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Report based on proceedings at IBM Start
Smarter Supply Chains
for aSustainable Future
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“ When one tugs at a single thing
in nature, he fi nds it attached
to the rest of the world.
John Muir, US author and naturalist, founder of The Sierra Club
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Smarter Supply Chains for a Sustainable Future
Contents
Executive summary .................................................................................................................................................... ..3
Smarter Supply Chains for a Sustainable Future .......................................................................................................... ..3
Outline of the day’s agenda ....................................................................................................................................................3
What is sustainability? ................................................................................................................................................ ..5
Common themes from the Summit ............................................................................................................................. ..7
Collaboraon is key to progress ..............................................................................................................................................7
Complexity requires systems thinking ...................................................... ................................... ...........................................7
Data and metrics are the basis for finding soluons ..............................................................................................................7
Soluons require atypical personal and corporate behaviour ................................................................................................7
Summary of proceedings ........................................................................................................................................... ..9
The constuents of a sustainable supply chain ........................................................... ............................. ..............................9
There is colossal waste in many supply chains ............................................................ ................................ ...........................9
Some steps are being taken, but we are not doing enough .......................................................... .........................................9
We need a holisc view to deal eff ecvely with inefficiencies and waste ............................................................................10
Some policies and regulaon are geng in the way ............................................................................................................11
The main challenge will be changing behaviours part 1 – consumers ..................................................................................11
Early educaon, awareness and new business models are important .......................................................... ......................11
Retailers are in a posion to make a diff erence ....................................................................................................................12
Changing behaviours part 2 – improving collaboraon across businesses ...........................................................................12
Commercial sensivies are a major barrier ........................................................................................................................12
Creang ‘safe havens’ for shared sensive informaon .......................................................................................................12
Ask not what you can share, ask what you can’t ............................................................... ..................................... ..............13
For eff ecve collaboraon, relaonships maer ..................................................................................................................13
Much of a product’s carbon footprint lies in the supply chain .............................................................. ...............................13
Most carbon emissions stascs for the UK exclude imports ......................................................... .....................................14
Hing government targets for carbon emission reducons will be harder than you think .................................................14
Traceability across whole supply chains must (and can) be achieved ........................................................... .......................14
Standards are already in place ..............................................................................................................................................15
We don’t know about best examples of work going on – needs drawing together .................................................. ...........15Problems are similar across business sectors ............................................................ .................................. .........................15
We must tell people about successes to create a posive feedback loop ............................................................................16
We need a TSM movement to parallel the TQM movement of the 1970s ............................................................ ...............16
If the price of oil escalates, all bets are off ...........................................................................................................................16
Outcomes: developing the themes ............................................................................................................................. 20
Harnessing the momentum of the Summit ...................................................... .................................. ..................................20
The IBM Summit at Start ............................................................................................................................................ 21
About The Bathwick Group ........................................................................................................................................ 22
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Smarter Supply Chains for a Sustainable Future
Executive summary
Only the most hardened climate deniers and sustainability
scepcs sll argue that we can connue to live, to expand,
and to consume the way we do indefinitely. We areheading for deep trouble, and possibly for disaster, driven
by our historic disregard for the scarcity of resources and
the collateral damage our acvies create, and on which
our progress to date has depended. The evidence is
increasingly stark, the consensus at praccal dominance
and the range of issues broadening across all social,
natural and economic systems. The problems are both
massive and systemic; our response must be worthy of
that challenge.
More than 120 business and government leaders and
commentators aended the Smarter Supply Chains day
(day 6) at the Summit. They concluded we need to act
faster, and work together across industry and country
boundaries; they lef determined to make change happen.
Their debates and comments are noted in this report, but
these points were key:
A customer buying a product sees only the packaging
and the store environment – the fact that the product may
be causing economic, social or ethical distress somewherein the world is invisible. In the past, retail organisaons have
focussed on supplying customer needs to the exclusion of
all other consideraons – ethical, social, product design
and even supply chain costs. It’s clear today however
that the product and its supply chain are part of the same
off er/service; a customer is buying a ‘package’ and we
need to provide more visibility and transparency on the
wider issues relang to that product or service.
Given that a product’s real cost (including impacts
such as carbon footprint) is 60% or more in the supply
chain, we must achieve beer quality data and metrics,by leveraging the technology already in place, and provide
clarity so that customers can make beer choices. Their
choices will drive new strategies and new ways of sourcing
and designing products.
This is sll a new dialogue – neither suppliers nor
customers are overly comfortable with arculang the
issues. This is not all about environmental or social
concerns however – there are big wins to be had for
business, including supply chain cost reducon, beer
supplier relaonships, and more innovave products.
