For technology firms wanting to make their supply chain more sustainable, collecting and sharing data has emerged as a key challenge.

Across the world, awareness of environmental and social issues is growing fast. In the past five years, 85% of consumers have shifted their purchasing behaviour to become more sustainable, according to Simon-Kucher and Partners. With technology, a 2021 World Economic Forum report found consumers are demanding more transparency around how technology products are made and disposed of.

As well as consumers, the pressure to improve sustainability is coming from investors, regulators, and employees. An Economist Impact study found that, in response, over half of supply chain executives (53%) now list improving sustainability is their top strategic objective. In addition, 72% said their employer had set clear emissions reductions target and 75% said sustainable logistics operations were a key focus.

To achieve these sustainability goals, being able to collect, share, and analyse data is key. For example, to identify current emissions, track progress, and to demonstrate openness. As Mark Lotto, a supply-chain and procurement consultant and former leader in strategic sourcing at GE, told The Economist: “I think that push is really on getting data, being transparent, and then just showing general improvement.”

Barriers to sustainable supply chains

Globally, most technology companies are committed to showing general improvement. However, The Economist identified several significant challenges, which include:

Difficulty identifying and reducing scope 3 emissions

Scope 3 emissions are indirect emissions that occur in the company’s reporting chain, both upstream and downstream. They are outside the company’s operations. They account for more than 90% of technology companies’ carbon footprint. In all, 61% of those surveyed by The Economist said measuring the level of emissions and actions to tackle them was a challenge for them.

Lack of clarity and action on emissions reductions

59% of respondents said they struggled to get clarity around suppliers’ commitments and actions on sustainability.
Sustainability

Low internal buy-in

If a CEO or board of directors are behind the push for sustainability, the chances of success are much greater. However, 59% of respondents also complained of a lack of board or C-level involvement and commitment to sustainable supply chain optimisation. Just 18% of companies named the CEO as the main person driving sustainability, and only 14% named the board of directors.

These issues are reinforced by the lack of adequate data sharing infrastructure.

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The need for greater supply chain digitalisation

Around half of the technology companies survey by The Economist said they were concerned about the difficulties collecting and sharing supply chain data. One respondent, Katie McGinty, chief sustainability officer at the US conglomerate Johnson Controls, summarised the issue by saying there is a huge need for “gold, solid, reliable sustainability data”. This is particularly true in the technology sector, which – on other fronts - is highly data-driven.

Supply chain data analytics can improve end to end visibility and offer the information companies need to optimise all stages and reduce the overall environmental impact. In other words, data is key to improving supply chain sustainability and can be used to optimise:

  • Supply chain design
  • Supply chain monitoring

In the absence of an established data-sharing infrastructure, 49% of technology companies told The Economist that they were engaging with suppliers to collect emissions data and develop reduction initiatives across the supply chain. A further 22% are planning to do this within the next 12 months. In all, 68% say they are developing, or planning to develop, calculation methodologies to record and disclose this data.

In addition, many technology companies have turned to third party service providers for sustainability assessments and reporting. Mr Lotto says: “The data isn’t good enough to make those trade-offs, so instead we’re relying on third parties.”

Aspiring to sustainable supply chain management

The benefits of improving the data sharing infrastructure are significant. For example, it can help improve end to end visibility, which can be used to find opportunities to improve sustainability at all stages of the supply chain.

One of the greatest challenges with data in technology logistics is also one of the reasons why digitalisation in supply chain would be of great benefit. It has to do with the highly fragmented nature of the technology supply chain. According to The Economist, almost half of technology companies (49%) have tier 1 suppliers, which provide products directly to the company, in at least six countries. Another 13% have tier 1 suppliers in 11 to 20 sourcing countries. A data-driven supply chain has huge potential to upgrade supply chain visibility and boost opportunities for sustainable supply chain optimisation.

Not only can supply chain data analytics show what is currently happening, but it could one day help predict and prepare for what might happen. Jay Mortensen, executive advisor for supply chain optimisation with the South Korean tech giant LG says: “We need to be predictive.” He adds: “There are machine-learning applications, just a step down from AI, that can really manage and work through databases and find the trends and key points.”

Indeed, extracting the full value of digitalisation in supply chain requires the latest, cutting-edge technologies. A total of 28% of respondents think that advanced analytics will be the greatest game changer in this space.

The future of data analytics in logistics data

It’s clear that the sustainability imperative is pushing the transformation of technology companies’ operations. There is a huge commitment to change, and a data-driven supply chain could play a huge role in identifying areas for improvement, facilitating transparency and openness on progress towards goals, and achieving meaningful change.

As Mr Mortensen summarises: “Sustainability in the long run means having good data.”

For more on supply chain strategies to improve sustainability in the technology industry, read the Sustainable Reboot report by Economist Impact.

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