Carbon Reduction efforts are a critical component of business strategy. According to a McKinsey & Co. report, most chief investment officers (85%) factor environmental, social and governance policies into their investment decisions.
The United States Securities and Exchange Commission recently published new climate reporting regulations. To be competitive, companies must build a sustainable business model.
Most organizations approach demand forecasting as a revenue function, but it’s also a pathway to carbon management. Each individual product unit generates emissions through material sourcing, manufacturing processes, transportation, storage and disposal. Inaccurate forecasting can lead to unwanted environmental outcomes.
Over-anticipating demand creates unnecessary emissions and wastes resources. Conversely, companies that underestimate demand may be forced to carry out smaller, less energy-efficient production runs and use expedited shipping methods that require more fossil fuels.
Refining demand forecasting benefits P&L and carbon reduction efforts. Accurately anticipating demand requires a wide range of information, including historical sales data, supply chain issues, current economic conditions, pricing structures, contract terms and competitor positioning. Manually gathering this data is resource-intensive and often results in outdated or incomplete information. But companies can invest in automation to collect and analyze data, resulting in more timely and precise forecasts.
By anticipating market needs, companies can optimize their production plans to decrease emissions and increase profitability.
Eco-friendly goods can’t make an impact if no one buys them. Businesses must balance their pricing strategy—setting a price point that encourages customer adoption while allowing the company to maintain healthy margins. To determine this, manufacturers must understand production and overhead costs, current contract portfolio terms, market demand, competitor prices and revenue goals. Using AI, companies can analyze data to suggest optimal pricing that attracts buyers and adjust recommendations as conditions change. The technology can also break down market segments to create customized pricing, allowing companies to maximize the value of hot markets and larger budgets.
Targeted strategies empower manufacturers to maximize the appeal and accessibility of their sustainable offerings. More eco-friendly products sold means more reduction in corporate emissions. Increased demand for such goods creates a positive feedback loop, justifying further investment in sustainable production and innovation.
Revenue management data overlaps with data required for climate reporting. Laws in Europe and California mandate value chain (Scope 3) emissions disclosures. Channel and sales data allow companies to better measure, report and reduce their supply chain’s carbon output.
A manufacturer’s largest suppliers and customers typically generate its most Scope 3 emissions. An effective revenue management system allows organizations to collect vendor-specific emissions figures, enabling more accurate reporting and actionable reduction strategies.
Granular revenue data contributes to product-specific emissions data. With the help of a sustainability consultant, manufacturers can determine each product’s carbon footprint.
Sustainability is intertwined with corporate success. Manufacturers strive to revenue optimization, and these efforts can be leveraged to reduce emissions. Accurate forecasting, strategic pricing and detailed sales analysis benefit revenue goals and long-term environmental impact.
This article was originally published on Advanced Manufacturing.
