Keeping supply chain sustainability simple. Kinaxis’ industry marketing director, Manda Schweitzer-Miller explains how the aerospace and defence sector can get back to the three Rs.
The aerospace and defence (A&D) industry has faced turbulent times over recent years with demand dropping off significantly and many skilled staff leaving the sector. Much of the impact was due to the pandemic. In 2020, the industry reported $697 billion of revenue, down 8% from 2019, and $25 billion of operating profit, a decrease of 61%, primarily due to the impacts of Covid-19 on commercial aerospace, as revenue passenger kilometres (RPK) plummeted by 66%.
The recovery is now well underway but as the sector builds its supply chains back up, it not only needs to address challenges around efficiency and resilience but also sustainability. The industry has set ambitious targets to reduce greenhouse gas emissions by 2050 but it is so far struggling to keep on track. Sourcing greener and cleaner materials such as fully electric engines or sustainable aviation fuels (SAFs) is adding more complexity to already complex A&D supply chains.
Navigating these challenges will not be easy, especially when you consider that compared with other industries A&D is still new to its sustainability journey, but it is urgent that it accelerates the process. There is anticipation of increased regulations and awareness of the potential of sustainable supply chains to drive operational efficiencies and business benefits is growing. Focusing on being a more sustainable enterprise and therefore having a more sustainable supply chain can not only reduce the impact on the environment it can also have many benefits on a company’s resilience to risk, improving margins and attraction to the people that buy your goods.
Sustainability is not new
Sustainability has been a hot topic since the early 2000s, but it is one that has become increasingly crucial as more consumer groups and regulations are imposed on businesses. For instance, more regulators now require publicly-listed companies to include measurements of their greenhouse gas (GHG) emissions in their annual reports, including the UK, which introduced 'streamlined energy and carbon reporting' in 2019, and we are also starting to see discussions on how to include the cost of carbon emitted on the balance sheet.
Last year’s COP26 summit held in Glasgow pushed many companies into announcing their plans to cut down on their carbon emissions, but many are failing to link these commitments to their end-to-end operations, and especially their supply chains. This is bad news for achieving these goals and of course for the environment because supply chains are the biggest source of a company’s overall carbon footprint. In fact, supply chains are responsible for between 65% and 95% of a company’s total emissions, according to the World Economic Forum.
The 3Rs
As A&D organisations look to operationalise and digitally transform their supply chains, they invariably need to go back to the basic building blocks of sustainability with the three Rs - reduce, reuse and recycle. These are part of a waste hierarchy process used to protect the environment and conserve resources through a priority approach. The aim is to gain the most practical benefits from products and to generate the minimum amount of waste. This approach also triggers other positive benefits like resource savings, reducing pollution and avoidance of greenhouse gas emissions, along with the development of sustainable technologies.
Reducing the use of materials often comes down to good supply chain planning. In the context of A&D, this entails businesses designing products with more foresight on their impact and using materials in the best way possible to meet customer expectations while at the same time reducing excess waste and production processes. It is also crucial to reduce the proportion of material that will be difficult to reintroduce into the supply chain after use, such as highly treated mixed materials. One way in which businesses can reduce the consumption of raw materials is by replacing them where possible with reused, or already recycled, materials.
When a product has reached the end of its lifespan it must be assessed as to whether the complete unit or its components can be converted into a new product or reused for other purposes, without it needing to be disposed of. Refurbishing products provides good business opportunities and can go a long way to helping natural resources. It is common to find reused materials from old aircraft in products such as circuit boards, televisions and computers.
Recycling comes into play where a product or its components cannot be reused, but its materials can be separated according to their composition such as metals or plastics. In the case of electronic devices these often include precious materials. A report in the United Nations’ Global E-waste Monitor 2020 showed that e-waste is the world’s fastest-growing domestic waste stream and that a record 53.6 million metric tonnes (Mt) of electronic waste was generated in 2019. By 2030 this figure is expected to almost double to 74 million Mt a year.
In aerospace and defence, another way of recycling equipment is through repurposing, where they can be used in other industries, such as aircraft seats being converted into home furniture, for example.
Supply chain benefits
A&D businesses that are eco-friendly not only help the environment, but are often more profitable. Those that put emphasis on environmentally friendly processes, including the supply chain, will win the approval of the ever-growing eco-conscious public, and that’s an especially key consideration for the aviation sector which is increasingly eager to win back passengers following on from two years of Covid disruptions. Additionally, for suppliers up and down the supply chain, focusing on sustainability efforts to match with their constituents may increase their favour in a landscape of increased materials scarcity.
There are also financial advantages to be gained too, particularly as the investment community is very much focused on sustainable organisations, often giving them better access to capital. Governments are also offering support for organisations to work in new and collaborative ways.
Climate change, concerns about the environment, increasing fuel costs and material shortages are changing the way many A&D organisations think about resilience. Therefore, sustainability is not just about the environment, it's also about how to make these businesses more profitable and resilient for the future.
