Digitization seen as critical to delivering on sustainability goals

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by Emily Atkins

Cloud-based computing, analytics and automation are seen as critical to the ability of manufacturers and distributors to deliver on sustainability targets.

A new study by Sage, The State of the Circular Economy, shows industry is paying greater attention to the need for, and benefits of, the Circular Economy (CE). It comes in response to the growing importance of sustainable business practices to over 60 percent of employees, customers, shareholders, and supply chain partners alike.

CE is based on the principles of designing out waste and pollution, keeping products and materials in use, regenerating natural systems, and supporting environmental sustainability. A huge majority (84 percent) of senior leaders polled for the study said building and implementing a CE strategy is now part of their role, with 32 percent stating it is central to their duties.

Almost three quarters (72 percent) of manufacturers and distributors see new technology and innovations as key to adopting CE and sustainability strategies, and concerns arising from inaction such as damaged brand perceptions (46 percent) and reduced long-term profitability (46 percent) are consolidating the need for investment.

“Sustainability is increasingly becoming a non-negotiable for modern manufacturers and distributors. While business goals remain front of mind, the industry equally recognizes the importance of environmental drivers, with energy-efficiency and helping the environment as key motivations for pursuing a sustainability strategy,” said Rob Sinfield, head of business unit, Sage X3 and Sage Intacct Manufacturing.

“As a result, 32 percent of organizations globally and 43 percent of North American respondents adopting circular economy strategies are already reaping the rewards – from greater profitability and productivity to improved resource usage and an enhanced brand reputation. Better yet, a further 32 percent believe they will achieve benefits within the next three years.”

Technology and innovation

Digital transformation is fundamental to delivering a CE strategy. The research found manufacturers and distributors ranked cloud applications (74 percent), data analytics (68 percent), and automation (67 percent) as the most important technologies for running a business more sustainably.

Cloud applications and infrastructure is impacting nearly every aspect of modern manufacturing already. The cloud enables manufacturers to develop products more effectively and support sustainable practices such as 3D printing.

Data analytics for predictive intelligence is helping businesses to refine their product development, optimize supply chains, and monitor equipment to increase resource efficiency. 

Automation boosts productivity by speeding up workflows and reducing human error. It also provides valuable data-driven insights that can be analyzed to improve production performance and sustainability.

However, the industry has more to do when it comes to technology adoption. Despite 61 percent citing cloud apps as helpful in collecting, analyzing, and reporting on their CE capabilities, public cloud usage is far from universal among manufacturers and distributors. In fact, only a minority of respondents say they use public cloud for core apps such as supply chain (39 percent), CRM (38 percent), business intelligence (35 percent), human resources management (34 percent), ERP (32 percent) and payroll (29 percent).

Overcoming barriers

Organizations want to take advantage of the opportunities presented by becoming more sustainable, such as improved reputation (50 percent), increased energy efficiency (47 percent), increased business resilience (46 percent) and a reduced impact on the environment (46 percent).

But despite recognizing the many advantages, global manufacturers and distributors are struggling to realize the full benefits. Navigating a turbulent external market, with its own immediate challenges of rising costs (72 percent), supply chain disruptions (71 percent) and changing customer demands (68 percent), is taking up valuable resources that leaders could otherwise invest in future-proofing their business.

Furthermore, two-thirds (67 percent) of manufacturers and distributors still need to transform their business operations in order to shift to CE. Almost two thirds (64 percent) of those companies say transformation is a significant barrier and is hindering their pursuit of greater sustainability. Finding people with the right expertise (71 percent) is the biggest challenge, along with cost and budget limitations (68 percent) and updating technology integrations and processes (68 percent).

 The report by Sage included 859 responses from IT and business leaders in manufacturing and distribution industries across the US and Canada (230), UK and Ireland (230), France (130), Germany (129), Spain (70) and South Africa (70).