As supply chain disruptions continue to affect industries around the world, environmental, social and governance (ESG) concerns remain a business priority. Producers and consumers are urged to consider whether their actions align with the sustainable principles of a circular economy – a model of production and consumption based on sharing, reusing, repairing, refurbishing and recycling existing materials for as long as possible. Extend the life-cycle of products and minimize waste.
Currently, only 8.6% of the world’s economy is successfully circular and there are still 91 billion tons of materials that are wasted every year. Research conducted by SAP and the World Economic Forum revealed that 4.9 billion people (61% of the world’s population) lack access to waste management or recycling infrastructure. It is therefore more critical than ever for businesses to put sustainability at the top of their agenda.
The operational significance of a circular supply chain
With sustainability a top priority, net-zero practices must become central to companies’ end-to-end operations. From design to consumption, companies should strive for zero emissions, zero waste and zero inequality ESG goals at every stage of the supply chain.
Speaking at BizClik’s Sustainability Live event earlier this year, SAP’s Global Head of Circular Economy Solutions, Stephen Jamieson, explained how the company has been helping businesses achieve their sustainability goals for the past 50 years. SAP believes in the importance of a circular model built on reusability and recyclability in the design, sourcing, marketing, production and delivery of goods, if the supply chain is truly sustainable.
“We use more resources than the planet can sustainably provide, and half of the total global emissions come from the way we use materials,” Jamieson told his live and virtual audience. “Shifting to a circular economy means a change in how we design not only products and new materials to eliminate waste, but also new policies, infrastructure and business ecosystems.”
Technological innovations are vital for a successful circular economy
With globalization, increased product complexity and heightened consumer demands, businesses continue to face barriers in the shift to a circular economy. Jamieson explained that the first step is to collect and use data to understand the environmental impact of decisions made along the supply chain. SAP focuses on three key areas for this:
- Eliminating waste to prevent environmental destruction.
- Circulating materials in the supply chain for as long as possible.
- Driving regenerative business through end-to-end operational insight, interweaving consumer decisions throughout.
To achieve these goals, businesses must engage with technological innovations that provide a fuller picture of their impact on the supply chain.
Sensors and ever-improving internet connectivity allow companies to collect data at every checkpoint, from the status of raw materials to the location of finished goods. Similarly, machine learning and artificial intelligence (AI) allow companies to collect advanced data that promotes efficiency along the supply chain – whether it’s changing transportation routes to speed up delivery or exchanging single-use materials in favor of reusable ones.
“To deliver a circular economy, we first need to measure it,” says Jamieson. “We need to understand the recycled content in materials and products. We need to understand whether things are reusable, compostable, whether they are from fossil-based sources, and what the CO2 content is.
Design and packaging complexities continue to be a problem
A study by Capgemini revealed that 41% of companies still have no plans to implement sustainable product design. Although many businesses have already taken strides in reducing their carbon emissions at all stages of the supply chain, many companies continue to ignore the early stages of product design and the later stages of end-of-life management.
Although the sustainable design of products and packaging can be expensive at first, the transition is vital if companies are to reap the benefits of a circular economy. Once sustainable design was fully implemented, 73% of companies experienced increased revenue growth along with a 67% reduction in carbon emissions.
Jamieson also discussed the complexities underlying sustainable packaging, as well as the need for companies to collect and interpret data to fully understand their environmental impact.
“Take a chocolate box. You have the tray with the chocolate that sits in the primary packaging and the secondary packaging around that. Then there’s the tertiary packaging, used for transportation. Being able to understand what materials are used at what point in time in “Production is an unbelievably complex task, and the fact is that the necessary data is often in different systems,” he says.
“We want to solve the data problem to provide an opinion of the renewables in the packaging of the chocolate box. What is its recyclability? How compostable is it? What is the thickness? What is the weight? Once we understand such things, we can Begin to aggregate analytics on a global level and help sustainability managers understand how they are performing against commitments.
Circularity is not just a problem for large, international businesses; Small to medium-sized businesses also have a part to play. Although they may not have access to the same funding or technology as their larger rivals, Jamison says it’s important that SMEs focus on scalable principles first: “It’s all about embedding sustainable practices that can be scaled as you grow.”
Facing the challenge of complex sustainability regulations
As regulations around sustainability continue to evolve, SAP is helping companies make the most of its network-based solutions, like SAP Ariba and SAP Business Network for Logistics. These technology-led strategies aim to help businesses address key sustainability challenges – including the collection of data – and transition to sustainable design and packaging.
“As we move forward into 2023, it’s about innovating business-specific and industry-specific solutions that address the last mile, so we can help consumers play their part in delivering a waste-free future,” says Jamieson.
“We are also very selective in terms of the materials we focus on. At the moment, we have a real focus on plastics and packaging, but this will quickly expand into textiles, batteries, food, building materials and electronic components, as further Regulations come online and existing regulations change.