Connect, anonymize, democratize, decide
Implementing connectivity, analytics, AI, ML
to transform supply chains toward sustainability
Posted December 2, 2021
By Malinda Salter
Connectivity is one of the most significant opportunities for brands, retailers and their supply chains to build more sustainable business ecosystems.
Shareholders and stakeholders gauge the positive and negative impacts a brand or retailer and its supporting commercial ecosystem have on the natural environment. Effects from resource use, chemicals, toxic substances, the management and treatment of effluents, emissions and waste, climate change risks and carbon availability are areas the industry is collecting data on, attempting to manage and making suitable changes around. The availability of valid and verified data supports effective management. Producers gather data throughout the supply chain.
Connectivity and open access to valid, verified data between supply chain partners are needed to assess the impacts of a supply chain. In other words, lack of connectivity, transparency and traceability remains the hurdle to the systemic transformation towards more sustainable production of consumer goods.
Several solutions on the market can privately store and report data extracted from supply chains. The industry is working towards a publicly available, collective deposit of available data supply chains, including their environmental and social impacts, allowing for true transformation towards a more sustainable supply chain solution.
One intriguing solution is the Blue Map used by the Institute of Environment and Public Affairs in China. Blue Map is a great framework to be aware of and expand upon, as the impact data needed to decide where to make what with whom, out of what materials, should be openly accessible.
Solutions are also available from Coupa, E2Open, Resonance, retraced, TexBase and Scivera, to name a few. Respectfully, while these are indeed excellent solutions, they have their limitations to driving systemic change, as they each serve a commercial need and are not looking at the industry as a collective whole, transparently presenting their data. Third-party certification systems are sitting on decades worth of data, simply degrading with time, data that could be modeled for industry insights.
In addition to these existing solutions, industry organizations, academics and governments collect data. Thus, there is a tremendous opportunity to look at data in retail and CPG supply chains.
A top-tier provider on data management and analysis, such as SAS Institute, could securely and safely access privately and publicly held data using qualified data protection and anti-fraud tools. They can then democratize, anonymize and reveal powerful insights from the global supply chains.
Further technological opportunities exist
As a curious, proactive and engaged industry, retailers and the CPG ecosystems have an expanding scope of sustainability concerns beyond measurable environmental and social impacts. Retailer interest in complex processes like reforestation, regeneration, biodiversity, circularity and the restoration of natural harm is snowballing. We chase new sustainability solutions and seek out new data points to track improvements, yet the management and analysis of this data remain unfinished, offering further technological opportunities.
In addition, traditional data is not always readily available through typical means, such as sensor readings, test reports and transactional document scanning, making the need for analytics even greater.
Several areas of sustainability technology have lagged in development or reached their threshold of beneficial returns, where connectivity and data analytics may drive systemic transformation through artificial intelligence and machine learning. However, a leapfrog in innovation is approaching. Social impacts struggle to enter the spotlight in sustainability reports and have been abandoned mainly by environmental scientists.
It is challenging to quantify an organization's impacts on its most important stakeholders, the employees, families, customers, suppliers, communities and any other person affected by the business. While measuring social impacts presents complex challenges such as anonymity and ethics, the expansion of IoT and AI will offer solutions for tracking benchmarks and improvements.
Data management and analyses will drive transformative solutions in sustainability for brands, retailers and their supply chains. We want to be agile and predictive, based on market demand and sustainable production insights. However, at its core, environmentally and socially responsible processes and sourcing are still non-integrated, lacking data collection/validation/verification throughout the supply chain, making it very difficult to upgrade the industry ecosystem to its best version of itself.
We need to be informed and agile in response to sustainability matters, not only demand disruptions, such as COVID. Therefore, we will begin to see messaging around "COVID" now shift to "sustainability."
Let's have a closer look at the areas where industry could analyze collective data sets to reveal impacts in an unprecedented fashion:
Human and worker rights. Protecting fundamental human rights and ethical working conditions should be a cost of business by brands and retailers. Ethical working conditions, child labor, health and safety, worker safety, such as noise control, climate, air, escape plans and PPE, plant and building safety, and accident prevention cannot be policed or enforced without information availability for objective reporting.
Once brands and retailers know the facts, they can drive change through their wallets, responding to consumer sentiments. Brands, retailers and the CPG industry could have the available information to make sound ethical buying decisions and drive change through the dollar, anonymously sharing their data, giving insights into processes, geolocations, even policy impacts. Equitable income disparity can occur when supply chains become democratized and weighted accordingly.
