For organizations pursuing a sustainability agenda, the supply chain has to be a key area of focus. Why? Because up to 85% of environmental, social and governance (ESG) related impacts occur in the supply chain – including over 90% the emissions associated with providing an enterprise’s products and services.¹ Without supply chain transformation, there can be no sustainability transformation.

The good news is that organizations recognize this challenge and are taking action. In fact, 49% of companies say they’ve established supply chain sustainability goals,² and 70% say they’re planning to invest in circular economies that reduce waste through reuse and recycling.³

90%

Supply chains often account for more than 90% of the emissions associated with providing an enterprise’s products and services when considering their overall climate impacts.¹

49%

49% of organizations have established supply chain sustainability goals.³

Building a more sustainable supply chain

One definition of a “sustainable supply chain”, by the World Economic Forum has defined it as one where ESG considerations are embedded from raw material production to the delivery of the product to the end customer.

A growing number of organizations are taking this definition further, to encompass post-purchase processes like product returns and disposal. The notion of a circular economy—where products and materials are reused and re-cycled rather than thrown away—is key to supply chain sustainability.

More sustainable supply chains are contemplated to help:

  • Minimize GHG emissions.
  • Preserve resources by reducing, reusing and recycling.
  • Meet customer expectations while mitigating climate impact.
  • Tackle economic and social inequities through ethical and responsible sourcing.

 

The challenge: Turning ambition into meaningful action

Doing the right things to achieve your goals is tough. Only 40% of companies have identified the initiatives to solve their sustainability gaps, and only one-third have integrated sustainability objectives and metrics into business processes.⁴ And because much of the supply chain is outside of the organization’s direct control, it can be one of the hardest places to start making improvements.

So how can companies overcome the barriers to sustainability? The answer lies with intelligent supply chain solutions that maximizes visibility, traceability and control.

Four barriers to a more sustainable supply chain

Achieving sustainability throughout the supply chain is easier said than done. Organizations often encounter barriers including:

  • Access to data: Unavailable or fragmented supply chain data makes it difficult to take the right actions.
  • Inventory visibility: Lack of key inventory data can lead to over ordering which drives up costs, creates more waste and contributes to GHG emissions.
  • Insight into product provenance: The number of touchpoints in your supply chain makes it difficult to ensure that products and materials are responsibly sourced and all supply chain players adhere to set ESG standards.
  • High customer expectations: Customers expect their orders to be fulfilled rapidly, even the same day, but this can lead to environmentally undesirable logistics, packaging and transportation options.

 

New report: Institute for Business Value Chief Supply Chain Officer study

From intelligent workflows to extracting more value from data, see how 1,500 supply chain leaders are preparing for a more sustainable future today.

Get the report →

Green circle with white circles around

The importance of supply chain sustainability

Companies that are not already implementing sustainability practices in their supply chain may damage their long-term profitability because stakeholders of all kinds increasingly want to see organizations take meaningful action on sustainability.

  • 60% of consumers would change shopping habits to reduce their environmental impact, and more than 70% say traceability of products is very important to them.⁵
  • 70% of employees they would stay at a company with a strong environmental agenda, and 10% of millennials would even take a pay cut to work for one.⁶
  • Investors believe sustainable businesses offer the best returns.
  • Governments and regulators are implementing sustainability requirements and 60% of CEOs say they’re feeling pressure to be more transparent on their organization’s sustainability measures,⁴ as previously voluntary ESG reporting frameworks are becoming mandatory. The European Union’s new Corporate Sustainability Reporting Directive (CSRD), for example, sets out stringent ESG reporting requirements.


As if all this wasn’t reason enough, a sustainable supply chain can benefit business. Accenture found that average operating margins for companies with high ESG performance ratings are 3.7 times higher than those of lower ESG performers, while shareholders receive 2.6 times higher total annual returns.⁷

 

Build a more sustainable supply chain with IBM solutions

By working with IBM, you can build a new kind of supply chain: aiming to be transparent, auditable and more sustainable, resilient to market shocks and volatility.

IBM Supply Chain Intelligence Suite an AI-based optimization and automation solution that helps improve supply chain resiliency, increase agility and accelerate time-to-value by providing actionable insights, smarter workflows and intelligent automation.

IBM Sterling® Order Management is a smart order fulfilment solution that accelerates supply chain transformation by simplifying technology and implementation complexity to deliver omnichannel, real-time inventory management, curbside pickup, buy online pickup in store (BOPIS), and ship from store (SFS).

 

Avoid wastage and excess inventory

To use inventory effectively and avoid waste and aging, you need true end-to-end visibility and accurate materials planning. Removing data silos is critical and requires a solution that provides real-time visibility across your global supply chain.

Many supply chain teams try to plan using manual tools, with limited insight into the wider supply chain. But with volatility on the rise, this approach is no longer viable.

Leaders need real-time access to supply chain data to optimize efficiency and sustainability. That’s where IBM solutions can help.

