Keeping supply chain sustainability simple – getting back to the three Rs
Businesses are rethinking their operations, seeking to transform themselves into more nimble and resilient organisations. Forward-thinking companies are particularly focusing on their supply chains as they strive to enhance these with agility and efficiency.
But sourcing, making and moving goods and services across the world has undeniably had an adverse impact on the environment. This is exemplified in a 2022 McKinsey report which says road freight accounts for 53% of CO2 emissions. If current trends continue, this figure is likely to rise to 56% by 2050.
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However, focusing on being a more sustainable enterprise and therefore having a more sustainable supply chain can not only reduce the impact on the environment it can also have many benefits on a company’s resilience to risk, improving margins and attraction to the people that buy your goods.
Sustainability is not new
Sustainability has been a hot topic since the early 2000s, but it is one that has become increasingly crucial as more consumer groups and regulations are imposed on businesses.
For instance, more regulators now require publicly listed companies to include measurements of their greenhouse gas (GHG) emissions in their annual reports, including the UK, which introduced 'streamlined energy and carbon reporting' in 2019, and we are also starting to see discussions on how to include the cost of carbon emitted on the balance sheet.
Last year’s COP26 summit held in Glasgow pushed many companies into announcing their plans to cut down on their carbon emissions, but many are failing to link these commitments to their end to end operations, and especially their supply chains.
This is bad news for achieving these goals and of course for the environment because supply chains are the biggest source of a company’s overall carbon footprint. In fact, supply chains are responsible for between 65% and 95% of a company’s total emissions, according to the World Economic Forum.
The 3Rs
As organisations look to operationalise and digitally transform their supply chains, they invariably need to go back to the basic building blocks of sustainability with the three Rs - reduce, reuse and recycle.
These are part of a waste hierarchy process used to protect the environment and conserve resources through a priority approach.
The aim is to gain the most practical benefits from products and to generate the minimum amount of waste. This approach also triggers other positive benefits like resource savings, reducing pollution and avoidance of greenhouse gas emissions, along with the development of sustainable technologies.
Reduce
Reducing the use of materials often comes down to good supply chain planning. This entails businesses designing products with more foresight on their impact and using materials in the best way possible to meet customer expectations while at the same time reducing excess waste and production processes.
It is also crucial to reduce the proportion of material that will be difficult to reintroduce into the supply chain after use, such as highly treated mixed materials.
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One way in which businesses can reduce the consumption of raw materials is by replacing them where possible with reused or already recycled materials.
Reuse
When a product has reached the end of its lifespan it must be assessed as to whether the complete unit or its components can be converted into a new product or reused for other purposes without it needing to be disposed of. Refurbishing products provides good business opportunities and can go a long way to helping natural resources.
This has led to some imaginative re-use outside of the more well-known recycling of plastics for pallets or packaging into, for example, plastic road elements via organisations like PlasticRoad in The Netherlands,
or turning used coffee grounds into biofuel with companies such as The Coffee Recycling Company. We are just at the beginning of a renewed focus on product re-use, which we would expect to accelerate still further in the future.
Recycle
Recycling comes into play where a product or its components cannot be reused, but its materials can be separated according to their composition such as metals or plastics. In the case of electronic devices these often include precious materials.
A report in the United Nations’ Global E-waste Monitor 2020 showed that e-waste is the world’s fastest-growing domestic waste stream and that a record 53.6 million metric tonnes (Mt) of electronic waste was generated in 2019. By 2030 this figure is expected to almost double to 74 million Mt a year.
Another way of recycling equipment is through repurposing, where they can be used in other industries or where refurbished equipment, like computers, can be donated to schools or charities.
The desire to reduce waste, reuse and recycle is driving a trend for new business models. Buying recycled material can often be expensive when recycled by a 3rd party.
So how, if you are a manufacturer of cars or washing machines, do you ensure that those materials come back into your cycle of production? By changing the way people consume them. The new type of all-inclusive car subscription as seen at Volvo is one example of this.
The benefits of a sustainable supply chain
Businesses that are eco-friendly not only help the environment but are often more profitable. Those that put emphasis on environmentally friendly processes, including the supply chain, will win the approval of the ever-growing eco-conscious public.
Read more: Can robotics solve our supply chain headaches?
There are also financial advantages to be gained too, particularly as the investment community is very much focused on sustainable organisations, often giving them better access to capital. Governments are also offering support for businesses to work in new and collaborative ways.
Climate change, concerns about the environment, increasing fuel costs and material shortages are changing the way many organisations think about resilience. Therefore, sustainability is not just about the environment, it's also about how to make businesses more profitable and resilient for the future.
- The author, Claire Rychlewski, is the senior vice president for Europe, the Middle East and Asia at Kinaxis.
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