in sustainability and decarbonization initiatives.

Sarah Watt, VP analyst with the Gartner Supply Chain practice, will be discussing these challenges in more detail at the upcoming Gartner Supply Chain Symposium/Xpo in Orlando, June 6-8. Members of the media who would like to speak with Sarah or attend the conference, can contact Sarah Hippold at

In advance of the conference, we sat down with Sarah Watt to ask her how supply chain leaders should manage the continuing disruption and balance the dilemma of competing priorities.

Q: What are the main challenges that supply chain leaders are currently facing?

A: Chief supply chain officers (CSCOs) are currently facing a triple challenge consisting of energy costs, energy security, and decarbonization.

Energy costs are increasing. This is being felt both by business and consumers – and in turn drives costs and inflation. I was looking at the cost of a barrel of brent crude between March 2021 and 2022, and in this time it has more than doubled. Supply chain leaders need to navigate increasing costs of energy for manufacturing, but also all the knock-on effects for shipping and cost of materials.

Energy security has become a significant concern after the Russian invasion of Ukraine. The International Energy Agency (IEA) defines energy security as “reliable affordable access to all fuels and energy sources”. The Russian invasion of Ukraine is leading many countries to question the interconnectedness of their energy systems. We see some EU countries talking about pausing or moving away from coal to achieve energy security.

In regard to decarbonization, more companies are setting science-based targets, and this is often a catalyst for looking at scope 3 value chain emissions. Data by the Carbon Disclosure Project (CDP) shows that supply chain emissions are 11.4x higher than operational emissions for many organizations. This means that supply chain leaders are in the spotlight to understand their value chains’ greenhouse gas emissions, and then to act.

Q: What are some practical actions that supply chain leaders can take to navigate this dynamic landscape?

A: A transition to a low carbon economy, is going to be bumpy in many markets. CSCOs are faced with a tricky equation. However, it’s not impossible, and there are some practical actions that supply chain leaders can take.

To address energy costs, CSCOs should start by looking at operational energy demand and where saving can be made in manufacturing. By focusing on energy efficiency, they can decrease costs and emissions. When looking at these projects, also include assessments of energy costs and emissions reductions goals. Then, look at how the enterprise is procuring energy, assess what strategies are in place, and what is needed to hedge and lock in prices where this makes sense.

Supply chain leaders should assess physical energy security risks by manufacturing site. Identify any opportunities to diversify energy supply. This could include investing in onsite renewable energy, looking for a power purchase agreement, or switching new manufacturing plants away from natural gas. They shouldn’t only think about physical security. Engage with IT to review cybersecurity defenses. Ask the same types of questions for critical supply chain partners.

The Intergovernmental Panel on Climate Change (IPCC) warns that the impacts of climate change are already affecting the lives of billions around the world. Supply chain leaders who want to engage in decarbonization efforts need to act now. They must start by putting in place carbon budgets, engaging suppliers, and raise capital. Reward suppliers for decarbonization efforts.

Q: This is a lot of weight on the shoulders of supply chain leaders. Who will be their allies?

A: Although there is a lot of responsibility on supply chain leaders’ shoulders, they cannot tackle these macro challenges alone. Partnership is essential for long-term success. There are four functions that can help, supply chain leaders balance this equation. They include:

  • Finance: Work with CFOs to look at mechanisms, such as internal carbon pricing and shadow carbon pricing, to raise capital for project and manage long-term emissions risks through decision making.
  • Product development: Supply chain leaders need to have insight into the product development strategy to assess the raw materials needed and the associated emissions impacts. They can provide insight into supplier capabilities - including emissions reduction - to inform purchasing choices. 
  • Human resource: HR teams can help activate employees to identify energy savings opportunities, and support contributions to wider enterprise sustainability goals. HR also needs to have awareness and put in place response strategies to the cost-of-living pressures impacting employees.
  • Information technology: Work with the CIO to prioritize software solutions that will provide insight into emissions performance and track projects. Also work with the CIO to identify the controls for cybersecurity disruption.  

Gartner clients can find more information in the report CSCO Response to Environmental Sustainability Trends for Supply Chain in 2022.

Non-Gartner clients can download the list 14 Tactics to Counteract Supply Instability and watch the complimentary webinar Supply Chain Sustainability: Progress from Strategy to Action.

If you are a member of the media who would like to speak further on these topics with Sarah Watt, please contact Sarah Hippold at Members of the media can reference this material in their articles with proper attribution to Gartner.

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