Sustainability Accelerates the Optimisation of E2E Operation Processes

Jens Fath and? Jasmin Pennicke from PwC Deutschland ?sit down with INNOVATION Magazine to discuss how future business models need to be adapted?to prioritise ESG and sustainability.

Jens Fath is one of the responsible?partners for the operations?transformation team at?PwC, and has a keen interest?in how top floor and shop?floor play together in exploring?possibilities for digitalisation, plus?how integrated and business-led end-to-end architecture can?support sustainability, as well as?digitalisation and IoT. Besides the?product complexity and structure,?Jens believes processes and?how to define them is having a?direct impact on sustainability?questions. He also considers?that we need to prioritise the?organisation, people mindset and?IT architecture, with strong core?and systems of differentiation,?to form a stable foundation for?sustainability.

Jasmin Pennicke is Manager in?the Operations team and looks?after PwC’s sustainability offering?in the operations practice,?coordinating and bringing together?all operations functions in terms?of sustainability. She explains,?“Looking at our service offering,?how can we leverage that in terms?of ESG? It is applicable to the entire?value chain, so you cannot look?at ESG in a silo. It is important to?link all the functions in order to?reach your goals. My role is to?bring all the people together, and?link our services offerings to our?colleagues’ offerings, so we can?have a full view.”

Jens and Jasmin believe it is?essential for companies to address?the topic of ESG and sustainability in order to be successful and?future-ready. Jasmin says,?“Sustainability appears to?be the next big trend, but?we think it is more than that.?Companies need to address it?because it is mandatory for us?as a society. On the regulatory?side, following the European?Green Deal, there will be a?lot coming up in the next few?years. Also, customers want?to have sustainable products,?and investors want to see green?investments. A lot of companies?see it as their responsibility to?create new business models?and new solutions, gaining new?market fields, because there are?new possibilities arising from?that.”

So, what does Jasmin anticipate?will be the impact of ESG and?sustainability on businesses in?terms of their future business?models? She answers, “ESG and?sustainability will have a big?impact on how decision making?will be carried out in the next?few years. Before sustainability,?you had to address costs, time?and quality in your processes.?Now, you have to consider new?factors and how to apply them.?It is more than just putting a?sustainability label on your?products, but reshaping your?business model, because you?can only be successful in terms of?sustainability if you reshape your?business in total. It is not only the?reporting part, but rethinking?how your products work, how you?want to introduce them to the?market, and how you balance ESG?factors with previously relevant?factors such as costs etc. It is a?big opportunity for new business?models.”

Jens adds, “In my opinion,?ESG and sustainability are an?accelerator for the optimisation of?operation processes – considering?customer, suppliers, and internal?operations processes the same?way – especially how to engineer?and build a product. If we were to?combine production and logistics?with sustainability, the result?would be that the sustainability?story would be accelerated.?Whether talking about the external?business model or the internal ways?of working end to end, they all go?hand-in-hand.”

PwC outlines five essential pillars?in the area of operations as far as?the entire value chain is concerned?in the context of ESG. Jasmin?continues, “First of all, when talking about the entire value chain,?it is important to look at your?footprint transformation, not only?in terms of climate change, but?your network – your suppliers,?your production locations and?supply chains – because they?have so much implication on?ESG factors. There is the strategy?part concerning all operations?functions, but you need to look at?your research and development?functions in terms of sustainable products. How do you perform a?circular product lifecycle portfolio?management and product design?for sustainability? You really?need to consider your supply?chain, how it is connected, and?how to optimise it in terms of?efficient transport management?and sustainable value creation?– building sustainable factories,?optimising production processes,?and gathering all the information?from the value chain. On the?technology enablement?side, how can you collect all the?data, establish the required?IT architecture, and perform?the right analytics to drive and?optimise operations in terms of?ESG?”

Jens mentions a sixth and cross-relevant pillar in architecture?management. He adds, “For?me, business-led, integrated?architecture management is?important because ESG?needs data and transparency. If we are?not collecting the right data out of?the right processes and analysing?it with the right technology, we?will not have the transparency?that we need for developing our?sustainability topics.”

In this way, business-led?architecture is playing a key role?in successful ESG. Jens elaborates,?“It is playing a key role for ESG,?for digitalisation, and, not least,?for developing sustainable companies, together with our?customers. New innovations need?an integrated architecture that is?business-led, and not only IT-driven.?It should be based on the business?capabilities that companies have?today and will need in the future.?If you know that the world must?be more sustainable in the future,?one of the key capabilities for?architecture is therefore helping towards making it more sustainable,?with integrated processes and?transparent data.”

