Smart supply chains: ESG implications

IoT sensors can be used to monitor how much energy the equipment in a factory is using, where a manufacturer might be losing energy, and how this could be fixed.

>> Smart Supply Chains: Implications for supply chains

Factors such as energy efficiency, waste and water usage, are tracked via sensors, allowing for effective management of resources and more accurate, granular results. In supply chains, IoT device monitoring assists in tracking these metrics globally, giving real-time carbon data and predictions. This provides stakeholders with an accurate understanding of impacts, allowing companies to effectively record data and provide greater visibility for investors.

For example, IoT sensors can be used to monitor how much energy the equipment in a factory is using, where a manufacturer might be losing energy, and how this could be fixed. In agriculture, IoT solutions can help minimise the use of water, fertiliser, and pesticides and even reduce the impact of greenhouse gases produced by livestock via monitoring the health of the animals.

According to Danfoss, IoT solutions have helped food retailers save an estimated USD37 million by cutting food waste (e.g. via temperature monitoring) and avoid more than 2 million tonnes of CO2 over the past five years alone. Moreover, IoT solutions could also be used by logistics companies to shorten delivery routes, which could help to reduce energy consumption, while predictive maintenance facilitated by IoT technology can help to extend the lifespan of critical equipment and ultimately help to reduce waste.

Furthermore, many IoT projects are contributing to the UN’s Sustainable Development Goals (SDGs). Currently, 84% of existing IoT deployments address the SDGs, with 75% focusing on just five of the SDGs. Specifically, "industry, innovation, and infrastructure" and "responsible consumption and production" both aid the sustainability of supply chains. It should be noted that environmental factors such as energy usage in production and the limit ed supply of raw materials and e-waste have to be considered along with the expected rise in IoT device volume.

Data collection from IoT devices in the supply chain provides potential benefits to both companies and consumers. Regarding the former, monitoring factors such as air and water quality to optimise health and wellbeing aids employee welfare. Tracking physical assets such as goods and infrastructure allows for greater supply chain transparency, whereby the consumer can monitor the location and expected arrival of ordered goods travelling through the supply chain.

A significant challenge faced with the increased adoption of IoT devices is the cybersecurity of such assets. Connected devices often lack sophisticated security, creating an entry point for hackers and a security vulnerability. In logistics, cyber-attacks can result in delays in resource and product distribution, potentially having significant societal impacts as well as potential reputational and financial implications. An additional risk is data privacy: movements and interactions are monitored more often with a greater number of connected devices. Concerns arise if this information ends up in the wrong hands.

>> Smart supply chains: The role of IoT

It’s becoming increasingly important for boards to include a technology expert and a Chief Information Security Officer (CISO), to evaluate and manage the risks involved. 73% of boards in the FTSE 350 recognise cyber threats in their supply chains to the first tier (third party). However, just 23% recognise these threats to the second-tier and beyond (fourth party and onwards), with 4% not recognising the risks at all, leaving firms vulnerable to attacks.