Decarbonising the supply chain: Role of digital technologies

A series of small steps that can incrementally reduce carbon emissions is a prudent way to  commence your journey towards decarbonisation 

The need to decarbonise your supply chain has eventually escalated to a now or never situation with the ever-increasing climate changes. Managers have an ethical and legitimate responsibility of helping their business firms to initiate decarbonising at the earliest to make the operations sustainable and allow the ecosystems to coexist

Given the current catastrophic situations the world is experiencing with climate change, it is imperative to pay attention to decarbonising the supply chains of business firms in different industry sectors. Delaying or neglecting the opportunity to decarbonise them now will lead to irreversible consequences. However, the majority expect someone else to begin the process of decarbonisation on behalf of them or they are not clear where to start and at which level. This article aims at sharing practical insights and easy to follow guidelines useful to managers and entrepreneurs to start decarbonising their supply chains at firm or industry level using digital technologies. 

Decarbonising 

Decarbonising refers to the removal or reduction of carbon dioxide emissions to the environment. It can also bring down the operational cost of a business firm while increasing its attractiveness to investors. Products of business firms having green practices have a better appeal from customers. Globally renowned sports gear manufacturer Adidas uses ocean plastics in some of their products which are sold at premium prices. 

Instead of expecting the state authorities to drive this, business firms should take the responsibility of decarbonising initiatives. Decarbonising can happen through internal activities such as products and process improvements to record low carbon footprints, switching to renewable fuels, energy conservation, improved layout to optimise operations and waste reduction. Similarly, you can influence the other players in your supply chain significantly by recognising the decarbonising efforts of vendors. Similarly, the use of proper demand forecasting techniques and inventory management systems can have a big impact on decarbonisation. Reduction of inventories including buffer stocks with better demand forecasting is an example. 

Despite many things happening at policy level in dedicated global events towards decarbonisation, the ground level implementation by business firms remains at a very low level. The author expects at least some managers and entrepreneurs who will read this article will take serious note of this situation and take the first steps to start the process of decarbonisation. 

Supply chain as a part of the value chain

The value chain of an industry begins with the initial inputs such as the basic ingredients for raw material suppliers and it ends with the end users of products. There are multiple individuals or firms in the value chain who keep on adding value to their inputs with the objective of offering a value-added output to make the operation economically viable. 

Reducing the lead time (refers to the total time taken from ordering to receipt of goods) by sourcing from nearby suppliers appropriately is an easy way to start the process of decarbonising your supply chain. A series of small steps that can incrementally reduce carbon emissions is a prudent way to commence your journey towards decarbonisation. Optimising your re-order quantity that will reduce the unnecessary transport cost is another simple step towards decarbonisation. 

Digital technologies 

The umbrella term, digital technologies cover devices such as computers, mobile phones, software, internet, VR & AR, etc. The user friendliness of these technologies, availability, scalability and reliability tends people and organisations to innovate using them looking for solutions to problems they face in various frontiers. For example, RFID technology can reduce supply chain inefficiencies, eliminate unnecessary transportation, and improve logistics thereby minimising carbon emissions. Being the biggest university in the country with over 25,000 students, SLIIT has a strict policy of restricting use of paper by digitalising processes which again is a major decarbonisation initiative. 

Despite the efforts by business firms towards decarbonisation, there are cases being reported in respect of green washing that refers to fake green initiatives for undue gains. We can use digital technologies both software systems such as ERP or CRM and hardware such as sensors, trackers, etc. to make the green initiatives traceable and transparent to stakeholders. Many firms attempt to use blockchain powered ERP where a distributed digital ledger is used to record transactions securely and make them visible to everyone in the value chain. 

Sourcing strategies 

From whom you source your raw materials and other inputs can also play a role in the decarbonisation of your operations. Green purchasing is becoming popular where business firms pay attention to how the suppliers carry out their operations. We may expect a similar trend towards whom you are selling your products with the term Green Selling. The General Secretary of the United Nations recently requested globally renowned advertising firms not to accommodate promotional campaigns for energy companies who do not care about the environment. Despite the feasibility of such actions this statement sends a message to all business firms in all walks of life globally to be mindful about the customers. 

Circular manufacturing 

Local apparel giant, MAS recently announced a collaboration with a US company to buy recycled polyester which is different from the currently used recycled plastic-based polyester. In this case, they use textile to textile recycling instead of repurposed plastic materials. This is obviously a great initiative towards decarbonisation. Managers reading this article may think about their own industry verticals as to how the concepts and practices in circular economies and circular manufacturing can be applied in their own operations. Digital technologies can certainly facilitate. A distributed ledger in a long value chain can make it visible for each player the eco friendliness of the products and processes with analytics. 

