A circular economy is among the long-term measures needed to combat climate change. This requires data transparency across supply chains
Despite businesses having plenty of data on the procurement side, it may not be rich enough to enable the organisation to demonstrate that it is meeting sustainability targets.
The linear nature of supply chains means that disposal of waste products from a business process are not accounted for with the same level of detail as raw materials procurement. In this linear relationship, the supply chain has a carbon footprint that grows as more raw materials are consumed. But someone’s waste materials may be someone else’s raw materials. This is the basis of a circular economy.
In May, the article New circular networks in resilient supply chains: an external capital perspective, published by open access academic publishing platform MDPI, said that by breaking with the linear production model with substantial modifications in both operations and relationships, the principles of circularity can give the supply chain greater resilience and a more flexible response to future disasters of a variety of disciplines at different levels.
Governments are putting into place measures to stimulate the circular economy. The EU Circular Economy Action Plan (2020) is part of the European Green Deal and Europe’s agenda for sustainable growth. It introduces legislative and non-legislative measures promoting a circular economy along the entire product lifecycle to ensure that resources are kept in the EU economy for as long as possible. Similarly, the UK government has said it is committed to moving towards a more circular economy.
In its Point of view circular transition paper, Deloitte notes that the economic benefits of moving to a circular economy include a reduction of material costs through decreased volume requirements, for example through more efficient use of materials or use of existing waste streams (internal or external) and the ability for a business to repurpose its own waste streams, which leads to lower waste management costs. There are also the upcycling benefits and the opportunity to optimise processes for closed loop operational designs. In turn, this leads to energy cost reduction.
“Sustainability is top of mind for many of our customers,” said Michiel Verhoeven, UK&I MD at SAP, at a recent roundtable that took place ahead of the UN Climate Change Conference, COP26. “With COP26 on the horizon, it is a necessity to have sustainability,” he said. “It doesn’t take Greta Thunberg to say it. We have to do it. We need to decarbon processes.”
The data challenge
A survey conducted for SAP, based on 5,621 responses collected across 16 industries, 19 countries and four continents, found that regulatory pressures are driving many organisations towards sustainable business models. However, the top barrier among the organisations SAP spoke to (35%) was the difficulty in embedding sustainability into business processes and IT systems.
UK organisations that took part in the survey said the collection and analysis of data led to unsatisfactory data quality. The survey reported that 28% feel it is not collected frequently enough, 23% believe it is incomplete or does not cover the correct scope, 22% want it to be accessible sooner, and 21% believe there is little transparency in how calculations are used to generate results.
While manufacturers have plenty of “upstream data” relating to raw materials captured in procurement systems, there is far less metadata covering what happens to waste materials downstream.
As Deloitte warns in the Circular transition paper: “Despite its elegance as a solution in addressing modern sustainability challenges, closing resource loops often entails greater amounts of planning and coordination to be successful. A well-working circular economy means thinking in systems and loops.
“This requires actors within supply networks to adopt and maintain more collaborative mindsets, ensuring resource recapture and reintegration. No matter the internal support, a transformation cannot be accomplished in isolation and would require careful consideration and coordination from design through execution.”
One example of how such collaboration is needed is discussed in Raising ambitions – a roadmap for the automotive circular economy, a paper from the World Economic Forum (WEF) in collaboration with Accenture, which was published in December 2020.
Among the areas covered in the paper was lifetime optimisation, which concerns how to extend vehicle and component lifetimes. According to Accenture and the WEF, this pathway can be led by car manufacturers as well as by aftermarket service providers. The paper’s authors note that it requires close coordination and information exchange between producers and aftermarket servicers.
“Necessary interventions on this path include modularising vehicle design, strengthening workshops as circularity hubs, scaling reuse and remanufacturing, and shifting to fleet-based and on-demand mobility solutions,” they wrote. “This pathway increases per-vehicle passenger kilometres. It also helps to reduce non-circular resource consumption and carbon emissions.”
In the chemicals industry, EY believes advances in digital technology can also be leveraged to enhance the transparency and credibility of circular value chains. The authors of the recently published EY paper Can repurposing drive your purpose? wrote: “Use of artificial intelligence and blockchain solutions for tracking and tracing material can provide increased confidence in the true source, and circular nature, which a customer may be paying a premium for.”
EY says a business strategy that is circular with a fully certified value chain, which is aligned with business partners, strengthens the commercial value of the end product, and provides options for participating in potential credit-trading schemes (such as for plastics) as they emerge and mature.
