The Digital Supply Chain podcast

Sustainable Supply Chains - new report released: A Chat With Richard Howells

April 30, 2021 Tom Raftery / Richard Howells Season 1 Episode 126
The Digital Supply Chain podcast
Sustainable Supply Chains - new report released: A Chat With Richard Howells
Show Notes Transcript

SAP and Oxford Economics have released a report on sustainability in supply chains called "The Sustainable Supply Chain Paradox: Balancing the bottom line with the green line". The report drew on the responses of over 1,000 supply chain executives globally to a detailed survey on the topic, and the results were enlightening.

I invited my colleague Richard Howells (aka @HowellsRichard on Twitter) to come on the podcast to talk in depth about the report and its findings. Click Play to find out more!

We had an excellent conversation and, as always, I learned loads, I hope you do too...

If you have any comments/suggestions or questions for the podcast - feel free to leave me a voice message over on my SpeakPipe page or just send it to me as a direct message on Twitter/LinkedIn. Audio messages will get played (unless you specifically ask me not to).

To learn more about how Industry 4.0 technologies can help your organisation read the 2020 global research study 'The Power of change from Industry 4.0 in manufacturing' (https://www.sap.com/cmp/dg/industry4-manufacturing/index.html)

And if you want to know more about any of SAP's Digital Supply Chain solutions, head on over to www.sap.com/digitalsupplychain and if you liked this show, please don't forget to rate and/or review it. It makes a big difference to help new people discover it. Thanks.

And remember, stay healthy, stay safe, stay sane!

Richard Howells:

Executives are beginning to close the gap between goal setting and actually taking meaningful actions around sustainability. But still many struggle to make processes more sustainable across the supply chain. They lacked the visibility not only within their own supply chain but with the in their suppliers supply chain. And finally, they see an opportunity for technology to be a great help in addressing several of these issues.

Tom Raftery:

Good morning, good afternoon or good evening were everywhere in the world. This is the digital supply chain podcast, the number one podcast focusing on the digitization of supply chain. And I'm your host, global vice president of SAP. Tom Raftery. Hi, everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP and with me on the show today I have my special guests Richard Richard, welcome back. For people who don't know you would you like to introduce yourself?

Richard Howells:

Thanks, Tom. Great to be back. My name is Richard Howells, and I focus a lot on thought leadership and awareness around our digital Supply Chain Solutions.

Tom Raftery:

Okay, and we're today, Friday, the 30th of April 2020. We are announcing a new white paper. Do you want to tell me a little bit about Richard?

Richard Howells:

Sure, we we worked with Oxford economics on a research project with 1000 different supply chain executives across the globe. So we've had an equal span of of respondents across regions and across many different industries, all around the concept of sustainable supply chains. And it has the fancy title of the sustainable supply chain paradox balancing the bottom line with the green line. Because when we're talking about sustainability, at the moment, at least it appears like it's all about balancing and trade offs. But balancing profitability versus sustainability. And I believe that we shouldn't have to do that in the in the medium to long term because a sustainable supply chain should be a profitable supply chain and vice versa.

Tom Raftery:

Yeah, cuz I remember having this conversation a couple of times on this podcast with people. And my assertion is that because one of the key things that sustainability does is it gets rid of waste, sustainable products should be cheaper and sustainable supply chains should be more profitable.

Richard Howells:

You're absolutely right. I mean, if you're trying if your goal is to reduce carbon emissions in logistics, for example, which means you reduce the number of miles you drive, you shouldn't be saving money, or using recycled material or byproducts and co products, or end of life products back into the process. Again, you should it's reducing the amount of raw materials you should be required, correct, as long as you design those products to take advantage of those bike products, co products and and repurposed products.

Tom Raftery:

Superb, superb. And can you tell me some of the key findings of this white paper?

Richard Howells:

Sure, well, first of all, I mean, when we talk about sustainability, I mean, sustainability has been a major focus for several years. It took a backseat during the pandemic, but it's front and center now in companies purposes, goals and mission admissions. And what we found the key findings, and there were four key findings, as in the executive overview of the research, is that executives are beginning to close the gap between goal setting and actually taking meaningful actions around sustainability. But still, many struggle to make processes more sustainable across the supply chain. They lack the visibility not only within their own supply chain, but with the in their suppliers supply chain. And finally, they see an opportunity for technology to be a great help in addressing several of these issues.

Tom Raftery:

Okay, okay. So basically, the the the will is there, but possibly the means not so much.

Richard Howells:

That's That's exactly right. Everyone said, if you go to somebody's corporate website, and you look for the company's purpose, it usually involves sustainability. It could be reducing carbon emissions, it could be being a key player in the circular economy. But sustainability is always top of mind. But but having the tools and processes in place is obviously a challenge.