Reverse logistics 

Excessive product returns are a cost to a business firm and there is a significant transportation cost. Therefore, reducing the returns is an easy step towards decarbonising your operation. Devising methods to prevent the release of inferior quality products to the market using digital technologies can be a very exciting project for your R&D team or any tech savvy group of employees. 

Avoiding product recalls can significantly reduce carbon emissions, for which a business firm should have proper quality assurance systems from design to development and delivery. Sensor based digital technologies can easily handle this. One of the biggest challenges some business firms face in reverse logistics is traceability of the products that have reached the end-of-life status where the manufacturer has a moral or legal responsibility of properly discarding them. EV batteries, CFL bulbs and many other products contain heavy metals will fall into this category. In case you handle such products, here is a great challenge for your R&D or innovation team to come up with a solution using digital technologies. Easy traceability itself can significantly contribute towards decarbonisation. Air tags to low cost IoT compatible with low power wireless technologies such as ZigBee readily available can help you start. 

Supply chain innovations 

No organisation can claim perfect products and processes as there is always room for improvement. Decarbonisation should be a mindset so that you start thinking about ways of reducing the carbon footprint from the product design stage itself. A good design can not only reduce the material consumption in production but also can save time, effort, space, packaging and transportation costs. Deploying techniques such as DIY or Do It Yourself through which the customer does the assembling of a product packaged as a semi knocked down item can significantly contribute to decarbonisation of the supply chain. Instructions shared with the end users digitally can save time, cost and energy. For software, internet security products and after sales services of many products, electronic delivery is another way to decarbonise your operations. 

A critical analysis of your supply chain can show you a multitude of opportunities to innovate your products and processes to begin the journey of decarbonisation. It should be noted that supply chain decarbonisation initiatives can easily be found in both manufacturing and service sectors. A bank manager who can mobilise deposits without visiting customers or the customers depositing money without going to the bank is a step towards decarbonising the supply chain of a bank. One can find an array of actions towards green banking powered by digital technologies by carefully scanning the financial intermediation activities of a bank. Similarly, a manager of a factory who attempts to optimise re-order quantity considering the logistics cost and energy cost of storing is an action towards decarbonisation. 

The future

The emergence of technologies such as block chain and digital twins will make it easy for business firms to decarbonise their supply chain operations collectively with the participation of every player in the value chain. Similarly, other Industry 5.0 technologies such as sensors, big data, AR and VR can be used in reviewing, redesigning and revamping processes of business firms as decarbonisation initiatives. A detailed virtual tour that can facilitate a prospective client to make the purchase decision without physically visiting your premises be it a hotel, hospital, airline or even a product such as an automobile is an example. Reduced number of visits can certainly lower the carbon footprint of the industry. Readers who are familiar with topics such as order penetration point will realise how early identification of a specific customer can lead to decarbonisation. 

Testing your decarbonisation strategies

Strategies you develop may or may not bring the desired outcomes once executed. Therefore, testing the strategy for its suitability and robustness prior to execution can save time, effort, resources and credibility. The R Hexagon introduced by the author in his strategy book ‘Rising in Crisis’ can be used to test your decarbonisation strategy before implementing same. R Hexagon suggests you to review a strategy in 6 areas namely Returns (what do you expect from the strategy, have you quantified), Response (what should you do to achieve the identified returns), Resources (do you have the required resources to implement the strategy including technology and competences), Reach (will you have easy access to the resources and markets), Relations (do you have the required connections and networking) and Risks (have you evaluated the risks in terms of market, technology, legal and reputation). It is always advisable to test a strategy before executing using a tool such as R Hexagon. 

Conclusion 

The need to decarbonise your supply chain has eventually escalated to a now or never situation with the ever-increasing climate changes. Managers have an ethical and legitimate responsibility of helping their business firms to initiate decarbonising at the earliest to make the operations sustainable and allow the ecosystems to coexist. This article attempted to demystify supply chain decarbonisation and make practitioners familiarise themselves with multiple opportunities available in using digital technologies to quick start the task at hand. Commencing the decarbonising process in your organisation will not cost you a substantial amount of money. As revealed through this short article getting rid of certain existing practices and adoption of some new practices may take you there as the first step. Readers who are keen on learning more about similar topics are invited to take part as listeners, presenters, and authors of the 3rd International Conference on Sustainable & Digital Business organised by the SLIIT Business School. www.icsdb.lk. 

(The writer is an ex-banker, a chartered logistics professional, certified marketer, member of the American Society of Mechanical Engineers, and a fellow of the British Computer Society, the Chartered Institute for IT. He has nearly four decades of experience in engineering, manufacturing, banking, and ICT sectors. Dr. Yapa has been teaching in postgraduate programs of over 20 local and international universities for 20+ years. He is currently a Senior Academic Fellow attached to SLIIT Business School and works as the Director of SLIIT Innovate. LinkedIn: Shanta Rajapaksha Yapa; email: [email protected].)