Consumer interest in sustainable goods and services is much more than buying reusable or following a trend. It's now part of everyday life, from the packages we buy, to the food we eat, and the homes in which we live. The same is true for midsize businesses – especially in their supply chain operations. In a survey of companies with annual revenues of less than $1 billion across 41 markets and 28 industries, the SAP Insights research center discovered that most supply chain organizations are incorporating sustainability directly into their strategies for increasing efficiency and driving revenue growth. This mindset influences everything from the location of plants, warehouses, and suppliers to the distance goods travel and the selection and onboarding of eco-friendly and socially ethical vendors.
This finding underscores the massive transformation supply chains must undergo to be competitive. While important to brand reputation, sustainability should be part of a balanced trifecta with operational efficiency and revenue growth. Doing so yields the lowest-possible cost with the greatest customer satisfaction while optimizing environmental, social, and governance (ESG) performance.
The SAP Insights report states, "Midsize companies with supply chains that quickly incorporate sustainability and the circular economy into their plans for growing revenue, increasing efficiency, and mitigating risk are well-positioned to differentiate themselves and gain a competitive advantage."
Increasing regulations are driving the need to act
Supply chains – as well as the rest of their business – are no strangers to sustainability-related government regulations and industry requirements. Packaging companies must demonstrate that every tier of their supplier network, for example, meets plastics recycling standards, doesn't use banned and dangerous substances, and is free from illegal, unsafe, and unfair employment practices.
Although they may initially incur higher costs, suppress efficiency, or limit growth, those mandates can kick off a series of competitive advantages in the long run. Consider the UK Plastics Pact, implemented to eliminate problematic or unnecessary single-use packaging and help ensure 100% of plastic packaging is reusable, recyclable, or compostable and contains 30% recycled content on average.
Compliance with the plastics pact resonates with a growing customer base that prefers sustainable brands and a workforce that wants to work for companies that drive results with ESG initiatives. In addition, investors – from the stock market to venture capitalists and industry-adjacent businesses – are influenced by the company's overall sustainability performance index. Plus, companies can consider more-efficient approaches to producing and shipping products through different materials, new manufacturing processes, or alternative suppliers.
In most cases, the desire to optimize the positive impacts of these sustainability initiatives has driven most supply chain organizations to further their digital transformation as a means to improve profitability and competitiveness. Based on the SAP Insights findings, the most sought-after technologies include cloud computing, employee collaboration tools, cybersecurity infrastructure, automated business intelligence dashboards, and business process intelligence.
All these technologies enable midsize businesses to view sustainability holistically and within the context of their operational efficiency and revenue growth. For instance, a combination of cloud solutions, collaboration platforms, process automation, and AI can help supply chain participants produce sustainable products and deliver them to customers with little impact on the environment and society.
Henkel: Digital approach to ease tax compliance
Henkel AG is dedicated to reimagining and improving life every day through innovative and sustainable consumer products brands and technologies. To deliver to or sell its products in Spain and the United Kingdom, the company and its customers must comply with tax laws on plastics. It also needs to provide customers with sustainability data on its products, so they can comply with the law and gauge the environmental impact of choosing Henkel brands. To this end, Henkel is using a digital approach that is supporting the company to:
- Create compliant and efficient tax reports for business users using an accurate database
- Reduce manual and time-consuming work when validating data and performing tax reports
- Increase the accuracy of sustainability data through intelligent processing and integration
- Gain insight on the design and production of products and packaging to increase efficiency
- Improve collaboration, analytics, forecasting, and simulations on sustainable packaging
Balance is the key to a competitive supply chain
Sustainability alone cannot solve every supply chain challenge. However, it can direct, complement, and amplify the outcomes of efficiency and revenue growth strategies. And by making changes now, midsize organizations will see a substantial ROI on those initiatives later – an intelligent and sustainable supply chain that fuels ongoing business competitiveness.
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