Achieving these benefits requires cross-organisaonal
cooperaon and collaboraon to amplify individual
endeavours. We need diff erent ways of working and diff erent
organisaonal structures, with cross-organisaonal teams
and groups organised around beliefs and values. There
was a willingness to share and parcipate at the Summit,
and a desire for more informaon and insight.
We all need to keep an open mind and experiment, see
what works and what doesn’t and constantly innovate.
The way forward is not clear, it demands new skills, new
ways of thinking and communicang, and new ways of
engaging.
Sustainability must have a strategic perspecve; it will
shape the future of the business and should become the
‘unconscious’ way of working for everyone. M&S exemplify
the strategic approach. Without a strategic approach, we
will lack the impetus for self-sustaining progress that is
strong enough to impact the whole supply chain.
Smarter Supply Chains for a Sustainable Future
Outline of the day’s agenda
K EYNOTES: Sara Eppel, Head of sustainable products and consumers, DEFRA
DEBATES How to help consumers make sustainable product decisions
Sustainability through collaboraon vs compeon
Sustainable supply chains as a source of compeve advantage
How do we reduce the impact of the products we supply?
Taking an industry approach to collaboraon – the applicaon of best pracces
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Smarter Supply Chains for a Sustainable Future
Data and metrics are the basis for fi nding solutions
We generate enormous quanes of data within our
organisaons, much of which languishes in silos, unused
for lack of capacity, the right tools or skills to process and
analyse its meaning. The amount of data, and the number
of sources from which it comes, is spiralling upwards every
day; we can’t hope to understand either the scale of the
challenge we face or the best routes to a soluon unless
we learn what we know, and how to gain valuable insights
from it.
Peter Drucker famously said “If it can’t be measured, itcan’t be managed”. In a sustainability context, if you don’t
have informaon on the impact of your operaons and
your acvity, you won’t be able manage that impact down.
Worse, you can’t enumerate and report success.
Solutions require atypical personal and corporate
behaviour
Of all the challenges we face in becoming more sustainable,
individual and organisaonal behaviour will perhapsbe the hardest to address. Personal and corporate
insecuries, consumpon-oriented lifestyles, unhelpful
corporate cultures, a focus on the short term, and a lack
of awareness (or unwillingness to understand) inhibit our
ability to eff ect change. They make us believe that what
we do individually makes lile diff erence, and help us to
hide behind compeve sensivies to jusfy inacon.
Will it be more carrot or a bigger sck that will produce the
changes we need? Probably both, and applied without
fear or favour, according to delegates at the Summit.
Scosh philosopher David Hume wrote “All plans of
government, which suppose great reformaon in the
manners of mankind, are plainly imaginary”. In other
words, good luck with changing human behaviour. In the
250 years since that was wrien, have we learned enough,
and are we opmisc enough, to prove him wrong?
Common themes from the Summit
Collaboration is key to progress
There are few challenges within organisaons that can be
solved by an individual employee or a single department,
and few challenges in sustainability that can be addressed
by a single organisaon operang in isolaon. ‘We need
to collaborate more’ was a key conclusion of every day of
the Summit at Start; collaboraon is the key to unlocking
creavity, finding new ways of approaching familiar
problems, and generang widely-accepted soluons. We
know however that few organisaons collaborate well,
internally or externally. Over the past five years we’ve
analysed how and why this is so. Individual and corporate
insecuries, unhelpful reward systems and compeve
sensivies are among the issues that combine to inhibit
openness and sharing of data and ideas.
Collaboraon is about changing the way individuals think
and organisaons respond, finding more eff ecve business
process alignment, and encouraging trust and posive
behaviours. Achieving such change is at the heart of
finding the efficiencies, technologies, and market models
that will define a more sustainable future.
Complexity requires systems thinking
The complexies of organisaons and markets are a barrier
to understanding and change. The developed world today
is a network of inter-dependent socio-technical systems,
in which changes of any type have systemic impacts that
are hard to foresee in the normal scope of an individual’s
role. Few people ever experience more than a small part
of the picture, and the decisions they take will only beappropriate within the context of their understanding.
Creang predicve frameworks and more holisc decision
support models requires systems thinking – the process
of understanding how things influence one another
within the whole – which is an unusual set of skills. Few
organisaons employ such skills, except perhaps in strategy
or technical design roles, but in an increasingly connected
world systems thinking is becoming important. We would
do well to recognise, nurture and value the appropriate
skills, as second- and third-level impacts are increasingly
coming to define the eff ecveness, and therefore the
success, of most organisaons.
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Smarter Supply Chains for a Sustainable Future
Summary of proceedings
The constituents of a sustainable supply chain
Supply chains are complex, highly interconnected, and
muldimensional, and while many organisaons have
produced good results in some parts of their operaons,
addressing the overall challenge remains a difficult
prospect. What constutes a sustainable supply chain?
