How sustainability is driving supply chain innovation

After the plumes of smoke from the recent Australian bushfires began to clear – the ensuing devastation left an indelible mark on the public’s imagination. Videos of burned...

After the plumes of smoke from the recent Australian bushfires began to clear – the ensuing devastation left an indelible mark on the public’s imagination. Videos of burned animals desperately seeking refuge from the flames went viral, images of exhausted firefighters plastered the front pages of newspapers around the world and the issue of climate change was once again thrust into the spotlight, with many arguing that the bushfires were caused by global warming. 

Closer to home, the UK announced the highest temperatures on record for January, and towards the end of last year, European Union lawmakers declared a “climate emergency” in a symbolic vote to increase pressure on business, governments and civil society to take urgent action. 

Global Trade and Climate Change 

Scientists state that since 1850, almost all long-term global warming is due to greenhouse gas emissions caused by human activities. Global trade is a critical multiplier of these fossil fuel-intensive activities that are contributing to surging temperatures, pollution and loss of biodiversity. 

In fact, emissions from the transport sector, the backbone of international trade, are growing exponentially and in 2015 represented around 18% of all man-made carbon emissions.

Another big driver of carbon emission in global trade is oversupply. Oversupply is often a result of something referred to as ‘incremental innovation’, a term used to describe a series of small improvements made to a company’s existing products or services. 

While there’s no doubt that innovation across all industries is the driving force behind much of the progress, we’ve experienced in the 21st Century, it’s also proven to be a double-edged sword when it comes to wasteful production. The production of unused inventory, for example, uses more than 10 giga tons of carbon dioxide, equivalent to approximately 1.75 billion car-years, as well as 1.6 trillion cubic meters of water, which is about 40% of annual global water consumption. 

Impact of Climate Change on Global Trade 

On the other hand, despite contributing to global warming, supply chains are particularly vulnerable to environmental disasters caused by climate change. For example, in 2016, wildfires in California shut down railway lines and trucking routes and recent floods in Europe completely stopped production at factories. 

In fact, in 2014, three of the top five supply chain disruptions were due to natural disasters resulting in the loss of over $15 billion and requiring an average 38 weeks for system recovery.

As consumers  are continuing to put significant pressure on brands to produce responsibly sourced and manufactured goods, it also means that industry bodies have started mandating that international trade should contribute to sustainable development – it’s clear that there has never been a more urgent time to start implementing solutions to address the industry’s role in mitigating climate change. 

Supply chains get smarter and more sustainable

One way of doing this is to invest in innovative measures to reduce the carbon footprint of global trade. 

And, there’s no shortage of innovations from which to choose. Same-day delivery by drone, blockchain, robotics and Artificial Intelligence are catapulting supply chain innovation on to the front page. 

However, technology is not only transforming supply chain management, it’s also sharpening the role of global trade in promoting sustainable development. 

  • Reducing impact at the last mile 

For example, forward-thinking companies are using cutting-edge technologies like electric vehicles and drones to improve efficiency in the last mile of deliveries, which account for a large portion of supply chain costs and carbon emissions on the roads. 

  • Sustainable forecasting 

Many businesses are increasingly investing in new technology, like demand sensing, to improve forecasting accuracy. Demand sensing technologies use real-time data, automation and machine learning algorithms to create accurate near-term forecasts that reflect current market realities. With 80% of unused stock driven by forecasting errors, it’s clear that the traditional approach to demand planning, which uses seasonal patterns and previous data sets to predict sales, belongs in the past. 

  • Transparency, compliance and sustainability 

Increased transparency in supply chain management is fast becoming the norm because stakeholders are increasingly expecting businesses to disclose their supply chain risks and environmental impact. Technology solutions and innovations are rising to the challenge and enabling businesses to increase transparency deeper in the supply chain, meet stakeholder requirements all while reducing compliance and supply chain management costs.

  • Circular supply chains 

Businesses are also increasingly leveraging software solutions to launch circular supply chains that effectively and transparently connect both ends of the supply chain. And if you’ve ever heard the old adage, “One man’s trash is another man’s treasure,” then you can understand the benefits of having a circular supply chain because circular supply chains help businesses make a profit from waste. As regulations on recycling and proper disposal of manufacturing by products become more stringent, investing in software to help improve compliance and transparency could give your business the edge. 

Sustainability is a business imperative 

Sustainable supply chain management is clearly no longer an option – it’s an imperative if businesses want to be successful in the 21st century. However, channel and supply chain management continues to be complex and demanding. Fortunately, advanced technology when used correctly can help overcome many of these obstacles.

Most importantly when you improve environmental, social and governance performance throughout your supply chain, you improve productivity and efficiency, save costs, foster innovation and ultimately make a positive impact on society.

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