Tom Raftery:

Yeah, as you know, I run this other podcast, the climate 21 podcast. And just a couple of weeks ago, I had david Harrison and David is the head of sustainable business for the London Stock Exchange, and he was explaining how investors are increasingly looking at the ESG reporting of companies and using that basing that basing their investment decisions on that. And then he was saying he was explaining how the porting from companies is a lot more important than companies might actually realize. Because it is being analyzed by the investment community, and therefore, company's access to capital. And the cost of that capital can very often be based on their sustainability reporting. And so suddenly, this means that these requirements and the desire to become sustainable is not just for, you know, trying to attract employees and retain employees trying to attract and keep customers, but also now trying to invest in in attracting investment into the company and trying to keep the share price of the company at a particular level. So, I can see why it's become important. And therefore, the tools that apparently are not there are not being found by these 1000 sustainability, or sorry, these 1000 supply chain executives, you know, they're they're not being found, or they're not there are there's some lack there somewhere.

Richard Howells:

Yeah, I mean, that's, that's, that's, you got, I couldn't have said it better. I mean, it's all it's all around, having good practices in place to keep customers employees and shareholders happy.

Tom Raftery:

Yeah, yeah. Yeah. And

Richard Howells:

government regulations and industry reg, regular, regular regulatory bodies.

Tom Raftery:

Yeah, I was gonna say, Are there other things driving sustainability initiatives? But yeah, it's... go on...

Richard Howells:

We asked, we asked, What are the tops, top drivers for driving sustainability and 43% put product and service innovation into their top three. And they were closely followed by the fact of customer demand. So we as consumers are demanding sustainability and that 41% put that in their top three. And then the third one, again, not far behind, again, was was the increased industry and governmental regulations.

Tom Raftery:

Alright, good. So that the awareness of that is increasing as well. That's that's, that's interesting. So it is it's essentially what we said and what were the what were the key findings and benefits then coming from this?

Richard Howells:

Well, if you think about it, it's all about I do a little bit of reading on this topic, and there was a guy called john Elkington in 1994, we talked about the triple bottom line of managing the profit the people in the planet, the profit would be the traditional economic measure of corporate corporate profit, the people is all around social responsibility, and, and how you treat all your businesses run. And planet was all around the environmental aspects of how you were treating the planet as part of your, of your sustainability initiatives. So the reality is that that was written 25 years ago. And since then the world's population has increased. We're seeing climate change, there's been environmental pollution, we're seeing a growth in a growth in the population, but a reduction in the availability of natural resources. So those three P's have become critical. I mean, the people and planet of puts up sustainability front and center. And your previous point, if you think about the third p profit, I mean, you've got to be to be sustainable as a business and viable as a business, you have to make a profit. So all three P's are now as as valuable or more valuable than ever. And as a result, at SAP, we're focusing on three different areas around climate action. So embedding businesses are enabling businesses to innovate and grow through efficient emissions management or compliance regulations, the circular economy of working with companies to work out how to leverage those byproducts and co products and, and consider end of life of products in the design process. And finally, equality for all to make sure that everyone is fairly treated, fairly paid, and without discrimination and compensated equitable, equitable,

Tom Raftery:

very good. How, how do we within SAP? How do we define sustainable supply chains,

Richard Howells:

we really talk about those three things. It's around the environmental, the social, and the economics. So we're talking about supply chains from design to operate all the ways. So we're considering supply chains all the way through the lifecycle of a product, all the way through the lifecycle of the things that we manufacture the things that our customers manufacture, that they sell them which they deliver to their customers. So it really is and it all starts with designing sustainable products, designing products that are biodegradable, that can be reused at the end of their life, minimizing the packaging material that goes into those products, for example. And then all the way through the the life of that product from manufacturing that product with minimal emissions to delivering that product leveraging sustainable for transportation, and having planning processes in place to minimize the amount of miles driven to a point we talked about earlier, but also how they operate once they're at a customer's location, how they perform, and then ultimately, at the end of life, how they're recycled or re processed or repurposed? Yeah,

Tom Raftery:

I mean, I think that last bit is is hugely important and possibly not considered well enough in the initial design of products, that recycling and reuse. I had the architect and designer, Bill McDonough on the climate 21 podcast this week. And he's the author of the book cradle to cradle. And you know, that's very much what he's talking about. He's kind of like the father of the circular economy. And this idea of designing goods so that they add, they're the end of the, what he calls a useful period, not end of life, but the end of their useful period can then be taken and become, as he puts it, food for something else. So does that become part of a new, useful period for some other device?

