Sustainable Supply Chains & Circular Economy for Future-Ready Businesses PDF

Sustainable Supply Chains and Circular Economy for Future-Ready Businesses GoImpact Capital Partners 2024 Sustainable Supply Chain Key Deﬁnitions and Current State of Climate Change Supply Chain Management Strategies Importance of a Sustainable Supply Chain Assessing and Managing Sustainability Risk in Company’s Supply Chain Sustainable Supply Chain Procurement, Traceability, and Transparency 2 Circular Economy Introduction to Sustainability Challenges Introduction to Circular Economy Transitioning to a Circular Economy and its Beneﬁts Framework Applications Stakeholder Engagement and its Applicability Waste Management Policies and Its Impact on Business Circular Business Models and Relation to Sustainable Supply Chains Quiz 3 Warm-Up Question How familiar are you with Sustainable Supply Chains? 1. I have never heard of them or I have heard of them, but don't know what they are. 2. I have some idea what they are, but don't know how they operate. 3. I have a clear idea what they are, but haven't work with them. 4. I can explain what they are, and I have work experience. 4 Key Definitions and Current State of Climate Change 5 Deﬁnitions What Is Sustainability?_ In the broadest sense, sustainability refers to the ability to maintain or support a process continuously over time. In business and policy contexts, sustainability seeks to prevent the depletion of natural or physical resources, so that they will remain available for the long term. (investopedia.com) A Common Misunderstanding Alert: avoid mixing the definition In the broadest sense with the definition from business and policy contexts. Supply Chain Sustainability_ The management of environmental, social and economic impacts and the encouragement of good governance practices, throughout the life cycles of goods and services. The objective of supply chain sustainability is to create, protect and grow long-term environmental, social and economic value for all stakeholders involved in bringing products and services to market. (UN Global Compact) 6 Global Greenhouse Gases Emissions Global Supply Chain CO2 emissions reached an unprecedented level of 37.4 Gt in 2023. Various factors influenced the change in CO2 emissions between 2022 and 2023, cumulatively accounting for nearly two-thirds (255 Mt CO2) of the 410 Mt overall increase. 7 Source: CO2 Emissions in 2023, IEA, 2024 Global Supply Chain Emissions by Sector Focusing on supply chain emissions is a key way to address climate change. A small number of supply chains, only eight, are responsible for half of the world's emissions. Additionally, most companies' emissions (75% on average) come from their supply chains (scope 3 emissions). 8 Source: WEF, Nov 2023 Biggest Carbon Emitters The MSCI Sustainability Institute Net-Zero Tracker A periodic report on progress by the world’s listed companies toward curbing climate risk 9 Policy Solutions for Global Impact Scientists evaluated 1,500 climate policies implemented over the past 25 years. They identified the 63 most successful climate policies. Instruments were categorized into policy types: information, pricing, regulation, and subsidy. These four policy types are central to high-level political discussions on optimal policy design. Scaling up the successful policies to other sectors and regions globally can be a powerful short-term climate mitigation strategy (Stechemesser et al. 2024). 10 Summary In the broadest sense, sustainability refers to the ability to maintain or support a process continuously over time. In business and policy contexts, sustainability seeks to prevent the depletion of natural or physical resources, so that they will remain available for the long term. CO2 emissions reached an unprecedented level of 37.4 Gt in 2023. Most companies’ emissions come from their supply chains. Focusing on supply chain emissions is a key way to address climate change. 11 Sustainable Supply Chain Management Strategies 12 Supply Chain Management The management of activities surrounding the flow of raw materials to the finished product or service (includes recycling and returns) a set of approaches utilised to integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimise system-wide costs while satisfying service level requirements Slack an allowance in the system to accommodate uncertainty in the supply Supply Chain: two or more parties linked by a ﬂow of chain, or inflexibilities, or to take advantage of economies of scale or scope resources typically material, information and money 13 Simple & Extended Supply Chains A simple supply chain is more straightforward, focusing on direct relationships and immediate processes. In contrast, an extended supply chain involves a holistic lifecycle approach with greater complexity, requiring 14 coordination and sustainability efforts across a larger and more interconnected network. Reverse Supply Chain Reverse supply chain (reverse logistics) is a process that enables businesses to recapture value from returned or end-of-life products and components. It includes all activities associated with the return of goods, including collection, sorting, refurbishing, remanufacturing, and recycling. Benefits of implementing reverse supply chain: - Extending product life by reselling refurbished products - Reduced disposal costs by recycling materials from used products - Improve brand reputation as being environmentally friendly and committed to sustainability 15 Source: Understanding reverse logistics, fleetx, 2022 Case Study: Cobalt Supply Chain 16 Source: Jeff Desjardins. (2017). Cobalt: A Precarious Supply Chain. Visual Capitalist. Case Study: Cobalt Supply Chain Video: Inside the Congo cobalt mines that exploit children A Sky News investigation has found children as young as four working in dangerous and squalid conditions in Cobalt mines in the Democratic Republic of the Congo for as little as 8 pennies a day. 17 Source: Jeff Desjardins. (2017). Cobalt: A Precarious Supply Chain. Visual Capitalist. Think Moment! Answer the following questions based on the video: 1. Why are children working in cobalt mines, and how does this work impact their health and future opportunities? 2. What role do international companies and consumers play in the demand for cobalt, and how can they ensure their supply chains are free from child labor and exploitation? 3. What steps can be taken globally to promote fair labor practices and protect vulnerable populations in the sustainable energy transition? 18 Stages of Supply Chain Management Strategies Sustainable supply chain management (SSCM): the management of material, information and capital flows as well as cooperation among companies along the supply chain while taking goals from all three dimensions of sustainable development, i.e., economic, environmental and social, into account which are derived from customer and stakeholder requirements. The 3 foundational Supply Chain Management Strategies are based on a legal, Source: Seuring and Müller (2008) ethical, and responsible approach, each with a higher level of maturity. 