How to Build More Sustainable Supply Chains
With the current climate crisis, consumers have a growing interest in more transparent, traceable, and circular supply chains. But what exactly does this mean?
Circularity, Transparency, and Traceability
Circular supply chains recycle and reuse old products to create new products.
Transparency is the commitment to honestly communicate and voluntarily disclose information. It involves the collection, storage, validation, and sharing of data surrounding supply chain operations, from all parties involved.
Traceability supports transparency, allowing consumers to directly connect an individual product and its ingredients back to their sources. For example, consumers could find out where the palm oil in a skincare product is from and whether it was ethically produced.
There is no doubt that a more transparent, traceable, and circular supply chain would benefit the environment. Businesses would exhaust fewer resources and be held accountable for environmental and human injustices.
However, supply chains today are a long way from reaching this more ethical, sustainable kind of supply chain. Why is this the case?
Pros and Cons of Sustainable Supply Chains
Some businesses are hesitant to adopt a sustainable supply chain because they believe:
- Producing a new product out of recycled material reduces its value, and/or
- Implementing a transparent, traceable, and circular supply chain is too expensive.
Product value is not necessarily decreased when using recycled materials because quality manufacturing can recover that value. Most consumers wouldn’t even notice the difference between a product made from new materials versus recycled materials. In fact, many consumers go out of their way to buy products made from recycled or biodegradable materials, which increases the value of those products. According to a McKinsey study of 7,751 consumers, 87% indicated they were concerned about the environmental and social impacts of the products they buy (SSIR).
While there are upfront costs associated with implementing a transparent, traceable, and circular supply chain, the long-term benefits and cost reductions — for both the environment and the business — outweigh them:
- Easily Obtainable Materials: The pandemic has highlighted how shortages can easily occur if businesses rely too much on materials from a specific source. Recycling old materials means that the materials are locally available, which would increase supply chain resiliency and decrease the likelihood of shortages, shipment delays, and supply chain disruptions.
- Increased Efficiency: Transparency and traceability allow businesses to increase efficiency. More data means more opportunities to discover patterns, predict delays, and identify room for improvement. In addition, practices like recycling old materials for new products or lowering energy usage can help reduce costs and decrease a company’s carbon footprint.
- Increased Profits: A sustainable supply chain is consumer-centric, especially for those who are environmentally and morally conscious. This can help businesses reach new market audiences and attain higher revenue and profits with decreased costs.
- Competitive Advantage: In 2019, Gartner announced that “transparency and traceability” were some of the top technology trends in 2020. In 2021, Gartner announced who they believed to be the top 25 supply chains of the year — and what did they all have in common? Sustainable supply chains and sustainability initiatives. Since many large advisory companies such as Gartner, Deloitte, and McKinsey all agree that sustainability sets companies apart from their competitors, businesses would be smart to implement a sustainable supply chain strategy if they have not already.
The Future of Sustainable Supply Chains
Many businesses have already discovered creative ways to innovate their supply chains. For example, salmon farmers in Norway use blockchain technology to make their supply chain more transparent and traceable. Consumers can simply scan barcodes to receive all information about provenance, welfare, and farming. (Harvard Business Review)
There are countless opportunities to make supply chains more sustainable using the power of technology. In episode 62 of Rethinking Supply Chain, BOEX Founder and CEO Sean Copeland envisions a future where the supply chain is so digitized, you could visit a local department store and 3D print a product on the spot. You could know the exact measurements of an online product without needing it shipped to examine the dimensions yourself. According to Harvard Business Review, this might actually be the future of supply chain as 3D printing becomes more widely adopted. This type of supply chain is sustainable because it increases the use of local and reused — rather than new — materials and decreases the carbon emissions from shipping.
How Can Businesses Develop a Sustainable Supply Chain?
Here are some actionable tips:
- Implement Blockchain and Machine Learning: These two technologies allow businesses to easily track data, such as carbon output or material origin, at every stage of production.
- Digitize Your Supply Chain: Digitization and automation enable businesses to spend more time on company development — such as keeping up with consumer demands and market trends like sustainability — and less time on repetitive, manual tasks. Artificial intelligence, automation, and machine learning minimize manual effort on menial tasks so that business leaders could focus on tasks that AI is not yet capable of doing, such as forming sustainability initiatives and improving business processes. Regardless, a study conducted by Emerson, a Fortune 500 manufacturing company, found that out of 1,000 consumers, 50% are less likely to shop at stores that don’t use the latest supply chain technology, so digitization would be a good idea for consumer-centric businesses (FreshFruitPortal).
Mass production to meet global consumer demands has been an enormous contributor to the climate crisis and environmental degradation. However, it is not too late for business manufacturers to shift operations and adopt a more circular supply chain that is both transparent and traceable.
About Venzee Technologies, Inc.Venzee is a platform that utilizes AI, machine learning, and blockchain technology to digitize supply chain for consumer brands so that they can easily send product data to any global retailer. For more information, visit venzee.com or follow Venzee on LinkedIn and Twitter.