Raw materials from sustainable sources
Re-use and recycling of product waste and packaging
Renewable energy sources to power the manufacture
and delivery of goods
Consumers making constuon educated choices
about the products they buy, the way they use and
dispose of them
Companies working together to ensure every asset
is fully ulised with duplicaon of eff ort and data
eliminated, and
New and interesng and excing products brought to
market in a sustainable way
While we may know and understand these elements, there
are relavely few examples of best pracce and creang a
sustainable supply chain remains a distant goal.
“More efficient, less wasteful supply chains
are not just good for the environment, they
make good business sense.
Chris Evans, VP, Retail Industry Execuve, IBM
UK
This is a real problem, because the level of waste that
occurs in supply chains in every industry is a real drag on
profitability and arficially inflates product prices.
There is colossal waste in many supply chains
Despite work on improved management and effi
ciencyover the years, there is sll an amazing amount of waste
in supply chains. The global consumer products and retail
industries lose an esmated £75 billion every year throughsupply chain waste 2; in the grocery sector, fully 40% of
food is lost between harvest and processing, and in the
UK we waste an addional 30% of that food in the home
through over-purchasing and failure to consume before
the sell-by date expires. To put that into real numbers, a
report by the UK’s Waste & Resources Acon Programme
(WRAP) in March of this year found that the food and
drink supply chain generates more than 11 million tonnes
of food waste each year, and an addional five million
tonnes of packaging waste. The esmated cost to the UKeconomy is GBP£17 billion, with GBP£5 billion of that total
aributed to the supply chain.
Some steps are being taken, but we are not doing
enough
From a consumer perspecve, the £12 billion per year of
food and drink that could have been eaten that consumers
throw away is equivalent to £480 for the each household.
Prevenng waste could save 20mt of CO₂ eq, which is theequivalent of taking one in four cars off the road.
“Companies that don’t operate sustainable
supply chains are probably no beer than
thieves – they’re taking something from
society.
Dr. Trevor Davis, Global Subject Maer Expert,
IBM
Stascs such as these may explain why steps have already
been taken in the grocery sector to limit wastage through
collaborave eff orts such as the Courtauld commitment.
2 Source: Analysis from IBM’s Ins tute of Business value, The Bathwick
Group, and others
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Smarter Supply Chains for a Sustainable Future
The Courtauld Commitment aims to improve
the resource e ffi ciency and reduce the environmental
impact of the grocery retail sector. It supports the aims of
the UK Climate Change Act 2008 (to reduce greenhouse
gas emissions by 34% by 2020 and 80% by 2050). WRAP
(Waste & Resources Ac on Programme) is responsible for
the agreement and works with leading retailers, brand
owners, manufacturers and suppliers. Since launching
phase 1 in 2005, 1.2 million tonnes of food and packaging
waste have been prevented through the programme.
Phase 2 was announced in March 2010, now targe ng
reduc ons in secondary and ter ary packaging, in
addi on to supply chain waste to primary packaging and
household food and drink waste. The aim is to encourage
the sustainable use of resources over the en re lifecycle
of grocery products sold in the UK.
Organisa ons commit to develop individual and collec ve
‘sector’ strategy plans to achieve the following targets:
To reduce the weight, and increase recycling rates and
recycled content of all grocery packaging, as appropriate,
to reduce the carbon impact of grocery packaging by
10%.
To reduce UK household food and drink wastes by 4%.
To reduce tradi onal grocery product and packaging
waste in the grocery supply chain by 5%. This includes
both solid and liquid wastes.
Despite the waste and the potenal for the businesses
involved to cut losses, only around a third of supply
contracts today include sustainability clauses. Many
delegates expressed their frustra
on both at the lackof progress made towards more sustainable behaviour
in recent years and at the difficules involved with
coordinang acon across supply chains that can contain
thousands of organisaons.
We need a holistic view to deal effectively with ineffi ciencies
and waste
Dealing with inefficiencies, waste and reporng from
the supply chain requires us to implement soluons
that encompass the whole lifecycle. There are too many
individual soluons today – many delegates quesoned
why there isn’t more collaboraon already happening.
Joining forces with others could create a wider and deeper
range of research and generate more acon than any one
organisaon can on its own. Data sharing iniaves like
GS1 are part of the soluon, in which data can provide bothinsight into inefficiencies and a plat orm for collaboraon.
The GS1 Data Crunch project
GS1, a supply chain standards organisa on, executed a
project with IBM in 2009, that compared the product data
held by suppliers with the data stored on grocery retailers’
systems. The results were staggering, uncovering
inconsistencies in what should have been iden cal
informa on in over 80% of cases.
