March 10, 2020
Dialing Up the Sustainability Win-Win for Business and the Environment
In this article:
- Leveraging the circular economy is perfectly aligned with a better bottom line for businesses.
- We did the math on the potential benefit for businesses and the environment. Spoiler: it’s massive.
- Digital transformation is the key to uniting business goals and environmental wins.
Up until now, sustainability practices were considered a ‘nice to have’ for a business— something that looks good in the About section of the company website, but nothing more.
With an uptick in media reports on environmental crises like the Australian bush fires of 2019, there has been a renewed sense of urgency on climate change issues. As a result, there has been a tectonic shift in the thinking of business leaders and increased interest in sustainability and circular economy initiatives.
But it’s not just about protecting the environment.
Harnessing the Circular Economy for Business Wins
According to Gartner, 70% of business leaders intend to invest in the circular economy in the next 18 months. There’s a growing body of evidence that incorporating elements of the circular economy will improve the bottom line for businesses of all kinds.
We covered a number of great examples of companies that are already leveraging the circular economy to improve their bottom line. Caterpillar, Dell, and Cisco are just a few of the companies who have been leading the way.
Paul Hawken’s 1993 book “The Ecology of Commerce” has many more examples (mostly from Europe) of companies that use waste products from other industries as cheaper alternatives to raw materials and even energy sourcing. For example, agriculture can use waste heat from manufacturing to keep greenhouses warm and productive.
If you strip away the environmental benefits, you can sum up why it works in one word: efficiency.
Potential Impact: We Do the Math
“Overall, the extraction and processing of natural resources accounts for more than 90% of global biodiversity loss and water stress impacts
and approximately half of global greenhouse gas emissions.“
– UN report: Global Resources Outlook 2019
Forbes says that the Global 2000 owned $189 trillion in assets as of 2018. That’s 52.5% of the world’s wealth (Barron’s says total global wealth is $360 T).
Based on a number of sources, we estimate that the Global 2000 spends around $12T annually on procurement of new assets. In our experience, at least 2% is idle surplus, sitting in warehouses and storage yards.
If that 2% was sold to other enterprises, that would generate over $3T in free cash for the businesses, not counting the savings on warehousing and maintenance costs.
The Environmental Benefit of Effective Disposition
Further, the OECD says that we all consume 90 gigatons of raw materials annually, with the Global 2000 consuming about 47 gigatons (if we use Barron’s number to determine the proportion of the world’s wealth controlled by the Global 2000).
If Global 2000 owners sold that 2% idle surplus to other buyers, that would instantly and easily produce these environmental wins:
- 12.7% annual reduction in global raw materials demand— at a minimum
- Greenhouse gas emissions drop by over 7.5%
- Biodiversity loss and water stress impacts drop by over 7.5%
And we don’t have to invent new technologies or overhaul any infrastructure. It’s so easy it’s practically free.
Granted, these are educated guesses, but they’re based on real numbers. The goal here is to give you an idea of how quickly and easily we can move the dial— but only if we have digitized asset records.
Digital Transformation is the Key
Digitalization of supply chain is the essential step towards uniting business and sustainability goals because:
- It brings visibility to the asset inventory. It’s not a big secret that B2B supply chain still relies on siloed systems, spreadsheets, and even paper records. Effective digitalization means assets that aren’t being used could be automatically flagged. From there, the decision can be made as to whether to redeploy internally (to reduce procurement costs) or to sell externally.
- It makes it easier to earn fair market value for assets. Some enterprises don’t look beyond the scrap market for surplus asset disposition. But it’s already possible to sell to other enterprises, back to OEMs, or to other resellers on platforms like ours. The longer we, as a business network, keep reselling those assets the more we save on costs, and the fewer resources we have to extract from the environment.
This will require a thinking shift on the part of procurement managers, who will need to start considering second hand options where it makes sense. The result, however, will be further cost and environmental savings as that $12T in procurement is ratcheted down.
Requis: the Enterprise Supply Chain Platform
Your team can start the digitization journey today: Requis is a fully fledged end-to-end supply chain and commerce platform.
Our procurement module takes two hours to learn and will typically save 15% to 20% on procurement staff hours by automating or eliminating repetitive tasks. Because RFQs are issued in a fixed format, sellers know what information to provide and where, and buyers don’t have to spend time hunting for information. Technical and financial evaluation comparisons between bidders are available in one convenient chart at a click of a button.
Our marketplace allows you to connect with other buyers and sellers for both procurement and disposition. Sales methods include auctions, purchasing at seller’s posted price, or making another offer.
Ask for a demo to get the full picture of how Requis provides an intuitive supply chain management solution.