2023-10-02
Supply Chain
Digital Supply Chains – Chances and Limits for Climate Transformation
Digitalization has the power to transform the way firms and their suppliers collaborate for sustainable supply chains. At the same time, there is an imperative to reduce the environmental impact of firms’ value chains (Scope 3). Both developments create synergies for firms - to simultaneously address the challenges of successful digitalization, collaboration and reduced climate impact. What opportunities and risks are waiting for them in these transformations?
That’s what we learned at the CHOICE Event #62 from Stefanie Kunkel, scientist at the Research Institute for Sustainability (RIFS) at the Helmholtz Centre Potsdam. Here you will find the most important insights from her presentation.
Understanding the Impact: A Multinational Study
Can industry 4.0 usher in a new era of sustainable supply chains? Researchers at the Research Institute for Sustainability (RIFS) at the Helmholtz Centre Potsdam delved into the possibilities and challenges of digital supply chains for environmental sustainability. To grasp the full scope of the issue, they undertook a comprehensive study, involving companies from Germany, Brazil, and China. The primary focus was to assess the influence of digital technologies on collaboration quality and environmental sustainability within these firms.
Impact on Environmental Sustainability – Germany most skeptic
When asked about the quality of cooperation within digitally connected environments, across all three countries, a significant majority of respondents reported an overall improvement. Remarkably, Chinese respondents exhibited the highest levels of reported quality enhancement, with 27% noting a "much higher" quality and 41% indicating a "higher" quality of cooperation. In contrast, only 8% foresaw a decrease, and 3% anticipated a significant decrease in cooperation quality.
A similar picture emerged for expectations of the impact of digital tools on the environmental sustainability of supply chains. A significant number of respondents reported moderate or significant improvements in these areas, reflecting optimism regarding Industry 4.0's effect on the corporate environment. Notably, German company representatives emerged as the most cautious, with 22% expressing doubts about any significant improvement in environmental sustainability resulting from digital technologies. Conversely, Brazilian and Chinese respondents displayed a more optimistic outlook.
Company Size Matters in Digital Collaboration
When considering company size, disparities in the digitalization of collaboration processes become evident.
The study also analyzed expectations for material and energy consumption among companies of different sizes. Larger companies appeared more optimistic about the potential reduction in material use through digital technologies. 40% of German large companies and even 71.7% of Chinese large companies expected lower material consumption.
The study showed a similar trend for energy consumption. Although it was noted that digitalization itself consumes energy, potentially influencing the outcome.
Digital Sharing of Environmental Data – China leads the way
High expectations sometimes meet a sobering reality - and that is exactly the case with digital supply chains. Because the fully automated digital exchange of environmental information with external partners is still extremely rare in all three countries. Only 2.9% in China and even only 1% in Germany and 0.9% in Brazil take full advantage of the new opportunities.
At least things look a little better when it comes to partially automated as well as manual data sharing. Over 35% of companies in all three countries share environmental information with external partners. Chinese companies in particular outperform their German and Brazilian counterparts: 60% of them use this practice, compared to 42% in Brazil and 35% in Germany.
Nonetheless, the most important result can clearly be stated as follows.
There is a clear discrepancy between hopes and potentials on the one hand and the implementation of digital tools on the other hand to advance sustainable supply chains. Companies are already aware of the benefits of digital sharing and management of environmental data, but are still lagging behind in translating this knowledge into action.
The solution: How to overcome Digital Hesitation
Companies today face a host of new challenges when it comes to sustainable supply chains, the confusion of which can inhibit them in their move to digital solutions. Nevertheless, they should consider that the bulk of their CO2 emissions often originate from their suppliers. Thus, true impact requires collaborative efforts with suppliers.
Our Climate Intelligence Platform offers a comprehensive solution to improve collaboration with your suppliers on climate actions. It automates the process of data collection, streamlining engagement with suppliers, and provides long-term tracking to improve decarbonization efforts.
The Journey: How it Works
Our approach involves several key steps:
Understanding the Status Quo: We begin by comprehending the current status of both the buyer and suppliers.
AI Screening: We leverage AI to source information from websites, science-based target documentation, and other sources to create climate risk profiles and maturity assessments for suppliers.
Segmentation: We segment suppliers, allowing for tailored strategies instead of one-size-fits-all approaches.
Climate Check: A quick "climate check" helps gather data from suppliers, making it a hassle-free process.
Advanced Analysis: More advanced suppliers undergo a detailed climate performance assessment, enabling them to provide additional data for a comprehensive view.
Integration: Finally, the integrated data is accessible through various systems, ensuring that it isn't locked but utilized effectively.
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The platform is used by leading companies across industries from Telecommunication, to Automotive and Manufacturing, over Food, Energy and FMCG to reach their Scope 3 targets.
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