Bad data has a severe cost impact on the industry:
The cost of manual workarounds to source missing
data and correct errors
Administra ve shrinkage costs in areas such as
ordering and invoicing
Lost consumer sales through shelf stock- outs
The report calculated that the industry could save at least
£1billion over the next fi ve years addressing these
problems.
Looking forward, consumers are demanding be er
product informa on and labelling for nutri on, health
and lifestyle. Planned legisla on is also demanding that
the industry provides further informa on related to
packaging and the environment. The industry predicts a
400% increase in the amount of data retailers need to
hold about products – manual workarounds and
pragma c fi xes employed currently by retailers are no
longer sustainable.
The conclusion of the Data Crunch Project was that
retailers and their suppliers should consider adop ng
Global Data Synchronisa on (GDS) techniques already in
use in the USA, Australia and mainland Europe. Similar
techniques could deliver bene fi ts in the UK, but would
require major retail groups to move away from tac cal
solu ons and embrace a new industry standard for
managing product data where one single, accurate,
master source is used by all par es.
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Smarter Supply Chains for a Sustainable Future
Some policies and regulation are getting in the way
It could be argued that a good starng point for addressing
waste would be to tackle the unintended consequences
of policies and regulaon. For example, the construcon
industry is the single largest waste producer in the UK.
Fully 30% of that waste is packaging, but vehicles arrive on
building sites to deliver materials and leave empty rather
than carrying away potenally recyclable material (much of
which is then burned). Construcon companies would like
to hall away the waste, but are prevented from doing so
because they would have to procure a waste licence every
one of their vehicles, which is prohibive both logiscally
and economically.
Similarly, on sites where new housing is being built,construcon companies are obliged to erect their own
generators and mini-grid for powering equipment, site
offices, etc. because the law does not allow them to aach
to the Naonal Grid (cheaper, no local pollutants, and
usually close by any new building site in the UK) unl the
buildings are completed and cerfied.
The main challenge will be changing behaviours part 1
– consumers
While retailers and other businesses can and should
be addressing supply chain inefficiencies, consumers
should also be playing their part. Viewing consumpon
as an affirmaon of status leads to profligate behaviour
and over-consumpon; creang waste through lack of
thinking is inexcusable in the modern world. Changing
consumer behaviour is not a simple task however; societal
dimensions are in play. A range of both incenve and
compulsion opons are required, and we must consider
potenal pping points and new business models, suchas reverng to an ‘old fashioned’ approach of mending
things or taking things back to retailers for service instead
of simply consuming and throwing away.
There were a range of views on how to change behaviours,
from the mainly ‘carrot’ end of the spectrum advocang
incenves as the key to change, to the mainly ‘sck’ view
that consumers would not change unless forced to, either
by higher prices or legislaon. Some delegates took the
view that if we want people to change behaviour we have
to make it easier and aracve; others expressed views at
the other end of the spectrum.
“Culture is what people do in the absence of
instructon.
Richard Wilding, Professor of Supply Chain Risk
Management, Cranfield School of Management
Whichever balance is chosen, the starng point is to
provide clarity on the choices available and the implicaons
of those choices, which would require a greater degree of
informaon availability and openness than is currently in
evidence and the educaon of consumers in how to use
that informaon to make more informed choices.
Early education, awareness and new business models
are important
Providing people with the ability to make beer choices
would suggest that we should be working to educate
consumers to the greatest degree possible. Educaon
creates awareness, and awareness creates change. The
easiest place to start is with young people; not only
because schools actually are educaonal facilies, but
because educaon is simpler and more eff ecve before
poor learned behaviours become ingrained. Changing
expectaons from buy-use-dispose consumpon to one of
repair-reuse-recycle is core to changing how people think
about resource usage and sustainable living.
Educaon is also about informaon provision however,
which should extend through to product labelling and
in-store promoons. The lack of standards for product
informaon in regard to sustainability should not provide
us with an excuse for inacon.New business models may hold the potenal for exisng
retailers to grow their businesses into new areas, while
increasing the sustainability of their overall off erings.
Sharing rarely-used products is a commonly-quoted idea,
but the few trials that have been completed show us that
to work, such schemes must take into account people’s
discomfort both with sharing more ‘personal’ products,
and in having to negoate with strangers.
Defra ran a pilot programme on a housing estate and found
that social and communicaon barriers were difficult to
overcome; while sharing power tools and lawnmowers
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Smarter Supply Chains for a Sustainable Future
was seen as a posive move, sharing washing machines
was unpopular.
Retailers are in a position to make a difference
Retailers are of course the gateway to consumers; they
have enormous power to influence people’s consumpon
choices. There are areas where consumers will want to
make their own decisions, so educaon on the right choices
is important; in other cases, retailers could and perhaps
should make the choice for them. Customers could be
influenced if retailers only sold products above a certain
sustainable standard – if those standards could be defined
– and deleted product lines known to be unsustainable.
