Supply Chain Digitalization is Now a Prerequisite for Retail Sustainability

While many of these ESG laws share the same general goals, they’re extremely localized, and each has its own unique reporting requirements.

Words Eric Linxwiler

Despite the clear demand for more sustainable goods, most brands and retailers are struggling to mitigate the greatest contributor to their social and environmental footprint: their supply chains. Supply chains account for up to 90% of a company’s environmental impact, yet brands and retailers are still mostly in the dark about the origins of the very products they sell. To achieve this overdue visibility and to navigate the considerable complexities involved in ensuring sustainability at every stage of product development and sourcing, businesses need to commit to digitalizing their supply chain operations end-to-end.

The Growing Necessity of Digitalization

Digitalization has long presented a strategic advantage for global retailers and brands – a powerful strategic option to create cost savings by automating processes, creating efficiencies, and reducing lead times. In the wake of new supply chain regulations governments are rapidly passing across the world, however, digitalization is no longer a nice-to-have but an indisputable necessity. From the European Union’s new Corporate Sustainability Reporting Directive to the United States’ Uyghur Forced Labor Prevention Act and the German Supply Chain Act, these laws demand meticulous scrutiny of supply chains to ensure ethical practices and environmental stewardship.

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Challenges of a Fragmented Regulatory Landscape

While many of these ESG laws share the same general goals, they’re extremely localized, and each has its own unique reporting requirements. Navigating the complexities created by this fragmented regulatory landscape is increasingly only possible with a multi-enterprise platform’s sophisticated data management capabilities. A platform like this serves as an intelligent connector of data from ERP systems, supply chain partners, NGOs, and sustainability databases, offering brands and retailers a unified view of their entire supply chain.

The Role of Supply Chain Maps in Ensuring Compliance

This platform’s supply chain maps illustrate the relationships between vendors and factories and even visualize key performance and scorecard metrics such as audit results, certifications, and risk levels, so compliance managers can see at a glance any vulnerabilities in their supplier base. By centralizing key supplier data, this technology is also instrumental in helping businesses meet their ESG requirements, including their Scope 3 carbon reduction goals, allowing them to collect and assess emissions data, efficiently implement improvement plans, and track and measure their progress.

AI’s Expanding Role

Increasingly, supply chain operations are leveraging artificial intelligence to introduce greater transparency and traceability into supply chains, bringing a new level of speed, efficiency, and accuracy. AI can now prepare chain of custody documentation for every order retail businesses face, and instantly identify any gaps in documentation, saving time and reducing the potential of costly detainments at ports. In addition to allowing businesses to more efficiently map their supplier bases, the AI can sift through large historical datasets and rapidly identify vendors and practices that pose potential ethical and environmental concerns. AI-driven analysis can pinpoint anomalies and draw connections to areas of risk, providing an early warning system to protect brand reputation and ensure ethical sourcing. Exciting AI-powered innovations are also enhancing quality control and optimizing demand forecasting, further solidifying AI’s role in modern supply chain operations.

The Push for AI in ESG Data Collection

It’s no wonder why 58% of organizations report they plan to improve ESG data collection with artificial intelligence. Brands and retailers are understandably eager to fold AI into their supply chain operations, but in truth, many have not yet created the digital infrastructure to do so. One major obstacle preventing businesses from realizing AI’s potential is the lack of organized, centralized, real-time data. To overcome this, companies need to start creating a central repository of supply chain data at the PO, SKU, and factory levels.

The Foundation of AI Success: Centralized Data

The foundation for optimizing the benefits of AI for any organization lies in the ability to interconnect thousands of proprietary data points from multiple data sets across the enterprise. This requires aggregating all data from early-stage planning through the creation of product specifications, onto sourcing, costing, and logistics, and including detailed information on all suppliers along the supply chain up to the Nth tier. It’s only once businesses have established optimal data management that they can begin unlocking AI’s full potential.

The Role of Digitalization in Enabling AI

Digitalizing with a multi-enterprise platform ensures that data is current, accurate, and accessible, setting the foundation for leveraging AI. These platforms provide real-time supply chain visibility, allowing businesses to monitor their supply chains continuously, identify potential issues before they escalate, and make informed decisions based on accurate, up-to-date information. They serve as the most effective and organized repository for proprietary supply chain data, integrating seamlessly through APIs with external databases. This interconnectedness enhances AI’s capabilities, enabling predictive analytics and automated decision-making across the supply chain.

AI’s Transformative Potential for Retailers

As retail stands on the brink of a digital revolution accelerated by the wider availability of powerful AI solutions, the opportunities for transformation are immense. Retailers that can effectively integrate AI into their supply chains will not only achieve greater operational efficiencies but will also gain competitive advantages in agility, customer satisfaction, and sustainability. To fully capitalize on AI’s growing potential to ensure responsible and sustainable supply chains, brands and retailers must prioritize digitalization now or risk falling behind consumers’ growing expectations of sustainability.

About the Author

Eric Linxwiler is Senior Vice President ofTradeBeyond. He has over 30 years of experience in enterprise software and cloud-based platform companies with a specialty in supply chain optimization and workflow management.

(Copyright@IndiaCSR)