What is a sustainable supply chain?
A sustainable supply chain is a concept that focuses on creating an environmentally friendly, socially responsible, and economically profitable value chain. This is an important aspect for companies that want to fulfill their responsibility toward the environment and society. However, a sustainable supply chain can also be a major challenge as it requires extensive review and optimization.
In a sustainable supply chain, suppliers and partners must meet environmental requirements and specific standards and ensure that the products and services they offer are environmentally friendly and socially responsible. Creating a sustainable supply chain requires close cooperation between companies, suppliers, service providers, associations and politicians.
Laws and requirements for a sustainable supply chain
European Green Deal
Companies that want to create a sustainable supply chain must not only define their own sustainability standards, but also comply with legal requirements and regulations. Many countries already have laws and regulations that require companies to make their supply chains sustainable. In the EU, among other things, there is a regulation on conflict minerals, which states that suppliers should not source minerals from conflict-affected workplaces (e.g. mines).
In addition, there are also requirements for working conditions and environmental protection that all companies must comply with. Accordingly, a sustainable supply chain requires precise knowledge of legal requirements and close cooperation with suppliers.
The laws and regulations at a glance
Laws and regulations require companies to reduce their greenhouse gas (GHG) emissions and to review their supply chain for sustainability and social responsibility. The abbreviation GHG stands for Greenhouse Gas Emission. GHG emissions are an important factor as companies are forced to measure, report and reduce their emissions. Scope 1-3 refers to the different areas in which companies precipitate greenhouse gas emissions.
Companies must ensure that they cover all areas in order to reduce their emissions. In addition to the Supply Chain Sustainability Act (SCSA), which has been in force for some time, the EU has just passed a European supply chain law that sets out even stricter requirements. These laws oblige companies to check their supply chain for sustainability and social responsibility. The aim of these laws is to oblige companies to avoid causing human rights violations or environmental damage.
The background for the laws and regulations
The background to the laws and regulations is the growing pressure from consumers, investors and governments to ensure that companies fulfill their social and environmental responsibilities. In addition, companies have recognized that a sustainable supply chain is more profitable in the long term and more resilient to risks.
Sustainability along the entire supply chain
Ensuring sustainability in the supply chain is a complex challenge. In the manufacturing industry, for example, environmental requirements for parts, components, materials and substances play an important role. Sustainability initiatives must therefore range from the procurement of raw materials and logistics to production returns and recycling processes.
Key issues in the sustainable supply chain:
● Environmental compatibility
● Social responsibility
● Transparency
● Resource efficiency
● Circular economy
A sustainable supply chain should be designed to have as little negative impact on the environment as possible. This includes, among other things, the use of environmentally friendly means of transport and the avoidance of non-compliant packaging. Likewise, a sustainable supply chain should take social aspects into account. Compliance with labor rights and fair working conditions for employees throughout the supply chain is essential.
It is also important that the sustainable supply chain is designed to be as resource efficient as possible. Among other efficiencies, the consumption of energy and raw materials can be minimized by implementing ideals from a circular economy concept. In many cases, adherence to product compliance requirements also helps to ensure that products meet applicable environmental and safety standards. If these regulations are complied with the products can be sold in the EU without any problems.
IIn addition, there are strategic proposals such as the European Green Deal and the Circular Economy Action Plan (2020) from the European Commission. Both also address issues around a sustainable supply chain and cite the need for a digital "Product passport" as an essential tool for a climate-friendly and resource-efficient economy. The Product Passport discloses information about the environmental and social compatibility of products and helps consumers make conscious purchasing decisions.
For companies to remain competitive, they must find solutions to make their supply chain sustainable and transparent. One important task on the way to a sustainable circular economy is the digitization of environmental requirements in order to simplify and accelerate verification and approval processesstarting with the product creation process.
Creating a sustainable supply chain through transparency
A well-coordinated supply chain can speed up the product development process and ensure a punctual start of production (SOP). As manufacturers' customers in particular are increasingly scrutinizing the sustainability of products, companies must ensure a transparent supply chain - from raw materials to end products and from product creation to the start of series production.