19 Source: What Makes a Supply Chain Sustainable, Searcy, MIT Sloan Management Review, 2016 Stages of Supply Chain Legal Supply Chain Strategy Requirement: operate within the law. Mantra: do what is required. There are a number of legal rules and regulations that need to be followed by organizations. The Supply Chain Strategy must cater to all legal rules. As an example, according to the Restrictions of Hazardous Substances Directive (RoHS) 2002/95/EC, an organization must not rely on the mercury, cadmium and chromium as they result in huge emission of hazardous substances. Corporate policies should be set to include legal rules abidance. We should also build a strong internal culture where employees are driven towards the compliance of rules and regulations. 20 Stages of Supply Chain Ethical Supply Chain Strategy Requirement: operate with integrity. Mantra: do what is right. To become an ethically strong organization, it is required that the organization operates with integrity and focuses on what is right. The organization could develop a policy that governs the organization’s operations. Supply Chain quality assurance team could also be built which comply with ethical sustainability. The organization can also follow the requirements of the International Labour Organization to become ethically strong. 21 Case Study: LVMH Moët Hennessy Louis Vuitton LVMH is the world's largest luxury brand group. ○ In 2023, LVMH reported a proﬁt of €22.8 billion. Human Rights and Working Conditions: ○ LVMH has faced criticism for its supply chain's poor working conditions and human rights violations. ○ Workers are reportedly paid as little as $2/hour, while products like luxury bags are sold for $2800. ○ Some workers are forced to sleep in factories to be available 24 hours a day. ○ Machine safety measures have been removed, increasing the risk to workers in favor of faster production. Ethical Considerations: ○ The unethical practices in LVMH's supply chain highlight the need to ensure living wages are paid throughout their supply chain. ○ Fair treatment and safe working conditions are needed. 22 Sources: Forbes, Financial Times, Haumann 2024 Supply Chain Dilemma Supply chain executives face significant decisions in their ESG strategies. Actions are ranging from “do what’s mandated and comply with guidelines and regulations” to “do what’s right.” There is no single correct approach, and each decision carries cost implications. 23 Stages of Supply Chain Responsible Supply Chain Strategy Requirement: operate responsibly. Mantra: do more good and less bad. To become responsible, the organization could spend resources in compliance with sustainable rules. The organization also could set up training and development programs to drive sustainability within the organization The organization can also focus on environment-friendly activities to boost its social responsibility. A Supply Chain that is legal, ethical, and responsible is NOT necessarily sustainable. 24 Stages of Supply Chain Sustainable Supply Chain Strategy Sustainable Supply Chain Strategy Requirement: operate within social and natural thresholds. Mantra: do what lasts. To comprehensively measure Supply Chain Sustainability, we need to evaluate the 3 Cs: context, collaboration, communication. 25 Source: Searcy, 2017 Stages of Supply Chain Management Strategies 26 Advantages of Sustainable Supply Chain Management “ Advantages: Minimising and avoiding risk Designing efficient business processes and strengthening the capacity for innovation Strengthening transparency and living up to higher standards in the business environment Creating values collectively (BMUB 2017) 27 Supply Chain & Small and Medium-sized Enterprises Simplified ESG Disclosure Guide for SMEs in Supply Chains: Malaysia provides SMEs in global supply chains with streamlined and standardized ESG disclosure guidelines. The Guide was developed by Capital Markets Malaysia, an affiliate of the Securities Commission Malaysia. The Guide references key standards, including Bursa Malaysia’s Listing Requirements and Sustainability Reporting Guide, FTSE4Good, GRI, IFRS S1 and S2, TCFD, and CDP. The 35 disclosures are categorized into Basic, Intermediate, and Advanced levels to accommodate varying degrees of sustainability maturity across companies. Source: Capital markets Malaysia 2024 28 Summary Supply Chain Management is the management of activities surrounding the flow of raw materials to the finished product or service. Reverse supply chain is a process that enables businesses to recapture value from returned or end-of-life products and components. The 4 stages of Supply Chain Management strategies are legal, ethical, responsible, and sustainable. To comprehensively measure supply chain sustainability, we need to evaluate context, collaboration, and communication. Many global steps are needed to promote fair labor practices and protect vulnerable populations during the sustainable energy transition. 29 Importance of Sustainable Supply Chain 30 Value Chains Value Chain: Activities that take a product from conception to distribution, and everything in between—(i.e. procuring raw materials, manufacturing functions, and marketing activities). step-by-step business model for transforming a product or service from idea to reality. help increase a business's efficiency so the business can deliver the most value for the least possible cost. creates a competitive advantage for a company by The value chain is large and complex and most of its emissions increasing productivity while are invisible to end users. keeping costs reasonable. 31 Source: The Next Frontier of Carbon Accounting, RMI, 2020 Sustainability & Value Chains Sustainability across the consumer products and retail value chain There are 22 speciﬁc actions designed to embed sustainability throughout the value chain. Best practices: Empower consumers and employees through awareness, education, and choice to deeply embed sustainability. Position technology at the core of sustainability initiatives to drive value Build in robust sustainability governance Collaborate with the broader ecosystem for a greater impact. 32 Source: Capgemini Research Institute Analysis, 2020 Case Study: Runamics Value Chain Runamics is a German running brand that creates sustainable sportswear. Its goal is to become Cradle to Cradle certified across its entire portfolio. Source: Henke, Kohl 2021, p. 47 33 Supply Chain Sustainability In 2023, corporates reported that Scope 3 supply chain emissions were, on average, 26 times greater than their direct operations emissions (Scopes 1 and 2), according to a report “Scope 3 Upstream: Big Challenges, Simple Remedies” by Boston Consulting Group and CDP, 2024. 34 Source: MIT Sustainable Supply Chain, 2021 Exercise: Emissions Reduction Planning Develop strategies to reduce emissions throughout your business's supply chain. Identify planning horizons on a roadmap and break down actions by emission types (Scope 1, Scope 2, Scope 3) across different time frames: for near-term (0-2 years), medium-term (2-5 years), and long-term (5+ years). 