SAP: Technology’s role in driving a circular economy

Sustainability - there isn’t a stakeholder of any business that isn’t demanding a rise in socially, environmentally, and economically responsible products and services. 

In today’s modern procurement and supply chain functions the consumption of natural resources can have devastating effects on humans, wildlife, and the planet. Now more than ever, the need to move away from a linear model to a circular economy is becoming more clear.

“A circular economy isn’t just about fixing environmental wrongs; it is about making sustainability profitable and profitability sustainable across industries, sectors, and lives,” said SAP.

It’s time to take responsibility

Around the world, governments are introducing new laws, taxes, and regulations to increase the sustainability efforts of organisations, such as the Extended Producer Responsibility (EPR) laws; the surge in plastic taxes, Germany’s Supply Chain Act, and France’s ban on the destruction of goods that haven’t been sold. 

Pressures continue to grow not only in Europe but globally to implement similar laws, taxes, and regulations to accelerate the commitments to sustainability. 

“In the past, manufacturers used to design products based on cost and performance as the key selling points; going forward, they will focus on sustainability and recyclability. This change is driven by customer demand, the availability of technology, and the new regulatory environment,” commented SAP.

SAP added: “This is great news for the planet but poses a market-by-market challenge especially for large producers because it is very difficult to adhere to regulations on their products in different geographies. Manufacturers embarking on transformational journeys are challenged by complex supply chains, heavy assets, and legacy technology.”

The years ahead will see organisations striving to tackle the challenge of managing the life cycles of thousands of products and tens of thousands of materials across multiple regions.

Identifying risks and opportunities

Alongside responsible production, SAP is seeing a rise in the application of ESG factors into the analysis process to identify risks and opportunities. 

Global consulting firm, PwC, found that 49% of investors globally would divest from companies that are not taking sufficient action on ESG issues, with 79% identifying that an organisation's management of ESG risks and opportunities is an important factor when making investment decisions.

Since June 2021, more than US$35tn has been invested globally into some form of ESG strategy. 

Technology’s role in driving a circular economy

Technology and the use of data can help organisations to solve the waste problem. 

“Data shows where the waste comes from, what it’s made of, and where it goes. Using supply chain software, powered by technologies such as automated machine learning, artificial intelligence (AI), and blockchain can turn a linear business model into a circular model that protects the environment while driving financial value,” commented SAP.

With clear strategies, circular models, and innovative tools and solutions, organisations can better reach their targets for zero waste, zero emissions, and zero inequality. 

“The way business runs today is not sustainable and transitioning to sustainable business is the greatest social and economic opportunity of our time. Businesses need to put sustainability at the core of their strategies and use technology to manage the ‘green line’ through their business,” said SAP.