‘Choice eding’ has already been used in some cases –B&Q for example stopped selling pao heaters some me
ago, without any apparent impact on other sales.
In contrast to the potenal for retailers to encourage more
sustainable consumer behaviour, several delegates at the
Summit pointed out that many of today’s promoons,
especially in the retail sector, actually encourage greater
consumpon – ‘Buy One Get One Free’ in parcular.
Historically, retailers have focused on selling larger
quanes of product (ofen at the expense of higher
quality), and indeed consumers have gladly played along.
We must find other ways of growing revenues (and
potenally profit margins) – perhaps through exploing
lines of business such as the rental or maintenance models
we menoned above.
Encouragingly, when delegates were asked for responses
by vong, 72% believed that consumer-facing organisaons
were, despite a weak economy, in a posion to help the
public make sustainable choices.
Changing behaviours part 2 – improving collaboration
across businesses
The need to change behaviours is not limited to consumers
of course. Creang more sustainable supply chains requires
a groundswell of manufacturers and retailers working in
concert, against agreed targets. The basis of collaboraon,
and parcularly in the case of supply chains, is the sharing
of informaon. From basic data to informaon about
operang processes, objecves and strategies, we need toshare to understand where inefficiencies exist, and how
we can act to find soluons.
Commercial sensitivities are a major barrier
The greatest barrier to informaon sharing and collaboraon
remains the fact that commercial organisaons have a
long history of carefully protecng their informaon –
very ofen without any intenon or eff ort to diff erenate
between truly sensive data and that which could be easily
shared without endangering commercial objecves.
One delegate described how the seafood cluster of
companies in Grimsby held a summit earlier in the year,
at which they discussed markeng plans, vision, and
strategies to try to idenfy synergies. Did this only happen
because the sector is under great pressure? Or could this
experience be applied to many other sectors without
generang any adverse consequences for parcipants?
“Technology businesses are used to
simultaneous competton and
collaboraton. There is a maturity in how
relatonships are managed. Retailers for
example do not have the same maturity in
relaton to their competton.
Creating ‘safe havens’ for shared sensitive information
One answer to the problem is to create independent
‘safe havens’ that allow data to be exchanged. There are
already many opportunies for sharing informaon – such
as the example of GS1 above, or Sedex, the Supplier
Ethical Data Exchange, below. In fact, there are ofen
too many ini
a
ves, each needing a degree of work fromorganisaons to provide and maintain the informaon
they contribute, and creang the potenal for mulple
standards.
“Creatng independent safe havens for data
is one way to address compettve
sensitvites.
Jim Spile, Chairman, GS1
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Smarter Supply Chains for a Sustainable Future
“It is critcal to establish long-term supply
relatonships to encourage investment inthe right behaviour.
Martyn Seal, PepsiCo
It’s also important to consider the micro and well as
the macro. Commercial pressures don’t just apply to
decision-making execuves – they aff ect everyone in a
company, and parcularly those involved at the interfaces
between organisaons. The procurement funcon in many
organisaons prizes low cost and aggressive negoaon
above progress towards longer-term goals. Atudes
that do not allow for give and take in supply relaonships
are unlikely to survive long enough or generate the trust
required to cooperate on achieving sustainability goals.
“The commercial pressures we put on
individuals in supplier-customer
relatonships rarely take long-term aims
into account.
Much of a product’s carbon footprint lies in the supply
chain
In addion to the issue of visible waste is that of invisible
impacts, such as the carbon footprint of a product. Up
to 80% of a product’s carbon footprint lies in the supply
chain. All organisa
ons in that supply chain share theresponsibility to find soluons to reduce that impact,
and will have to work together if the challenges are to be
addressed.
“60% of the carbon footprint of a packet of
crisps is in the supply chain, before it gets
to us.
Martyn Seal, PepsiCo
There are too few examples of good informaon sharing
today, so while remaining mindful of the possibility of
proliferang standards, we should not let such concerns
get in the way of defining agreed approaches to the
presentaon of useful and aconable informaon toconsumers and other organisaons within our supply
chains.
Sedex, the Supplier Ethical Data Exchange, is a
not-for-pro fi t organisa on based in London, UK, open
for membership to any company (anywhere in the world)
that is commi ed to con nuous improvement of the
ethical performance of their supply chains. Sedex started
2001 when a group of UK retailers and their fi rst er
suppliers recognised a need to collaborate and drive
convergence in social audit standards and ethical
self-assessment. Members par cipate in working
groups and networking, using the organisa on’s services
to establish best prac ce and as a collabora ve plat orm.
Member numbers passed 28,000 during 2010.
