Transparency: The hidden value in the value chain
December 9, 2020
In 2017, I completed construction of a modern timber-frame eco-house in South Oxfordshire, UK. The timber came from responsibly managed forests. My builder told me that using sustainably forested timber is equivalent to removing almost 30 tons of CO2 from the atmosphere. And that’s the equivalent of 10+ years of emissions from a medium-sized car, or 40 flights from Cologne to Mallorca.
My interest in the origin of the things I purchase is one shared by consumers around the world, particularly during COVID-19. Consumers are increasingly valuing sustainability. Almost half (45%) of consumers say are making more sustainable choices during COVID-19 and will likely continue these habits in the long term.
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Blockchain: the Red String
Blockchain can help deliver the value chain transparency consumers demand.
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Businesses are responding by creating more transparent supply chains. It is why companies like retailer Everlane have taken the lead by partnering with ethical factories around the world, providing “radical transparency.” This includes the true cost of every product they make and “one-click” transparency on each of their factories.
Many senior executives in supply chain and operations are being tasked with building a responsible value chain. It’s no longer solely the realm of sustainability specialists. I see more and more companies requiring executives in all areas to bake sustainability into the business. That is not surprising, as 40% of CEOs say sustainability is driving revenue growth. And 35% say their company is realizing value through cost reduction because of their sustainability efforts. Sustainability is not only the right thing to do, it’s also good for business.
Each of my client conversations has its own nuances, depending on the company’s industry and particular needs. But all have one thing in common—technology. Why? Because you can’t get full transparency into your company’s value chain unless you use technology correctly and in an integrated way.
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45%
of consumers say are making more sustainable choices during COVID-19 and will likely continue these habits in the long term.
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Three characteristics of a responsible value chain
Accenture sees three areas comprising a responsible value chain. First, your company and brands must be trusted by consumers, employees and investors. Second, you must get to a net zero state through carbon-neutral products, production, and supply chains. And third, you need to master the circular economy model, moving away from linear value chains. That means driving resource-efficient business models and ecosystems.
To succeed in all of these areas, you need to shine a light into the deepest recesses of your business. And then you need to use artificial intelligence (AI) and analytics to highlight areas of opportunity. Where are the black holes in your supply chain, for example? Is it visibility into third-tier suppliers’ Human Resources or environmental practices? Is it the carbon emissions of your distribution fleets?
Many times, companies feel they’ve covered their bases because they can vouch for their own transparency. But consumers will hold your company responsible for slip-ups around your products, even if those mistakes came from an ecosystem partner.
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Integrated data makes it so much easier
The good news is that factories and warehouses are more digitally enabled. Smart machines collect data, as do smart products. When you integrate this data, trends, potential issues and opportunities become apparent. You can proactively use your own transparency to stop many issues before they occur. (For more on that topic, Accenture’s lead executive for Austria, Germany, Russia and Switzerland, Frank Reimensperger, discussed the importance of data for sustainable supply chains in Davos during the World Economic Forum.)
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Accenture is very active in this area. For example, we developed a tool for a multinational conglomerate to continually assess human rights risks across its supply chain. It uses business partner data, country data and site-specific data to give this company transparency it’s never had. In the COVID-19 era, as organizations move deeper into their supply chain benches to partner, a tool like this becomes invaluable.
We worked with a confectioner to develop a blockchain pilot that records the origin of cocoa beans, sharing this single source of truth with all parties involved. Not only does this help them share vital information with consumers, but it also helps in case of quality issues.
We helped a fashion company identify and quantify ways to maximize value from its pre- and post- consumer waste streams, redirecting materials to be more sustainable and support a circular economy.
For a major beverage company, we helped embed sustainability into their plan for a factory of the future. The company wanted to reduce energy usage per unit, achieve zero-waste-to-landfill, and integrate circular economy principles throughout its operations. We identified US$10M annual savings in waste. We also developed production and HVAC energy analytics programs projected to drive 5% to 15% savings in annual energy costs.
Bottom line--many executives still talk about sustainability in future terms. But leading companies are making great strides now.
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For a major beverage company, we helped embed sustainability into their plan for a factory of the future . . . We identified US$10M annual savings in waste.
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Not if, but when
It’s not a question of whether to build a responsible value chain. Rather, it’s a question of how —especially when you see the results from companies who have taken the plunge. Accenture 2020 research shows highly sustainable brands are growing at 2x the rate of other brands. And even during COVID-19, responsible business leaders have delivered 6.3% higher cumulative returns and lower volatility.
For more on transparent supply chains, check out my colleague’s blog on the topic. And for more on supply chain topics overall, please visit our supply chain blog landing page.
