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Low Carbon, High Growth: The 21st Century Sustainable Supply Chain Model

 

The supply chain has traditionally been viewed as a linear process from the vantage point of a single company, starting with the supplier and ending with the point of sale. What happens to the product materials after use has not been a core business concern. The limitations of this perspective have important implications for the supply chain’s ability to compete in the emerging business paradigm.

Billions of tonnes of waste are generated from businesses across the world. Growing political and societal awareness of these effects is increasing pressure on businesses.

Supply chains need to, therefore, dramatically reduce raw material requirements and move toward zero-waste processing cycles in which resources are completely recycled or reused. 

The Supply Chain Needs a New Shape

The supply chain needs to be molded into a closed loop enabling the flow of goods from the point of consumption back to the point of origin in order to maximize the capture of value. 

The core competitive advantage of the future will lie in an ultra-lean supply chain boasting minimal resource and carbon intensities, enabled by a high level of connectivity and information exchange. Reducing the environmental burden of supply chain operations is not only a question of “corporate social responsibility”; it is becoming a matter of strategic risk management. 

The Existing Supply Chain Model Leads to High-Carbon Growth

Today’s supply chain model is narrowly focused on transactions between a company and its direct suppliers and customers. While the current model benefits customers through low supply chain costs and high service levels, these supply chains are slow to respond to the changing market dynamics.

Information exchange is often constrained by the current model, limiting collaboration and further efficiency gains. Companies singularly focused on optimizing their own transactions miss business opportunities along the full product cycle

The 21st Century Supply Chain Model: Delivers Low-Carbon Growth

 The 21st century supply chain model will not replace but build upon the existing supply chain model.

Connectivity among supply chain actors is necessary to enable collaboration and information exchange in the supply chain. In the 21st century model, supply chain participants will be linked through an information and collaboration hub.

Innovative IT systems will provide smart decision support and new capabilities while ensuring the full supply chain cycle delivers on agility and sustainability. 

Growth Opportunities Enabled by the Evolving Model

The new focus on sustainability opens supply chain opportunities with the following economic benefits:

  • Sustainable products, which are designed for using sustainable materials 
  • Low consumption of energy in use and for recapturing embedded resources in the reverse chain
  • Product waste, which ensures resources are not wasted on products that do not reach a customer
  • Low-carbon logistics, which minimize energy consumption in transport and handling per unit
  • Reverse chain, which closes the product loop and captures residual value from returns

Companies have seen growth opportunities in these areas, resulting both from cost reductions and from new revenue opportunities: 

  • Herman Miller and Knoll have improved market shares and net incomes in the years following concerted efforts to improve product sustainability.
  • Zara was able to reduce product waste substantially, avoiding about 188,000 tonnes of carbon emissions compared with the industrial average in 2009.
  • Xerox saved $400 million in material and production costs by using remanufactured components in its production line.

This new supply chain model relies on capturing, processing and sharing information that enables new types of collaboration. This collaboration accelerates the transition from a high-growth, high-carbon supply chain model to a high-growth, low-carbon one. This is the beginning of the shift toward a 21st century supply chain model.

In this white paper, we make the case for overhauling today’s supply chains. The crux of this change will be to build closed-loop supply chains enabling cradle-to-cradle material flows. We combine the results of our joint research and analysis with interviews conducted with senior industry executives.

This paper is a part of the TCS-Xyntéo series, which aims to map out practical ways wherein key industries and business models can contribute to profits and reduce carbon emissions.

Read White Paper: Low Carbon, High Growth: The 21st Century Sustainable Supply Chain Model (2.33 MB PDF)