Supply chains and their impact on sustainability | AIOpodcast

Dr. Adrian Reisch
May 2, 2022
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Sustainability, circular economy and decarbonization: all extremely relevant themes for today's supply chains. Dr. Andreas Müller speaks with Georg Hantschke, supply chain sustainability expert at aioneers. What are the steps we need to take to make our supply chains more sustainable, and where do we start?

Andreas: Hi Georg, great to have you here today! Let's take this opportunity to discuss sustainability, circular economy, and decarbonization: all issues that are very relevant today. But before we discuss, let me briefly introduce you. For me, you are the perfect embodiment of sustainability. Your career started in supply chain. You did your masters in supply chain management in Rotterdam, and then you had your first experience with a manufacturing company before you finally joined consulting. You then went on to a start-up. If I remember correctly, they recycle, refurbish, or resell used mobile phones. This got you deeply involved with sustainability. Now, you lead sustainability efforts at aioneers.

But before we start, let's talk about an article I read: an interview in USAtoday with an ex-Blackrock manager on sustainable investments. He spoke about greenwashing and claimed many businesses listed in sustainable investment funds are greenwashing rather than doing real things. Quite the accusation!

Of course, this would be harder for us: we deal with real supply chains. Supply chains have positive and negative impacts, but it's impossible to greenwash them since we're dealing with real data and see real things happening. So, how can we increase positive impacts while avoiding negative impacts from supply chains?

Georg: When we look at supply chains, they are often global and span across multiple companies that work together to provide products and services to end customers. They directly impact company performance, both top, and bottom line. So, you can say, if supply chains do not perform well, the business will not perform well. However, while looking at sustainability, if the environmental and social impacts from the decisions made along the supply chains are not considered, effects like pollution, waste, and global warming occur uncontrollably. So, we go back to the old trade-off between realizing economic growth and its resulting standard of living while ensuring that whatever we do today enables future generations to live on this planet. This trade-off is usually made in favor of the immediate economic impacts, and that's one of the biggest challenges we see today. That is why I think, so far, the planet or how we live cannot be classified as sustainable.

Andreas: Supply chains have been accused of being the biggest polluters, creating the most significant negative impact. Of course, this isn't good. But: let's look at the potential. Because this large negative also means there's enormous potential to improve for good dramatically.

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Georg: Exactly, and I think if you make changes along the supply chain, and you make these changes in terms of positive impact on the environment, then you will see an immediate effect. So, you will be able to reduce the waste. You will be able to have more of an impact on global warming and other things. Supply chains are a big lever towards a more environmental and sustainable future.

Andreas: When we look at supply chains, we often speak about the performance gap. With all the data available, we can measure performance gaps quite easily. But what about sustainability? Can we include this? What are the potential means to do so?

Georg: At aioneers, we call this the sustainability gap in the supply chains. We look at the contribution, in general, of the economy, but especially supply chains, towards being able to live with the resource constraints of this planet – aiming not to overshoot them. Today, it takes the earth 18 months to replenish the used resources in one year, and so this gap is increasing. The United Nations' Sustainable Development Goals (SDG), evoked in 2015, tackle a broad range of fundamental social, economic, and environmental issues, targeting to close that sustainability gap. We would close the sustainability gap by reaching these sustainable development goals. The SDGs 9 and 12 relate to innovation, inventions, industries, and responsible production and consumption. These directly link to the supply chain, meaning if you contribute towards these goals, you help close the sustainability gap. The SDGs have vital topics, such as decarbonization, circular economy, and resources. As aioneers, these are issues we want to tackle.

Andreas: At aioneers, we developed closed-loop performance management. In closed-loop performance management, we start with analytics. Based on the findings from analytics, we have decision support from intelligent algorithms. Finally, execution management – and then it begins again. Like an infinity loop. How can we use this methodology and technology in the case of sustainability?

Georg: So, let's talk about decarbonization first. Decarbonization starts with measuring the carbon footprint of a supply chain or a company. We do that with aioneers insights. We refer to the greenhouse gas protocol to ensure that we follow the accounting standard for carbon emissions, measure the carbon footprint, identify the root causes of carbon emissions along the supply chain, and depict that and make it transparent in aioneers insights. I think that that's the starting point to establish the baseline of where you stand today with your carbon emissions. Then, of course, taking it further, you set your targets based on that. You say you have to reduce your carbon footprints. We then take into account the methodology of science-based targets. With science-based targets, companies can measure and determine their contribution to reducing global warming and aim to be carbon neutral. That is what we factor in. We use our capabilities to set realistic but ambitious carbon reduction targets, and then we execute that. Here aioneers impact comes into play. Measuring and setting targets is the first step. Realizing them by following initiatives and measures is next. Your initiatives in aioneers impact clearly outline what you must do to reduce carbon footprints. This is what decarbonizes the supply chain – not the theoretical exercises before. Therefore, the aioneers platform helps decarbonize supply chains and allows companies to transition into a decarbonized future.

Read our whitepaper on the corporate sustainability reporting directive!

Andreas: Absolutely. So when we think back to the claim about greenwashing, this becomes impossible because we're dealing with real objects and real data from the supply chain. Measures applied to these objects aim to reduce emissions or achieve other sustainability targets. But what about the circular economy – how can this technology support there?

Georg: I definitely think there are several valuable aspects. For a circular economy, obviously, with aioneers insights, we can look at the different products and materials of the company and determine, for instance, how many polymers are being used and the recycling potential of these polymers. Obviously, for a circular economy, you have to take a holistic perspective to enable a company to transition into a circular economy.

Andreas: This, then, is probably another topic for a different conversation. But I think we can round off our chat here. Georg, it was a pleasure to discuss sustainability compliance, decarbonization, and circular economy issues with you!

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