So, how can transformation?management support the ESG?journey? Jens answers, “I think all?companies are currently undergoing?complex transformations. The?first is triggered by digitalisation,?the second by the market and political situations, and the third is?triggered by ESG and sustainability.?Transformation means things?are moving, and one of the main?topics we should not forget is the?people dimension. Transformation?management means we need a?clear, structured program that?is organising the transformation?journey and helping the enablement?of change for taking our people with?us, raising their understanding?of what is behind the topics.?Visible value is the key to?success.”

If you want to have people?acting on sustainability topics,?you first need to convince them?by telling them the goal and?why the change of behaviour is?needed. If you cannot convince?the people, there will not be the?required acceptance. Jasmin?adds, “A lot of people already?know the goal of sustainability?in total, but the next step is?understanding what they?can do in a company to take?positive action. They need to?be able to fully participate and?feel their impact in order to?motivate them to follow these?ambitions.”

PwC has its own ambition to?lead in ESG efforts. For instance,?through the validation of PwC’s?targets to reduce greenhouse?gas emissions by 50 per cent?by 2030 through the Science?Based Targets initiative (SBTi).?Jasmin continues, “We are?providing transparency on our?own sustainability activities and?leading by example. We are?developing and enhancing a lot?of our existing service offerings,?as well as developing?new service offerings, to help our?clients derive strategies and?set up roadmaps in terms of?ESG. We have created many?of our own digital solutions?to enable companies to?gain transparency on?their footprints and KPIs.?Together with our partners,?we have a lot of solutions?available, and every project?in our landscape has an?ESG aspect, even if it is not?labelled as such. The topic is?everywhere.”

Is digitalisation the key?to achieving the targets?companies have set in terms?of ESG and sustainability??Jasmin says, “It is important?to collect data and create?transparency along the?value chain, giving a?baseline foundation. The?next step is then to set up?ESG KPIs or measurements?that are important to?make production plans?and build strategies and?corresponding roadmaps.?By connecting data from?different systems, decision?making processes are?facilitated, as well as?supporting management?and reporting processes, so?it all goes hand-in-hand.”

Jens adds, “I think the back?loop of the data is key.?If we are collecting data?automatically and analysing?it, it is our chance to push?it back to the shop floor,?logistics or engineering?where people need a?signal, such as a view on?the transparency, or a?change in the product due?to reoccurring problems.?By using the data and?looping it back into other?departments and systems,?you can then talk about?use cases like considering?energy management in?production planning, for?example. Digitalisation is?therefore helpful in collecting?and analysing the data, but?the main value comes from?looping it back into other?processes.”

Jens highlights the fact that?we should not take ESG?as a separate entity. He?explains, “Companies have?to do digitalisation, and if?we combine ESG topics, the?initial investment is not as?high as it might seem. In our?opinion, ESG saves money,?raises efficiency, supports?lean operation processes,?and the payback besides reaching sustainability KPIs will?be very quick.”

Jasmin elaborates, “We have?a lot of clients that focused on?energy efficiency some time?ago. They wanted to have?their own energy supplies,?and estimated a payback of?between five and 10 years. In?these times, it is paying back?in just one or two years. Times?are changing, and the payback?periods are getting shorter and?shorter.”

Jasmin shares a couple of?use cases to illustrate how?sustainability strategies are?gaining momentum. She says,?“We are setting up roadmaps?with a lot of Tier 1 automotive?suppliers and manufacturers?in terms of ESG. You need to?focus on what is important for?your company, your clients,?and find the right topics. We?are now looking at Scopes 1, 2?and 3 in terms of CO2emissions,?deriving roadmaps for how?companies can be CO2neutral?in 2050. Having a roadmap?with dedicated measures on?fuel switch and the change?of energy mix, for example,?is now becoming even more?prominent. Furthermore, we?are working with a lot of companies?from the process industry because?of the greater focus on Scope?3 emissions, deriving strategies?focusing on their raw materials,?how they are sourced, their supplier?network, and how they can?integrate their suppliers into their?strategy. It is absolutely a combined?effort with your suppliers.”

Finally, Jens stresses that?sustainability must be one of the?main topics when developing?business strategies for companies?and their customers going?forward. He concludes, “We?are in a learning curve because?ESG and sustainability is such a?new – but highly relevant – topic.?It feels similar to digitalisation when it first came to the fore. The?important point to remember is?that we will only achieve success?if we are doing it end-to-end and?integrating products, processes,?organisation and?IT.”

For further information on PwC?Germany, visit www.pwc.de

This article was originally published in the?September 2022 issue of Digital Innovation, Europe’s go-to digital technology magazine.

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