Sustainability is no longer just a buzzword. It's a critical aspect of business that all companies need to prioritize, as there is increasing pressure from investors and new regulatory legislation, and customers who are becoming increasingly aware of companies’ environmental impact. In fact, 24% of total estimated deaths are linked to the environment, which gives a lot of attention to this matter.
Companies need to manage sustainability effectively, but they face many obstacles, such as data availability, data and systems complexity, deep supply chain networks, and teams that tend to work in silos using tribal knowledge.
Managing data is one of the biggest sustainability challenges companies are grappling with (this is true even among those who have been on the sustainability journey for some time). This challenge is mainly driven by the intrinsic complexity that surrounds the data required to manage sustainability, as most of the data needed comes from their rather opaque and complex supply chain networks. Given this paradigm, it is only natural for companies to begin managing sustainability from a supply chain lens.
In order to effectively combine sustainability and supply chain disciplines, companies will need to deploy symbiotic systems to connect these two realms. Investing in technology, for instance, is a great way to tackle sustainability data related problems, such as visibility of data for all points in the supply chain and reducing environmental issues such as GHG emissions, water stress, and waste. There is a myriad of technological options that companies can choose from. Artificial Intelligence (AI) is one such technology that can help identify trends and patterns, enabling enhanced capabilities from recognizing hotspots and risks in their supply chain all the way to writing their voluntary disclosures and regulatory compliance reports. Another useful technology is Cloud software. Applications in this technology can map the supply chain, assimilating data from a diverse array of enterprise systems into a single, comprehensive digital twin. Companies can then create simulations and scenarios to assess investment alternatives to address sustainability challenges, while balancing critical supply chain performance metrics.
With the right technological investments, companies can move beyond collecting and reporting on historical data to drive transformative action by incorporating ESG metrics into their operating models. This visibility allows decision-makers to make better-informed decisions and, more importantly, incorporates all relevant stakeholders at the decision-making table. Some of the decisions that companies can make when they incorporate ESG metrics into the operating model are to find flexible production locations with more sustainable performance closer to demand, or reshore production to increase flexibility and sustainability in their manufacturing decisions. In fact, according to an MIT review article, the use of technologies in this space has made it possible for companies to break ties with cost-reducing dependencies and begin looking to increase service levels together with sustainability metrics.
Supplier engagement and collaboration are also critical components of sustainability strategies, and technology is a powerful ally in boosting efficiency and success in these practices. For instance, technology can help standardize and streamline interactions with suppliers, freeing planners and managers to dedicate more time to managing their supplier relationships, devising sustainability initiatives, and better collaborating with their stakeholders. In the supplier engagement space, there is often something called "supplier fatigue," as suppliers receive multiple requests from customers to fill out surveys on sustainability data. The biggest pain point is that most of these requests are not standardized, and it takes a lot of resources to process the data requests. Although technology can certainly help streamline data acquisition and analysis by leveraging connections to various data sources and harmonizing different types of data, it can also enable companies to segment and target their supplier management more effectively. By moving beyond a transactional and process-driven relationship with suppliers, technology can help companies customize their approach and generate more value. Additionally, real-time data acquisition and analysis facilitated by technology can make it easier for suppliers to adopt new practices by offering different engagement types tailored to their level of maturity.
Innovative companies are leading the way toward a sustainable future. By making the right investments in technology and process changes, these companies are gaining an advantage in the sustainability race. They are also giving a voice to sustainability teams in traditionally operational spaces, which raises the sustainability agenda a step further than the conventional compliance, reporting, and marketing status quo. Technology can help companies address the challenges they face in managing sustainability by providing visibility into the supply chain, reducing environmental and social issues, and even helping with supplier engagement and collaboration. Moreover, investing in technology not only favors sustainability but also creates overall value for the company. Investing in sustainability and technology is a win-win strategy for companies and the environment.
