- Global business is a key culprit in climate change, but also drives solutions.
- Business performance measurement must include resilience and sustainability performance.
- Technology can help manage carbon emissions and accelerate progress in the transition to a circular economy.
Global business drives global production and consumption, leading to increasingly high standards of living – but at what expense to future generations and our planet?
While companies play a crucial role in creating solutions to prevent environmental and health crises, “business as usual” will not get us close to achieving the UN SDGs within the next 10 years.
Now, it's essential that businesses accelerate technology – and here are some ways they can do it.
Measuring sustainability performance
The COVID-19 pandemic has forced everyone to re-think how enterprises measure their performance. Sound business has traditionally required managing profitability and growth, but the crisis has revealed the importance of resilience.
Global supply chains, for example, have been optimised for decades to be as efficient as possible. But when COVID-19 forced global restrictions, many highly optimised and efficient supply chains broke due to a lack of agility and flexibility. Helping supply chains adapt and introduce greater resilience has become a priority metric.
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And while the health crisis has forced many environmental efforts to slow down, climate change has not. If companies want to be a best-run business, then they need to put more emphasis and focus on the environment. The year 2020 made it very clear to business leaders that in addition to their top and bottom lines they must also focus on managing their “green line” for sustainable business success. This has the potential to become the guiding principle for the way we evaluate and steer businesses today and in the future.
Corporations can measure business success more holistically through new accounting practices that connect economic, social and environmental impacts. This philosophy is reflected in the SAP Integrated Report. We also have joined international efforts such as the Value Balancing Alliance and local initiatives such as QuartaVista, a project funded by the German government, which aim to standardise the broad measures of corporate impact.
To accelerate the pace of change needed to make positive impacts at scale, companies must adopt and implement technologies that enable and drive entirely redefined business processes. The most important areas to focus on immediately are the interrelated areas of managing carbon emissions and transitioning to a circular economy.
Managing carbon emissions
In the digital age, enterprises rely on technological solutions to track and manage CO2 and other greenhouse gas emissions across the entire value chain, from sourcing materials through manufacturing to final distribution. This will require suppliers, operations and logistics to determine and disclose their relative emissions. Companies can use this data to gain better insights, allowing them to consolidate, analyse and manage the carbon footprint of their individual products and services more effectively.
We already see companies, such as in the food sector, acting on their corporate responsibilities, investor advice and consumer demand to label their products with product-level emissions information. This gives consumers the information they need to make more responsible purchase decisions, creating a virtuous circle.
Transitioning to a circular economy and reducing waste
In the current paradigm of fossil-fuel use and the linear approach to production and consumption, it is impossible to reduce emissions to zero. There are 100 billion tonnes of materials entering the global economy each year, but only about 10 percent are recycled or re-used. This is a massive cost to businesses and societies because it is inefficient and impacts our environment significantly beyond planetary boundaries. Studies show that we must quickly transition to closed-loop value chains.
When it comes to the circular economy and keeping valuable materials in use longer, technology can accelerate the circular benefits for businesses. Companies can gain enormous benefits from capturing value from materials currently being wasted. A restorative and regenerative economy can potentially unlock $4.5 trillion in growth, reduce CO2 by 45 percent and waste by 90 percent. A global transformation is focused on supply chain traceability, transparency about sustainable sourcing and production, and waste recovery throughout the product use cycle.
What is a circular economy?
The global population is expected to reach close to 9 billion people by 2030 – inclusive of 3 billion new middle-class consumers.This places unprecedented pressure on natural resources to meet future consumer demand.
A circular economy is an industrial system that is restorative or regenerative by intention and design. It replaces the end-of-life concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals and aims for the elimination of waste through the superior design of materials, products, systems and business models.
Nothing that is made in a circular economy becomes waste, moving away from our current linear ‘take-make-dispose’ economy. The circular economy’s potential for innovation, job creation and economic development is huge: estimates indicate a trillion-dollar opportunity.
The World Economic Forum has collaborated with the Ellen MacArthur Foundation for a number of years to accelerate the Circular Economy transition through Project MainStream - a CEO-led initiative that helps to scale business driven circular economy innovations.
Join our project, part of the World Economic Forum’s Shaping the Future of Environment and Natural Resource Security System Initiative, by contacting us to become a member or partner.
While many different materials flow through global value chains, plastic has become a high-visibility resource targeted for reduction and re-use. More than 450 businesses, governments and other organizations representing more than 20 percent of consumer-packaged goods globally have made commitments to an ambitious set of targets by 2025. SAP helps maintain the value of material flows and to capture new revenues by innovating business models and helping companies adopt circular economy approaches and processes.
To begin with, companies must focus on responsible design. Product designers and engineers must create new approaches for product modularity, repairability, reclamation and packaging in order to reduce waste and keep materials in use longer.
What is one company’s waste is another company’s valuable input – but you have to be able to find it, value it and use it. This is where we need to advance more responsible sourcing and procurement. The aim is to use technology to connect buyers and sellers in secondary materials marketplaces.
It can be challenging, however, for companies to locate, assess, validate and incorporate these sources into current processes. Recyclers are beginning to use geospatial technology, data science and real-time analytics to improve resource recovery and re-use.
Responsible production is another area where companies can use technologies like real-time tracking to provide traceability of both upstream suppliers and finished products. Technologies such as blockchain enable brands to trace and share product lineage so customers can make informed purchases. Traceability apps and experience management solutions can also enable producers with deep insights into consumer sentiment around the value of circularity.
What is the World Economic Forum doing about the circular economy?
The World Economic Forum has created a series of initiatives to promote circularity.
1. Scale360° Playbook was designed to build lasting ecosystems for the circular economy and help solutions scale.
Its unique hub-based approach - launched this September - is designed to prioritize circular innovation while fostering communities that allow innovators from around the world to share ideas and solutions. Emerging innovators from around the world can connect and work together ideas and solutions through the UpLink, the Forum's open innovation platform.
Discover how the Scale360° Playbook can drive circular innovation in your community.
2. A new Circular Cars Initiative (CCI) embodies an ambition for a more circular automotive industry. It represents a coalition of more than 60 automakers, suppliers, research institutions, NGOs and international organizations committed to realizing this near-term ambition.
CCI has recently released a new series of circularity “roadmaps”, developed in collaboration with the World Economic Forum, the World Business Council for Sustainable Development (WBCSD), McKinsey & Co. and Accenture Strategy. These reports explain the specifics of this new circular transition.
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3. The World Economic Forum’s Accelerating Digital Traceability for Sustainable Production initiative brings together manufacturers, suppliers, consumers and regulators to jointly establish solutions and provide a supporting ecosystem to increase supply chain visibility and accelerate sustainability and circularity across manufacturing and production sectors.
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All the greatest technology in the world, however, will not completely solve our problems. It comes down to people – to the decisions we make as individuals but also as companies and networks.
Businesses have a major role to play in recalibrating to an economic system that supports sustainable growth and profits. Beyond business, we must think about the world we want for our children and future generations. We must set ambitious goals, measure ourselves differently, account for our actions and collaborate across organizations, industries and regions.
Leading companies are already taking action, but time is of the essence. More must join, so we can move faster, together, into a sustainable future.