35 Sources: Massey 2023, page 38 UN Global Compact 36 Best Practices Council of Supply Chain Management Professionals (CSCMP) The State of Supply Chain Sustainability report Supply Chain Sustainability Award Massachusetts Institute of Technology Sustainable Supply Chain Lab Circular Supply Chain Initiative Supply Chain Carbon Emissions The MIT Global SCALE Network 37 Source: MIT-CTL State of Supply Chain Sustainability, 2023 Suppliers’ Management Model 1. Supplier sustainability is ignored 2. Supplier sustainability is “on the agenda” and discussed in company meetings 3. Suppliers are asked to report their impacts 4. Suppliers have to agree to audits and controls against a “code of conduct” 5. Suppliers have to set speciﬁc goals 6. Suppliers are subject to penalties and incentives regarding their sustainability goals 7. The company collaborates with competitors to create industry-wide improvements 8. The company invests in suppliers’ sustainability through training 38 Source: Sheffi, 2018, page 397 Pathway Towards Sustainability Building and optimizing supplier relationships offers opportunities to: Improve supply chain resilience. Increase efficiency and productivity. Manage and reduce operational costs. Minimize labor disruptions. Create business value through increased market share and price premiums. Goldman Sachs' equity research found that organizations practicing these methods have: A 16% valuation premium over competitors. 3% higher EBITDA than companies without such practices (14% vs. 11%). 39 Source: ERM, 2024 Merging Proﬁtability with Social Responsibility Over the past 20+ years, new leaders in traditional sourcing have emerged, notably in the Philippines and India. Traditional sourcing, like offshore contact centers, has been widely used to optimize efficiency and reduce costs. “Impact sourcing is an inclusive employment practice through which companies in global supply chains intentionally hire and provide career development opportunities to people who otherwise would have limited prospects for formal employment.” (Rockefeller Foundation on Global Impact Sourcing Coalition). Embracing impact sourcing enables businesses to make a substantial positive impact. It demonstrates that profitability and social responsibility can successfully coexist. 40 Source: Impactify, 2024 Activities for Sustainable Supply Chain Management Sustainable supply chain management is a marathon, not a sprint. Sustainable supply chain management must be integrated into various existing internal processes to be effective. BMUB, 2017 Bányai et al. 2022 41 Case Study: Decathlon Second Life With a mission to move towards a zero-waste policy, Decathlon Singapore has implemented a sustainability initiative, known as “Second Life”, to make a positive impact on the planet and its people. Combined with its 365-day return policy, this is an excellent way to extend product use and reduce waste. The project aims to: 1. Provide users with the option to sell back used Decathlon products and purchase returned Decathlon products in resellable conditions at even lower prices 2. Give every sports product, from home gym equipment to bicycles, a sustainable future by repairing, refurbishing, and reusing 42 Source: 2022 Decathlon Non Financial Reporting Declaration VIDEO: Decathlon Second Life 43 Summary The value chain, which is the full lifecycle of a product, is large and complex and most of its emissions are invisible to end users. Business drivers for supply chain sustainability can be broadly categorized into sustainability-related risks, sustainability-driven productivity, and sustainability advantaged growth. Sustainable supply chain management must be integrated into various existing internal processes to be effective. 44 Assessing and Managing Sustainability Risk in a Company’s Supply Chain 45 Sustainability risks Sustainability Risk Categories: Reputational risk Regulatory risk Litigation risk Competitive risk Strategic risk Supply chain risk Competence and productivity risk The Sustainability Risk Assessment framework: a life-cycle assessment of a product, a sustainability risk assessment, a study of these risks effects using activity-based life-cycle costing. Sustainability risks should be managed in relation to effects on internal and external stakeholder value creation, including, but not limited to cost. 46 Source: Schulte and Knuts, 2022 Sustainability risks Cases studies and extensive interviews with more than 250 experts. “Business executives' personal opinions on environmental sustainability are irrelevant.” The business merits of environmental sustainability are based on the fact that even the most ardent climate change skeptics in the C-suite face natural resource costs, public relations problems, regulatory burdens, and a green consumer segment. Three basic business rationales for corporate sustainability efforts: cutting costs, reducing risk, and achieving growth. For companies, sustainability is not a simple case of “profits versus planet” but is instead a more subtle issue of (some) people versus (other) people—those looking for jobs and inexpensive goods versus others who seek a pristine environment. 47 Source: Balancing Green by Yossi Sheffi; with Edgar Blanco ESG Risk Management ESG risk can take many different forms encompassing operational risks as well as human rights risk (risk to people, not risk to the company) or negative Environmental and Social impacts which then become reputational risks or financial risks. 48 Source: Managing ESG risk in the supply chains of private companies and assets., PRI, 2021 Implications When evaluating risks in a sustainable Supply or Value Chain, there are 3 key implications that we must take into consideration. Hierarchy of Supply Chain / Value Chain Priorities Establishment of Thresholds End-to-End Supply Chain / Value Chain Analysis 49 Implications Hierarchy of Supply Chain Priorities Insufficient economic activities could disturb the organizational goal of becoming a sustainable Supply Chain based organization. The need to possess a strong economic system is a necessity as it enables the organization to possess a sustainable Supply Chain. Lack of environment-friendliness could also serve as the major barrier in the process of becoming an organization with a sustainable Supply Chain. Therefore, the organization must define the environmental threshold. Lack of social threshold could also serve as a major problem. Therefore, the organization must maintain a balance between social and environmental thresholds. 50 Implications Establishment of Thresholds The lack of agreed-upon thresholds could serve as the major problem which hinders sustainable organizational growth. The organization has to enhance the number of agreed-upon thresholds to grow. The development of sustainable goals is also necessary as it provides a clear cut direction on how the organization could achieve the goals in the long or short term. The organizations can also check the areas of improvements and growth. Missing sustainable organizational standards could serve as the barrier which could hinder the organizational goal from becoming a sustainable Supply Chain organization. 