Ask not what you can share, ask what you can’t
One strategy for making progress on collaboraon is toask what data shouldn’t be shared, rather than starng
from the assumpon that everything is sensive. The
reality of the laer assumpon is that few employees will
invest the me in achieving internal agreement to release
a set of data, and few would want to take the risk if the
eff ort ran into problems. If you start from the premise
that most data is not compevely sensive, it is easier to
encourage a culture of sharing – both within and outside
the organisaon.
For effective collaboration, relationships matter
It is difficult to over-esmate the importance of trust in any
collaboraon. Relaonships at every level of an acvity
determine whether collaboraon will be successful or
not. In the supply chain, creang long-term contracts and
relaonships can form the basis for working towards joint
goals. Without such collaboraon, many sustainability
eff orts will not succeed.
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Smarter Supply Chains for a Sustainable Future
The issue of embedded emissions throughout the supply
chain has made it hard in many cases for companies and
regulators to determine the true environmental impact of
a product.
Most carbon emissions statistics for the UK exclude
imports
Embedded emissions are important parcularly in
those countries that import heavily, such as the UK, but
most reported carbon emission stascs do not include
embedded emissions – and the numbers involved are
staggering.
A study by sciensts at the Carnegie Instuon for
Science3 showed that 253m tonnes of CO2 are released
annually in the manufacture of products bound for UK,
which if included in our emissions totals would increase
the country’s carbon footprint by 46%! Only the US
and Japan have a higher total emissions import figure.
Professor Dieter Helm from the University of Oxford, in a
paper published in 20074, noted: “If carbon outsourcing is
factored back in, the UK’s impressive emissions cuts over
the past two decades don’t look so impressive anymore.
Rather than falling by over 15% since 1990, they actually
rose by around 19%. And even this is flaering, since the
UK closed most of its coal industry in the 1990s for reasons
unrelated to climate change.”
“75% of a UK resident’s individual carbon
impact comes from the products and
services they buy and use.
Sara Eppel, Head, Sustainable Products andConsumers, Defra
As Professor Helm points out, it is consumpon and not
producon that maers when apporoning responsibility
for carbon emissions, or any other impact of a product
or service, making it clearer sll that our import-based
consuming lifestyle is a major obstacle to reducing true
emissions.
3 ‘Consump on-based accoun ng of CO2 emissions’ (2010), Steven J.
Davis and Ken Caldeira
4 Helm, D. R., Smale, R. and Phillips, J. (2007), ‘Too Good to be True?
The UK’s Climate Change Record’
Hitting government targets for carbon emission reductions
will be harder than you think
Even without taking embedded emissions properly into
account, meeng exisng targets for emissions reducon
is going to prove even harder than the raw numbers would
suggest. Reducon targets are based on 1990 levels,
regardless of (economic or populaon) growth since that
year.
“Something that came out of our future
scenario planning process was that we
need to be almost carbon-free today; takinggrowth into account, an 80% reducton by
2050 is equivalent to a 95% reducton
today.
Martyn Seal, PepsiCo
As other independent sources have suggested, reducons
in the future, adjusted to take account of growth, are
equivalent to a proporonately higher cut on today’s
figures. Finding that scale of reducons across many supply
chains will be impossible without virtually carbon-freetransportaon and swingeing cuts in emissions from
manufacturing and/or processing.
Traceability across whole supply chains must (and can)
be achieved
Meeng targets requires the ability to report real numbers.
Not just emissions of course, but all manner of elements of
acvity, whether from reporng, regulatory or standards
viewpoints. Traceability – the ability to understand andreport on the source(s) of a product and its route to
market – is fundamental to environmental reporng and
auding.
As well as the challenges already noted (such as
informaon availability), there are many other potenal
obstacles, such as the sheer scale of an operaon – how
can clothing retailers engage with all stakeholders to get
the informaon back that they need? Marks & Spencer
for example deals ulmately with 30,000 diff erent coon
farmers. How can the end supplier of products to the
customer help all elements of the supply chain to achieve
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Smarter Supply Chains for a Sustainable Future
the required goals? A common dataset and plat orm would
make many such tasks simpler, perhaps available as a web
service, so that even very small suppliers could contribute
easily through technology as simple as a browser.
There are instances where traceability has been achieved
however, such as tracking food from farm to plate, showing
that similar ambions in longer or more complex scenarios
are achievable.
Standards are already in place
Contrary to the thinking of many delegates at the Summit,
some standards for assessing and reporng aspects of
sustainability already exist. For example, a Brish Standard
already exists for assessing the life cycle greenhouse gas
emissions of goods and services: PAS 2050 (Publically
Available Specificaon 2050). The standard sets out 5
basic steps to determine a product carbon footprint:
Process map1.
Detail all the materials, acvies and processes that
contribute to each stage of the chosen product’s life
cycle.
