Smarter Supply Chain for a Sustainable Future: Report based on proceeedings at IBM Start

8/7/2019 Smarter Supply Chain for a Sustainable Future: Report based on proceeedings at IBM Start

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Report based on proceedings at IBM Start

Smarter Supply Chains

for aSustainable Future



“ 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



Page 1

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





Page 3


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.


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



Page 4








Page 7


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.





Page 9


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



Page 10


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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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



Page 12


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



Page 13


“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.


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.



Page 14


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.


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



Page 15


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.



Page 16


“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.



Page 17


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

$30

$40

$50

$60

$70

$80

P r i c e p

e r b a r r e l o f c r u d e o

i l

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

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2 0 1 0

3-year rolling average crude oil prices/bbl

(inaon adjusted)







Page 20


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.



Page 21


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’.



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



Documents

Smarter Supply Chain for a Sustainable Future: Report based on proceeedings at IBM Start