ESG Principles
Companies tend to look internally to bring about gains on their ESG checklists. It's time they looked outside too. Image Credit: Shutterstock

The pandemic demonstrated the vulnerability of supply chains. IMF data show that the global trade in goods fell 12.2 per cent in 2020 and has remained volatile for goods that rely on worldwide value chains.

It also reminded us that firms need the right technology at the right time. Those with the tools to track and manage the movement of goods across their supply chain are better equipped to weather volatility. Gartner found that almost two-thirds of supply chain leaders view technology as a competitive advantage. Consumers put their faith in technology too: Oracle found 70 per cent would be more willing to buy from a brand they knew used AI to manage their supply chain.

As organisations prepare for a period of recovery, they must consider solutions that not only help them source goods more effectively, but also deliver on sustainability goals. Supply chains are increasingly scrutinised as a source of direct and indirect emissions, and digitalisation has a major role to play in making them more sustainable.

The big picture

There is a clear consensus that sustainability should be a governing principle of any 21st Century organisation. Indeed, an Oracle study found 94 per cent of business leaders believe sustainability and societal metrics should be used to inform traditional business metrics.

But there is a risk of Environmental, Social, and Governance (ESG) tunnel vision, especially as organisations set ambitious targets for net-zero carbon emissions. Rather than focusing solely on CO2 or plastic waste, firms must take a holistic view across their supply chains. Everything from the emissions produced by manufacturing and transportation to the impact of individual materials and commodities such as timber or palm oil needs to be considered.

Firms face mounting pressure to ensure their entire value chain is sustainable. Drawing together insights from across supply chains has been a particular barrier for many organisations’ ESG initiatives—more than a third of business leaders consider their biggest challenge to be obtaining ESG metrics from partners and third-parties.

Measuring sustainability

Until organisations understand the impact their value chain has on the world around them, they can’t take the steps necessary to address it. Most emissions are produced outside of firms’ core operations: McKinsey research found that 80 per cent of an average consumer goods company’s greenhouse gas emissions are produced by their supply chain.

To set, measure, and achieve supply chain sustainability goals, organisations must embrace digitalisation. Cloud infrastructure and applications enable organisations to draw data from a range of sources for accurate, real-time reporting and predictive analytics.

Measurement can be baked into operations – a suite of Supply Chain Management (SCM) solutions enables organisations to manage procurement, inventory, and logistics more efficiently, while providing unparalleled visibility. Processing and packaging company Tetra Pak transformed its global logistics with Oracle Cloud. With the goal of achieving net zero by 2030, the firm has consolidated its transportation management systems for greater visibility of its environmental impact. By automating many of its supply chain and logistics processes, it can improve productivity and efficiency too.

Product packaging

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

Packaging needs to be evaluated based on concrete data and insights. For example, while compostable packaging has the potential to introduce circularity to this aspect of the supply chain, it can’t be broken down by anaerobic digestion, which is favoured by nations such as the UK. Consumer awareness is also a limiting factor: a BBIA survey found that just 10 per cent of shoppers recognise composting labels.

‘Green’ supply chains

An interconnected view of sustainability is needed to match the complex patterns of climate breakdown described in the IPCC’s Sixth Assessment Report. In the face of this threat, organisations must tackle not only direct emissions and waste, but also indirect emissions produced by up and downstream activities.

The cloud gives organisations 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 optimise efficiency and embed sustainability into their operations.