51 Implications End-to-End Supply Chain Analysis It is vital to conduct an end-to-end Supply Chain analysis system, as every link in the chain affects the broader Supply Chain, and thus every link needs to be held accountable. One organization (or group) needs to take the leader in the effort, but attention and analysis cannot be restricted to the leader. Be aware that the greatest impact on sustainability may not be driven by the largest organization. 52 Dealing with Risks … benefits from this? … makes decisions about this? Who … have you also heard discuss this? … will be the key people in this? … is this harmful to? … is most directly affected? … would be the best person to consult? … deserves recognition for this? … are the strengths/weaknesses? … is another alternative? What … is the best/worst case scenario? … can we do to make a positive change? … is another perspective? … would be a counter-argument?... Is most/least important? … is getting in the way of our action? … would we see this in the real world? … is there the most need for this? Where … can we get more information? … will this idea take us? … are there similar concepts/situations? … in the world would this be a problem? … do we go for help with this? … are the areas for improvement? 53 Source: Global Digital Citizen Dealing with Risks … is this acceptable/unacceptable? … would this cause a problem? When … will we know we’ve succeeded? … can we expect this to change? … would this benefit our society? … is the best time to take action? … has this played a part in history? … should we ask for help with this? … is this a problem/challenge? … is this the best/worst scenario? Why … should people know about this? … have we allowed this to happen? … is it relevant to me/others? … are people influenced by this? … has it been this way for so long? … is there a need for this today? … is this similar to _______? … do we know the truth about this? How … does this benefit us/others? … do we see this in the future? … does this disrupt things? … will we approach this safely? … does this harm us/others? … can we change this for our good? 54 Source: Global Digital Citizen Assessing Risk in Supply Chain In order to manage these supply chain related risks, we first have to pinpoint where these risk prone areas within our supply chain. A thorough mapping of the entire value chain within your organization’s supply chain. Conduct a yearly Risk Assessment. Implement a robust Risk Management plan. Consistent monitoring, reporting, and updating of the Risk Management plan if necessary. 55 Supply Chain Risks Source: Hugos 2024. 56 Supply Chain Mapping To gain a comprehensive understanding of the movement and sources of goods and materials, the company should establish a thorough mapping of its supply chain. Implementing key performance indicators (KPIs) such as geographical distribution of suppliers, nature of sourced materials, and labour practices. These measurable goals are crucial to guarantee ongoing advancements and continual improvements in the supply chain processes. 57 Source: Sedex, 2023 Risk Assessment and Management Annual Risk Assessment: Risk Management Plan: Evaluate supply chain weaknesses, assess Track and appraise effectiveness of risk their impact, and rank them by importance. control measures. Utilize suitable tools for risk evaluation. Give precedence to the most impactful risks. Pinpoint high-impact risks. Continuously monitor and report on risks to Define strategic areas of focus based on risks. enhance the plan. Establish priorities taking into account local Proactively reduce risks through mitigation requirements. strategies. Shift risks whenever feasible. 58 Risks Types Not all risks leading to supply chain disruptions are the same. Known-known risks: These are risks that we are fully aware of, understand their likelihood, and can plan for in advance, such as typhoons impacting suppliers in Southeast Asia. Known-unknown risks exist, but their potential impact cannot be accurately quantified, such as earthquakes in Japan. Unknown-unknown risks: These are "black swan" events or novel risks in which we do not know what can happen, when it might happen, or what the impact will be, as exemplified by the COVID-19 pandemic. 59 Source: Hugos 2024 Risk Mitigation Strategies 60 Data for Risk Management 61 Source: https://supplychains.trase.earth Sustainability Risk Management Beneﬁts Sustainability Risk Management beneﬁts include: Brand differentiation Reputational risk mitigation Innovation and market opportunity creation Attracting, engaging, and retaining talent Increased operational efficiency and supply chain resilience Access to international investors or business partners Partnerships with international organisations 62 Sustainability Risk Management Checklist Source: https://www.process.st/checklist/sustainability-risk-management-checklist/ Case Study: Risks in Supply Chain Climate Change and Fishing Dispute in the South China Sea Fish accounts for 22% of the region's protein intake. Declining fish stocks and high demand increase competition, potentially leading to future serious confrontations. Fisheries have already led to disputes between China, Vietnam, and the Philippines. Sustainable fishing and conflict resolution mechanisms are essential for ensuring long-term fish stock viability and regional stability. 63 Source: Climate Diplomacy 2024 Summary The Sustainability Risk Assessment Framework composes of a life cycle assessment of a product, a sustainability risk assessment, and a study of these risks effects using activity-based life-cycle costing. When evaluating risks in a sustainable supply chain, the hierarchy of supply chain priorities, establishment of thresholds, end-to-end supply chain analysis must be taken into consideration. Risk mitigation strategies are essential for a sustainable supply chain. ESG risks can take many different forms and encompass various risks. 64 Group Activity: Personal Supply Chain Mapping 65 A single smartphone can carry approximately 80% of the stable elements on the periodic table. Over the past century, human-made mass has increased rapidly, doubling approximately every 20 years. 1970 and 2015, human consumption of earth's natural resources more than tripled. Every year, we extract almost 90 billion tons of raw materials from the earth. 66 Source: Elements, 2021 Supply Chain Mapping Choose an item you use in your daily life. Research the raw materials needed to make it and how these raw materials come together to form the finished product. Also research what kind of transportation is used to get the final product to you. Is this product sustainable? 1. What are the raw materials needed for this product? Where are they found? 