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Why Sustainability matters in the midst of supply chain disruption

By Suroor Anwar, VP APAC, Strategy & Commercial, RS Components

The year 2021 has seen one of the greatest disruptions to supply chains, with the entire industry being put through a stress test while also dealing with rising fuel costs. In addition to these disruptions, the threat of climate change due to rising emissions and its catastrophic impacts was emphasised during the COP26 held in Glasgow. After all, the supply chain industry alone accounts for more than 50 percent of annual greenhouse gas emissions. The sense of urgency surrounding climate change has pushed consumers to expect more from their suppliers, with mounting pressure from companies’ stakeholders for companies to embrace sustainable solutions across their businesses. Fortunately, supply chains are still focusing heavily on their sustainability efforts, despite the disruption and rising fuel costs.

COVID – a hindrance to sustainability efforts

Supply chain resilience is not novel and has been a topic of discussion by many. The supply chain industry has weathered through many unprecedented events, and several decades of experience have taught many in the field to buffer stocks, and adopt a just in time sourcing model to reduce inventory levels. However, no one could have predicted the effects COVID-19 pandemic had on supply chains. For the first time ever, the stress on supply chains was unparalleled to what years of experience had taught us. Shortages from raw materials to cars are reaching historic levels. Instead of organizations being focused on implementing sustainable practices, they were forced to turn their attention to procuring enough inventory.

How technology can help drive sustainability

With each passing year, technology becomes more advanced. Together with Industry 4.0, technology can be used to aid sustainability efforts in the manufacturing industry. For example, manufacturers can invest and integrate green technology when rebuilding or restoring machines. This extends machine productivity and use, while lowering the carbon footprint. Other emerging technologies such as AI are now being used widely across the board, and have the potential to transform manual repetitive tasks into highly automated processes. Smart manufacturing also enables manufacturers to create accurate and detailed production plans and helps manufacturers predict failure and monitor product defects. However, it is not a one-way street. When making the shift to technology, it’s important for manufacturers to ensure their suppliers and business partners are also on the same page, sharing the commitment to sustainability and having the capabilities to support them in their green mission.

For example, at RS, we have adopted eProcurement solutions such as RS PurchasingManager and Product Plus. RS’ eProcurement solution allows users greater control over their procurement and purchasing processes. The solution gives businesses full visibility into their spending, and accurate purchasing data. Thus, this ensures minimal errors during procurement and maximum Purchase to Pay process at cost reductions. Such solutions increase procurement efficiency, reduce costs, and leads to less wastage. Some other processes include predictive maintenance. Adopting this technology, it allows us to push supply chains towards further transparency and sustainability. Manufacturers can get full visibility into energy consumption across operations, be able to look out for equipment reliability and maintenance, and ensure that energy is efficiently utilised.

Net Zero Supply Chains

Fortunately, the commitment to tackling climate change is accelerating in all sectors of society. However, one of the ways we could accelerate the goal of achieving a net-zero supply chain is by decarbonizing supply chains. With as many as 1,400 companies pledging to reach net-zero by 2050, it is a must to adopt for manufacturers. Furthermore, it has become mandatory to meet tightening regulatory sustainability requirements and this move has compelled manufacturers to optimize their supply chains.

Some climate leading companies have introduced low-carbon governance into their business models. This includes embedding carbon reduction considerations into product development, procurement, finance and so forth, so those management incentives are aligned around them. Some have also chosen to redesign products. For example, creating a closed-loop system that increases the number of recycled materials — a strategy increasingly embraced by electronics companies including Dell Technologies and HP Inc. Swapping out one material or component for another is also another method, as Unilever is prioritizing with its cleaning products.

Other tactics include calculating an emissions baseline and moving to share data with suppliers. Siemens, for example, is collaborating on a pilot program to measure emissions for a washing machine along the entire supply chain. Lastly, they have also set targets that “cascade” net-zero emissions ambitions down to their suppliers. Manufacturers are also seeking out environmentally responsible suppliers. They are also encouraging suppliers to set science-based reduction commitments – or require them to adhere to the targets based on the pledge.

How will the increased scrutiny from central banks and banks drive sustainability efforts across the industry?

According to an article published by South China Morning Post, a past survey shows that 91 percent of global consumers expect businesses to address social and environmental issues, and 90 percent of them would boycott a company if it were engaged in irresponsible business practices.  There is a clear distinction between brands that are actualizing supply chain sustainability and brands that are marketing supply chain sustainability. A truly green supply chain is a supply chain that implements strategies and actions to improve performance in areas that are not eco-friendly or in this case, sustainable.

Governments are also increasingly aware of the dangers of climate change and many have resorted to allocating funds for sustainability projects. However, this is where greenwashing could potentially be on the rise. Stocks and funds highly rated on environmental, social and governance metrics have attracted trillions of dollars of investments in recent years. With the increased scrutiny, this means that companies will now have to actualize supply chain sustainability, instead of marketing supply chain sustainability.

It is increasingly evident that the supply chain industry will be going through massive changes in the upcoming years. Organizations will need to take a smarter approach to procurement, facilitate collaboration, and access actionable insights to drive continuous improvement and help reduce carbon emissions. In order for us to reduce carbon emissions, we will have to adapt to these changes and fortunately for us, technology is here to help us tide this through.

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