Zero Waste, Maximum Profitability
Today I want to talk about how targeting zero waste can help to achieve maximum profitability.
Have you ever swum in the nice refreshing blue water of the ocean on a sunny day and suddenly encountered a plastic bag or some other piece of garbage floating right in front of your eyes? Most likely this caused an uncomfortable feeling within you, and you immediately felt the desire to leave the water.
Probably similar emotions rushed through the participants of the Ocean Plastics Leadership Summit in 2019 when they jumped into the in ocean in the middle of nowhere and suddenly felt surrounded by pieces of plastics instead of colorful fish. For one representative of a consumer goods company this was a particularly eye-opening moment. To their amazement and shock one of the first pieces of macro-plastic waste that caught the group’s attention was a container carrying the logo of one of their brands. Even more concerning was the cloud of micro-plastic floating around, which participants didn’t need to use much imagination to reconstruct into various brands’ packaging based on the many unique colors floating by.
Moments and experiences like this one are contributing to a global mind shift, not only with consumers but also with company leaders and policy makers. SAP helped to convene the expedition of the Ocean Plastics Leadership Summit in 2019, and at the World Economic Forum in Davos in 2020, SAP announced its vision for a plastic-free ocean by 2030. On first sight, this all might sound like a simple “feel-good” topic or even blunt “greenwashing”. However, by taking a closer look, it becomes obvious that reducing waste as well as increasing reuse and recycling rates can and in most cases will have a direct and significant impact on both profitability and supply chain resilience.
According to estimations, 91% of plastic isn’t recycled. Considering that oil resources are limited, costs of shipping materials have gone up significantly during the recent months (also for packaging materials), and that incinerating plastic waste contributes to the global climate crisis, this is a shockingly high number, and an untapped opportunity at the same time.
Where some people only see waste, others see above-ground mines. Fortunately, green technology is advancing and innovating, so that the recycling of plastic waste does not automatically mean downcycling into lower quality plastics any longer. Instead, former single-use plastic can be reborn as uncolored translucent perfect plastic (just like virgin plastic) either by laser spectroscopy-supported sorting or advanced molecular recycling. Blockchain-based technologies like GreenToken by SAP provide transparency along complex supply chains and can help to ensure the targeted percentage of certified recycled content.
At the same time, more than 400 Extended Producer Responsibility (EPR) schemes and plastic taxes are either already in place or are planned around the world. Depending on the country, there might be even multiple Producer Responsibility Organisations (PRO) with different fees and waste declaration requirements, which all adds to the complexity. Countries like Germany also have a central registry in place which allows competitors to monitor the declarations of their peers, increasing the pressure for doing things right as everybody else is watching. Finally, regulations as well as related fees, taxes and declaration requirements are still evolving and constantly changing. Thus, companies have to chase after moving targets.
As a consequence, it becomes paramount for companies like consumer packaged goods (CPG) companies to have a deep and reliable understanding of their waste compositions across product lines and packaging materials on an ongoing basis. Only with this knowledge, EPR fees can be negotiated and declared in a way that optimizes costs and maximizes profitability. Only with these insights, packaging and product designs can be adjusted to further reduce EPR fees and plastic taxes, to increase reuse and recycling rates and to become more flexible and agile with respect to material supplies for overall supply chain resilience.
As you might have learned in our recent SAP Sustainability Day or from our openSAP course “Helping Business Thrive in a Circular Economy”, we have been working on a new solution called SAP Responsible Design and Production, which is now generally available to our customers (see also this announcement). More than 40 customers from different industries helped us build the solution by providing feedback during the development. Key partners on our Circular Economy journey has been the Ellen MacArthur Foundation, a leading organization helping companies with their transition to circular economy business models, as well as Accenture. The addition of SAP Responsible Design and Production to our growing portfolio of sustainability-related solutions and features is another important milestone for making the “green line” reality, and thus to add sustainability as a third dimension of business success in addition to the top and bottom line (watch out for more blog posts by me and others on this topic).
SAP Responsible Design and Production allows calculating waste compositions and corresponding EPR fees for declarations to PROs in different countries in parallel. Packaging compositions can be directly imported from existing SAP Product Lifecycle Management (PLM) systems or simply uploaded via files. This way, managing EPR fees and plastic taxes at scale becomes an easy task.
Through the analytical capabilities of SAP Responsible Design and Production it becomes possible to gain deep understandings packaging materials and their associated costs. This way, opportunities for saving costs can be identified and effects of alternative packaging and product designs can be explored. The data management features of the solution allow discovering inconsistencies and thus ensure that EPR declarations are solid and reliable.
From a technology point of view, we develop our new sustainability solutions as cloud-based solutions on top of the SAP Business Technology platform and leverage the data management power of SAP HANA.
If you want to learn more about SAP Responsible Design and Production and the other sustainability-related solutions from SAP, you should become a follower of our SAP Sustainability Community to stay up-to-date about any sustainability news from SAP. Watch out for what we have to say about Holistic Steering and Reporting very soon, another dimension of our growing sustainability product portfolio!