We are living in an age where there is acute awareness of the social and environmental impact of our actions, both at an individual and corporate level.
This was evident at the annual SCF Forum Europe in Amsterdam held last month, with the conversations and panel discussions revolving around how all suppliers can be supported in a more sustainable way; the circular economy and using SCF as a tool to encourage more environmentally friendly behaviour.
The tone and theme of the day was set by Dutch astronaut Andre Kuipers’ opening presentation. His stark images taken from space of the negative impact humans have had on the world’s forests and natural landscapes would not be quickly forgotten and were an important reminder of the need to take wider perspective on the potentially negative impact of individual action.
Discussions throughout the day reflected that theme, as the market considered how SCF should be approached from a more holistic perspective and bring benefits to everyone in the supplier network – from the large multinational to the small business or farmer.
I hope the market will continue to move away from the idea that SCF is just another ‘solution’, a reverse factoring product offered to help large corporates push out their DPOs.
Rather it should be viewed as more of a “strategic” tool that supports all businesses throughout the supply chain. This was clearly demonstrated during a presentation from Danish shipping firm DFDS on why the company chose to implement SCF.
I see two key issues that both shaped the forum and will continue to inform discussions in the coming year:
- Supply Chain Inclusivity: We should consider how ‘inclusive’ our supply chains are and whether opportunities and access to finance are available to all players. SCF cannot be just a tool for the large buyers and tier one suppliers. It must go deeper and pay attention to the needs of the smaller suppliers, whether that is access to financing, being paid fairly or providing support on how to invest in the sustainable production of the goods they produce.By supporting everyone in the network and being more aware of where products come from, you can also improve the security of your supply chain. For instance, large multinationals in the food and agri-sector could minimise the risk of contaminated food entering the chain if they’ve paid attention to the welfare, financial health and production methods of their smaller suppliers. This is an increasingly urgent requirement as consumer scrutiny grows. There will be a role here for technological innovation to manage the flow of data needed to provide transparency on where the products have come from. To a certain extent, this shift in focus is starting to happen. This year’s fintech panel included presentations from each company about how they were providing more “inclusive” solutions that helped provide smaller suppliers with access to affordable finance.
- The Circular Economy: We need to consider how SCF can support the concept of a ‘circular economy’, where goods are produced to be used and reused for as long as possible and then recycled with the aim of reducing waste. How can we support the financial and physical flows when the end-product is no longer just thrown onto a landfill but returned to the original seller for another purpose? There will be challenges to face when products that used to be sold as ‘finished goods’ are now sold as a ‘service’ and reused with different users. How will SCF support the shift of physical and financial flows from a linear to a circular direction? Pressure will also increase on large corporations to take responsibility for their products for the whole of its lifecycle – rather than just until it is sold. The EU is pushing forward with its circular economy initiatives which includes plans to make all plastic packaging recyclable by 2030 and tackle problems such as marine litter. With these objectives in mind, there will be an increasing requirement for technology to trace where products end up and how it is ultimately used or recycled. Again, this will involve large quantities of data flowing within a supplier network, alongside the flow of physical goods and financing.
For SCF to effectively respond to these environmental and social needs, there must be greater cooperation between those supporting the various financial, data and physical flows.
Within a corporation, the supply chain managers often have a more outward view of the wider physical supply chain and the needs of the suppliers. Their perspectives will complement the often more inward-looking view of the treasurer whose priority is to maintain the financial health of the company. We at the SCF Community will facilitate these conversations through conferences and other events and I hope to welcome more representatives from the logistical side of the supply chain at next year’s event.
In fact, collaboration between different disciplines needs to start even earlier at university level. Too often business graduates are taught in silos, where their focus is either finance, procurement or supply chain management. We need our education system to be more cross-disciplinary.
Again, the SCF Community is supporting this with the use of our simulated educational games for students such as the Blue Connection – which gives students the chance to virtually run a company with the aim of meeting circular economy-related goals while also generating a profit. There were opportunities to experiment with this game at the forum this year.
The world has become a more interconnected place and the SCF Community is here to encourage a more interconnected conversation to ensure companies no longer make decisions about their supply chain without considering the wider physical, financial and environmental implications.