Check boundaries and prioritsaton2.
Define which emissions will be included and excluded
– for example: you may wish to focus data collecon
on the main sources of greenhouse gas emissions.
Collectng data3.
Collect data based on actual meter readings and
records - only use esmates if absolutely necessary.
Select appropriate emissions conversions factors (for
example, kgCO2/litre of fuel).
Calculate footprint4.
Calculate the greenhouse gas emissions (kg CO2e per
product unit) from each source.
Check uncertainty5.
Provide an assessment of the margin of error for your
calculaon. This can be a stascal analysis or a simple
assessment of data quality.
There are problems with PAS2050 however; it is a
complicated methodology and requires a significant
investment to complete properly, and product category
rules need to be defined. It is possible for a smaller
company to run through the tool and get a rough carbonfootprint for a product, but despite several organisaons
adopng it, there is not enough data today to make simple
calculaons possible for companies unable or unwilling to
make the full investment required.
We don’t know about best examples of work going on –
needs drawing together
Providing standards to assist companies to plan their
eff orts to be more sustainable is important, but not theonly way to help eff orts move forward. Several delegates
pointed to the unavailability of a shared repository for
examples of best pracce as a major gap in the market.
Despite there being some outstanding individual examples
of successes achieved and efficiencies gained, it was clear
that the experiences gained are not widely known. One
clear output of the day was a suggeson to create a shared
repository for such achievements, both as a source of
informaon for organisaons with similar challenges, and
as a place of inspiraon.
Again though, some organisaons might view the
experience they have gained as compevely sensive,
but we would urge them to consider whether there is
more to be gained – in both co-working with partners
and suppliers, and in the opportunity to establish thought
leadership – from sharing their successes more widely.
Problems are similar across business sectors
There were suggesons that examples of best pracce are
really only applicable to very similar companies in the same
sector. As in many other cases we have analysed in the
past however (such as data warehousing requirements),
there are surprisingly few diff erences between industry
sectors in many of the sustainability challenges they face,
which should allow more eff ecve sharing of experience
and best pracces.
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Smarter Supply Chains for a Sustainable Future
“We need to recogniton that problems are
fundamentally prey similar across industrysectors. We should look cross-sector for
scale and sharing best practces.
Wayne Balta, IBM
Similaries across mulple sectors could combine with a
library of best pracce to provide the opportunity to scale
eff orts and create real change.
We must tell people about successes to create a positive
feedback loop
As well as the opportunity to share best pracce between
companies, Marks & Spencer showed how providing
informaon back to consumers on how successful
sustainability projects are being creates a posive feedback
loop which will generate more success. The example
cited was the in-store provision of informaon about the
amount of money raised for Oxfam from the take-back
scheme for clothing. Such communica
on acts both as aspur to acon for a customer, and a strong brand boost for
M&S.
The government was cited as an example of not doing well
in this regard; very few public campaigns are followed up
with an assessment and communicaon of their success.
We need a TSM movement to parallel the TQM movement
of the 1970s
One intriguing suggeson from Dr Trevor Davis of IBMinvolved creang a ‘Total Sustainability Management’
movement to parallel the ‘Total Quality Management’
(TQM) surge in the 1970s. TQM became integral to
businesses as the value of adopng TQM pracces was
demonstrated.
“TQM movement started as cost-avoidance.
Not only was quality a good thing to have,but lack of quality was a bad thing. Quality
is intmately related to financial
performance; so are most aspects of
sustainability.
Dr. Trevor Davis
TQM placed significant emphasis on measurement as the
basis for understanding both how improvements could be
achieved and for measuring success, and it is important
again now as we have already noted.
“A lot of emphasis on measuring things and
benchmarking was key to geng quality on
the agenda.
Dr. Trevor Davis
Also important is the concept of the ‘management system’.
There is an equivalent in sustainability (ISO14000) but it
hasn’t become as popular or embedded in the same way as
ISO9000 has in the field of quality – too many organisaons
sll see sustainability as a bolt-on – something that is done
in addion to normal operaon – rather than a core part of
that operaon. TQM became embedded in organisaonal
culture; it is vital that sustainable thinking become
embedded throughout organisaons unl it becomes a
part of business as usual.
If the price of oil escalates, all bets are off
One of the key elements behind the success of global
supply chains is cheap energy, primarily oil. The price of
oil has been rising steadily over the past 10 years; rising
demand, parcularly from China, heralds the permanent
end of cheap oil – the past two years only reached a plateau
because of the global recession, but even so, spot prices
have reached beyond even the peak prices of 1980.
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Smarter Supply Chains for a Sustainable Future
What if oil prices connue to rise? How will global supplychains be aff ected? How many products will become
economically unsustainable? Many organisaons are
already planning for more local sourcing of products and
sub-components to migate the risk.