2. What are the steps involved in making this product? Where does each step in the production take place? 3. What energy is needed to produce this item? Where does that energy come from? 4. What kind of transportation, if any, is needed at each stage of the production process, including getting the finished product to you? 5. Is there a corporate returns policy for the product? How does this factor into the supply chain? 6. What type of slack might there be in this supply chain, and where, and for what reasons? 7. What do you imagine are the key challenges in the planning and operation of this supply chain? Describe its supply chain as you know or imagine it & go as far upstream & downstream as possible. 67 Sustainable Supply Chain Procurement, Traceability, and Transparency 68 Responsible Sourcing Six steps to responsible Responsible sourcing, also referred to as supply chain sourcing responsibility, is a voluntary commitment by 1) Selecting a supplier companies to take into account social and 2) Set clear expectations on environmental considerations when managing compliance with the law their relationships with suppliers. 3) Integrate responsible sourcing into buying practices 4) Support suppliers in setting their own business standards 5) Track supplier compliance 6) Manage stakeholder expectations and reporting. Source: International Chamber of Commerce. 2016. World Economic Forum, 2022. 69 Supplier Engagement Supplier engagement is a set of mechanisms or interventions that are implemented with suppliers to build compliance with policy commitments across the production base. Companies can use the supplier engagement approach to help them implement their commitments to responsible sourcing. Supplier engagement plays a large role in scope 3 emissions tracking and management, as supply chain emissions account for on average more than eleven times the emissions of a company’s own direct operations. Scope 3 emissions: all the emissions associated, not with the company itself, but that the organisation is indirectly responsible for, up and down its value chain. For example, from buying products from its suppliers, and from its products when customers use them. For many businesses, Scope 3 emissions account for more than 70 percent of their carbon footprint. 70 Source: Deloitte (n.d.) What should We Consider When Engaging Suppliers on ESG? 1. Set the right key performance indicators (KPIs). 2. Work towards consistency in supplier reporting. 3. Give suppliers the resources they need to meet compliance standards. 4. Collaborate on your joint journey towards sustainability. 71 Source: Terrascope, 2024. Case Study: Singtel Efforts Supplier sustainability assessment Singtel: “Collaboration with socially and environmentally A) Identifying key suppliers (5,227 suppliers globally) conscious suppliers will help us B) Assessing suppliers’ environmental and social focus areas mitigate a significant proportion of our sustainability risks.” Third-party sustainability risk assessments of current suppliers A Sustainability Self- Assessment Next steps Questionnaire: corporate governance, diversity, human rights, labour rights and anti-modern slavery, work health and safety, environmental and energy management, and conflict minerals. 72 Case Study: Singtel Efforts Singtel requires 100% of their new suppliers to accept Singtel’s requirements in the Singtel Supplier Code of Conduct which includes “Environmental management” and “Human Rights and Modern Slavery”. Singtel’s Supplier Code of Conduct requires supplies to adopt environmental management practices and encourage them to properly track and report greenhouse-gas emissions. Singtel also says that they will continue to refine other requirements such as labour rights and life cycle management. 73 Source: Singtel Sustainability Report 2023 Supplier Sustainability Audit The term supplier sustainability audit (SSA) makes it clear that the audits are not optional, voluntary audits (such as SA 8000, ISO 45001 etc.) that an organisation decides to undertake itself, but rather are audits requested, commissioned, and demanded by Focal Companies. SSAs encompass audits of the suppliers’ operations (headquarters and/or production facilities) with the aim of evaluating the supplier’s sustainability practices and compliance with sustainability requirement, including an assessment of both social and environmental aspects of sustainability (Fraser et al. 2020). Supplier Sustainability Audit A broad range of environmental and social supply chain audits: Initiative for Compliance and Sustainability (ICS) Higg Facility Environmental Module (FEM) Social and Labor Convergence Program (SLCP) Worldwide Responsible Accredited Production (WRAP) Equitable Food Initiative (EFI) ERSA 2.0 Fraser et al. 2020 75 Supply Chain Transparency & Traceability Transparency: The process of disclosing your suppliers to stakeholders and consumers for them to understand how goods are produced, the labor practices involved, the journey of the products from source to consumer, and any environmental impacts that arise in the process. Supply chain transparency goes hand in hand with traceability Traceability: The ability to identify and trace the history, distribution, location and application of products, parts, and materials; ensuring the reliability of sustainability claims. Source: Transparency-ONE, 2018 How is Transparency Measured? There are a variety of technologies that track and trace products by: 1. Physically tagging products 2. Digitally recording events and transactions through the product’s lifecycle Key Elements in creating a successful transparency and traceability tool: - Focus on a specific industry - Incorporating first-mile integration and end-to-end visibility - Integrate with readily accessible data - Leverage APIs 77 Source: Transparency and Traceability, CLP, 2021 Case Study: Certiﬁcation and Labels Cradle-to-Cradle Certification It is a product-focused certification that assesses a product’s life cycle for environmental and social impact. Products evaluated across five different categories. Has helped companies to innovate and optimise products that enable a healthy, equitable, and sustainable future. 78 Source: Cradle to Cradle Certified Case Study: Certiﬁcation and Labels Ecovadis It is a globally recognised sustainability assessment platform rating companies’ sustainability performance of their supply chain based on four key categories. Mission: Guiding all companies toward a sustainable world Ratings range from bronze (insufficient) to platinum (advanced), providing a clear benchmark for a company’s sustainability efforts. 79 Source: Ecovadis Case Study: Certiﬁcation and Labels APICS Certified Supply Chain Professional (CSCP) First and only supply chain certification encompassing end-to-end global supply chain. Individuals can study flexibly (self-study/instructor) and must pass the exam before attaining certification. Equips individuals with skills to effectively manage global supply chain activities. 