Achieving this requires a seamless supply chain from sourcing through to recycling. Collecting data in the correct format and providing this across a supply chain requires industry and international standards and joined-up IT to trace raw materials from sourcing to recycling. Such data can help organisations at every stage of the circular economy to minimise contamination, which ensures a higher yield from recycled waste materials.
For example, Wouter van Tol, head of sustainability at DS Smith, a company that provides corrugated paper packaging, says: “In waste, we need closed loops. We pick up recycled material and turn them into packaging. Achieving net-zero is impossible without technology.”
Topolytics is a data analytics firm that aims to make the world’s waste accountable. Its CEO, Mike Groves, believes that the traditional model of a supply chain makes it difficult to gather data on which components used during the manufacture of a product and packaging can be recycled economically. According to Groves, there is a multibillion-pound opportunity in the recycling industry, but 60% of waste materials go into landfill. “Capturing value is difficult because the way waste infrastructure is designed is for a linear model,” he says.
There is a lack of the visibility that is required to move to a circular model, which improves sustainability, says Groves. For instance, the movement of materials during the manufacturing process is suboptimal. Traceability is needed across the supply chain from the time raw materials are picked up, delivery, movement through the manufacturing process and then transfer somewhere else as a waste material.
“Making systems much more visible, with data on what it is and where it is, can create value in downstream businesses,” he says. From the product manufacturer’s perspective, the data also helps operationally. “Waste producers don’t get to see this data instantly,” he adds.
The data provides insights that can help decision-makers to understand where best to intervene and transact with businesses specialising in waste material to deliver an optimal recovery outcome, based on the volume of material recovered, says Groves. “If we look at a CPG [consumer packaged goods] company or a manufacturer, which has immediate concerns due to compliance, we can see a quick return and there are efficiency gains.”
Along with waste materials from the upstream manufacturer’s production sites, on the recycling side, investing in automation and machine visions are key to streamlining the recycling process. Waste Robotics, for instance, is a company that develops software to recognise waste materials and facilitate robotic extraction. One of its customers is Groupe Gagnon, which offers a source collection programme for Styrofoam.
Waste Robotics provided a fully automated robotic sorting line that allowed for robotic extraction of these materials. The system comprises an in-feed conveyor, a spreading conveyor, a sorting conveyor, a platform and one gantry-style robot system equipped with artificial intelligence vision and a Waste Robotics proprietary robotic grappling tool.
According to Topolytics’ Groves, data across the supply chain can help waste processors to determine their return on investment. “They can build a business case to invest more in recycling,” he says.
Analysing a supply chain
Last year, Topolytics worked with SAP and three of its customers – DS Smith, BrewDog and Coca-Cola – to co-develop a prototype called WasteMap, the aim of which was to demonstrate producer responsibility and enhance environmental, social and corporate governance (ESG) reporting on resources, materials and waste.
Running in Scotland, the project provided a live view of waste materials moving into, through and out of Scotland. The project involved ingesting, processing and analysing data on products, materials, production and process wastes. Topolytics then calculated the types and amounts of materials, and their current pathway through the “downstream” materials supply chain. This generated insights that could then be used to improve materials recovery and reduce the associated environmental impact.
Explaining the benefits of these metrics, Martin Dickie, co-founder of BrewDog, says: “Measuring carbon impact across our supply chains is vital – including that of our brewery, distribution and retail waste. The starting point is understanding what happens to the material that is handled by our recycling and waste management partners.”
Looking at the results of the pilot, Groves says: “We showed we can model all the data, how we can marry the data from SAP in terms of types of materials and weight, and then how we get that data into waste systems.”
According to Groves, the project demonstrates the complexity of a circular economy, but also offers a useful lexicon of how to approach the problem. “We are using that in Asia to model the flow of materials,” he adds.
Global and industry standards
As DS Smith’s van Tol points out, standardisation is necessary to improve sustainability and recycling. “It is a crying shame that perfectly good fibre ends up in landfill,” he says. “Why can’t we separate paper and card and have one standard for the collection and recycling of materials across Europe and the UK?”
Fortunately, firms are recognising the importance of sustainability in their business strategy. The State of sustainability in the global 200 report, published in January by analyst firm Forrester, found that 58% of the Global 200 firms have created a position for a director, vice-president, or executive to lead their sustainability programmes. This role is responsible for driving climate action and establishing long-term sustainability goals for the entire organisation, across waste, water and energy.
By thinking in terms of a circular economy, businesses can find new opportunities. Anglian Water, for instance, has been working with SAP to find what Andy Browne, head of sustainability at Anglian Water, describes as “unknown unknowns”. He says: “We have started discussions to see how to build a circular economy thinking in how you select suppliers and how you map opportunities where you can replace an input in one of your business processes with someone’s output.”