By Shashi Jina, Research Director, SAPinsider
The New Age Supply Chain: Sustainability and Resource Optimization
With an evolving and volatile global environment, stakeholders are placing greater focus on supply chain risks. Thus, there’s a greater demand to be more resourceful and conscientious of environmental and social needs.
The COVID-19 pandemic in 2020 exposed underlying supply chain risks. It also accelerated the digital transformation that was already underway, changing the way we work, learn, and interact. Remote working during the pandemic led to our professional and social lives intertwining, creating a more social-conscious workforce focused on bringing about a sustainable future. This collective awareness has led to the emergence of sustainability as a key component of the supply chain process
What is sustainability
Sustainability is a broad term focused on the optimization of natural resources, reusing, and often re-purposing materials while maintaining environmental balance. The goal is to address the needs of today without impacting future generations. Renewable clean energy is the most notable example of sustainability. The foundational pillars of sustainability are economic, environmental, and social, while those pillars for supply chain are profitability, compliance, and people.
Why Is This Important: Effective Use of Resources?
In the context of supply chain, most organizations consume materials and resources and generate waste in the form, of:
- Raw materials to produce end products
- Consuming energy to run production facilities
- Generate scrap from the production process
- Environmental waste from production facilities.
All these areas present significant sustainability and optimization opportunities for organizations while promoting greater social responsibility.
This new supply chain “lens” on how to optimize resources, and redeploy, recycle, reuse, and re-purpose material will undoubtedly result in meeting sustainability pillar goals — reducing supply chain costs through scrap reduction; , decreasing energy consumption to meet environmental goals; and supplying more Eco-friendly products to the consumer.
What Is Happening in the Market?
With consumers more aware of the impact of sustainability and demanding more Eco-friendly products and solutions, there is a push for organizations to prove their contribution to these new requirements. Organizations are making strong commitments to sustainability, in large part through transparency and addressing material issues. They are integrating their supply chain with sustainability. This trend introduces a new breed of solutions focused on:
- Dedicated sustainability marketplaces for connecting buyers and sellers for materials;
- Blockchain technology solutions that provide insight on how products were repurposed, demonstrating the visibility and integrity of the material across the supply chain;
- Tracking of volumes and costs, allowing greater insight and visibility into the effective and optimal use of materials and products to drive down waste and costs.
What Should SAPinsiders Consider for the Future
Based on SAPinsider community insights and trends on the current sustainability landscape, organizations should develop a strong supply chain strategy with embedded sustainability elements. They should consider this as not just a typical supply chain cost driver, but a competitive weapon to drive consumer and buyer motivations. They should consider technologies that support these strategies in the form of sustainability marketplaces and blockchain technology. Build your supply chain with the following considerations:
- Launch organization-wide sustainability initiatives
- Align regulatory risk and compliance plans
- Integrate environmental, social, and governance risk considerations into supply chain analysis and decisions
- Implement measurable sustainability metrics which align environmental and social outcomes with your existing SCM KPIs
- Instill sustainability into the organization’s supply chain culture and value system
- Drive innovation by channeling supply chain investments towards new technologies that reinforce positive behavior by rewarding good practices that impact the economic value chain