80 Source: APICS CSCP Case Study: Certiﬁcation and Labels Certification and Labels Product-level certification Encourages transparency by Does not directly address promotes transparency as requiring companies to disclose transparency. consumers can access detailed information about their Transparency information about the product’s environmental and social policies circularity, material health and and practices through supply chain. environmental impact. Responsible sourcing is incentivised Encourages responsible sourcing by Does not directly address by ensuring materials used are assessing a company's supplier responsible sourcing. However, it safe, products are recyclable, and engagement practices and may indirectly contribute to Responsible Sourcing that product manufacturing results commitment to ethical sourcing responsible sourcing as it is one of in a positive impact on air and the and sustainable procurement the key topics covered in APICS climate. principles. CSCP programme, which can result in increased awareness. Focuses primarily on product Relies on self-reported data from Not a dedicated sustainable supply design and manufacturing and may companies, which raises concerns chain certification, thus its impact Limitations not address broader supply chain about potential greenwashing. may be limited. sustainability issues such as labour practices. 81 Summary Supplier engagement plays a large role in scope 3 emissions tracking and management. Responsible sourcing is a voluntary commitment by companies to take into account social and environmental considerations when managing their relationships with suppliers. There are six steps to responsible sourcing. Supplier sustainability audits are not optional and voluntary, but rather requested, commissioned, and demanded. Supply chain transparency goes hand in hand with traceability. 82 Introduction to Sustainability Challenges 83 Economic problems and industrialization have increased demand for resources and waste generation, amplifying pollution and emission of greenhouse gases, degradation and biodiversity loss. Supply chains are crucial for companies’ climate action. Approximately 60% of global carbon emissions comes from supply chains. Hence, businesses must see sustainable supply chains as an integral part of its transitioning strategy. 84 Source: Accenture, 2023 What Will How will the People Eat world function in in 2050? 2050 if vital resources become scarce? 85 Introduction to Circular Economy 86 Warm-Up Question How familiar are you with Circularity? 1. I have never heard of this term or I have heard of it but don't know what it is. 2. I have some idea what it is, but don't know how it works. 3. I have a clear idea what it is, but haven't work with it. 4. I can explain what it is, and I have work experience. 87 Deﬁnitions Circularity: the fraction of a product that comes from used products Product circularity: the extent to which linear flow has been minimised and restorative flow maximised for its component materials, and how long and intensively it is used compared to a similar industry-average product Circularity of the system: accounts for reduced use of virgin materials, reduced output of waste, increased use of renewable energies and increased energy output during end-of-life. 88 Source: Corona et al. (2019) Video: Circularity in Our Life “Circular economy” means running the economy like nature runs its own business: plants use carbon dioxide and nutrients to grow and produce oxygen. Nothing is wasted. It is a closed loop system. Circular economy is generally opposed to the linear economy (take-make-waste) we have been running for many years. 89 Think Moment! Answer the following questions based on the video: 1. Explain two transition strategies to create a circular economy: substitution and dematerialization. 2. What are the real life examples of substitution? 3. How to implement the circular economy principles to achieve a sustainable supply chain? 90 Transitioning to Circular Economy and its Benefits 91 In the linear economy, raw natural resources are taken, A circular economy model closes the gap between the transformed into products and are disposed. production and the natural ecosystems’ cycles. 92 Source: Towards Zero Waste Singapore, 2024 Circular Economy: How is it Deﬁned? Circular economy is described as an economic system Circular economy is operationalised at multiple levels, that replaces the concept of End-of-Life with premises including a micro level (products, services, companies, of total material use reduction; re-use of products by and customers), a meso level (eco-industrial parks and extension of product life through repair, refurbishment economic sectors), and a macro level (region, nation and and remanufacturing; and finally recycling and beyond). recovering materials from production and consumption. 93 Source: Wasserbaur et al. (2022) The Linear Model is No Longer Viable Global circularity is still in decline. The share of secondary materials consumed by the global economy has decreased from 9.1% in 2018 to 7.2% in 2023—a 21% drop over the course of five years. 94 Circular Economy Aims Economic Prosperity Future generations Quality of Life Social equity Environmental quality Sustainable development 95 Source: Innovations in the spirit of the circular economy Approach to Measuring Circular Economy Macro-systems SYSTEM INDICATORS AT THE NATIONAL LEVEL Perspective: CE at the global and/or national level and/or the overall industry structure Meso-systems Perspective: SYSTEM CE at the regional level and/or eco-industrial parks Micro-systems Perspective: SYSTEM product level changes, firms and/or consumers and their preferences 96 Source: Alaerts et al., 2019 Slowing & Closing the Loop Slowing the Loop: design of long-life products, product life extension techniques (e.g., repair, and refurbishing pay-per-use or time-based solutions). Closing the Loop: returning products to production after use. May involve reverse logistics that take products back from consumers to producers & reuse of materials through recycling. 97 Source: World Economic Forum, 2023 Enablers Business models: redesigning products & services, including emerging types of business model (e.g. product-as-a-service) Consumers: consumption/consumer perspective/consumers as drivers of CE The transition to a circular economy implies the adoption of measures that reduce the extraction and use of natural resources; and includes ecological design, new business models, an adequate political context, economic instruments and financing. 98 Circular Economy Call-to-Action Based on a literature and consultation based research from government agencies, businesses, philanthropies, and NGOs, these 9 interconnected call-to-actions were identified. 99 Source: Platform for Accelerating the Circular Economy (PACE), 2022 Systems Thinking The next-generation circular service business model is all about connections and synergies. 