The quesons raised during the Summit and outlined in this
paper are being addressed in the ongoing work planned or
supported by IBM, some of which is noted below.
Three-year rolling average price of crude oil;Figure 2.
source: www.in fl a ondata.com
$0
$10
$20
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P r i c e p
e r b a r r e l o f c r u d e o
i l
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(inaon adjusted)
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Smarter Supply Chains for a Sustainable Future
Outcomes: developing the themes
Harnessing the momentum of the Summit
RETAIL AND CPG FORUM
IBM will host an ‘Enabling a Sustainable Supply Chain’
forum in the New Year to connue the discussion of key
issues. The event is designed to build on the momentum
and shared learning created during Start and will specifically
seek to build a vibrant and collaborave community of
business leaders who, collecvely, can have a posive
impact on the delivery of sustainability strategies within
their own organisaons.
THE S TART INNOVATION J AM
The IBM Summit at Start, to quote Charles Hendry, the
Minister of State for Energy & Climate Change, was “one
of the most significant events of its kind that has ever
taken place in this country”. The Summit brought together
key stakeholders from many communies, and created a
momentum amongst aendees to do something to make
a diff erence. The journey towards a sustainable economy
will be a long one, and the Summit was always intendedto be the start of a process rather than a single, albeit
impressive, event. As a connuaon of that process, IBM
has announced that it will be hosng a ‘Start Innovaon
Jam’ in April of 2011.
An Innovaon Jam is an online text-based discussion forum
for conducng a large-scale brainstorming event. Diverse
groups of individuals are connected via a web browser to
discuss and develop aconable ideas for business-crical
or urgent societal issues. The key word is ‘aconable’. The
purpose of this Jam is to take what was learned from the
Summit, and turn it into a bank of aconable ideas. This
is about how – the Summit idenfied a number of urgent
needs to which we need to find soluons: we need to
encourage collaboraon between diff ering constuencies,
but how do we make it happen? How do we start to change
individual and corporate behaviours? How do we engage
with younger people and how do we act NOW to make a
diff erence? The Jam aims to answer these quesons and
in doing so kick off hundreds of projects that will generate
real soluons and provide inspiraon for a thousand
more.
The Jam will be facilitated by IBM in conjuncon with the
Start organisaon and many of the other Start partners.They will be inving everyone who aended the 2010
Summit, their partners and clients, and many others who
wish to join them on the journey.
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Smarter Supply Chains for a Sustainable Future
The IBM Summit at Start
Start is an iniave established by HRH The Prince of
Wales, that aims to create a vision of a more sustainable
future, and seeks to promote sustainability through simple,posive and aspiraonal messages.
IBM is one of the founding partners, and is the exclusive
partner for Business to Business engagement. In September
2010 IBM led a Business Summit – nine invitaon-only
days that covered key topics on the sustainability agenda
for business. Its starng point was simple: “ask not what
you can do for sustainability – ask what sustainability can
do for you”.
Business engagement in the broad sustainability agendais crucial if we are to make progress. Business led the
industrial revoluon, it led the digital revoluon and all the
signs are that it will drive the sustainability revoluon too.
Each day of the summit saw senior business leaders, public
sector officials, NGOs, academics and commentators come
together in London’s Lancaster House to make a diff erence
to how sustainability is perceived and posioned in the
UK. Over 1,000 of the UK’s most influenal people joined
forces with some of IBM’s global experts to create a new
constuency around economic, social and environmentalsustainability.
Charles Hendry, the UK Minister of State for Energy and
Climate Change said that the IBM Summit at Start was
“one of the most significant events of its kind that has ever
taken place in this country”; this document, wrien by
The Bathwick Group, reports the output from the summit,
with a specific focus on Day 6, ‘Smarter Supply Chains for
a Sustainable Future’.
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About The Bathwick Group
The Bathwick Group is a research-based consulng company that helps clients address their most pressing needs in
strategic planning and go-to-market execuon.
Sustainability & the future economy:
Defining the future – risks and opportunies; strategic modelling and benchmarking, future-proofing to migate strategic
risks, and idenficaon of new market opportunies
The future of business & organisatonal performance:
Focused on collaboraon and disrupve plat orms; solving client challenges rapidly by combining external experts and IP
protecon mechanisms to expedite soluons to important challenges
The applicaton and future of informaton technologies:
Focused on infrastructure (futures and cloud compung) and interacon (including social media) in business. Future-proofing
strategy and eff ecveness audits for enterprise IT leaders, cloud assessments, data audits, and benchmarking
IT industry futures:
Markeng strategy, customer analysis and deep research, sales acceleraon and business partner enablement soluons
www.bathwickgroup.com
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