Lean & Green

Building sustainable and cost-efficient supply chains

Large organizations must face multiple issues with their complex supply chains, including the need to become more efficient and more sustainable.

While the climate crisis is not new, the intense demand placed on businesses by customers, investors, and regulators to eliminate climate impact and contribute to a just society has never been greater. This could prove to be the biggest test yet, while a wide-reaching wave of regulation – in Europe in particular – are entering into force. Those that fall behind on sustainability will find their risks greater and their margins lower.

How can businesses managers build ‘lean and green’ supply chains? How can they be equally committed to sustainability and cost efficiency without compromizing either?

To find out, we surveyed 525 decision-makers in supply chain and procurement, sustainability, regulatory affairs, and digital transformation. Their responses reveal that digitalization means companies no longer need to choose between ‘lean’ and ‘green’.

Lean and Green approaches pay dividends

There’s a perception that increasing regulation, such as those coming from the EU on sustainability and human rights, puts undue pressure on organizations as they face unprecedented burdens due to heavy consumer demand, post-Covid interruptions and disruption due to the war in Ukraine.

However according to our industry study, taking lean and green approaches offers tangible returns for businesses both now and in the future. Due to their sustainability initiatives, two in five (40%) of businesses already see improved revenue, with a further 38% expecting to see improved revenue next year.

Lean and green objectives are not mutually exclusive. When equipped with a verified understanding of the lifecycle costs and sustainability impact of their materials and other inputs, businesses can devise procurement strategies which serve both agendas.

How would you consider your revenue growth because of your sustainable initiatives?
(% of respondents)

The economic crunch acts as an accelerant for digitalization

Digital transformation is the top priority for many businesses, now and in the next 18 months.

The tight economic climate is accelerating their digital transformation initiatives, and the same is true for initiatives in sustainability, cost efficiency, compliance, and resilience.

However, roadmaps must also include verified key data elements, such as life cycle assessments, Carbon footprint assessments, human rights risk monitoring, circular economy factors, in addition to reliable data verification and documentation platforms to support mapping, onboarding, and monitoring

Improvements could come from looking at more specific technologies which address supply chain sustainability and efficiency.

Besides, these investments should be intimately connected to the needs of incoming regulation.

Where are you regarding your digital transformation initiatives?
(% of respondents)

Organizations are unprepared for incoming regulation

New regulation designed to protect the integrity of the European market will have long-lasting impacts on organizations with complex supply chains. Many organizations are unprepared to deal with these new regulations.

Organizations in Europe have made most progress aligning with the ISO 20400 standard, but new European regulations - CBAM, CSDDD, Digital Product Passport or Ecodesign - will demand much more from them. So far, only one-third of interviewed companies are compliant with those.

Return on investment should embrace lean and green metrics to measure sustainability and efficiency initiatives that the boardroom will appreciate; and once organizations know where they are, and how they are improving, they can begin to adapt to comply with greater confidence with incoming regulations.

What is your degree of maturity when it comes to eu regulations compliance?
(% of respondents)

Life Cycle Assessment: a common barrier to implementing supply chain sustainability

Life Cycle Assessment (LCA), defined by the ISO 14040 standard, is a set of capabilities that allow companies to precisely measure the environmental impact of their products at each phase of its life, from raw material acquisition through manufacture and use to end-of-life disposal.

LCA is also essential for verifying sustainability will be increasingly vital to meet growing demand for green products and services while complying with upcoming regulation. Without an understanding of a product’s impact throughout its entire life cycle, claims about its sustainability cannot be verified.

Today however, companies’ lack of understanding of LCA seems to be the biggest barrier to supply chain sustainability, more than any other. It is also the leading barrier to supply chain resilience, and a relatively common barrier to cost efficiency.

What are the biggest barriers to implementing supply chain sustainability?
(% of respondents)

Return on digitalization

Organizations understand that digital transformation can help them optimize both cost and sustainability without compromise.

However, despite its potential and high priority, there is room for improvement in supply chain digital transformation. So far, only a little over half of interviewed companies have achieved either full adoption or leading practice in IoT, whereas digital twins, robotics, and blockchain – all still emerging technologies in supply chains – trail behind.

Elsewhere, supply chain digitalization pays dividends: about a third of respondents say their digital initiatives have already produced cost savings (32%) and revenue growth (33%), with around half expecting those benefits to materialize within the next year.

There is no doubt that the digitalization of supply chain operations promises to give greater insight into both the cost and ESG impact of products throughout their life cycle, allowing businesses to optimize for both cost efficiency and sustainability.

In the context of supply chain operations, what is your organization’s maturity in each of the following technologies?
(% of respondents)