Environmental impacts. Environmental protection and comprehensive resource management are essential for financial accounting and the assessment of socio-ecological impacts. Brands, retailers and consumers should have access to information regarding emissions and effluents, carbon footprint impacts and reduction, wastewater management, waste handling, chemical use and storage, plus energy efficiencies. These impacts are environmental yet impact greater society, and quality of life may be understood through advanced analytics using artificial intelligence and machine learning.
Cost mitigation. Material and processes have cost impacts. Cost mitigation occurs through improved process time, raw materials, speed, resource use, violations and fines, and each can be mitigated in procurement, lowering the impacts of a product. Demand planning and forecasting tools help to apply pressures from buyers for optimization. Eventually, brands, retailers and the CPG sector will have more power and influence on who and what occurs within the supply chains. The demand planning should ultimately be reaching upstream to mining raw materials and looking more closely at agriculture, including environmental and, increasingly so, the social impacts related to low prices (see Turkmenistan, Uyghur, cotton, mining industry).
Risk. Risk defines a firm's ability to sustain itself during change. Supply chains are not static but dynamic, constantly changing, and at risk of disruption, variable and volatile. Firms face valuations and assessments from financial institutions and require impact insights. Strategic sourcing demands more significant insights to predict risk in unstable business ecosystems. In addition, climate risks are increasing, and brands and retailers need to be agile in designing supply chains. Managing supply chain and retail risks help fortify a firm's value, indicating that they create sustainable supply chains.
Reporting schemes. Industry must address objective and transparent reporting of greenhouse gases, effluents, emissions, projections, test reports, documentation, CSR, social standards, and other parameters. Currently, the industry lacks standardization. As a result, international regulations, partner compliance, and industry demands remain segregated, and a collective industry standard and reporting scheme has yet to be devised and adopted.
One result is an over-abundance of third-party certifications, overlapping efforts and limited insights. Unfortunately, third-party certifications offer a few barriers to sustainable development. The tendency is for collected data by these certification organizations to be subjective, unavailable for public review, updated only annually, driven by industry sectors such as the chemical industry, and costly. They hold the certificate holder at a point in time and act as a barrier to innovation leaps.
Another result is the demand for audits, which exhausts the auditors performing the audits and the factories that agree to the assessments as a cost of doing business. Finally, resources are poorly used and managed without a streamlined solution for collecting, communicating, and storing various data points in which multiple parties are interested.
Compliance. Adhering to the requirements of brands and retailers, governing bodies and industry initiatives demand a series of compliance parameters and guidelines to obey. Compliance pressures are crafted and implemented by many entities, each with individual motivations and demands that are often not aligned, and unfortunately often, non-transferrable for various causes. This variety of stipulated limit values, non-standardized, has led to costs in time, effort and finances that impact all supply chain partners, ultimately a company's bottom line and consumers' product costs. Of course, there should be a resource that collects, compares and assesses the parameters and requirements of international and private needs.
We’ve only scratched the surface
Most brands and retailers and their supply chains are beginning to understand how data analytics can reveal their socio-environmental impacts upstream to raw materials.
As an industry, we have only scratched the surface of what can be done with data-driven solutions on the path to sustainability, the environmental, social and economic impacts.
Instead, the industry has relied on temporary solutions that have outlived their usefulness. Many older solutions now act as barriers to innovation. The costs of maintaining antiquated solutions with limited returns are no longer practical, and a leap of innovation must occur to reach transformative change to meet the sustainability goals.
I cannot wait to see the systemic transformation, which is why I entered the field of data analytics. Why should the industry fear sharing electricity bills or test reports in a world where data is protected for international banking, utilities and governments? It used to be that they didn't want to share the actual cost of production. Is this still the issue? The black boxes and the lack of insights will need to evolve from isolated, privately owned, siloed data into a functional and useful, accessible resource to allow existing supply chains to improve and for new partners to enter the ecosystem.
Brands, retailers and the CPG industry have an opportunity to make a systemic transformation towards more sustainable manufacturing and, therefore, products.
Piecemeal solutions, certifications and bolt-on solutions have limitations that block a technological leapfrog towards an innovative future. So which brand, retailer and CPG partner will begin the inevitable shift in technology and initiate systemic transformation towards a more sustainable supply chain ecosystem?
Malinda Salter is a senior industry consultant in Sustainability for Retail and CPG for SAS, the leader of data analytics, based in Cary, N.C. Her industry background spans 25 years and includes textile and apparel design and R&D on 7th Avenue, management of textile archives of the British Museum, sales and auditing for the OEKO-TEX™ Association and professional consulting services before transferring to the software industry. She holds textile design and management degrees from the University of Wisconsin-Madison, Fashion Institute of Technology and N.C. State’s Wilson College of Textiles.