Streamlining supply chains is key to accelerating along the road to net-zero

According to Deloitte’s Environmental, Social and Governance Preparedness Survey Report, published in May 2023, “78 per cent of participants identified managing supply chain emissions” as a potential hurdle in achieving net zero”, (page 33).

Also “63 per cent of the survey participants indicated costs associated with transitioning to net zero technologies as a potential challenge to achieving net-zero. (page 33 again).

Overall only “27 per cent” of the companies surveyed by Deloitte felt confident about ESG preparedness, (page 27).

This is a surprisingly low number given that Securities and Exchange Board of India (SEBI) has introduced the Business Responsibility and Sustainability Reporting (BRSR) framework to streamline the ESG disclosure requirements for listed companies in India (now the largest country in the world by population) effective from the current fiscal year (FY23-24) for the top 150 listed firms, increasing to the top 1,000 by FY 26-27.

Supply chains need to be re-engineered with data at their core. Compliance requirements are also being upgraded with the addition of ESG metrics. Digital Product Passports, aka digital twins or digital assets, are designed to capture the entire life cycle of a product through its supply chain. This provides invaluable data for a regulator but only if the data has integrity and trust.

While there is no standard for Digital Product Passports today, the European Commission has proposed the development of a European Digital Product Passport (DPP) to create a digital environment which would enable data-exchange mechanisms and transparency throughout our supply chains to address political and environmental challenges. The EU is targeting 2026 for its launch, initially targeting apparel, batteries and consumer electronics but it is expected that these will be closely followed by DPPs in the textiles, plastics, chemicals, construction and automobile manufacturing sectors.

While regulators do not lay out a specific technology, it does define the need for verification of compliance, compatibility with open standards and interoperability across product groups and systems. The scope of new regulation will be far reaching as seen in India.

It would make sense for these passports to be built on blockchain technology. Blockchain with its unique attributes can be the single source of truth and allow collaboration between organisations without compromising data privacy. Blockchain’s immutability (you can only append to the dataset, not change it) can power the optimal audit record – with trust designed in – which is increasingly critical for all areas of business operations and transaction reporting. This can be used to revolutionise data sharing within the organisation and externally amongst its wider community stretching from the lowest tier of suppliers through to customers and regulators.

Consider a world where each asset has its digital twin, otherwise known as its Digital Product Passport. The passport provides the information required to more accurately assess the status and condition of the product or component.

There are many types of digital twins such as those that are a representation of a product, “Product Twin”; “Production plant twin” – mirroring the production facility; “Network Twin” – representing the wider supply chain and infrastructure twin. While each records data on their part of the product process, the opportunity to connect them altogether represents a new way of thinking about business.

Like any database, the value of blockchain is only as good as the data it records. Any enterprise blockchain application must be able to connect and collect data, in real time through existing enterprise systems otherwise, what is the point?

Automated data collection remains a journey. Today, applications can collect data through a combination of sensors, devises and integrations with existing digital systems combined with manual entries where no digital system exists. Over time, manual systems are then replaced with automated data collections points.

Unfortunately, there are enterprise-focussed blockchain applications who purport to integrate but the reality is, they operate with manual input only mode today. These should be avoided. Implementations without the capability to integrate are pointless and can set companies back rather than give them a head start.

Once the twin is up and running, it can bring enormous benefit. From ‘de-bottlenecking’, resource planning and allocation to the creation of new revenue opportunities such as certification of carbon capture and sequestration etc.

Today, forward thinking organisations can influence the standard by preparing early. Implementing a solution such as Finboot’s MARCO across your supply chains can demonstrate the capacity of data collection and its quality today. Gaps can then be addressed and data quality can be improved before it is too late.

It is key to invest in a technology solution that can grow to avoid costs of duplication or worse, the need to restart your application development because the first set-up was too rigid. Those who start early will be best positioned to turn compliance into competitive advantage.

“Industrial India has a unique opportunity. By implementing leading edge technologies such as blockchain to power a trusted ecosystem of compliant companies, we can set a new bar for product standards in India and for export,” said Sanjeev Fadnavis, CEO of Nitor Infotech - an Ascendion company.

The new world doctrine requires a new approach: technology modelled (digital twin) and tracked (blockchain) to ensure the organisations acquiescence. The opportunity it how to turn compliance into SDG aligned value – namely jobs, opportunities and sustainable wealth.