By Matt Spooner, Industry Thought Leader, Kinaxis

It is crunch time in our fight against climate change. That’s the stark call to action contained in the latest IPCC climate report, published in April by global scientists and academics. The report lays out the urgent need to reduce greenhouse gas (GHG) emissions across all sectors – otherwise global warming will surpass the critical temperature change of 1.5 degrees Celsius.

These concerns are nothing new. But only now are many people starting to realise that transitioning to renewable energy is merely scratching the surface. The role of the supply chain has come to the fore as a missing link for corporate climate action. In fact, McKinsey states that supply chains account for up to 80% of annual GHG emissions.

It seems that many of us have become ‘carbon blind’ to our supply chains. Traditional supply chains have certainly played a part in leading us into a throwaway society, where materials are produced, used, and then discarded. But there is hope, as the supply chain profession can make a real impact in fostering a circular economy.

In a circular economy, supply chains take ownership of their products and services throughout their network, designing strategies to bring resources full circle for re-use with a simpler recycling process – with an aim of zero waste. With smart technology, businesses can gain visibility and transparency of operations and materials at every stage of the process to drive an entirely connected supply chain that supports international climate action.

An untapped opportunity

 

Supply chain GHG emissions have been found to be 11.4 times higher on average than operational emissions, highlighting the scale of the sustainability challenge. Yet the majority of businesses have not even started involving their supply chain teams in corporate sustainability efforts. According to the Chartered Institute for Procurement and Supply, 80% of supply chain managers claim to either have no involvement in planning for sustainability, little involvement, or are unaware of any corporate sustainability strategy.

This represents a huge opportunity gone amiss. Supply chains are already under considerable pressure to meet demand following the disruption of the pandemic – and environmental sustainability will prove pivotal to their ability to rebalance and build resilience in the challenging years ahead. After all, supply chain inefficiency affects more than GHG emissions: businesses are also seeing the effects of climate change of bottom lines and revenues.

Therefore, the role of supply chain professionals is fundamental in mitigating the risks of the climate crisis. The stage is now set for the growth of a more sustainable ‘circular’ supply chain.

The circular model

For years, the linear economy has been king. A one-way chain has been forged with fossil fuels, supported by a ‘take-make-use-dispose’ supply chain model. The impact on our planet is increasingly clear.

But a new story can unfold, with the supply chain and technology combining to bring the system to a more natural circular form. Sustainable supply chains encompass the re-use, sharing, repair, refurbishment, remanufacturing, and recycling of materials, creating a closed-loop system that reduces waste and lowers carbon emissions. In doing so, products, equipment and infrastructure are kept in continual use, helping to build a circular economy aimed at eliminating waste.

By connecting the end of the linear supply chain with its beginning, businesses stand to make long-term cost savings, as they will be spending less money on raw materials whilst turning existing products back into profit. In addition, companies with sustainable supply chains are much more likely to benefit economically from government incentives and increased consumer loyalty. Turning the supply chain into a circular economy will help businesses to diversify the supply of essential materials, enabling them to become more resilient by decoupling material consumption and economic performance.

Collaboration is key

 

However, to build a truly sustainable supply chain for the circular economy, there must be greater collaboration between businesses and suppliers. This will involve getting everybody on board and building a shared roadmap towards cutting carbon emissions. At present, suppliers can be hesitant to share certain information due to fears of being held accountable or being put at a disadvantage. But if all tiers of the supply chain can become invested in a circular model to combat climate change, differences can be put aside towards a common goal: bringing about enduring, positive change across the ecosystem.

There must also be greater collaboration with Marketing and Product Management to design and sell repairable, long-lasting products. In the clothing world, consumer demand for cheap, fast fashion has created wasteful supply chains clogged with throwaway inventory. The Ellen MacArthur Foundation found that the number of times the average piece of clothing is worn has decreased dramatically over the last 15 years, particularly in more developed countries. This is emblematic of the overproduction and overconsumption of cheap goods that compounds climate change. Left unchecked, businesses that simply sell more and more new products will undermine any wider progress towards supply chain sustainability, so it is imperative that product managers and marketers unite to develop more ethical goods.

This change can only be achieved if incentives are provided for companies to fundamentally alter their business models. When doing the right thing is rewarded, it is much more likely to be incorporated into best practice. Critically, the workings of the supply chain must also be made more traceable and transparent by sharing standardised data insights across a multi-step supply chain.

Transparent and transformative digital tools

 

This is why investment in smart technology is so important. The right supply chain management software can empower data across the supply chain, providing visibility and transparency of operations and materials at every stage. Findings can then be reported and shared across planning, sourcing, manufacturing, delivery and returns, strengthening collaborative ties between businesses, suppliers, manufacturers, and customers. Clear and connected data insights will promote industry-wide co-operation, allowing a range of expertise and innovation to be shared within a more robust circular model.

 

The clock is ticking on climate change. But with the right digital tools and a shared hunger to transform, businesses can act today to build greener and more resilient supply chains for the future. This will be key to reaching a circular economy and a more sustainable world.