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Market News

 March 13, 2012
The end of supply chains and the start of "supply loops"

 The world is facing a new industrial revolution, one which is resourced based. What's for certain is that the "Take-Make-Waste" model is no longer feasible when we have a world population of seven billion and growing.

Businesses need to adopt this new model and ensure that it is inclusive and doesn't leave most of the earth's population living in poverty. Corporate Social Responsibility needs to move to the heart of sustainable businesses, with such thinking engrained throughout the supply chain.

Crucially, businesses must make their consumption behaviours transparent to provenance and impacts, and this is where sustainability teams in businesses can play a key role.

As affluence and consumption grow globally, we must urgently move away from the excessive resource demands of the last one hundred years to a much more collaborative and conscientious form of consumption. It is the sustainability team that can and should help drive this transition within businesses. It is also a key opportunity to demonstrate that the sustainability department is not just about reducing costs and environmental impacts, it also has a genuine role to play in creating completely new and transformative business models.

The opportunity for business is to help customers manage the complexity of purchasing and lifestyle decisions in a way that makes acting on their values easy. Similarly, on the supply side we must again embrace technology's ability to move away from supply chains to "supply loops". Here again transparency and traceability are key allies in ensuring we optimise our global supply networks and begin to drive efficiency and eradicate waste.

While there may be more obvious and manageable solutions for manufacturing companies, there's nothing stopping service-based industries from playing their part. We at BT don't manufacture our own products, which is why we think it's essential we work closely with suppliers to improve the environmental performance of the products and services we provide.

There is a long way to go before any company can claim to have developed genuine "supply loops", but there are important first steps organisations should now be taking.

In February 2011 BT introduced a new procurement standard, requiring all suppliers to measure and reports their carbon and greenhouse gas emissions and set reduction targets. This is designed to encourage supplier innovation and to speed up development of low carbon technologies. While we recognised that it would be challenging for some small companies, we ran workshops in partnership with the Carbon Trust to help 80 UK small and medium-sized suppliers improve their understanding of climate change and develop action plans to reduce their impact.

By stating, in our procurement principles, that every replacement product or service has to have a lower environmental impact than its predecessor, we're helping improve our product range. For example, our smaller wireless Home Hub for broadband introduced in 2011 requires 25 per cent less plastic to be used in manufacturing. It typically uses a third less power than previous models because it adjusts power consumption based on use.

BT was the first UK company to sign the European Union's code of conduct on broadband energy consumption that recommends stringent power consumption limits for communication and network equipment. It is expected to save up to 25TWh annually in Europe by 2015, saving up to €7.5bn.

On top of this, BT became the first company in the world to have product carbon footprints independently verified by the Carbon Trust to the new GHG Protocol Product Standard. The independent verification covers three of BT's most popular consumer products; the BT Home Hub, the BT Vision+ digital set-top box and the BT Graphite 2500 DECT phone.

In other sectors we are seeing similar work. Most notably, Nike has for the past few years been offering football shirts made entirely from old plastic bottles, taking the idea of a supply loop to a whole new level while developing a new business model that gives it a clear competitive advantage.

There is also a broader economic case for this type of supply chain innovation. According to recent figures from Dame Ellen MacArthur's Circular Economy initiative better design and more efficient use of materials could save European manufacturers $630bn a year by 2025.

The challenge is that to date, the greater focus of climate change efforts has been on regulation and achieving political consensus to influence supply-side impacts.

Tackling demand-side impacts from consumption and acceleration has for the large part been sidelined. We need a more holistic approach which is transparent across national and international systems of production and consumption, and which gives clear line of sight to the resources we need to manage for the benefit of all nations and all ecosystems.