  • IBM Supply Chain Intelligence Suite: Supply Chain ControlTower provides the visibility you need to orchestrate your end-to-end supply chain network, identify and understand the impact of external events to predict disruptions, and take actions based on configurable alerts and recommendations driven by AI insights.
  • IBM SCIS MRO Inventory Optimization help you uncover a clearer, more accurate view of maintenance, repair and operations (MRO) inventory and helps you optimize it by providing an accurate, detailed picture of performance.
  • Sterling Inventory Visibility processes inventory supply and demand activity to provide accurate and real-time global visibility across channels to prevent inventory stockouts and overselling.
  • IBM Planning Analytics with Watson® helps you easily create and adjust plans as needed by leveraging deep insights to understand what’s driving demand and create supply chain plans that are smooth, synchronized, responsive and resilient.

Facilitate responsible, trusted sourcing

As consumers and regulators demand evidence of responsible and ethical sourcing, assuring provenance has never been more important. Yet it can be difficult to exercise vigilance across a supply chain that involves many intermediaries.

Intelligent Supply Chain’s Transparent Supply enables you to build a viable and sustainable ecosystem of partners, designing business and governance models that reflect shared values:

  • Transact in a more trusted and efficient way by sharing data through an 
 immutable, distributed and shared blockchain ledger to ensure 
 provenance and quality, reduce waste, and increase profitability.
  • Provide transparency to purpose-driven consumers by helping them 
 purchase in line with their values—and deepen engagement by allowing 
 them to directly participate in sustainability initiatives.
  • Achieve and monitor compliance such as the FDA’s Food Safety Modernization Act Rule 204(d), by securely uploading, sharing, and verifying Critical Tracking Events and Key Data Elements using blockchain technology. Easily export reports when they’re required by the FDA, and run continuous reviews of your data to ensure you remain compliant.


For organizations in the food industry, IBM Supply Chain Intelligence Suite: Food Trust is a collaborative network you can join that is built on IBM Blockchain and based on Transparent Supply. It encompasses growers, processors, wholesalers, distributors, manufacturers, retailers, and others, enhancing visibility and accountability across the food supply chain.

The IBM Intelligent Supply Chains Trust Your Supplier helps you manage supplier risk more effectively by continuously monitoring suppliers to ensure they comply with your ESG and responsible sourcing policies. You can request certifications, create records of supplier practices and performance, and enable auditors to verify the accuracy and authenticity of documents you submit for review.

 

Meet customer expectations while mitigating climate impact

As consumers become more willing to choose low-carbon, low-waste options for shipping and packaging, meeting expectations is no longer just about speed of delivery. Enabling consumers to make choices in line with their values can help your organization reduce emissions and waste too.

IBM Supply Chain Intelligent Suite: Blockchain Transparent Supply allows you to receive, upload and exchange product carbon footprint (PCF) data in a standardized format, so you can more accurately track and disclose product-based carbon emissions across your supply chain. This blockchain-based technology helps you track and verify the accuracy of your Scope 1, 2, and 3 emissions and estimate the cradle to gate emissions of your products to substantiate your ESG claims.

Optimize order fulfillment and consolidate shipments into fewer packages with more environmentally preferable shipping methods using IBM Sterling Intelligent Promising.

Savings in product waste, reduced shipping packages, and smart order routing and orchestration can help to reduce your carbon footprint. Integration with carbon-accounting engines avoidance in CO2 emissions can be shown to online shoppers when asking them to make their shipping choices. The solution also provides a CO2 emissions dashboard to visualize emissions avoidance resulting from optimization.

Improve supply chain circularity

Consumers increasingly want to buy from companies that take actions to reduce waste and environmental impact. A survey of 5,000 European consumers 15 shows the weight of consumer sentiment:

  • 77% believe it’s important that products are recyclable
  • 22% are prepared to pay more for products that contain recyclable materials
  • 40% believe it should be forbidden to sell products that are not recyclable


Process returns using an order management system (OMS) and uncover the status of stock for reselling, refurbishment or recycling using IBM Sterling Order Management. Enhance your re-commerce sustainability value and present to customers along with visibility into CO2 emissions avoidance. You can also pair the solution with IBM Blockchain Transparent Supply for goods that benefit from proof of provenance.  

 

Make progress toward your sustainability goals with the help of IBM Sustainability Consulting Services and IBM Supply Chain Software.

Next steps

¹ Supply Chain Guidance (Link resides outside ibm.com), EPA United States Environmental Protection Agency, 4 February 2022.
² MIT, CSCMP: 35% of companies lack supply chain sustainability goals (Link resides outside ibm.com), Supply Chain Dive, 20 July 2020.
³ Circular economy (Link resides outside ibm.com): the future of supply chain, Supply Chain Digital, 17 May 2020.
Sustainability as a transformation catalyst, IBM Institute for Business Value, 10 January 2022.
Circular economy (Link resides outside ibm.com): the future of supply chain, Supply Chain Digital, 17 May 2020.
Meet the 2020 consumers driving change (Link resides outside ibm.com), National Retail Federation, 10 January 2020.
Why all bsuinesses should embrace sustainability (Link resides outside ibm.com), IMD. May 2002.