The Digital Supply Chain podcast

Building a Sustainable Supply Chain For The High Tech Industry - A Chat With Joe Mulligan

September 15, 2021 Tom Raftery / Joe Mulligan Season 1 Episode 160
The Digital Supply Chain podcast
Building a Sustainable Supply Chain For The High Tech Industry - A Chat With Joe Mulligan
Show Notes Transcript

We (in SAP) are running a webinar on September 22nd titled Building a Sustainable Supply Chain for the High Tech Industry. The idea of this webinar is to show how you can optimize both your shareholder return and your design-to-operate processes for sustainability.

Given that the subject is both climate, and supply chain-related, I felt this made it an ideal episode to publish both on this podcast, and on my Digital Supply Chain podcast.

I invited Joe Mulligan, the webinar host to come on the podcast and give us a preview of the webinar's content and learn how organisations can reduce emissions while increasing profitability. If you want to register to join the webinar head on over to the registration page (even after the 22nd as the recording will remain online after the webinar has taken place).

This was a truly fascinating episode of the podcast 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).

If you want to learn more about how to juggle sustainability and efficiency mandates while recovering from pandemic-induced disruptions, meeting growth targets, and preparing for an uncertain future, check out our Oxford Economics research report here.

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! 

Joe Mulligan:

I'm really happy. I'm one of several speakers. I've got some brilliant people coming on to the webinar to support me. And we have a starting plan of how do you actually tackle this and make a ton of money and be regulatory compliant and be a thought leader in your industry.

Tom Raftery:

Good morning, good afternoon, or good evening wherever you are 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 at SAP. Tom Raftery. Hi, everyone. Welcome to the first joint podcast of the digital supply chain and climate 21 podcasts. I run both podcasts if you are used to listening to the digital supply chain podcast. Welcome to the climate 21 podcast. And if you're used to listening to the climate 21 podcast, welcome to the digital supply chain podcast. So you'll see why I'm publishing this as a joint podcast shortly. My name is Tom Raftery with SAP and Whitney on the podcast. Today, I have my special guest, Joe. Joe, would you like to introduce yourself?

Joe Mulligan:

Tom, first of all, thanks for having me. Great to be on your podcast and listening to it. I'm Joe Mulligan, digital supply chain specialist with SAP in the West Coast and focusing on supply chain and sustainability. Thanks for having me. Sure.

Tom Raftery:

Now, can you explain to people who are listening? Why this is a joint climate and supply chain podcast?

Joe Mulligan:

Yeah, there's a great intersection between supply chain and climate. And a lot of what is done in supply chain is about manufacturing products, designing products and getting them out to market. So the overlap is just enormous Tom.

Tom Raftery:

In fact, I spoke to Ken pucker recently, he's the former CEO of Timberland. And he was saying that back in the early 2000s, when they were just starting to measure and report their emissions. So they were one of the very first companies to do it. He said that they were dropping their emissions 15% per year, but they could only report on their scope one and scope two emissions, there was no way for them to calculate their scope three emissions, but they figured their scope three emissions was about 95% of the emissions. So it, you know, that right there tells you the importance of supply chain in the climate in the whole climate story, correct?

Joe Mulligan:

Yeah, McCain? Well, to that point, McKenzie just came out with a note that, you know, you go after scope, one, you know, creating carbon and, and scope to, you know, the support to create it. It's only half McKinsey's know, you know, his estimate of approximately half and a lot of it's wrapped up in the products that we use that we love every day, you know, the laptops, I'm using the phones, and the chemicals that go in and the manufacturing, the transport the logistics. And so yeah, ignoring that, Tom, he just can't You can't do it.

Tom Raftery:

Yeah. So talk to me about some of the issues that are out there for organizations who want to get into this kind of area.

