Digital transition & ESG criteria – Supply chains and digitization: focus on sustainability

The Covid-19 pandemic has demonstrated the vulnerability of supply chains. The IMF data (International Monetary Fund) show that global trade in goods fell by 12.2% in 2020 and remained volatile for goods that depend on global supply chains.

She also reminded us that businesses need the right technology at the right time. Those that have tools to track and manage the movement of goods through their supply chain are better equipped to deal with volatility.

Gartner found that nearly two-thirds (61%) of supply chain managers view technology as a competitive advantage. On the consumer side it is the same and a recent survey from Oracle found that 70% of them would be more willing to buy from a brand if it uses artificial intelligence to manage its supply chain.

However, as organizations prepare for recovery, they must consider solutions to improve their efficiency without forgetting sustainable development.

No business without sustainability

There is a clear consensus that sustainability should be a guiding principle of any organization in the 21st century. A study from Oracle revealed that 94% of business leaders agree that sustainability should be an inherent part of traditional business actions.

But at the risk of taking an overly simplistic view of ESG criteria, companies should avoid focusing solely on CO2 or plastic waste, in order to take a more holistic view of their supply chains. Indeed, everything must be taken into account, starting with the emissions produced during manufacturing and transport to the impact of individual materials and raw products such as wood or palm oil.

But bringing together information from across supply chains is a hurdle for many organizations – more than a third (35%) of business leaders consider their biggest challenge to be getting ESG metrics from from partners and third parties.

A holistic measure to quantify sustainability

Measurement is fundamental to any ESG strategy. But until organizations understand the impact of their value chain on the world around them, they can’t take the necessary steps to address it.

Most of the emissions are produced outside the main activities of the companies: a study from McKinsey found that 80% of the average consumer goods company’s greenhouse gas emissions are produced by its supply chain.

This is where technology comes in, because to set, measure and achieve supply chain sustainability goals, organizations must embrace digitalization. Cloud infrastructure and applications enable organizations to pull data from various sources to produce accurate real-time reports and predictive analytics.

Thus, quantification can be integrated into operations – and management solutions dedicated to supply chains (SCM) enable organizations to more effectively manage purchasing, inventory, and logistics, while providing unparalleled visibility.

Retraced, a German-based sustainable fashion platform, used Oracle Autonomous Database with blockchain to gain visibility into complex supply chains. The platform provides its customers with material traceability across the supply chain. At the core of the strategy, the cloud infrastructure provides the scalability to support thousands of requests concurrently.

The impact of transport in the age of the cloud

The transport of goods and materials must be made more sustainable. According to’EEA (The European Environment Agency), international shipping alone accounts for 5% of EU-28 emissions. It will have to be reduced by a third by 2050 to meet EU targets. Fortunately, this is an area that can be enhanced by cloud applications, which can help minimize the impact of transportation on the environment.

Cloud-based supply chain management applications are dedicated transportation management solutions to optimize entire logistics networks. Thus, the movements of vehicle fleets can be planned to make the best use of available resources, while machine learning can accurately predict transit times and identify where emissions and costs could be reduced.

Processing and packaging company Tetra Pak has transformed its global logistics with the cloud. With the objective of reaching net zero by 2030, the firm has consolidated its transport management systems for better visibility of its environmental impact. By automating many of its supply chain and logistics processes, it can also improve its productivity and efficiency.

Packaging, black sheep of supply chains

Packaging can have a huge impact on the waste produced by supply chains. Many customers pay close attention to how products are packaged and appreciate transparency when it comes to their sustainability credentials. Indeed, the Boston Consulting Group found that 70% of consumers are willing to pay a 5% premium for sustainably produced products.

Packaging should be assessed on the basis of concrete data and information. For example, while compostable packaging has the potential to introduce circularity into this aspect of the supply chain, it cannot be broken down which is favored by countries like the UK. Consumer awareness is also a limiting factor: a investigation of the BBIA (Biodegradable Industries and Associations) found that only 10% of shoppers recognize compost labels.

In some cases, recycled and recyclable plastics can help reduce food waste compared to other types of packaging by preserving freshness longer. Huel (whole food producers) performed a multivariate analysis on their meal replacement products. It shows that the plastic bag represents only 3% of the carbon footprint of the product and gives it a shelf life of one year.

The cloud, transit towards greener supply chains

An interconnected view of sustainability is needed to match the complex patterns of climate degradation described in the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC). In the face of this threat, organizations must address not only direct emissions and waste, but also indirect emissions produced by upstream and downstream activities.

The cloud gives organizations the visibility, control, and scalability they need to make their supply chains more sustainable and ethical. By consolidating their supply chain and transportation management solutions, they can optimize efficiency and embed sustainability into their operations. Xavier Chabanne Oracle Switzerland

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