100 Source: Systems Innovation 2024 Consumption Patterns in Singapore 101 Source: Straughan, Mathews 2024 Evolution Toward Circularity Circular Business Models: business offerings based on the provision of capturing residual value in products, encouraging take-back systems and circular product design. This includes also business offerings based on The Circular function provision, e.g., leasing, sharing, pay-per-use and pay-per-result. Economy combines A systemic transition to a circular economy includes four fundamental sustainability, building blocks: innovation and 1) Materials and product design business. 2) Circular Business Models 3) Reverse supply networks 4) Enabling conditions 102 Source: Wasserbaur et al. 2022 Evolution Toward Circularity The Circular Economy combines sustainability, innovation, and business. 103 Source: World Economic Forum, 2022 Case Studies: Municipal Projects 1. London: London's Business Transformation programme boosts circular business models and waste reduction among SMEs, enhancing economic growth. 2. Western Cape: The Industrial Symbiosis project in Western Cape promotes resource sharing in manufacturing, reducing landfill waste, and creating jobs. 3. Brussels: Brussels' Be Circular program guides retail businesses towards circularity, focusing on waste reduction and resource-efficient practices. 4. Denmark: Denmark's procurement agency offers eco-friendly office furniture to municipalities, cutting costs and fostering sustainable product markets. 5. Turku, Finland: Turku revises procurement to promote circular food systems, emphasizing plant-based meals and minimizing food waste in public sectors. 6. Porto: Porto's CityLoops project streamlines procurement in municipal and tourism sectors, advancing a policy for sustainable and circular public procurement. 104 Source: Circle Economy Foundation 2023 Policy Initiatives Policy initiatives with the objective to transform societies towards a circular economy: The Circular a) policies influencing product design, Economy b) policies pertaining to manufacturing/provision of products and services, combines c) policies pertaining to consumption, sustainability, d) policies that address waste/End-of-Life resource management, and, innovation and e) policies supporting market development of circularly managed resources. business. 105 Case Study: EU Policy (ESPR) Applies to all products on the EU market, including imports Significant structural The Ecodesign changes impacting the core for Sustainable of manufacturing: Products Enhanced ecodesign Regulation Labeling requirements (ESPR) took Digital product effect passports on July 18, 2024. Circular public procurement Prohibition on destroying unsold goods Source: European Union 2022 106 Case Study: EU Policy (CBAM) A policy tool designed to impose a carbon price on imported carbon-intensive goods ensures that these imports are subject to the same carbon costs as products produced within the EU. Mandatory Actual Data (Starting July 2024): Importers must report the actual embedded emissions for all goods covered under CBAM. Carbon Border Adjustment Mechanism 107 Circularity: Circular Strategies Game 1. In groups of 3-4, select one of the following a. products to focus on. 2. 3. Explore functional and emotional needs that a. the product satisfies. b. Interview a teammate and post questions about how they might use the product or service c. Make sure to inquire about the specific features of the product and their importance to the user i. “What is the best/worst part about this product?‘ ii. “Why is this product/feature important to you” d. Understand how they live their lives or operate their business i. Try to find potential areas of improvement within their lifestyles e. Share observations in the team and move to insights: Ask ‘what is broken/missing in the experience?’ i. 4. Ideate new products or services using the circular strategies on the following slide a. Brainstorm as many ideas as possible b. Use different combinations of the strategies to make more creative solutions 108 Source: Corona et al. (2019) 109 Source: Corona et al. (2019) Circularity: Circular Strategies Game 1. Select a solution to develop a. Describe and illustrate your selection solution, be as visual as possible! b. Add in as much as detail as possible c. Give your produce a memorable name! 2. Develop your rationale a. What about your product specifically improves the user’s experience? i. What are the economical and practical benefits? b. Is the product now circular? i. Is it regenerative? ii. Does it increase the circularity of existing materials? c. What systems need to be in place? i. What should the feedback systems look like? ii. What collaborations are important to make this product succeed? 3. Sharing a. Share your product and rationale to the other groups 110 Source: Corona et al. (2019) Summary In the linear economy, raw natural resources are taken, transformed, and disposed. In a circular economy, there are no gaps between production and the natural ecosystems’ cycles. The transition to a circular economy requires the mobilization of resources and investments that support the adoption and upscale of ecological design and new technologies and business models. Slowing the loop refers to the design of long-life products and product life extension techniques, whereas closing the loop refers to returning products to production after use. The Circular Economy combines sustainability, innovation, and business. 111 Framework Applications 112 Leadership for a Circular Economy The Ellen MacArthur Foundation (established in 2010) has emerged as a global thought leader. Formulated three principles: Eliminate waste and pollution Circulate products and materials (at their highest value) Regenerate nature More: https://ellenmacarthurfoundation.org/publications The Platform for Accelerating the Circular Economy It was established in 2018 by the World Economic Forum, World Resources Institute, Philips, Ellen MacArthur Foundation, United Nations Environment Programme, and over 40 other partners. It helps accelerate the transition to a circular economy globally. Ellen MacArthur More: https://pacecircular.org 113 Transition to a Circular Economy The Platform for Accelerating the Circular economy (PACE) was built to convene, align and scale up efforts to transition to a circular economy through collaboration and action. It was established in 2018 by the World Economic Forum, World Resources Institute, Philips, Ellen MacArthur Foundation, United Nations Environment Programme, and over 40 other partners. It helps accelerate the transition to a circular economy globally as a public-private collaboration mechanism and project accelerator. More: https://pacecircular.org 114 Source: PACE, 2024 Video: Philips Going Circular 115 Think Moment! Answer the following questions based on the Philips video: 1. What barriers do you imagine that advocates within Philips encountered as they pushed to shift toward new business models? 