Cracking the code on supply chain sustainability: How AI and data are creating more responsible operations
By Sheri Hinish, Global Services and Alliances Lead, IBM Consulting Sustainability Services
Supply chain and sustainability topics have dominated global business headlines for more than two years. The interconnectedness of climate change and supply chain disruptions highlights the complexity of supply chains, including the impact in realizing the 2030 vision of the UN’s Sustainable Development Goals. These include the need for responsible consumption and production, decent work and economic growth, as well as driving climate action (SDGs 8, 12 and 13.) Environmental, social, and governance (ESG) topics interwoven in the fabric of global supply chains cut across virtually all 17 SDGs. Many solutions have been proposed, but one that is too often overlooked could be the most effective of all: AI. How can we help humans make better decisions in work that powers the world, work that matters.
Take for example, global non-profit, Heifer International, that’s working to sustainably end world hunger. Together with CATIE, an international organization focused on sustainable and inclusive human well-being in Latin America, the cooperative is working with farmers on a system that combines predictive AI technology with geospatial, weather, environmental and IoT field data in a comprehensive dashboard tailored to a farmer’s land.
Coffee drinkers consume more than half a trillion cups per year, and two-thirds aged 19-24 say they prefer to buy coffee that is sustainably grown and responsibly sourced. The industry’s large global supply chain, however, makes tracing responsible business practices in the coffee supply chain difficult. The cooperative solution delivers weather alerts and other information, such as optimal planting patterns and expected yields linked to market pricing.
These insights can help farmers and agribusinesses make more informed decisions for improving crop yield and value, as well as food safety, responsible land use, water stewardship, and ethical sourcing. The technology is expected to play an important role in increasing the incomes of coffee and cocoa farmers.
Sustainability rising as a key business imperative
Sustainability is no longer a nice to have; it has become top of mind for everyone. A recent IBM Institute for Business Value (IBV) study found that Chief Supply Chain Officers (CSCOs) rank sustainability as their third biggest challenge in the next few years, trailing only supply chain disruptions and technology infrastructure.
Although there is an increased spotlight on sustainability where nearly half (49%) of all companies have corporate supply chain sustainability goals, another 35% lack such objectives, according to research from the Massachusetts Institute of Technology (MIT) Center for Transportation and Logistics and the Council of Supply Chain Management Professionals (CSCMP).
Whether your customer base is B2B or B2C – sustainability impacts your business’ top and bottom line. Advancing corporate sustainability begins with a commitment to transparency and other capabilities like upstream thinking in product design and empowering responsible sourcing. Responsible sourcing, or “ethical procurement”, is a voluntary commitment by companies to intentionally lead with social and environmental factors when managing their relationships with suppliers.
Companies are looking for more responsible ways to source products and, given the current climate, are shifting their resources to businesses whose sustainable actions are speaking louder than their words. This sentiment is also shared among the consumer population. Recent data from an IBM survey of 16,000 global consumers found that 49% of consumers say they paid an average premium of 59% for products branded as environmentally sustainable or socially responsible. But should consumers have to pay more for sustainable products?
Consumers demand for more transparency and sustainability into the entire supply chain of the products they purchase and consume are putting pressure for companies to reimagine their supply chains. In IBV’s latest CEO study, boards are demanding 5X more transparency year over year around ESG performance which highlights the need for end-to-end data, visibility, and better automation across the breadth of global networks.
In response to the evolving global supply chain challenges, CSCOs are embracing innovative technologies like AI and automation as solutions to provide greater predictability, ecosystem interconnectivity and more responsible and sustainable operations.
Automation and AI can enable CSCOs and their organizations to collect data, identify risk, validate documentation, and provide audit trails, even in high inflationary periods, while also managing their carbon, waste, energy, water consumption, and material utility.
Companies who have cracked the code on supply chain sustainability aren’t shy about their recipe for success. CSCOs who are accelerating their data-led innovation are already outperforming their peers on key metrics are some are even reporting 11% higher annual revenue growth.
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As a result of embracing AI and automated workflows they have been able to focus deeper on cybersecurity, invest in their digital infrastructure, extend their sustainability initiatives and even create new products and services.
And it’s paying off – more than half (58%) of innovative CSCOs are seeing greater opportunities to improve customer engagement through sustainability imperatives.
Building partnerships for the greater good
Building a sustainable enterprise requires strong partnerships and cooperation at scale. Consider creating an ecosystem of partners to help your company realize a comprehensive supply chain strategy that is inclusive of the capabilities needed in scope 3 emissions reduction, protecting human rights imperatives, and connecting the first mile to the last mile in how materials are used, reused, and extended without increasing your carbon footprint. By working together, ecosystem partners can achieve greater real-time visibility, insights, and collective action for the greater good on their current and future business operations – the more innovative CSCOs are seeing 95% more benefits than other CSCOs!
The road ahead in realizing a sustainable supply chain is not without challenges, but there is a silver lining: there are actionable steps and a pragmatic roadmap that sets the course to ensure that your supply chain’s input and output are part of the solution to addressing the two biggest opportunities facing business and humanity: the global climate crisis and social inequities.
Creating a more sustainable, responsible and equitable world cannot happen in a vacuum – we must work together with powerful tools like AI to create supply chains that meaningfully impact the world in which we live and work; the world that we share.