The topic of sustainability has been around for a long time. But the pandemic has given consumers much more time to reflect on their lifestyles and demand more transparency from supply chains. As a result, companies will need to accelerate their sustainability initiatives.
Digital applications such as Trase, a partnership between the Stockholm Environment Institute, Global Canopy and the European Forest Institute, together with high-profile partners such as the Université Catholique de Louvain in Belgium, are making a huge impact in highlighting environmental issues. Trase looks at data on supply chain transactions in commodity-producing regions such as Latin America and Southeast Asia and measures its impact on deforestation. This effort helps keep corporations around the world accountable for increasingly ambitious commitments to zero-deforestation supply chains. At the same time, consumers’ engagement in sustainability has been deepened by the crisis.
Sustainability has also become a key component of investment approaches. In fact, according to the World Resources Institute, during the pandemic, index funds that include firms with high ESG scores (essentially high sustainability scores) outperformed those in more traditional funds.
It comes as no surprise to me, therefore, that 80% of 320 of the world’s largest enterprises interviewed in Longitude’s Real-time intelligence and the future of supply chains report, commissioned by Orange Business, said they are investing in sustainable technologies. This includes new data collection technologies to provide better insight into sustainability metrics and managing and controlling factors such as energy usage.
Sustainability will enable enterprises to manage risk better
The pandemic has shown up the need to strengthen fragile supply chains, enabling countries as far as possible to benefit from their unique resources and capabilities. Many enterprises have hit bottlenecks with single supplier strategies highlighting the necessity to develop multiple alternatives and avoid over-reliance on certain regions. At the same time, enterprises are coming under increasing pressure from consumers, investors and regulators to exhibit their social and environmental credentials.
By putting supply-chain sustainability under the microscope, enterprises can better manage and mitigate risk. Technological innovation can both help solve environmental challenges and enhance supply chain efficiency at the same time. For example, IoT and advanced analytics can help identify opportunities to decrease environmental impacts across operations, such as re-routing trucks to reduce carbon footprints and measure water and energy usage. With its unique capabilities at recording, tracking and monitoring assets, Blockchain can not only solve logistical issues but can ensure provenance in supply chains. It can also help satisfy the growing consumer demand for ethical sourcing.
Digital and data are critical to resetting business for the new different
In 2020, revenues suffered. Businesses have taken a battering, and many will need to cut costs significantly wherever possible to get back to normality.
As we move into the new different, digitalization and data collection are becoming key enablers of cost reduction. They are also important foundation blocks for sustainability. In fact, of the multinationals we surveyed, 80% went as far as saying that they are investing in digital technologies to become more sustainable. Half of the respondents, for example, said they are investing in new data collection technologies to provide better insights into key sustainability metrics.
Enterprises, however, have some way to go in their data strategies. According to a recent Bain survey, less than 15% of executives said they were confident in their companies’ ability to consistently deliver traceability. Although they are harvesting data, they are finding it difficult to create value from it for smart decision making as well as monitoring sustainability initiatives. Much of this is down to unreliable data or lack of standardization.
This is where collaboration comes in. As Bain points out, enterprises will need to work together to overcome these hurdles by creating common standards, data models and platforms.
In the long run, sustainability goes beyond reporting pressure – it’s vital in generating competitive advantage. That’s why digitalization and sustainable innovation are fundamentally interlinked.
Digitalization is critical in re-inventing products and services and coming up with new ones where environmental, financial and social considerations are being made long term. Some 78% of respondents said that sustainability had become a primary factor in driving product and service innovation, which is also imperative to future competitiveness. At the same time, enterprises will need to collaborate and share data to better and faster achieve these goals.
Starting at the source
Sustainability is high on the boardroom agenda. Of the multinationals we surveyed, 65% said they are working to become more sustainable. This won’t happen overnight, however. The pandemic has left many enterprises struggling to keep the lights on. Yet it has shown them a path forward where ecology and economy can work hand in hand.
Frank is Managing Director of Benelux and leads enterprise activities across Belgium, the Netherlands and Luxembourg. He studied commercial economics and marketing in Utrecht and has over 20 years of business and technology leadership experience. Frank is the proud father of two sons and, in his free time, he enjoys being with his family and friends, sailing, playing tennis, golfing and experiencing new sights.