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The new era of sustainable supply chains

November 15, 2019
Chemical Value Chain

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To improve sustainability, materials manufacturers are welcoming new digital technologies and process innovations into their global supply chains

From palm oil to plastics, the global supply chains of many critical raw materials are evolving as consumers and manufacturers increasingly seek sustainable and renewable options. Digital technologies, including blockchain, Internet of Things (IoT) sensors and modeling tools, are facilitating these supply-chain transitions by enabling unprecedented data visibility and analyses. At the same time, chemical manufacturers are turning toward process and chemistry innovations to improve the sustainability of their raw materials.

BLOCKCHAIN DELIVERS ACCOUNTABILITY
Blockchain, in particular, provides many specific capabilities that are helping manufacturers realize more sustainable sourcing practices. In the plastics sector, for instance, DOMO Chemicals and Covestro AG, along with the Circularise initiative, are partnering to implement blockchain technology to improve traceability and transparency in plastics manufacturing. “Blockchain can be applied to many challenges in the plastics value chain, such as complex record keeping and tracking of products. Blockchain serves as a less corruptible and better automated alternative to centralized databases,” says Jordi de Vos, founder of Circularise. Blockchain provides encoded information storage on a network-to-network chain, which validates data to protect business dealings and prevents the theft or manipulation of documents — a unique combination of transparency and security.

The Circularise platform creates a digital twin of a material, component or product to build end-to-end traceability by integrating audit reports, certifications, material parameters and more. In addition to making materials traceable, Circularise aims to protect stakeholders’ privacy — the protocol is specifically developed to enable the disclosure of relevant supply-chain information without having to share sensitive data. One facet of the Circularise Plastics program is the creation of “material passports,” which contain all the verified information attached to a particular material, including batch number, certificates of analysis and more. “For example, when a material is being recycled, the recycler, and subsequently the customer, would know exactly where the material originates and exactly what it is made from,” explains Burkhard Zimmermann, head of strategy, sustainability and digital at Covestro’s Polycarbonates business unit.

The Circularise initiative aims to advance sustainability concepts — beyond just looking at plastics recyclability — and enable a communication protocol to facilitate their implementation. “This project can give us a sustainable feedstock of recycled plastics over time, yet also acknowledge additional benefits throughout the value chain and support customers in their search for sustainable materials,” emphasizes Thomas Nuyts, global product director of Domo’s Engineering Plastics segments.

Investment activities are further highlighting the economic importance of sustainable sourcing. In September, blockchain-based product-tracking platform OpenSC — co-founded by the World Wide Fund for Nature and BCG Digital Ventures — received $4 million in seed funding to further develop its technology to trace, verify and share supply-chain data. OpenSC assigns a digital identity to a product and uses IoT technologies to trace its supply chain from origin to consumer. Collected data are stored in a decentralized, tamperproof blockchain. “The benefit of blockchain is twofold. Firstly, it’s an immutable ledger, which means that once the data are recorded, it cannot be changed. The second benefit is that public blockchains are accessible and decentralized, so data can be made open and visible to consumers and other interested parties,” explains Markus Mutz, CEO of OpenSC. OpenSC utilizes machine learning to synthesize meaningful insights and verify ethical production claims by processing large amounts of previously underutilized data from disparate sources — including satellite images, GPS information, weather patterns and more.

OpenSC recently announced a pilot project with global food manufacturer Nestlé S.A. to trace milk products from New Zealand to the Middle East, and plans are in place to expand this partnership to trace palm oil sourced in Mexico. Palm oil is a ubiquitous ingredient in numerous food and personal-care products, but its procurement is currently fraught with environmental risks related to deforestation, making it an area where innovative supply-chain strategies are necessary. “OpenSC can use technology to verify that a palm-oil product was farmed on deforestation-free land by analyzing satellite imagery over time. This can be overlaid with plantation boundary coordinates and a unique product identification, tracing the product back to a particular property, verifying that it was produced without deforestation,” says Mutz. Palm oil is just one example of a product chain that can benefit from the data transparency provided by the customizable blockchain platform. Moving forward, Mutz believes that new levels of openness enabled by blockchain and other IoT technologies will drive consumers to increasingly demand sustainably sourced goods and encourage manufacturers to manage their supply chains to mitigate waste, fraud and other risks.

The need for responsible sourcing in the mining and minerals sector has been amplified by the tremendous growth in demand for battery materials, such as cobalt, graphite, lithium, lead, nickel and manganese. “The circumstances under which battery materials are produced, traded and transformed in certain geographies is fraught with risks,” explains Nicholas Garrett, CEO of RCS Global Group. RCS Global has collaborated with IBM and a consortium of large-scale mining companies, automotive manufacturers and intermediate suppliers to develop the Responsible Sourcing Blockchain Network (RSBN), said to be the mining industry’s first blockchain-based endeavor to tackle supply-chain sustainability. The RSBN includes an integrated assurance mechanism incorporating RSC Global’s audits, which consider standards and guidance from the Organisation for Economic Cooperation and Development (OECD), including verification against human rights abuses. “For each tier of the supply chain, additional criteria can be applied, including, but not limited to, social, environmental or operational health and safety conditions,” adds Garrett. The RSBN platform also aims to promote the socioeconomic advancement of small-scale miners through a tokenization model. Furthermore, the platform is designed so that it can be expanded to include additional conflict minerals and precious metals, with the goal of making it the industry standard for fully assured material traceability and provenance.

In addition to the RSBN, RCS has developed a smartphone application for data collection from remote mining sites.

“We use handheld devices for onsite monitoring of responsible practices and to scan tagged material shipments to enable traceability. Both data flows are captured in our central database, where algorithm-based analytics help us to analyze the data, design on-the-ground risk reports and direct and verify corrective actions,” explains Garrett.

However, he emphasizes, even with the abundant capabilities of digital technologies, a “boots on the ground” approach remains key in high-risk supply chains to ensure data integrity and for downstream companies to gain full visibility into their supply chain. “Our global supplier audit program helps clients map their entire raw-material-specific supplier ecosystem and verify that this ecosystem adheres to responsible sourcing practices, including industry policy frameworks, corporate codes of conduct and legislative requirements,” adds Garrett.

Another key element in assuaging supply-chain concerns is the collaborative management of relationships between suppliers and customers. “Enterprise contract management provides supply-chain visibility by tracking what a firm’s worldwide obligation, entitlements and business relationships truly are. It gives a firm grasp on the supply chain, key suppliers, the composition of the products purchased and the locales in which they operate,” says Neal Singh, chief operating officer at Icertis. Icertis offers blockchain and artificial intelligence (AI) technologies to help companies improve transparency, execution speed and compliance with regard to measuring supplier diversity and product provenance. In the pharmaceutical sector, for instance, the complexities surrounding global supply chains, regulatory programs and drug trials introduce unique issues rooted in contract management and data visibility. “We’re seeing more customers with the need to enforce regulatory compliance across multiple geographies and optimize their relationships with material suppliers,” adds Singh.

By Mary Page Bailey

Source: Chemical Engineering

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