1. How do you think they were able to overcome them? 1. If you were a Philips executive, what brand promises or value propositions would you use to drive the transition toward greater circularity? Learn more: Supplier Sustainability Audit Program Manual | Philips 116 Frameworks and Indicators Circularity assessment frameworks Circularity assessment indicators: Life Cycle Assessment Reuse Potential Indicator Material Flow Analysis Value-based Resource efficiency Input Output analysis Longevity indicator Sustainable circular index Eco-efficiency index Circular Performance indicator Eco-efficient Value Ratio Global Resource Indicator Circularity degree (Corona 2019) 117 Circular Transition Indicators 118 Case Study: Circularity Screening Banks screen portfolios against circularity criteria with various indicators. This action helps banks assess the resource efficiency and circularity of clients' activities. The screening process also identifies opportunities for clients to improve their resource efficiency and circularity. A decision tree can be used to support client engagement based on the results of portfolio screening. Source: UNEP FI 2023 119 Life-Cycle Life-Cycle Inventory Impact Analysis Assessment (LCI) (LCIA) Collection and analysis of all The evaluation of potential data necessary to quantify environmental impacts the inputs (resource and (e.g. smog formation, energy flows) and outputs particulate matter, (emissions and other acidification) based on the releases) into and out of the LCI analysis results using a product system that crosses comprehensive set of the system boundary. impact categories. 120 The RESOLVE Framework RESOLVE framework developed by McKinsey Ellen Macarthur Replace the old with advanced renewable materials Foundation, 2016 121 Think Moment! RESOLVE Framework in Action 'PRReSSOLVED' is the Project Moonshot team's adaptation of the RESOLVE framework: Place-based Innovation, Restorative, Social Innovation and Distributive by Design. The Moonshot Map is a database of Circular and Regenerative businesses/initiatives in New Zealand. 1. Launch The Moonshot Map at https://www.projectmoonshot.city 2. Search by “Projects”. Select and analyze one company. 3. Explore actions that have been taken by your company. 4. Capture highlights of the companies’ activities. 5. Select a group presenter. Share. 122 What Does a Supply Chain Need in a Circular Economy? 123 The 9R Framework allows for deeper consideration of the product life cycle. 124 Source: Potting, 2017 Most existing indicators from six primary sources (ESRS E5, ISO 59020, CTI v4.0, Circulytics and GRI 301 and 306) focus on end-of-life or lifespan extension. 125 Source: WBCSD 2024 Commonly Applied Corporate Practices I 126 Source: Deutz et al. 2024 ISO 59000 Family of Standards ISO Circular Economy Definition: Economic system that uses a systemic approach to maintain a circular flow of resources, by recovering, retaining or adding to their value, while contributing to sustainable development. ISO 59004 ISO’s standard on Circular economy — Vocabulary, principles and guidance for implementation (2024) ISO 59010 ISO’s standard on Circular economy — Guidance on the transition of business models and value networks (2024) ISO 59020 ISO’s standard on Circular economy — Measuring and assessing circularity performance (2024) ISO 59040 ISO’s draft standard on Circular economy — Product circularity data sheet (Under development) 127 Summary The Platform for Accelerating the Circular Economy (PACE) helps to scale up global efforts to transition to a circular economy. The ReSolve framework consists of regenerate, share, optimise, loop, virtualise, and exchange to support circularity. The Life-Cycle Assessment is a framework for assessing the environmental impacts of product systems and decisions. The 9R Framework allows for deeper consideration of the product life cycle. 128 Stakeholder Engagement and its Applicability 129 What is Stakeholder Engagement? Stakeholder engagement is the process of collaborating with individuals and groups that can affect or be affected by the objectives of an organisation, such as transitioning to a circular economy. Internal stakeholders are people whose interest in a company comes through a direct relationship, such as employment, ownership, or investment. Employees and investors are considered internal stakeholders. External stakeholders are those who do not directly work with a company but are affected somehow by the actions and outcomes of the business. Customers, suppliers, and public groups are considered external stakeholders. As businesses transition from linear to circular models, effective stakeholder engagement is essential and plays a pivotal role in driving sustainable change. 130 Source: Investopedia, Laura Porter, 2024 Importance of Stakeholder Engagement Building trust through collaboration: Actively collaborating with stakeholders in the transition to circularity will help to foster trust between the organisation and stakeholder. This not only enhances effectiveness of circular initiatives but also generates a sense of shared responsibility and accountability. Listening to diverse perspectives: Understanding stakeholder expectations and concerns allows organisations to tailor circular strategies to address certain problems and ensure inclusivity. This enhances the organisation’s reputation and increases its social acceptance. Moreover, gathering input from diverse stakeholders leads to more informed decisions. Risk Mitigation: Engaging and involving stakeholders can increase the net for catching potential issues earlier. For example, regulators might identify compliance hurdles for new circular business models. This allows for proactive measures to address risks before they become major roadblocks. 131 Source: Intricacies of Stakeholders, Peak Frameworks Effective Stakeholder Engagement Strategies 1) Identifying and Mapping Your Stakeholders Begin by identifying all potential stakeholders, both internal and external - which can include sponsors, employees, customers, and investors. Map these stakeholders based on their level of influence and their interests. Mapping them will help define key stakeholders and ensure that resources and communication efforts are allocated more effectively. 2) Understand Their Needs and Expectations This lays the foundation for aligning the project (e.g. circular business model) with their interests and needs. Surveys or targeted discussions can be conducted to collect information and to learn more about their perspectives. 132 Source: SME, 2021 Effective Stakeholder Engagement Strategies 3) Tailored Communication Identify appropriate communication channels and tailor them as necessary based on their interests and influence. For example, for high interest/high influence stakeholders, panel meetings and partnerships are most effective communication channels. It is also important for the organisation to be transparent about their circular economy goals, progress, and challenges. This ensures that communication is clear and accessible to all stakeholders, resulting in better understanding and engagement. 133 Source: Stakeholder Engagem

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