Accelerating your journey toward a resilient, sustainable supply chain

The world is facing an extraordinary challenge: To stabilize our climate by building a net-zero carbon economy. In every country around the globe, people and organizations are experiencing risks to their livelihoods, and their lives, as more and more carbon is pumped into the atmosphere each year.

The impact of manufacturing is significant:

• 62%?of global CO2 emissions come from manufacturing and production sectors (20%) (1) and the commercial transportation (road freight, air freight, shipping) sector (42%) (2).?
• 54% of global energy consumption is by manufacturing and production sectors (1)

Pressure is growing for manufacturers to transform to net zero. With increasing government regulations, growing concern from stakeholders and customers, and intensifying supply chain issues fueled by the pandemic, the manufacturing sector has more than its share of challenges.

Sustainability and agility are driving transformation

While manufacturing generates a considerable impact on the environment, it also has much to gain by adopting sustainable practices. Sustainability and agility have become vital business drivers, beyond mere profit for industrial enterprises.?

Manufacturers understand that driving new efficiencies and adopting sustainable practices can create significant improvements across the business. More and more, manufacturers I talk with understand the importance of:

• Delivering innovative products, processes, and systems for next-generation manufacturing
• Driving efficiency into the business to reduce CO2 emissions, costs, and materials consumption
• Optimizing the use of resources while increasing adaptability in times of crisis or rapid market shifts
• Creating new revenue streams with new business models
• Realizing it is imperative they move fast and deliberately with increasing compliance requirements and pressures

It is clear the market is shifting to embrace a sustainability mindset: 99%?of manufacturing?CxOs?say environmental programs drive long-term shareholder value. (3)

Manufacturers can lead the way to sustainability

Sustainability is the driving force for innovative products, processes, and systems for next-generation manufacturing and resilient supply chains.?Your organization can lead this journey to net-zero emissions with net-positive gains by employing strategies including:

• Reducing your environmental impact across carbon emissions, waste, air quality, and water use. It starts with improving operational efficiencies and tactics such as scaling of carbon capture and removal technologies and establishing the origins of emissions across your supply chain.
• Reducing waste in design, production, and product end of life is about designing for sustainability and adopting circular economy principles across globally distributed supply chains and markets. Simply put, circular design asks us to consider the ways in which goods might be repurposed, reused, or repaired to extend their lifespans and lessen waste. In fact, it is a hallmark of Microsoft’s own lofty sustainability goals. We have pledged, by 2030, to be carbon neutral, water positive, and zero waste. By 2025 we aim to reuse 90% of our cloud hardware assets. To help achieve this goal, we launched our first Circular Center pilot program in Amsterdam in 2020 and the results have been astounding. The team there was able to achieve 83% reuse and 17% recycle of critical parts while helping to achieve a carbon reduction of 145,000 metric tons. Incredible!
• Improving resilience to climate risks across logistics, fixed assets, and the supply chain requires manufacturing organizations to adopt an agile approach to supply chain management, building in the ability to source from alternative suppliers and conducting ongoing analysis of risks to materials, logistics, suppliers, and fixed assets.
• Optimizing your supply chain to improve resiliency and traceability?happens through?intelligent supply chain?planning technologies. This is about increasing agility and responsiveness with optimized inventory levels in real-time, using a range of IoT-enabled devices and sensors to view and manage goods. And improving coordination with suppliers with logistics management tools that leverage supply chain traceability and digital provenance practices can enforce sustainable sourcing. A fundamental technology to achieve this is blockchain. Microsoft recently received one of the highest recognitions in the supply chain industry by research firm Gartner for our innovative use of blockchain to improve supply chain resiliency, traceability, and predictability. This means we can track and reduce our carbon footprint for materials production and equipment usage. We can target responsible mineral sourcing, prevent tampering, and ensure authenticity across the supply chain. The platform, which was built with a consortium of partners, has already uncovered tens of millions of dollars in hidden costs, improved end-to-end item level traceability, reduced cycle time, and expanded margins by digitizing items in a shared data structure.

The Microsoft Cloud for Sustainability

The first step toward any sustainability initiative is to measure, measure, measure. Measurement is an important first step in all sustainability journeys. When we measure, we establish a baseline, and then we relentlessly improve, optimize, and transform.

And now, the task of recording and measuring data has never been more accessible thanks to the Microsoft Cloud for Sustainability. Now generally available, this cloud offering is a vital tool that allows organizations pinpoint specific emission areas and track if they are meeting their reduction goals. This allows manufacturers to facilitate greater transparency and accountability throughout their value chain, from raw materials to product creation to distribution. A data-first approach can help organizations achieve data integrity and gain the visibility they need to drive efficiencies, reduce emissions, and design out waste.

