May 17, 2020

Unilever, Bank of America and Rolls Royce among companies tackling supply chain emissions

Supply Chain
Bank of America
BT Group
Nestle
James Henderson
4 min
The number of companies leading the way with cutting carbon emissions has doubled in the last year
The number of companies forging ahead with an industry-leading approach to tackling emissions in the supply chain has doubled in a year, according to ne...

The number of companies forging ahead with an industry-leading approach to tackling emissions in the supply chain has doubled in a year, according to new research by CDP, with analysis provided by McKinsey & Company.

CDP has awarded 58 companies – out of a total of +3,300 – a place on its second annual Supplier Engagement leader board, double the 29 identified in 2017.

These leaders – which include Bank of America, BT Group, Nestlé, Panasonic, Rolls Royce, Société Générale, Tokyo Gas Co. and Unilever – are recognised for their work with suppliers to reduce emissions and lower environmental risks in the supply chain.

The leaders are announced as more companies than ever before are looking at water security in their supply chains – leading to a 15% rise in suppliers disclosing water data to their customers through CDP in 2017 – and organisations including Klabin, L'Oréal and McDonald’s are among the first to work with CDP to tackle deforestation in their supply chains.  

Examples of leadership among the 58 companies include:

Ajinomoto: the Japanese food, chemicals and pharmaceuticals corporation worked with a key supplier to become the only company worldwide to sell drinks in 100% recycled heat-resistant PET bottles, reducing the use of virgin plastics from fossil fuels by around 2,000 tonnes a year.

Kellogg Company: the global food company operates its Origins program across 21 countries, supporting around 294,000 farmers to become more sustainable and build resilience to the impacts of climate change.

Sky: in partnership with a key supplier, the European entertainment and telecommunications company is pioneering a circular economy model for its new set-top box, using sustainable product design to create a closed loop system with zero waste to landfill. 

Gabrielle Ginér, Head of Sustainable Business Policy at BT Group said: “We’re proud to be recognised on CDP’s Supplier Engagement leader board for our efforts to engage suppliers on climate change.

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“Reducing our supply chain emissions is an essential component of our ambitious science-based target to help keep global temperature rise below 1.5°C. Working with suppliers through CDP’s supply chain programme is crucial to driving this change.”

Patricia Espinosa, Executive Secretary, United Nations Framework Convention on Climate Change, who has written the foreword in the report, commented: “I am pleased to see that an ever-increasing number of companies reporting to CDP are integrating sustainability-thinking into their business models and applaud the members of the CDP supply chain program for being pioneers in this regard. I encourage businesses to work with suppliers to raise ambition across their supply chain.”

The report – which includes commentary from The Carbon Trust – reveals that this leadership is paying dividends, as awareness of climate change-related risks and opportunities is increasing down the supply chain.

Over three quarters (76%) of suppliers responding to CDP have identified some inherent climate change risks to their business and more than half (52%) report that they have integrated climate change into their business strategy.

There is huge potential for positive impact. Reductions equivalent to 551mn metric tonnes of carbon dioxide – more than Brazil’s total emissions in 2016 – were reported by suppliers worldwide in 2017. This is an increase from 434mn metric tonnes reported in 2016. Cost savings amounting to $14bn were reported in 2017 as a result of emissions reduction activities.

Yet, this impact is only a fraction of what could be achieved if all organizations at each tier of the supply chain were engaged and working to drive down emissions. Currently, less than a quarter (23%) of supplier respondents are in turn engaging with their own suppliers to reduce emissions, suggesting that many may be missing out on business opportunities and financial savings.

Dexter Galvin, Global Director of Corporates and Supply Chains at CDP, said: “Big businesses have for some time understood the importance of managing their Scope 1 and 2 emissions, but Scope 3 emissions, hidden in the value chain – and far greater in volume – are just as vital.

“While it’s encouraging that awareness of climate-related risk is filtering down the supply chain, it’s crucial that engagement and action follows. As our findings show, this not only makes sound business sense, but can result in considerable cost savings for both purchasing organisations and their suppliers.”

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Jun 11, 2021

NTT DATA Services, Remodelling Supply Chains for Resilience

NTTDATA
supplychain
Supplychainriskmanagement
Procurement
6 min
Joey Dean, Managing Director of healthcare consulting at NTT DATA Services, shares remodelling strategies for more resilient supply chains

Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.

The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.

A Multi-Vendor Sourcing Approach

“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.

“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.

But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?

“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.

Wielding Big Tech for Better Outcomes

So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry

“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality. 

“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”

Evolving Procurement Models 

From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view. 

“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.

“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”

“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”

But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?

“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.

The Challenges

These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.

On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.

Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”

He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”

As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”

 

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