Sustainable Supply Chain Reference Architecture

In this edition of the Sustainable Supply Chain Framework newsletter, I’m exploring the Reference Architecture, specifically focusing on the Solution Layers dimension. I'll cover the other two dimensions in future newsletters to keep this one concise.

The solution layers cover various aspects of an end-to-end solution throughout its lifecycle. Not all layers are necessary for every use case; for example, if there’s no change to the business model, that layer can be skipped.

Unlike other reference models, S2CRA includes business value and business model aspects to ensure digital sustainability solutions provide value and consider potential business model innovation.

Business Value

The traditional way looking at business value is limited to revenue, cost and profit, which is also still reflected in todays business cases. For sustainability solutions this view is much too narrow and we need to move from an financial accounting centric view to a more holistic perspective and a business value portfolio.

Existing frameworks and guidelines like the UN Sustainability Development Goals and Global Reporting Initiative (GRI) consider this holistic view on business benefits already. The topic of sustainability ledgers, with focus on CO2 accounting is emerging, also in software solutions like those from SAP and ClimatePartner .

Existing performance measurement frameworks like the.Balanced Scorecard help with integrate the defined Business Value Portfolio into the strategy planning and execution process of an organization. This is an example how to integrate sustainability into existing processes and structure, instead of creating new once. It shows that sustainability is core to the business and not one part of the organization that looks good from a marketing and public relations perspective.

People

People make change happen. Just building new systems or changing processes without consideration of the people impacted, is a guarantee push-back and failure. To make a sustainability transformation successful, you want to achieve people-related goals through creating people change.

Creating a common sustainability language within your organization is crucial to avoid communication issues. People need to learn new skills, which can be a personal and professional growth opportunity. Translating business value metrics into team and individual KPIs helps everyone understand their contributions, like how a factory worker's energy-saving efforts reduce CO2 emissions. This fosters a sustainability mindset, encouraging acceptance of new digital solutions and process changes.

What we try to achieve here is to create a sustainability mindset that drives behavioural change and therefore helps with the acceptance of new digital solutions and process changes. Here I can highly recommend to look at Sustainability Mindset Indicator and also the work of Otto Scharmer and Peter Senge in the field of organizational learning.

Processes

First off, the processes that are impacted by the sustainability transformation need to be identified. Then they need to be reengineered and last but not least, additional process KPIs need to be put in place, based on the defined business value portfolio.

Business Process Management has been around for a long time. The journey to success is to build sustainabiliy into the existing processes and business process management and not create a "sustainability island".

Data

Did you hear about "data is the new oil". Not a very sustainable thing to say I guess. Still data is key to all sustainability initiatives and all digital sustainability solutions. Again a lot of data management and analytics capabilities are already there. The challenge is to make the sustainability-(related) data reliable, agile and secure. Manipulation of sustainability data, e.g. CO2 footprint, leads to green-washing. Low quality data used by AI models, may lead to wrong operational decisions that increase the environmental impact. Unavailability of data will lead to gaps in sustainability reporting that will create a lower rating from financial institutions. So making sure you have complete and high quality sustainability data is crucial, and the measures you take to achieve this will probably have a positive impact on your other data as well. This way your investment into sustainability, makes you more competitive as a business. Those sustainability geeks amongst you may now say. STOP. Sustainability = people + planet + PROFIT, and you are right, which brings us back to the chapter of people and the aspect of a common language. So following the definition of sustainabily of the Triple Bottom Line concept from John Elkington , investment in the environmental and social impact of your organisation will lead to positive impact on your financials as well.

Besides the proven data management concepts, the topic of data spaces needs to be considered for sustainability use cases. Data exchange, especially between organisation, has always be a pain point and data space are here to solve this. We may come back to data spaces and sustainability in a future newsletter as a separate topic. In the meantime, I can only highly recommend to look at Gaia-X Association for Data and Cloud (AISBL) and Catena-X as a starting point.

Technology

Especially people coming from the IT world sometimes have a very limited view on the topic of technology. You may have even heard terms like "Shadow IT", indicating that many organization do not have an integrated approach to technology.

Asset-centric industries like manufacturing, energy utilities or mining have traditonally a siloed technology world of Operations Technology/Asset and Information Technology. With Digital Twins and other technology developments this siloed approach prevents organizations to optimize their business and is a stumbling block on the way to a sustainability transformation. Forward thinking organizations like Lion have already combined IT and OT. Technology is not a cost center, but an enable of the business, so having it sit under the CFO is not really helpful. Lion, for example, has integrated IT into the COO area, where also the asset business and operational technology sits. Bravo!

Business Model

Sustainability is not only an additional cost category in an existing business model, but can transform every part of the business model, including revenue streams, value proposition and customer relation. In this context, I use the term Business Model as defined by Alexander Osterwalder in his Business Model Canvas approach.

Legislation is forcing companies to invest in sustainability. Why not create a competitive advantage through sustainability. Sure, this requires more thinking and a more strategic approach, but first research shows that this is possible (Sustainability improves finanical performance).

Use the Business Model Canvas as a checklist to see if a specific sustainability use case can also help you with business model innnovation.

Closing out

Thank you to those, who made it until here. I close out for this month and looking forword to talk about the Solution Life Cycle and Solution Reach dimension of the Sustainabile Supply Chain Architecture next months. Hope to have you all with me again.

As always, if you have comments, please leave them here to discuss in our growing community. If I can ask you for a favor, please spread the word, so more people can get invovled in our discussions.

There is one more thing: Please remember that the Sustainable Supply Chain Working Group of the MIT Club of Germany works with partner organizations and dedicated individuals around the world to fill the Sustainable Supply Chain Framework with more details through the analysis of existing and creation of new sustainability use cases that are integrated into the framework. If you want to contribute please DM me.

Take care,

Peter