Joe Mulligan:

Yeah, so a great question, Tom. You know, it's a it's a topic in almost every meeting I get into now I cover, you know, supply chain, product lifecycle management, manufacturing, it comes up. And it's a, it's a shift from two years ago, two years ago, people that cared more passionately about it would bring it up. But now it's mainstream. The tops, all of my top customers have top level down initiatives from their shareholders and their CEOs, and are in like, what are you going to do about it? And I think, I think the big design Geist of the moment is people, it's they're so confused, Tom, there's sustainability is such a huge topic, that and then and then people are talking about plastics, and, you know, sustainable workforce, things. And the topic is just an, you know, equality in the workforce, and then emissions management, and people are just confused. And I think it's like they're, they're just stuck for what can I pause? How do I tackle this, this 800 pound? You know, Beast? That's the big topic. I see.

Tom Raftery:

And how do you tackle that? 800 pound beast?

Joe Mulligan:

Yeah, what that's actually the we have four main takeaways in the pot in the webinar that we have coming up. And the first one is you got to focus. Okay, so this, this, this webinar is focused specifically on high tech electronics account. And so

Tom Raftery:

before we go any further do it because I should have mentioned the webinar earlier on so we have a webinar coming up. It is What's the date of the webinar again, September 22, September, two Second, thank you. So for people who are interested, there'll be a link in the show notes to this webinar. And at this webinar, Joe, you're going to be talking and sorry, I interrupted you there go back to the four principles you're talking about.

Joe Mulligan:

Yeah. Well, so how do you how do you, how do you? How do you focus? How do you focus? So we're going to be presenting a, there's a great group called the sustainability accounting standards boards, says B, and we're going to be sharing SAS B's materiality map. SAS B is a group of professionals all around the world, from leading companies, and they've looked at 77 industries, including the high tech, you know, industry, and they have a material reality map that's out on their website that says, hey, here's the things that are materially important to you, as a financial person to consider the costs of carbon, and the impact on your organization, that materiality map, Tom, it's like a pirate's treasure map. So what are the top 10 or 12 items I should focus on? And we're actually taking that, that map and we're going to focus on just three of those 10 or so issues on our webcast?

Tom Raftery:

And what three are you focusing on?

Joe Mulligan:

The main one, emissions management, transportation, and supply chain, and product lifecycle follow the product. So track track your overall emissions of greenhouse gases, track track, how they go into your products, and, and, and the impact the chemical bomb, all the way through how it gets manufactured? All the way to how it gets retired. And then and then. And then supply chain, transportation and logistics, reverse logistics. Those are the three main focuses.

Tom Raftery:

And why those three?

Joe Mulligan:

Well, it's, it's, well, it's actually the second point. And so now, now I have 10 or 12 items from the materiality map, which ones don't go after. And I read something that was I just loved and it's the climate doesn't care what ton of carbon you take out of it, right? It's just, it's, it's a chemical, right? So at the end of the day, it's it's out there, you know, carbons, the biggest one methane, you know, very volatile, secondary one, that's actually very profitable. And so if I'm going to take a ton of carbon out, the climate doesn't care which tonne of carbon you take out. So McKinsey did a landmark study in 2011. And we're going to talk about that. And they came up with basically, how do you rank the amount of carbon you're going to take out? And how do you how do you look at the carbon projects that I can take out, and McKinsey calls it the marginal abatement cost curve. And so you're familiar with margin, right profitability go after the most profitable items first. And McKinsey across 10 Industries, basically come up with a ranking and said, here's the ones, here's the places you can take carbon out and make make money for your company. So the triple bottom line, let's let's let's abate carbon impact, and go after the most profitable projects first, which doesn't, you know, relieve of us going after the projects that will cost, you know, society, money, but let's just do it in a logical fashion. And I think that if you put those two together, here's the top areas as a high tech company I have to work on. And here's a methodology to rank them and go after the ones that that enable me to go out and profitably a beat carbon. That's a great start. That's just a great start. So,

Tom Raftery:

I mean, most people when they think of getting carbon out of their systems, you know, it sounds like something that's going to cost money. But you're saying that there are actually projects you could go after in your own organization, where you're reducing your emissions and increasing your profits in the same goal is there? Could you give a couple of examples of the kinds of things you're talking about?

