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The Global Push for Sustainability
Around the globe, there has been a tremendous increase in commitments and regulations in response to a need to reduce and eliminate plastic waste while minimizing carbon footprints.
You may be familiar with the UK Plastics Tax, The Ellen MacArthur Foundation, Extended Producer Responsibility, and Corporate NetZero Strategies, to name a few.
But carrying out such commitments or any sustainability initiatives across any organization is highly complex - and what is considered “sustainable” today might not be tomorrow.
From country to country and sometimes even from state to state, specific sustainability rules and regulations may change which makes keeping up with them even more complex.
And as much as companies may want to avoid these commitments altogether, with consumer pressures, company-wide social responsibility goals, and legal actions, businesses are going to have to set goals and take action.
A Spec-First Approach to Sustainability
Unfortunately, for many companies, the data needed to meet sustainability goals and actions are difficult to find and stored in different business units.
Breaking down these silos and organizing data is the first step in meeting sustainability goals - and this can all be done using what we call “spec-first approach”.
A spec-first approach means digitizing, mapping, automating, and sharing the DNA-level or specification data that gives companies insights into the baseline of their supply chain and production.
And this approach is key to empowering sustainability commitments, complying with regulations, and cost-cutting.
Adequate data is needed to report on sustainability but unfortunately, many organizations find themselves struggling when it comes to readily accessing the valuable data they are looking for.
Companies are likely to find that there is no common format among all their data or there is a lack of supplier-owned data. Others may find that reporting and benchmarking are only done as one-off projects but are not consistently tracked throughout the entire organization.
At the end of the day, although it may be complex, collecting all this data is not only essential for sustainability but this data is also key in driving cost optimization.
Sustainable Cost Reduction
With adequate specification data, companies can provide cross-functional insights and track metrics that allow for products and packaging to be more sustainable - all while identifying waste and calculating cost savings.
Yes, you read that correctly with spec data, sustainability drivers can also be cost drivers - and companies are going to want to save costs especially when economic conditions tighten. Being sustainable doesn’t necessarily mean spending more, but you have to understand and have access to the right data to make the right decisions.
Global Inflation and Supply Chain Disruptions
Global disruptions such as inflation and supply chain slow downs are out of most companies' control and are typically detrimental to all stakeholders.
But, history has shown that these disruptions have their upsides and have the ability to help companies build resilience and discover gaps in their business models.
Companies with operations and procurement practices that are able to adapt to such disruptions are the ones that end up thriving after these “storms” pass.
The ability to digitize and organize data allows brands to close the gap between production and costs across their entire supply chain, making events such as inflation or supply chain disruptions easy to face and reduces the overall impact on the business.
Strategic Cost Savings
As companies drive sustainability with spec data they can also implement strategic cost optimization as a strategy to combat consumer demands and global disruptions.
Companies that view sustainability as a means to address disruptions rather than a mere cost to cut during difficult economic times will see benefits across their entire company.
In a recent report by Gartner, “20 Strategic Cost Optimization and Sustainability Opportunities”, it was supported that sustainability can help executives cut costs and optimize performance in response to disruption.
Executives who encourage the view of sustainability as a long-term investment and gather adequate spec data to uphold such goals are likely to see benefits such as prevention of packaging SKU Proliferation, reduced manufacturing waste, and reduced risks of recalls and rejected shipments.
Supply Chain Data and Cost Optimization
With specification data available to implement cost-reduction initiatives companies can also upgrade suppliers that embody higher compliance to regulations, and who also value consolidation of packaging or increased use of reusable packaging to reduce costs.
This data can additionally help producers increase energy efficiency and locate places where transportation costs could be reduced. Reducing greenhouse gasses (GHG) not only positively affects the environment but additionally reduces company costs.
Developing frameworks to capitalize on these optimizations is essential although it can’t be done without the proper data.
Identifying the Best Sustainability and Strategic Cost Optimizations
Specification management data allows companies to identify the best sustainability and strategic cost optimizations, and in the recent Gartner report, executive leaders focused on sustainability or strategic cost optimization should: - analyze financial impacts by rating the cost, performance optimization and growth potential, evaluate sustainability impacts by rating the environmental, social and governance potential, and map strategic cost optimization opportunities by creating a simple 2 x 2 graph.
Companies should begin by rating and analyzing the costs of certain transitions to ensure that such changes will positively affect the company at the end of each financial term. Cost reductions should be reflected in short-term expenditures to be viewed as financially responsible.
And beyond short-term benefits, these financial decisions should also be investments that involve long-term financial growth. Investing in long-term growth will ensure that companies can better adapt to unexpected recessions and inflations.
Once companies have identified the financial impacts associated with certain changes the sustainability impact of these cost optimizations should be worked out.
Businesses should ask questions such as how the changes may mitigate environmental impacts or improve the well-being of humans…
As these changes and their impacts are identified companies will be able to appropriately map out current and future cost optimization strategies that also align with sustainability goals.
Although there are many examples of opportunities for companies to strategically optimize costs while decreasing environmental impact with the proper data there are a few that stand out…
Taking a spec-first approach to data management will empower companies to have visibility into their packaging spend. With this data, companies can make intelligent decisions that can help increase packaging consolidation and packaging reuse all while decreasing spot purchase reduction.
Additionally, prioritizing data management that empowers optimization across all teams will give companies greater purchasing agility. For example with this insight companies may be able to decrease corrugate spending or increase alternate supplier usage, improving sustainability practices while reducing costs.
Conclusion
With sufficient data, It's easy to say that transforming purchasing practices to favor sustainability is likely to result in decreasing costs in the long run.
And although organizing data to the DNA-level in its beginning stages may seem intimidating, companies who are able to implement these practices will find effective company-wide decision-making much simpler, enabling both sustainability and strategic cost optimization.
To read more about how Gartner suggests strategically optimizing costs and sustainability download the research here.
