Sustainability in Consumer Chemical Supply Chains

Every industry, when left to steady growth and its own devices, is likely to wind up inefficient—consumer chemicals is no exception.¹ So, perhaps we could have expected 2020 to showcase industry leadership concerned with trimming the fat, but there is more than run-of-the-mill efficiency on the docket this year; leaders are instead concerned with much broader practical and theoretical questions around efficiency and the circular economy, sustainability, and environmental health.²

The COVID-19 Supply Chain Shakeup

“The chemicals sector is entering a new era,” claims PwC in its 23rd annual Global CEO Survey.² This is a phrase we’ve heard a lot this year, but for good reason: with the international economic shakeup created by COVID-19, entire industries have pivoted towards risk management and supply chain redesign to minimize loss and accelerate growth out of the pandemic years. As echoed by Matt Cimon, quoted in our recent research collaboration with Goldbeck Recruiting Inc. entitled The Future of Food, the downtime created by this year’s spring lockdown made time for his employees at Portofino Wholesale Bakery to revamp their entire product lines and production operations.³

We can consider this to be the era of new eras, perhaps, as this sentiment is expressed across disparate industries. PwC elaborates that “…these same factors [created by COVID-19] also provide opportunities for growth and differentiation for companies that redefine their value chains and business models, adapt to the circular economy, capture the opportunities from digital technology, and upskill their people.”²

Consumer Chemicals and Sustainable Supply Chains

In the world of consumer chemicals, companies are facing demands to change at every step of their supply chains, balancing consumer and partner sentiment with the practical matters of profitable production.

“Buyers of consumer goods are asking questions around sustainable sourcing of raw materials, labour issues, product safety and recycling,” reports Ben Sawicki for The Chemical Company. “They are likely these days to base purchasing decisions on how sustainable they perceive the product to be, and indeed the company that supplies it.”⁴

As such, companies—especially large producers, like multinational companies (MNCs)—have been attempting to pivot towards a sustainable supply chain. But this process is fraught with challenges and risk.

Sustainable Consumer Chemicals and the Risk of Obsolescence

The elephant in the room: consumer chemicals and their corollary products are, in part, predicated upon their being single use. As such, nationwide bans on single use products like straws, bags, or bottles can present a serious risk to upstream producers as consumer level brands make commitments around sustainability. Naturally, when a first tier producer responds to consumer demand for, say, reusable vessels, suppliers of disposable plastic containers will lose out.²

This precarious position has wide reaching supply network implications, and the pivot towards sustainability should therefore be a collaborative one.⁵ Vertical collaboration is the simplest pro-competitive mode of collaboration and is intended to create benefits beyond what is achievable by one company alone. Consumer chemical vertical markets comprise one of Canadian Alliance’s core competencies and is a prime example of this sort of collaborative optimization. By working with our customers to optimize their supply chain, together, we reduce operational inefficiencies, creating both supply chain and environmental sustainability.⁶

Enabling Digitally-Driven Supply Chains

At Canadian Alliance, we have long advocated for the implementation of digital systems along the supply chain to create efficiencies, transparency and value. The promise of digital systems continues to grow as such efficiencies translate almost directly to sustainabilities.⁷ Digitally driven supply and value networks can both “trim the fat” mentioned earlier and create sites for capturing new value. This shift is a big one, but it will be worth it, suggests PwC.

“This development has the potential to eliminate waste altogether and is playing a game-changing role in enabling a circular economy,” writes PwC. “Digitalisation is the catalyst through which technological breakthroughs will push our productivity to new levels, increase welfare and make us more sustainable.”⁷

The function of a circular economy is total sustainability and sufficiency. Implementing AI, the Internet of Things, and blockchain systems within our own consumer chemical supply chains (and all supply chains, indeed) brings with it the promise of consistent and unwavering profitability.⁷

The Future of Consumer Chemical Supply Chains is Not Without Risk

All told, sustainability, both in terms of environmental operations and digitisation towards a circular economy, represent the next stage of massive growth in supply chains. But for consumer chemicals, making the shift towards sustainability in these terms is not with serious risk and companies must learn to balance growth carefully. As the Harvard Business Review reported in 2020, some of the multinational companies embracing sustainability commitments have faced serious backlash in recent months.⁸ Why?

For all that data transparency can give us, it can’t ensure that our upstream supplier networks adhere to the sustainability promises and goals we set for ourselves.

“Many of the MNCs that have committed to it have faced scandals brought about by suppliers that, despite being aware of sustainability standards, have nevertheless gone on to violate them,” wrote Verónica H. Villena and Dennis A. Gioia for the HBR.⁸

These are concerns companies must take into account as they digest the rare circumstances 2020 has served up to fortify their operations and supply chains for the future, which is, necessarily, a more sustainable one. While not the easiest route to follow, because is both just and profitable.

Cited

1 Chemical & Engineering News. “C&EN’s World Chemical Outlook 2020.” Accessed November 12, 2020. https://cen.acs.org/business/CENs-World-Chemical-Outlook-2020/98/i2.

2 PricewaterhouseCoopers. “Chemicals Trends 2020: Winning Strategies for an Era of Sustainable Value Chains.” PwC. Accessed November 12, 2020. https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2020/trends/chemicals.html.

3 “The Future of Food: A Fundamental Industry in Flux.” Canadian Alliance Terminals and Goldbeck Recruiting. Accessed 12 Nov, 2020. https://goldbeck.com/futureoffood

4 Sawicki, Ben. “Sustainability Along The Supply Chain.” The Chemical Company (blog), January 2, 2017. http://dev.thechemco.com/sustainability-along-the-supply-chain/.

5 “Starting at the Source: Sustainability in Supply Chains | McKinsey.” Accessed November 12, 2020. https://www.mckinsey.com/business-functions/sustainability/our-insights/starting-at-the-source-sustainability-in-supply-chains#.

6 “Specialties.” Canadian Alliance – Metro Vancouver Logistics & Warehousing (blog). Accessed November 12, 2020. https://canadianalliance.ca/specialties/.

7 PricewaterhouseCoopers. “The Road to Circularity.” PwC. Accessed November 12, 2020. https://www.pwc.nl/en/assets/documents/pwc-the-road-to-circularity-en.pdf