Joe Mulligan:

Yeah, absolutely. Not, not in the high tech industry. I'm working on a super major oil and gas account. And they've been using the McKinsey marginal abatement cost curve for years, before we got engaged with them, trying to pursue on their own what the what the pursuits are. So a great a great example, in the oil and gas industry is planning for projects, there's a lot of construction going on, and improving, improving the profitability of construction projects. And the reuse. And doing the right the first time saves an enormous amount of material and energy use. energy use is an amazingly good proxy for carbon use, right? And so if you don't have good measurements of carbon, actually tracking the energy use that you're paying for, right? Quite a bit, you're getting that utility bill every month. And a lot of companies have pretty good Building Information Management Systems with that. So we that that's a great example. Another one is, you know, methane leaks leaks. So you've a methane leak in a pipeline. We have solutions that can track exactly where that leak is to the foot. Send a maintenance tech who's who's certified With the right part at the right time, the right party, get the methane leak stopped, save that valuable gas. So you can go sell it and take out a greenhouse gas as at times more volatile than carbon, for the missions, that that's like not pie in the sky. I'm not like recreating my products. This is a project Tom that like you could launch today and have immediate ROI really quickly and take out massive. So it's, it actually gets to the third thing is the power of and, and I'm stealing this from the bank of america CEO. And but it's it's used in a lot of areas. So I can run projects and any in oil and gas 40 McKenzie says 42% of the projects that they've identified that the current of the oil and gas industry needs to abate carbon 42% are profitable, leaving only 58% that are going to cost industry money. So let's start on the ones that are profitable. And yeah,

Tom Raftery:

so I mean, talk a little more about the power of and because for people who haven't come across the expression before, it might be a little confusing, can you, you know, delve a little deeper into that one.

Joe Mulligan:

Yeah, yeah. So, so Chevron, toxic Chairman worth talks about, I'm going to lower carbon emissions profitably. And then this marginal abatement cost curve talks about that bank of america CEO talks about how they can continue to grow capitalization of their their accounts and value to their shareholders, and at the same time, a beat the energies in the carbon emissions that they have. And it's not an either or. Right, you can absolutely pursue both of those, you know, simultaneously. And I think the trick is, how do you how do you focus? How do you rank the ones that are profitable, and let's get projects started, right around around doing both of those items. And then the the world's moving towards the concept of a triple bottom line, we've all measured profitability as the first bottom line. And what's coming is regulations around this, a number of companies have been doing this on their own without regulations. But it's widely expected the United Nations and the SEC and the United States, a lot of news in the Wall Street Journal, are looking for climate reporting and the material impact. So the second bottom line is the carbon impact. You mentioned, scope one, scope two, scope three, we'll talk about that briefly. And what those what those means in the in the webinar. And then the third bottom line, of course, is social. So create safe working environments, that and then do and manage the company, not just on pure profitability, but considering the impacts of of two and three in the power of and says, I'm a smart human being, you know, and I can manage multiple things in my head at one time, and I can do multiple things at the same time.

Tom Raftery:

You're better than me, then I'm, I can only do one thing at a time. So that's focus rank and the power of Anders. Three of the four principles. What was the fourth one?

Joe Mulligan:

The fourth one gets to, you know, the approach, and how do we go about doing this. And so we think we need to be pragmatic and have two approaches, top down, top down and bottoms up, alright, used in a lot of business in a lot of ways. So when it comes to climate, climate management, top down is aggregate reporting, typically approached with a business intelligence tool, a BI tool, and then, and that's required by regulators in the United States and Europe, there are 16 aggregates that get aggregated up for your greenhouse gas emissions for US and EU reporting. And that's a great start. But we also need to do bottoms up, we need to measure the systems for high tech electronics accounts, you need to measure the details of chemicals that go into your products, you need to know the chemical bomb of your products, need to know where they're manufactured, and the energy use and the carbon impact need to know the supply chain transportation lanes that you're taking, and be able to compare and run scenarios not just to do profitability, which is fantastic. And to be able to look at constraints and supply chain demands and transportation lanes, but but also run a scenario of Hey, what's the carbon impact? And let's just say on the profitability supply chain, that it's pretty close unprofitability you know, option one is slightly less expensive than option two, but but oftentimes, option two, the carbon impact is wildly higher. And then as an organization, you can make a decision that, hey, we're going to decide as an organization to to fulfill our commitment to our shareholders. That will we'll take option two for this plan. So that the so the BI aggregates are a great start. And but but SAP believes they actually wait You get to improvement is the details. And so you need applications with the details. And so what's the pragmatic approach to to these top issues? And how do we how do we merge the two without, you know, being crazy? Does that make sense?

