Sustainability at scale: how to effectively balance supply chain demands
Organisations are spinning more plates than ever before. With tighter budgetary constraints, growing supply chain complexity, and a focus on Scope 3 emissions sparking a greater focus on sustainability, it can be difficult for leaders to excel in every area.
Daniel Smith, Director of Sustainability and ESG at e2open, further explores.
For instance, 51% of supply chain leaders have increased the number of locations in their network in the past few years, therefore increasing its complexity. Yet only 53% have sufficient or high master-data quality and 33% of companies still lack a business case for sustainable supply chains.
Yet sustainable business is the future. To form long-term strategic plans on the basis of unsustainable practices is to make barriers part of the architecture and artificially limit growth.
Companies must strike a balance between scaling operations and transitioning to more sustainable business practices. From integrated data and increased transparency of operations to more collaborative working practices and partnerships, supply chains must work together towards a net-zero future.
Addressing and calculating Scope 3 emissions
The first major environmental step is to understand the current picture in terms of Scope 3 emissions. This is the largest emissions category for most companies, and supply chains often present the biggest question mark when it comes to measuring the environmental impact of operations.
No matter the maturity of a company, the best place to start is by building an understanding of what the supply chain looks like. This includes how many tiers are involved, who the various suppliers are and what they supply, and what the knock-on emissions are for those materials. Though many companies use averages to arrive at a Scope 3 calculation, the time is coming where more granular understanding will be essential. However, that will be almost impossible without being able to tie emissions to distinct materials, business processes, and suppliers.
Increased transparency, data sharing, supply chain technology, and collaboration between every link in the supply chain will build the foundation for success.
Ensuring strategies for action are sustainable and scalable
Visibility is clearly vital to scale operations and enable meaningful and accurate measurements of Scope 3 emissions. Fundamentally, scalability and sustainability are related concepts when building a supply chain strategy. A course of action that is unsustainable is unscalable, so sustainability needs to be a factor for any company that wishes to grow in the long term.
For example, consider a company that manufactures capital equipment that its clients use to drive their day-to-day operations. This equipment is sophisticated and complex, and the value it provides depends largely on its uptime. If the equipment breaks down, client operations grind to a halt, at tremendous financial and opportunity cost to clients. Because of this, it is extremely important to have plenty of inventory available to repair the equipment quickly when needed, keeping downtime to a minimum. However, it is also important financially not to carry too much inventory, and not to have to rush that inventory from hotspot to hotspot. In other words, it would be smart for the business to only stock what it needs, at the right place, the first time.
This business practice greatly reduces the waste that comes from overstocking inventory and the emissions created by expediting it from place to place due to suboptimal planning. But these efficiencies can only be achieved with enhanced transparency and collaboration both internally and with clients, suppliers, and other partners. Free-flowing data and total visibility informs these proactive decisions and enables leaders to balance sustainability and scalability effectively.
Better visibility drives better business
The idea of a sustainable or scalable business depends on the company’s knowledge of its resources and constraints – and its ability to ensure sufficient supply and solutions to continue and evolve operations. In other words, it depends on visibility, making data-driven decisions, and measuring the effectiveness of those decisions. Each of these steps is done using data.
Bringing all company-wide and partner data together drives better business. Partners related to sourcing and manufacturing, flows of materials and components, transportation and logistics activities, cross-border regulations, and even partners used to store and distribute products create a complex, sprawling network. Ideally all these partners, processes, and data would exist together in one collaborative space without silos, enabling the company to model changes in real time and optimise processes. With real-time collaboration, businesses can orchestrate the extended supply network to operate in the most efficient and cost-effective way. Crucially, the absence of one of these components – cost, customer service, or sustainability – will skew the business outcomes. Since they are interdependent business goals, each must be considered simultaneously and in view of how each affects the others.
Stakeholder engagement and collaboration are vital to make this vision a reality. Ensuring sustainability and resiliency involves the buy-in of partners to share data and work together. This also benefits them, creating a more sustainable ecological and business environment. Significant opportunities in the circular economy, in large-scale electrification, and in carbon-neutral business will only be available when all players lean in. These are system-wide changes and it’s important to move together as much as possible to maximise success.
To lay a foundation for this work, it is important to gain end-to-end visibility and create a culture of collaboration across the entire value chain. Every efficiency gained in operations is one which will pay dividends as the business grows – and vice versa. When organisations can orchestrate the whole, not just disconnected parts, this is where scalability and sustainability will thrive.