How digitisation enables petrochemical supply chain sustainability

Key insights:

  • There is a growing awareness among consumers as well as managers that supply chains should become more sustainable, from a social and environmental perspective.
  • Digital technologies are already widely used to improve operational efficiency and customer service.
  • The recently published EPCA 2019 report illustrates through 12 case studies from different players in the petrochemical supply chain and beyond how digital technologies can also be used to achieve four sustainability goals: extended useful life of assets, maximised utilisation of assets, looped materials and minimised CO2 emission.

For three years now EPCA, The European Petrochemical Association, and Vlerick Business School have been exploring how digitisation can add value to the petrochemical supply chain. Since the previous report published in 2018, digitisation has been gaining momentum. And so has sustainability awareness. How can digitisation minimise the ecological footprint of the petrochemical supply chain? To explore this question EPCA and its Supply Chain Programme Committee (SCPC) organised a “Digital Cafe” workshop at EPCA’s Annual Meeting in Berlin, on 8 October 2019. Professor Ann Vereecke and researchers Alejandra Cabos Rodriguez and Joachim Van den Bergh summarised the conclusions of the round table discussions as well as the lessons learned from desk research and expert interviews in a comprehensive report, which is now available. Ann comments on its findings.

Time to act and rethink

Climate change is a reality”, she starts off. “It not only affects the environment, people and communities, but also disrupts the supply chain. If we want to preserve the planet, organisations and businesses will have to change the way they work.”

In this context, the report highlights two questions that need to be addressed. Firstly, can we make each step in the supply chain more efficient from an ecological perspective, reducing waste and energy consumption in each step? And secondly, can we change the structure of the supply chain, from linear to circular, to implement the sustainability principles of the circular economy, i.e. (1) preserving and enhancing natural resources, (2) keeping products in use, and (3) avoiding negative externalities such as waste and pollution?

“There is no question that digital technologies can make the supply chain smarter and more efficient”, Ann says. “That’s why they are widely used to improve operational efficiency and customer service. Now, can they also help to reduce the ecological footprint of our supply chain? Can they be used to make our supply chain more circular?”

Structuring framework

In principle they can. But how? To structure their own thinking about the impact of digital technologies on sustainability in the supply chain, Ann and the team developed a framework.


Framework for developing a digitised, sustainable supply chain

She explains how it should be read, from right to left: “Digital technologies, such as Internet of Things, cloud computing, blockchain or artificial intelligence implemented in supply chain processes, i.e. in planning, sourcing, production, delivery and/or the return flow, enable the company to introduce innovative supply chain practices, for example, flow optimisation, waste reduction, and waste stream recycling. As a result, they deliver value in terms of extended useful life of assets, maximised utilisation of assets, looped materials and minimised CO2 emission, making the supply chain more eco-efficient and sustainable.”

“As with any change process there are barriers to overcome and success factors to consider”, she goes on. “But all this ultimately contributes to the accomplishment of sustainable development goals, which helps to mitigate the impact of climate change, advance the circular economy, and is a step towards a more sustainable world.”

Twelve case studies

Ann and her team collected 12 case studies from different players in the petrochemical supply chain and beyond – manufacturing companies, logistic service providers and port authorities. These cases were analysed using the framework described above.

The digital technologies these organisations have introduced are as diverse as they are numerous: data platforms; cloud computing; digital twins; sensors connecting people, assets, equipment and resources in the IoT; big data, data analytics, artificial intelligence and machine learning; blockchain; autonomous vehicles and robots, mobile apps and additive manufacturing.

“Remarkably, almost all of the case studies we found have a positive effect on eco-efficiency. There were also lots of examples where digitisation maximises or increases the utilisation of assets and a few showed how digital technologies deliver value in terms of looped materials, i.e. recycling and waste reduction.”

Three goals in one

Two of the case studies illustrate how digitisation helps to achieve all three goals at once.

The first one is the optimised Verbund at BASF. At BASF’s Verbund sites, production plants, logistics and infrastructure are integrated, creating an efficient value chain and reducing CO2 emissions. BASF is now incorporating digital technologies like artificial intelligence and machine learning to optimise material flows between processes, and sensors and data analytics for predictive maintenance. The result: better utilisation of the assets, better use of materials and reduced waste, as well as a reduced carbon footprint.

The second one is that of Aurubis, a leading global provider of non-ferrous metals and the largest copper recycler worldwide. It processes complex metal concentrates, scrap metals and metal-bearing recycling materials into metals of the highest quality. Aurubis Belgium has developed a digital model enabling the company to optimise the reverse logistics and the recycling of waste from its customers’ production processes. By using real-time data modelling, Aurubis avoids copper scrap having to go through the entire refining process while still producing the required quality.

Unexpected players

It is important to realise that the petrochemical supply chain spans different sectors, from crude oil to consumer goods. “If you buy a ready-made lasagne in the supermarket,” says Ann, “it often comes in a plastic tray. Plastic is a derivative from oil. So, the petrochemical supply chain hosts players some of us may not readily associate with it.”

Adidas is a case in point and another example of looped materials. Its FutureCraft Loop high-performance running shoes are entirely made of reusable thermoplastic polyurethane, a petrochemical-based plastic developed in collaboration with BASF. These shoes are fully recyclable into new shoes.

Inspiration

While it is true that digital technologies are still adopted first and foremost to improve efficiency and customer service, Ann points out that the case studies show that they also make the supply chain more sustainable and that there are organisations that explicitly include sustainability goals in the business case. “But,” she adds, “using digital technologies as enablers for supply chain sustainability will require creativity and innovative thinking, and, not to forget, stakeholder involvement, especially from customers and suppliers, as partners in the supply chain. The round table discussions at the Digital Café also stressed the importance of standardisation and trust.”

And she concludes: “We hope that this report inspires organisations in all stages of the petrochemical supply chain, as well as in sectors beyond this study, to broaden their perspective on digitisation, and to consider digital technologies as useful tools to help transform their own supply chains into a more sustainable circular model. In doing so they will contribute to the transformation of the entire petrochemical supply chain, or, as the case may be, to that of other sectors.”

Want to know more?

Download the full report, including the 12 case studies, the conclusions from the round table discussions at the Digital Café workshop, and interesting facts and figures from the EPCA website.

Accreditations
& Rankings

Equis Association of MBAs AACSB Financial Times