Tom Raftery:

Yeah, no, absolutely. What I'm wondering, I guess, is for people who are listening, where to from here, I mean, obviously, where to from here is to attend the webinar on September 22, that we refer to, and I'm assuming this webinar will be recorded as well. So if somebody happens to be listening to this podcast on September 23, the link that we drop in the show notes will still be active, and they can watch it on demand for several months afterwards. But anyway, where where to from here for people once once they have tuned into the webinar, and, you know, seen in detail this with the slides and everything that we'll be presenting, what's their next step?

Joe Mulligan:

Yeah, well, we're going to our call to actions a 30 6090. Day approach, Tom. So 30 days, we can help our end what what the set of solutions are Tom, at the end of the day, you know, SAP, and our customers, we live in a world of mixed solutions. And so, you know, we're quite happy if if alternative solutions are found. And we're happy to guide clients to the solution. But let's take action. And I'm really excited to meet people who can have an outsize impact on their thing. So 30 6090 day action items, 30 days, go on the SAS B board, look at the materiality map, we're presenting it in the webinar, a pic of those eight or 10 topics that are highly material to your industry, and that your controller, your CFO are going to be talking to you about as a supply chain professional. And then pick, pick the areas you want to focus on. Take a meeting with us, we'll talk about how to rank those things with a marginal abatement cost curve, and set some priorities around it. And then set some projects in the Six Sigma world, right? you'd actually define a project, you know, define, measure, analyze, improve, control, and measure it. Let's measure these things for both profitability Tom and carbon abatement. And let's come up. And let's start with a 90 days let's start projects at companies. And we've got all the time in the world, Tom, to talk to clients that actually want to make a substantial material impact on carbon.

Tom Raftery:

Okay, and then, when you're going through that exercise and looking at the possible paths to take, I assume low hanging fruit is what you're looking for first low hanging fruit that's that that helps with profitability.

Joe Mulligan:

Exactly. Well, yes, absolutely. And why why not take those quick wins, and, but at the same time, we want to set up a framework, like a roadmap for the longer term. So so I need a sustainability dashboard of some type to manage regulatory reporting, to know you can't improve what you can't measure, right? Start the BI aggregate tops down, pick two or three projects, right, that are bottoms up that I'm going to get some detail on. And then so start projects right away, but have the big picture in mind, start to meet with executive stakeholders, right about what you're doing with these things. And then I had an unfortunate one of my head high technology accounts. Last week, Tom, told I was bringing sustainability in the conversation. And there were two groups from the customer on the call. And one of them was very interested in sustainability. The other one said, No, we don't really want to talk about it. We don't want to boil the ocean. That's like, that's an unfortunate, you know, metaphor to use in this conversation. So one of the things I'm suggesting is at least 20% of your RFPs going forward, starting today have to have sustainability in the use case, because supply chain, it's it's all it's dramatic. Like we talked about the start of this podcast, about half the greenhouse emissions come from products and their supply chain. And I think it's it's table stakes to have sustainability ease and that profitability first and bottom line. That's absolutely as part of the requirement.

