In a world where disruption is constant and sustainability is an ever more pressing business priority, investing in these areas will help paper manufacturers build resilience without compromising their ESG activities or their bottom line.
Paper manufacturers have already implemented numerous sustainability initiatives in recent years, although volatile material and energy costs, supply chain issues and the shortage of skilled workers have exacerbated the issue.
In fact, there’s a stronger case to be made for paper companies to maintain and even redouble their sustainability efforts. Doing so would not only keep them on track with increasing ESG (environmental/ social/ governance) requirements, targets and commitments, it could also give them a competitive advantage by helping to address the disruptions they’ve been dealing with lately.
For paper-manufacturing organizations, the connection between sustainability and profitability is growing stronger. A new study summarizing research from Oxford Economics found that businesses with an emphasis on sustainability and reliance on ERP report profitability performance 46% higher than peers who do not.
So where should paper companies target investments to drive value and results, and still act sustainably in the face of disruption? Here are five potentially high-impact areas:
1. Managing material and energy costs more closely.
In the National Association of Manufacturers’ Q32022 outlook survey, manufacturers ranked raw material and energy costs among the biggest problems they face today. What’s more, getting enough materials to the right factories at the right time can still be challenging. Meanwhile, for ESG reporting and carbon-footprint-tracking purposes, manufacturers also need to be vetting and tracking the provenance of raw materials, as well as the resources and emissions associated with transporting and using those materials. They also need to be tracking the cost and emissions associated with their operational-energy inputs.
To better manage all these risks, manufacturers are shifting their supply chains closer to home. A recent ABB Robotics & Discrete Automation survey of manufacturing executives found that 37% of US businesses are planning to bring production back home and 33% are looking to nearshore and shift their operations to a closer location. In tandem with these physical operational shifts, they’ll also need to ensure they have the track-and-trace and modeling capabilities to identify optimal pathways for sourcing materials and energy supplies. For example, RFID sensors used in tandem with blockchain technology can help supply-chain managers track and confirm the ethical and environmental provenance of the materials they source.
2. Improving collaboration and visibility to build resilience across the supply chain.
In a recent SAP survey of senior business decision-makers, more than half (52%) said they believe their supply chain needs much more improvement and one-third said they expect supply chain issues will persist through the summer of 2023.
Embracing a business network or ecosystem approach, where multiple tiers of suppliers, distributors, logistics providers and other partners are connected and sharing data in close to real time, can give paper manufacturers the visibility they need to identify potential supply chain issues. It can also help them meet their sustainability goals and responsibilities. Within the network construct, a manufacturer and its suppliers and logistics providers can use analytics and modeling tools to collaboratively develop optimal pathways for warehousing, transportation, etc., that balance reliability, resilience and cost with emissions and carbon-footprint factors. All this is predicated on manufacturers having connectivity and visibility beyond their own walls, across multiple tiers of suppliers, through last-mile logistics, all the way to the customer.
We’re already seeing this type of network approach gain traction in the automotive industry. The Catena-X consortium, which includes some of the biggest names in the European automotive value chain, is creating standards and channels for the exchange of data about material traceability, carbon-footprint management, and demand and capacity management. Not only is participation in this ecosystem enabling manufacturers to overcome supply-chain disruptions, it’s also supporting their efforts to meet mounting sustainability-related regulatory requirements.
3. Making factories smarter and more efficient.
Using Industry 4.0 capabilities like automation, the Industrial Internet of Things (IIoT), digital twin and predictive analytics, paper manufacturers can find new cost-effective ways to minimize waste and make more efficient use of assets, energy and resources during production. They can also draw insight from the data they gather to reduce the lifecycle carbon footprint of the end products they make, how the example from Steinbeis Paper (link) illustrates.
4. Further expansion of circular-economy principles. Since a high proportion of the total product emissions in manufacturing can be traced back to purchased materials and components, companies in the paper industry are stepping up their efforts towards the circular economy. As a result, recovered paper is increasingly a valuable and high-demand commodity, and companies are trying to secure access to it directly from communities and major retailers by building their own take-back circuits. Not only do they significantly reduce the carbon footprint of their products, they also counteract supply chain disruptions and material shortages, making them more resilient. Numerous companies in the paper industry are already benefiting from such circular business models.
5. Smarter product design.
When it comes to packaging design, prioritizing a minimalist approach using fewer materials can be a win-win. Such an approach can not only reduce material and manufacturing requirements and costs, but also make these products more attractive to customers who, as we know, take carbon footprint and other sustainability factors more into account in their purchasing decisions. Using modelling/simulation technology, manufacturers can iterate during the design/engineering process to optimize sustainability, profitability and quality while considering material availability. This also applies to the reduction of plastic in the primary (composites) but also secondary and tertiary packaging, as more and more countries and regions also impose a tax on plastic.
In a world where disruption is constant and sustainability is an ever more pressing business priority, investing in these areas will help manufacturers build resilience without compromising their ESG activities or their bottom line.
If you’d like to know a bit more about SAP sustainability solutions in action, watch these short demo videos or request a demo.