Richard Howells:

I mean, I'm seeing adverts on the TV at the moment in the US were with about plastic bottles. And all of the drinks manufacturers are on the same advert which you would never see. You'd never see Coca Cola and Pepsi on the same advert. Talking about recently leveraging or designing recyclable bottles that get get fed back into the manufacturing process to generate pellets to make recyclable bottles. And it's it's just it just shows that, that when companies who are compared direct competitors to the here, they're all getting on the same on the same platform that it's it's a serious topic. Yeah,

Tom Raftery:

yeah. And the issue of plastics has gotten a lot of attention rate lately, particularly, plastics entering the sea, and it's affecting marine life. It's a huge, huge problem.

Richard Howells:

Yes, indeed. And I think everyone can, as individuals, we can do things about it, but certainly as companies and businesses, we can.

Tom Raftery:

Yeah, even even more so even more. So. What, what so we've seen that the 1000 executives that we talked to for this, you know, have the will, we've seen that they don't so much have the way, what are some of the challenges that are facing them.

Richard Howells:

Some of the statistics that we we found that it showed that they have sustainability as a goal, as we said earlier, but they haven't got taken the concrete step steps to realize them. And just to throw out some of the numbers 65% have stated that they have a clear purpose around sustainability. And the further 23% said that they were going to have a purpose within the next company wide purpose in the next three years, that's 88% in total. But if you look at some of the numbers of how they they're getting there, they're a long way from meeting those goals. For example, only half today can say that they've reduced their overall shipping miles. And that's a clear example of how to be more sustainable and logistics processes. And then over two thirds said that they would reduce the amount of business they would do with a supplier if it showed that they had unsustainable practices, or unethical practices. Yeah, they don't have the information to make that decision, right, only a very small percentage of the visibility into their, their multi tiered supply chain processes. And it's not just one tear down the supply chain. The numbers are bad enough one tear down. But if you go another tier again, it's almost minuscule that so for example, you could be a clothing manufacturer who subcontracted to a third party. But they if they've subcontracted yet again to somebody else, you don't have that visibility, or most companies don't have the visibility to see how those practice at their practices are working. And the reality is if if an issue is raised about a product that you sell, it's your brand that gets damaged, your reputation. patient gets jammed, damaged, your share price that gets damaged, not the company two or three tears down the supply chain who actually made that product for you.

Tom Raftery:

Yeah, yeah. I mean, how do we fix that?

Richard Howells:

visibility? I mean, I've been on I've been on this podcast a few times. And the answer is usually it's having more information at the right time to make the decisions, having visibility of your suppliers and your suppliers, suppliers. Having visibility of your contract manufacturer is having visibility of your logistics processes so you so that you can track the miles that have been driven, whether it's you or a third party logistics provider doing it. So it then ties into the business network, having a business network where you can collaborate and share information across that network. To drive sustainable and enforce sustainability initiatives were appropriate.

Tom Raftery:

Then the hard question becomes how do you get that visibility?

Richard Howells:

It really is down to technology, I mean, having the the, the tools in place to capture that information, you then start talking about things like the Internet of Things and and capturing real time information from devices, or trucks, or having the visibility of sharing and collaborating through the network. Information about how the manufacturing is going in a particular site, which suppliers that your manufacturers are using. And ultimately, which suppliers they're using. And sharing that information and collaborating. Because it's a, I would say sustainability is a team sport when it comes when you're talking across your business network. Because every step has to be sustainable, and proven to be sustainable.

Tom Raftery:

Yeah. And I mean, if if it is, if you are part of a business network, then this information sharing becomes easier. But I mean, there's been talk about business networks for a long time. And, you know, to a large extent they haven't, they haven't taken off as much as their potential I would say they should have done.

Richard Howells:

But I would say the part of that problem is that there isn't a problem with having a network, there's lots of networks, that's the problem. You may have a network for your logistics processes, you might have a network for your supplier collaboration, you may have a different network to do with contract manufacturers. And then being able to pull all that data together into one unified network is, is the Nirvana, it's the it's the goal that we at SAP are striving towards, with our business network strategy, and thus having the information in one central place where you can you can share, collaborate and improve. Okay,

Tom Raftery:

okay. So, Richard, you mentioned the whole concept of design to operate earlier? h w, you know, are there s ecific aspects of that, that a e that are, you know, capable o helping here?

