A new study by Sage, the leader in accounting, financial, HR and payroll technology for small and medium-sized businesses (SMBs), today reveals the significant hurdles faced by manufacturers and distributors shifting to a sustainable Circular Economy business strategy, despite widespread acknowledgement of the many benefits it will deliver.
“The State of the Circular Economy” report shows the 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% 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. 84% of senior leaders say building and implementing a CE strategy is now part of their role, with 32% stating it is central to their duties.
Rob Sinfield, Head of Business Unit, Sage X3 and Sage Intacct Manufacturing, said: “Sustainability is increasingly becoming a non-negotiable for modern manufacturers and distributors. While business goals remain front of mind, the industry equally recognises the importance of environmental drivers, with energy-efficiency and helping the environment as key motivations for pursuing a sustainability strategy.
“As a result, 32% of organisations 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% believe they will achieve benefits within the next three years.”
Manufacturers and distributors see new technology and innovations (72%) as a key enabler to adopting CE and sustainability strategies, and concerns arising from inaction such as damaged brand perceptions (46%) and reduced long-term profitability (46%) are consolidating the need for investment.
The promise of technology and innovation
Digital transformation is fundamental to delivering a CE strategy. The research found manufacturers and distributors ranked cloud applications (74%), data analytics (68%), and automation (67%) 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 analysed to improve production performance and sustainability.
However, the industry has more to do when it comes to technology adoption. Despite 61% citing cloud apps as helpful in collecting, analysing, 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%), CRM (38%), business intelligence (35%), human resources management (34%), ERP (32%) and payroll (29%).
Overcoming the barriers to sustainable transformation
Organisations want to take advantage of the opportunities presented by becoming more sustainable, such as improved reputation (50%), increased energy efficiency (47%), increased business resiliency (46%) and a reduced impact on the environment (46%).
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%), supply chain disruptions (71%) and changing customer demands (68%), is taking up valuable resources that leaders could otherwise invest in future-proofing their business.
Furthermore, two-thirds (67%) of manufacturers and distributors still need to transform their business operations in order to shift to CE. 64% of those companies say transformation is a significant barrier and is hindering their pursuit of greater sustainability. Finding people with the right expertise (71%) is the biggest challenge, along with cost and budget limitations (68%) and updating technology integrations and processes (68%).
Tech expert Isaac Sacolick, President and Founder of StarCIO, said: “Organisations can overcome these barriers with innovative thinking. Recruiting from a wider talent pool to bring data and analytics skillsets into the fold will help manufacturers and distributors see the bigger picture – what can I solve today, how can I become more sustainable tomorrow, and where do I want to be in 10 years.
“With greater data insights at their fingertips, organisations will be able to identify the most suited use cases for automation and transformative technologies to enhance their cost efficiency and free up time to focus on the pressing need for a circular economy and sustainability strategy.”