It is now generally accepted that human activity is driving climate change and putting pressure on the natural world. This is exacerbated by a growing global population and a predominant global, industrial economy based on consumerism and continuous economic growth. Now is the time to act. As global leaders commit to limiting temperature increases and achieving net zero carbon emissions – generally on timescales that span decades – many business leaders and citizens are calling for more immediate measures. So, what can organizations do to drive tangible action to reduce carbon emissions?
Understanding the challenges
For most businesses, supply chain operations are major contributors to scope 1 emissions (direct controllable activity including manufacturing and distribution activities) and scope 3 emissions (purchased goods and services which includes raw materials and outsourced supply chain operations). All of these can be influenced and changed with focused action. At HCLTech, our approach focuses on sustainability solutions that provide insight and drive action. Before we explore some tangible solutions to help organizations become more sustainable, let's look at the three main parts of the problem:
- Sustainably sourcing external goods and services addressing scope 3 emissions
- Supply chain operations that are part of scope 1 emissions within the direct control of the business
- Consumer distribution, a part of either scope 1 or 3 depending on the business model, but influenceable by the business via consumer demand fulfilment.
Sustainable Sourcing with Ariba and EcoVadis
To incorporate sustainability criteria into sourcing criteria when running sourcing events, we have developed integration between Ariba Sourcing and EcoVadis (a leading provider of ESG audit services and ratings) using BTP and APIs provided by EcoVadis. This integration enables organizations to specify specific criteria around risk, sustainability ratings, and other ESG criteria. For vendors not registered with EcoVadis, we have automated the process that invites them to sign-up and be audited.
Prioritizing ESG ratings, and selection criteria alongside the traditional criteria of business risk, commercial, and quality, will encourage organizations to prioritize their ESG agendas to remain competitive. A dashboard developed in SAP Analytics Cloud provides a profile of the complete supplier base in terms of the EcoVadis ratings and can be used to prioritize sourcing strategies.
Sustainable Supply Chain Operations
The key to driving a more sustainable supply chain is to gather data on consumption, effluent, and any other attributes that indicate contribution to emissions. Our approach is to use IoT sensors such as power meters to monitor actual usage and consumption to provide data-driven insights. This is provided using HCLTech’s NIO platform for integrating sensors and collating data. The collated data is integrated into SAP and can be confirmed against batches of materials produced or maintenance orders for specific equipment. Doing so builds a bottom-up picture of the carbon footprint of specific batches of products manufactured or distributed using specific equipment.
Rolling out this approach across all operations is a major commitment. However, we believe that businesses can identify the processes with the highest potential environmental impact and start with those. The scope can be rolled out more broadly across more activities and equipment, adding more sensors and measurement mechanisms and establishing a platform for continuous monitoring and improvement.
Sustainable Customer Distribution
The modern trend for many consumers is ultimate flexibility, short-term availability, and next-day delivery. However, many consumers are becoming more environmentally conscious when ordering products. Our approach is to offer customers more environmentally friendly options at the online point of purchase. We have developed a solution embedded in our business-to-consumer SAP Commerce Cloud template. Key features included in the template are:
- Displaying product ESG information: In many industries and markets, product power consumption and other environmental data are already mandatory. Users can be shown the carbon footprint of the product's manufacturing, using data collected through the sustainable supply chain solution mentioned above, to encourage more sustainable choices. As consumer sentiment shifts towards sustainability, people will be more likely to make eco-conscious decisions.
- Flexible delivery timescale to enable optimization of the delivery: Allowing a wider window for delivery enables shipping companies to optimize vehicle routing to minimize emissions. While not fully in the control of the main selling entity, a wider adoption of this practice will enable final-mile logistics companies to optimize deliveries while those who provide direct-to-customer shipping could benefit immediately.
- Returning old products: Encouraging the recycling of old products to reclaim materials and parts is a key part of the circular economy. Delivery options can include return shipping of an old product being replaced in the same packaging used to deliver the new one. Many organizations charge for this additional service.
- Carbon offset purchasing: Carbon offsetting provides consumers with the opportunity to pay additional money to buy carbon offsets equivalent to the carbon footprint of the products ordered. This is an established practice in some industries such as travel but can be applied more widely.
Building an economy based on sustainable business is critical and a shared global responsibility. It's never too late to make changes. The sooner and greater the change, the better for the planet's health. As we have seen, some solutions can be deployed that will help drive businesses to a more sustainable future, starting today.