Tom Raftery:

No, no, absolutely. Interestingly, I mean, you you referred a couple of times to regulations. And this is this is one of the things that I'm seeing that is going to change enormously in the next few years. The whole regulatory landscape, particularly here in Europe, potentially in North America, as well. And I say potentially because you have elections coming up next year. And so that could change a lot of things here in Europe, it's it's, it's already happened as in the European Commission has passed legislation making it mandatory for all 27 states to reduce emissions 55% by 2030, which is a incredibly ambitious goal, which means each individual state of the 27 will roll out their own rules to companies and individuals living in those countries on how to and setting aims for emissions reduction. So this is going to be huge, at least here in the EU and probably in lots of other gios as well, just in the next eight years, because it's only eight years to 2030. So this is the whole regulatory framework globally is going to change massively. And this is going to be hugely challenging. How should companies I mean, if you're, if you're a large company, you're probably dealing in multiple regions and geographies. So you'll have multiple regulatory frameworks to try and, you know, battle against our meat, or however we want to say it. That's got to be an enormous challenge for companies, how do they do with that?

Joe Mulligan:

autumn I, there's a huge mindset in the last two years, total shift, tectonic shift, used to be all the cost of regulations, and it's challenging for me, and it's gonna put me out of business. I don't hear that anymore. I don't hear that when I go to Houston, I don't hear that when I go to Ohio. I don't hear that here in California anymore. What I hear from the executives and the thought leaders is my company is going to be on the cutting edge. We want to do this pragmatically. And smartly. As a consequence, yeah, we need to do regulatory reporting, but we're not doing it to satisfy the regulators. We're doing this to satisfy our shareholders, we're doing this to satisfy ourselves as human beings, who understand that this is the right thing to do. And that this is a competitive advantage. There's tons of studies about how people I have strong preference to deal with companies who are aware of sustainability as an issue. And and corporations across the political spectrum are are this this this thing is is is passed? Now, the regulations is like one measurement mark. But Tom, I'd really like to turn the focus to how do I make? I'm not the first, you know, most amazing capitalists you've ever met? I love profitable companies. So how do I how do I design? If I'm a high tech account? How do I design excellent products? And how do I do the digital thread and the digital twin and know ahead of time those impacts and connect the dots when I'm outsource contract manufacturing? How do I know what those impacts are? And it's just confusing for people. And so we've, I'm really happy. I'm one of several speakers, I've got some brilliant people coming on to the webinar to support me. And we have a starting plan of how do you actually tackle this, and make a ton of money and be regulatory compliant, and be a thought leader in your industry. And it's like an A, like, you can be green in your personal life. But if you were a supply chain professional working for a high tech electronics account, right? On the top, say fortune 500 accounts or fortune, global 2000 accounts, your impact would be so outsized on society, in your role and your skills, you're needed. Now, the people that are coming to this, you know, your podcast, and this webinar, or the gold collar workers, right up tomorrow. So we're so excited,

Tom Raftery:

good. And Christian Klein put it well, when he says that we want to make sustainability profitable and profitability sustainable. And, you know, I think that's a really nice way of putting it. Because if we if companies are not profitable, then by definition, they're not sustainable, because they will go out of business, you know, which is the ultimate sustainability is staying in business.

Unknown:

So

Tom Raftery:

yeah, it's going to be interesting. Any any questions that I haven't asked you that you think I should have any topics we've not addressed, that you think, you know, people should be aware of before we wrap up? Now,

Joe Mulligan:

you know, this is we're going to focus on one with seven use cases, we're going to focus on one in particular, but we'd love to hear feedback from you and your listeners about on this other use cases, what are the details that the accounts want to have and, and the team will get together the right people from inside and outside of SAP? to to to educate your listeners, Tom? Fantastic,

Tom Raftery:

fantastic. Okay, Joe, if people want to know more about yourself, Joe, about the webinar, or about any of the topics we discussed today, where would you have me direct them?

Joe Mulligan:

Yeah. So I'm on LinkedIn. Joe Mulligan at SM with my email Joe Mulligan at SAP calm, very open to working with people who want to do something, do something materially impactful

Tom Raftery:

so far, but I'll put a link to the webinar and to your LinkedIn account in the show notes for this so people can just click on it and go straight through. Great Joe. That's been fantastic investor, look at the webinar and thanks a million Coming on the podcast today. Thanks for having me, Tom toxin. 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 sa p.com. 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 on