Richard Howells:

Sure, I mean, when we talk about sustainability and sustainable supply chains, where we're talking about everything from raw materials, sourcing, to last mile to logistics, and even to the product usage, returns and recycling processes. So if I walk through the different steps in the process, when we're talking about the design step, the r&d, I think we said a little earlier, it, you have to make sure that the products that you're designing and the packaging that you're using is biodegradable, or environmentally sustainable. And you can do that, and having the ability to capture that information. And know that information during the design process, to calculate the environmental costs of products through the lifecycle, or simulating the manufacturing impact on the environment of this product, if we will go into manufacture it, and always listening to the customer, the voice of the customer to get to take into account their feedback and what their sustainability drivers are. We talk about planning processes, because we're always trying to reduce emissions and ethically satisfy and source materials. And you can build that into your planning logic, you can improve demand accuracy to to reduce inventory obsolescence, so that you if you if your demand is correct, you're not making products and inventory that isn't required and thus going to waste. You can in the planning process, you can predict end of life scenarios to support that circular economy on and have simulated simulation capabilities to determine the amount of co2 you will generate attempt to manufacture this quantity and to distribute this quantity to the locations that are required. So having a co2 footprint of the plan through procurement, production and transportation. And then always being able to report your actual usage, your actual production, your actual transportation, versus your planned to see how you performed against that plan. But when you manufacture, I mean, you're always trying to do that with minimal waste, and reduce the impact on the environment. So be able to capture and monitor energy usage as a function of your production volumes or measuring the co2 emissions to ensure that you satisfy those compliance chemist commitments, and also ensuring the safety of your manufacturing workforce throughout the throughout the production process. logistics. We mentioned this a little earlier, but it's all about reducing the co2 emissions and looking at different ways of transportation of trant or types of transportation, maybe electric vehicles in inner cities or for last mile delivery tasks. And leveraging planning logic within logistics so that when you do have a long trip, you at least optimize that trip. You you optimize the route to minimize the miles and thus reduce the carbon footprint and you make sure that the truck is loaded efficiently and effectively so that you can maximum It is that that space to, to make the most of it during those months. And finally, in the operations phase, making sure that the products that you manufacture the products you use are energy efficient, and they're safe for the environment and the workforce, that you can that that you can perform the maintenance, to extend the life of an asset, to maximize its usefulness and extend its usefulness. And again, at all times, ensuring the safety of that equipment, the safety of that asset, and the safety of the people using that asset. So all the way across the supply chain from design, through to decommission, you're taking into account sustainability, sustainability can't be an afterthought. It's got to be part of those processes.

Tom Raftery:

Very good, very good. coming towards the end of the podcast. Now, if we scroll kind of to the end of the report, what were the major recommendations that the report laid out for people?

Richard Howells:

The report, as I said, it's, it spoke to 1000s of people, and it came out with the following findings. First of all, you need to create your long term strategy for sustainability, to drive sustainable change over time, you need to have plans in place to source ethically sourced materials, to have manufacturing processes that minimize that waste that having the tools in place to do that. And then optimize the delivery process of making sure that as I said a little earlier, reduce the miles and reduce the carbon footprint. But it's really determining where within those processes, you can see the the low hanging fruit. What we seen, the survey showed that the planning and design had made the most progress in sustainability initiatives that manufacturing is where the low with the biggest benefit is seeing both benefit that has happened but also future benefit. That logistics is where the low hanging fruit is because that's where you can actually tangibly say, if I reduce the number of miles I reduce the carbon footprint if I use a better forms of, of power in vehicles that I reduce the carbon footprint. And the operation step is key from a circular economy perspective perspective, as well as in the design phase, because you've got to be able to reuse that material or product or recycle it or repurpose it at the end of life rather than it being in a landfill for 400 years. Yeah,

Tom Raftery:

yeah. So Richard, winding up. Now, is there any question I've not asked you that you kind of wish I had, or any topic that we've not addressed that you think it's important for people to think about?

Richard Howells:

Well, the one thing that I would mention is, in the last two days, we had our first ever SAP sustainability summit. And you can still access the replays of those sessions online, and I'm sure we can share the link with people. Yep. And at Sapphire. In June, we will have a whole track dedicated to sustainable supply chains. And I know that you and I are both on that agenda. So I would encourage people to go and learn more at Sapphire.

Tom Raftery:

Pretty good. And if people want to know more about yourself our this report or any of the topics we talked about today, Richard, where would you have me direct them?

Richard Howells:

Okay, so my LinkedIn page is a good place to go. I have a Twitter handle @Ho ellsRichard and if you search f r Richard Howells forbes, you' l actually find some articles be ng published in the next few da s around this report and sustain bility in general and supply hains in general that I've w itten. Okay,

Tom Raftery:

Okay, and we have link to this rep

Richard Howells:

Absol tely. Yes, I can. I can provi e the link for your viewe s or listeners that you can p st.

Tom Raftery:

Super, I'll inclu e that in the show notes a well. Great, Richard, that s been fantastic. Thanks so m ch for coming on the podcast

Richard Howells:

Thank you, Tom. My pleasure.

Tom Raftery:

Okay, we've come to the end of the show. Thanks, everyone for listening. If you'd like to know more about digital supply chains, head on over to sa p.com slash digital supply chain or, or simply drop me an email to Tom Raftery at SAP calm. If you'd like to show, please don't forget to subscribe to it and your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time.