Supply chain sustainability is a pressing issue for the future of business and the world.
With Australian and New Zealand-based companies investing more money into sustainability initiatives, seeking to reduce waste and carbon emissions, Guy Ferrier, Director, Supply Chain Consulting Practice, Australia & New Zealand at TCS, explores the best practices in achieving circularity and building sustainable supply chains.
The earth will become warmer by 1.5 degrees by 2030, compared to pre-industrial levels and is predicted to rise by more than 2 degrees by 2050. The risk inherent in this environmental change underscores the need to implement sustainability practices immediately.
As of 2020, the World Bank estimated Australia to be emitting over 14 tonnes of carbon or carbon equivalents per capita per annum, but a net zero emission target will see us dropping this to around 1 tonne. As such, there is significant work to be done.
Our Climate Change Authority has been requesting submissions since February 2023. On June 27, it released a consultation paper that will likely see a considerable expansion in the proposed mandatory reporting, which will start to apply for the financial year ending June 2025. Large-scale data collection and related reporting requirements will need to be in place by July 1, 2024— less than one year away.
Australian organisations have long been looking at potential compliance factors. But this shift to a mandatory reporting culture requires organisations to crystallise their approach, define the data they need, how it will be captured, what cost-savings in the process can be done, and overall, how they will meet their carbon-cutting objectives in the short term. They will need to identify ways to effectively implement the essential sustainable practices that benefit their business while completing their revenue and profit goals.
Steps needed to achieve sustainability in supply chain
First, the workforce must be trained to increase digital skills, as digital technology is essential to achieving sustainability.
It includes using technology to optimise and measure the outcomes of improved processes, reduce waste, increase employee efficiency, and expand performance across functions and teams for monitoring and corrective action. It can be achieved using tools like cloud computing, data analytics, improved EAS usage, and Internet of Things (IoT) devices.
Second, many organisations are looking at how to adopt electric vehicles to reduce carbon footprint where transportation or mobile servicing of their customers is a significant contributor to their greenhouse gas emissions. In these cases, the shift towards electric vehicles and reducing carbon-heavy fuels is critical to cutting these emissions. Companies can also encourage public transportation, cycling, and walking among their employees to reduce the overall carbon footprint.
Third, companies must change their mindset from short-term profits to longer-term sustainability goals. They must think beyond the present and focus on future profits. This is where the circular economy comes in and the role of the supply chain in it. The traditional linear model involves extracting raw materials, producing goods, and disposing of waste. This model is not sustainable in the long run as it leads to resource depletion, pollution, and an increasing stockpile of waste products from which valuable resources are almost irrecoverable.
Conversely, the circular model involves designing products for reuse, repair, recycling, and resource recovery. This model aims to create a closed loop where resources are conserved, and wastage minimised. The world reuses only 9% of the total resources extracted yearly, creating a circularity gap. It's an ample opportunity for companies to explore, with over 21 significant areas identified [by the Circle Economy reported at the WEF] for organisations to explore.
Companies can adopt circular practices by using recycled materials, designing products for longevity and ease of repair, and implementing closed-loop supply chains. The result is an opportunity to look at many aspects of their business model and the technology required to track and report how their resources are transforming. Circularity is broad and covers all aspects from using virgin, recycled and repurposed products, how they get remade and for what purpose, and identifying the end-of-use outcomes in landfill, incineration, dispersion or emissions as atmospheric carbon or equivalents.
Enabling sustainability targets
Technological enablers are useful for pushing the scope of technology in supply chains and other parts of the business model to achieve those changes and track results.
The use of Digital Twins is increasing as they provide virtual replicas of physical systems, processes, or assets created and maintained using real-time data. They provide companies with an analytical approach to improve efficiency and reduce costs. Although they sound complex, in many cases, valuable replicas can be set up in only a few weeks that return organisationally important feedback on areas for improvement, often in execution timeframes. Other technologies like Blockchain can create transparent supply chains with verifiable and tamper-proof inputs, allowing companies to track the movement of goods and ensure that they are produced and transported sustainably with the right level of accountability falling on the participants in the supply chain. Finally, Artificial Intelligence can optimise supply chain operations where significant data inputs are available, reducing waste and improving efficiency.
Sustainable practices in production and packaging are also important to reducing waste. Eco-friendly machinery is necessary for organisations to reduce their carbon emissions. Treating and reusing waste products as raw materials is another way to achieve sustainability goals. Connecting different industries where waste can be used as raw materials is also a step towards attaining circularity in the economy, where waste from one industry can be repurposed and used as a raw material in another.