Our good partners—including ABB, Blue Yonder, Honeywell, ICONICS, Johnson Controls, and many others—already have early solutions in the market. And companies including Grupo Bimbo are rolling out the Microsoft Cloud for Sustainability to gain the transparency and insights needed to embed sustainability throughout the end-to-end value chain.?

We are on a common, connected journey

At Microsoft, we have discovered that for organizations of all sizes, in every industry, the overarching sustainability journey is similar. It has been our own experience, and we see it with others, too.

It is important to understand where you are today, set future goals, and make data-driven decisions about the best steps to achieve those goals.

That is exactly how we started. Our own sustainability journey began when we set our first carbon goal more than a decade ago. This led us to better organize our data and realign our company’s vision and strategy with our sustainability goals. We continue to build on our commitment to innovate and invest in technologies that address environmental sustainability and to transparently share our learnings to make sustainability actionable for your business.

I am so proud of what companies are accomplishing in their sustainability efforts in collaboration with Microsoft. Ecolab, a global leader in water and hygiene solutions, is using our technology to help companies save billions of gallons of water and millions of dollars each year. They are facilitating reduced energy use and carbon emissions in a variety of industries, like power, food and beverage, and manufacturing through efficiency-focused water management and monitoring technologies.

Sustainable stainless-steel company Outokumpu uses Azure Cloud and AI Services to collect and analyze data in every step of production at their biggest factory in Tornio, Finland, enabling faster and more accurate decisions in real time. They have increased output by 15% and reduced quality defects by 40%, enabling them to operate 30% greener than the industrial average in Europe, since just one ton less of stainless-steel scrap avoids one ton of CO2 emissions.

And Bosch has just developed an Integrated Asset Performance Management solution powered by a digital twin running on Microsoft Azure to automate predictive maintenance on their rotating machines. The data from the digital twin directly improves sustainability by ensuring parts are replaced only when necessary and machines are operating at maximum efficiency.

Starting your journey

Given the gravity of the task at hand, it can seem intimidating or even impossible to start your journey toward end-to-end sustainability. Here are my suggestions for taking your first steps:

1. Establish a baseline: I said this earlier and am reiterating it for a reason. There cannot be progress in an area where there is no measurement.
2. Rethink: Replace undesired actions or operational movements that can translate into reduced carbon emissions.
3. Partner with suppliers: Expanding production capacity for low-carbon materials is vital in the effort to embed sustainably throughout the value chain. Work with them now to reap rewards down the line.
4. Create a plan with a partner: Every journey needs a map, and this one is no different. Working with a partner who will meet you where you are on your journey and help you establish actionable next steps is a critical step.
5. Deploy the right tool to measure and track your carbon footprint. A tool such as the Microsoft Sustainability Manager is an actionable way to achieve reporting effectiveness and transparency and stay committed to a sustainable supply chain.

Looking to a resilient supply chain future

Finally, as we come to the end of this series on digital transformation in the supply chain, I will close with an urgent personal appeal. It is not too late to change the trajectory of climate change, but only if organizations around the globe take swift, decisive, and meaningful action to fundamentally transform their approach.

This is the fight of our generation. We must become united in urgency, and collaborative in action. We can do this—together. To stay updated on Microsoft’s own journey, and to learn more about the technology that will take us to net zero, please follow me on LinkedIn and Twitter.?I also invite you to join my Art of Possible video series, where I will be talking more about innovation, transformation, and leadership.

Thank you for joining us on this journey to realize a resilient supply chain. We look forward to hearing from you to learn your feedback, insights or where you might need help. ??

Microsoft Changemakers Episodes

• Microsoft Changemakers: Accelerate Your Journey Towards Supply Chain Resiliency – Episode 1
• Microsoft Changemakers: Ensuring Resiliency and Business Continuity Are Essential to Survival - Episode 2
• Microsoft Changemakers: Use Data to Create End-to-End Visibility Across the Supply Chain – Episode 3
• Microsoft Changemakers: Transforming the Supply Chain Starts with Empowering Your People – Episode 4
• Microsoft Changemakers: The Future is Sustainability – Episode 5

Resources

Microsoft Supply Chain Resources

• Visit Microsoft.com/manufacturing to learn how we can help you empower your workforce
• Get in touch with supply chain experts (for U.S. businesses)
• Accelerate your sustainability journey with the Microsoft Cloud for Sustainability
• Learn more about Microsoft’s commitment to sustainability

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?1?Carbon Reduction in Manufacturing Initiative, World Economic Forum

2?Cars, planes, trains: where do CO2 emissions from transport come from??Our World in Data, 2020?

3 The ESG premium: New perspectives on value and performance, McKinsey & Co.