2degrees works with supply chains to find savings that ultimately benefit its corporate clients. The indirect strategy is highly effective and gaining in popularity, writes David W. Smith
To the casual observer, the innovative idea behind the 2degrees community for sustainable business often appears counterintuitive. To benefit its corporate clients, including Asda, RBS, Kingfisher and Unilever, 2degrees concentrates on improving the sustainability records of their hundreds of supply chain providers.
It’s a unique indirect approach, which relies on clients benefiting from a knock-on effect after the suppliers have saved money and reduced their carbon footprints. But the rapid expansion of 2degrees suggests the strategy is working well. Entrepreneur Martin Chilcott set up 2degrees in 2008 and it already has 49,600 members from 178 countries.
“We’ve seen fantastic growth in a short period which increases the total number of connections across our network. It’s like heating up a liquid and the gases and molecules move faster and faster and bump into each other more and more,” says Chilcott. “Our online platform allows the number of connections to be multiplied in a systematic and organised way.”
Chilcott says connections occur between hundreds of experts who would not normally interact. “We have sustainability, energy, water and engineering people all talking and solving each other’s problems. Previously, it’s unlikely they’d even have known about each other’s existence. The only chance of a meeting would have been bumping into each other at a conference.”
The concentration on the supply chain is effective because that is where most cost and environmental savings can be made. Greater efficiencies benefit the providers of goods and services first of all, but ultimately the savings get passed onto 2degrees’ clients.
Asda, for example, calculated that four-fifths of its cost risks and nine- tenths of its environmental impact were embedded in its supply chain base. It formed a partnership with 2degrees to develop its Sustain and Save Exchange (SSE) in 2012. Asda’s SSE platform serves 1,000 members from 300 food suppliers, representing over £7 billion sales. To date, the online platform has identified cost savings of over £50 million, as well as sizeable resource efficiencies.
When working with a client like Asda, 2degrees sets up a private online space and organises a series of workshops to identify precise challenges. Then, 2degrees invites a small number of suppliers into the space and works hard to make sure they connect.
“The key is not creating collaboration between our client and their supply base, but creating collaborations across the supply base itself,” says Chilcott. “If you’re a food manufacturer of any sort, the people who know most about your processes and costs are other manufacturers of food. The retailers don’t know because their expertise is in running shops.”
Once the space is up and running with a small number of collaborators, 2degrees invites more suppliers to join in. “When others come in they don’t see lots of content from the client but instead they see ideas from people like them talking to other people like them and solving problems. We nurture that culture of problem solving and track it all.”
A database runs in the background on every participant. Every time they use the platform, it helps 2degrees to build up a picture of them, including what problems they have solved, or need to solve.
“When one person comes in and says ‘I want to recycle the oils we are using in processing’, we can crosslink to 50 or 60 individuals who have found a solution, or are trying to look for answers. We bring them into the conversation. First we search inside the client’s supply chain and if we don’t get good answers from within, we go outside into the wider 2degrees group.”
A set of tools is used to analyse data on things like water, waste and energy use. The data is used to gain insights into opportunities for savings. “It’s not quite big data yet, but it’s certainly bigger data and an efficient way to solve problems. A lot of what we’re doing is getting suppliers to build trust in each other and the system. We say ‘if you give us data, we will give back insights into your own business’. Businesses often say to suppliers ‘give me the data’, but when suppliers feel they are being pushed around they just tick boxes.”
The environmental benefits are shared right across the supply chain and reduce the corporate client’s total footprint. The cost savings take a little longer to come through, but they will. “If a supplier makes a £20,000 investment in new freezer technology, but saves £100,000 a year as a result, what happens to those savings? Some go to shareholders and staff bonuses and some is reinvested in greater productivity. But it could also mean lower costs in order to gain a greater share of the supermarket shelves. So that’s of benefit to our clients.
“And there’s another benefit. If a supplier invests in quality systems, there’s less likely to be a ‘horsegate’ type of scandal. The impact of that sort of reputational damage when something goes wrong with the supply chain is catastrophic,” he says.
Awareness of the value of the 2degrees approach is growing fast. Currently most clients are multinationals based in the UK, although increasingly overseas businesses are getting involved. “We’ve got clients in big corporations that say all businesses will be doing something like this in the future. Optimising the supply base will not be a niche activity, but entirely mainstream,” says Chilcott.
The Asda SSE platform has been embraced by members of the supply chain with monthly averages of 1,500 visits and 10 responses per question. The Asda SSE platform has 1,000 members from 300 food suppliers and 2degrees claims to have saved them millions of euros by cutting waste, energy and water use. In 2014 the scope expanded to help suppliers ‘futureproof’ businesses against the effects of climate change. Advice has led to many successes, including:
– A family-owned vegetable business has already saved £100,000 and is projected to save £3.5 million over 25 years, through investment in solar photovoltaics.
– A prepared foods supplier has introduced energy-efficient refrigeration technologies and saved £500,000.
– A farm supplier has cut 80,000kg of carbon emissions and saved £191,327.