A sustainable supply chain should be transparent so that the origin and quality of the manufacturing industry's products can be traced. Supply chain transparency also allows potential risks and problems to be identified and mitigated or eliminated at an early stage. A transparent supply chain makes it possible to monitor conditions and ensure that child labor and environmental pollution are not happening. The higher the transparency of the supply chain, the more the issue of sustainability can be traced.
Challenges related to a sustainable supply chain
The value chain presents companies with challenges related to a sustainable supply chain. Until now there were long, complicated communication channels, old-fashioned systems, and manual processing which led to a high error rate. One challenge is to compensate the increasing effort due to the growing number of requirements with an optimized process in the verification process.
In many cases, the verification process is still particularly time-consuming, error-prone and difficult to understand due to manual data entry. The solution is to digitize the requirements and make digital verification possible for every component. Digitization enables easier communication between suppliers, companies and laboratories and ensures that the end product meets the requirements.
An ideal solution for implementation is a supply chain collaboration platform. This platform ensures standardized and simplified verification of environmental indicators.
An example of one such supply chain collaboration platform is material.one - the first product and material release management platform of its kind.
Use case: Digital verification for a sustainable circular economy with material.one
The Circular Economy is the industry term for an economy in which resources are used for as long as possible and waste is avoided. The traceability of products and materials can play an important supportive role in proving conformity to environmental requirements even at the extremities of the supply chain. material.one is a supply chain collaboration platform that helps companies to make their supply chains more transparent by creating a digital twin of the individual parts and material components.
By digitizing Circular Economy requirements, companies can trace the path and, above all, the origin of materials and products throughout the supply chain and ensure which materials and alloys they are made from. Likewise, it can be determined which materials the subcomponents used are made of and that they meet quality and environmental requirements. Companies benefit from a comprehensive database with information on sustainable materials, such as reused or recycled materials, as well as their origin and availability.
Companies can thus specifically select suppliers who can meet these requirements. By using material.one, companies can also reduce CO2 emissions throughout the supply chain. Finally, the platform provides information on the CO2 emission values of materials and products. In this way, targeted measures can be taken to reduce CO2 emissions and manufacture products in a climate-friendly way.
Use Case: Future Sustainable Car Materials - BMW Group relies on material.one platform
Source: BMW Press Portal
As part of a research project entitled "Future Sustainable Car Materials", material.one is responsible for the digitalization of environmental requirements and verifications. This project is being carried out by the BMW Group.
The aim of the project is to gain new insights from the research results in order to make cars more sustainable in the future. The implementation of new Circular Economy processes plays a central role in this project.
Use Case: Circular Economy - Digitization of recycled content records at AUDI
Source: Audi press portal
The challenge: Before using material.one, component-level data collection of sustainability KPIs (recycling and CO2) was time-consuming and error-prone. Many suppliers and service providers did not work together in an integrated way in the supply chain. The entire process generated a lot of manual effort for data collection and aggregation. Metadata was scattered and not available in a centralized location in a standardized process.
The solution: material.one as a central platform now integrates all Volkswagen internal systems for metadata. It is a completely digital process from the CAD file to the digital dossier based on the digitized Volkswagen standards for recyclable materials and CO2.
Conclusion
In summary, a sustainable supply chain enables companies to act in an environmentally responsible and socially equitable manner while being mindful of profitability. It requires close cooperation between all stakeholders and strict compliance with environmental and occupational standards.
However, implementing such a supply chain presents challenges, especially in terms of transparency and communication. The supply chain collaboration platform material.one offers an innovative solution to this by simplifying the process and enabling companies to accurately track the origin of their materials as well as the CO2 emissions generated in their production.
Companies like BMW and Audi already rely on material.one for their sustainability initiatives. Become part of this movement for a more sustainable future in your industry.
Would you like to make your supply chain more transparent? Try material.one now! Take the next step towards becoming a responsible company and actively contribute to environmental conservation.
Learn more about the BMW and AUDI use cases
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With material.one all stakeholders can collaborate a standardized manner in a compliance conforming way based on the "need to know". As an industry cloud platform, material.one provides information on material and material sampling, percentage of recycled material, certificates as well as CO₂ footprint information.