2. www.2degreesnetwork.com 1Joining Forces
These leading brands have progressed
beyond compliance, are embedding
sustainable practices into their
operations and are increasingly
designing sustainability into their
products and supply chains. They are
planning on thriving, not just surviving,
in this new world order.
But the reality of tackling the
fundamental operational issues needed
to make practical change happen can
be daunting. This challenge is made
worse because making the change
requires co-ordinated, collective
action across a whole value chain and
industry. Operating sustainably cannot
be done alone.
One way of unlocking the potential of
working in a more sustainable way is by
embracing a more collaborative, joined-
up approach to operational business
practices. 2degrees refers to this
concept as ‘fully-linked collaboration’.
Fully-linked collaboration makes it
easy for producers, manufacturers,
suppliers and retailers to work together
at scale, at an operational level, sharing
information and best practice in order to
solve common, practical problems.
It’s a simple concept, but a powerful
one. This report examines the emerging
evidence which suggests that through
communication, cooperation and
collaboration, businesses can:
• Save money
• Reduce impacts and risks
• Innovate and grow
Introduction
We are entering an unprecedented period where global
demand for resource is beginning to out-strip supply.
Market leaders and pioneers are responding by changing
the way they do business. Across all industries, and
in increasing numbers, they are realizing there is an
opportunity to cut costs, reduce risks and grow by being
more sustainable.
15%the annual revenue
increase achieved by
companies who are
working in a more
collaborative way with
their supply chains
(Next Manufacturing Revolution Report)
3. www.2degreesnetwork.com 2Joining Forces
Introduction (cont.)
Evidence implies that this is more than just a ‘feel-good’ concept that looks good on
paper, but is becoming a new commercial reality. Technology now provides the ways
and means to make it efficient for companies to work together to implement practical
initiatives that can deliver measurable returns to their bottom line.
The 2degrees global collaboration platform and its client programs (see below) are at
the forefront of this development and act as an important facilitator, helping to engage,
inform and enable companies in a value chain to work together to realize the benefits
of being more sustainable. Recent research has uncovered compelling evidence of
the direct operational savings to be made through increased collaboration:
• $1.3 billion estimated p/a savings in the food supply chain of one
leading supermarket as a result of its supplier collaboration network
• 12% improved profit margin for manufacturing companies involved in
collaborative initiatives
• €4.6 billion estimated p/a savings for the European manufacturing sector
through supplier collaborations in areas such as energy, transport and waste
In addition to these direct operational savings, there is also more hidden, strategic
value to be gained from collaboration. A more collaborative approach to business can:
drive innovation
build competitive
advantage
strengthen brand
reputation
reduce risk
increase transparency
and traceability
secure supply
For example: Tesco Plc as part
of its ‘Using our scale for good’
corporate value aims to foster a
new spirit of partnership with
suppliers that delivers innovation
for its customers in the three key
areas of food waste, health and
obesity, and youth employment.
4. www.2degreesnetwork.com 3Joining Forces
In the next few pages, we look in more detail at the savings
and wider benefits of collaboration around the areas of
energy, waste, procurement and distribution, and see
examples of companies who are already benefiting from
working in a more collaborative and fully-linked way.
About the research
Unless otherwise stated, all information in the report is based on the following research:
The Next Manufacturing Revolution: Non-Labour Resource Productivity and its Potential for
UK Manufacturing, published July 2013: www.nextmanufacturingrevolution.org
2degrees Strategic Consulting Project, 2013: MBA Saïd Business School, University of Oxford
The Carbon Disclosure Project S&P 500 Climate Change Report for 2013:
https://www.cdproject.net/CDPResults/CDP-SP500-climate-report-2013.pdf
Real life case studies of companies working collaboratively through the 2degrees platform:
www.2degreesnetwork.com
5. www.2degreesnetwork.com 4Joining Forces
Summary
of findings
This report concludes that collaboration is a crucial element
in a broader sustainable business strategy that can help
achieve significant cost savings in the areas of energy, waste,
procurement and distribution, as well as generating important
strategic and long-term benefits.
Highlights include:
1. In waste: $1 billion - the additional annual revenue that General Motors
claims it generates from the reuse and recycling of by-products
2. In procurement: 10-35% - the potential savings of a buying group,
according to procurement and purchasing consultancy, The Buying Support Agency
3. In distribution: 27% - the number of estimated empty freight truck
journeys in the EU
4. In energy: $1.9 billion - the potential annual saving on energy spend in the
UK manufacturing sector, based on current best practice. An overall saving of 20%
5. In strategic benefits that can accrue to the players we include:
innovation, competitive advantage, risk reduction, brand reputation, transparency
and traceability and security of supply
The challenge is that achieving ‘fully-linked collaboration’ is a new approach and
requires the ability to:
• engage stakeholders at scale around the goals of the collaboration
• create new relationships at an operational-level between suppliers
• drive the exchange of knowledge around the business practices needed to
achieve these goals
• enable companies involved to realize measurable outcomes in target areas such
as energy, resource efficiency and security of supply
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The global energy landscape is changing, affecting the cost
competitiveness of companies across the world.
Global electricity consumption is expected to double by 2035. Europe is increasingly reliant on
importing natural resources to produce electricity and generation capacity will decrease as a
number of coal plants are retired.
As a result, a restricted supply, relative to demand, poses a threat to a secure and affordable
energy supply. To mitigate this threat, companies are switching on to the benefits of energy
efficiency. In the UK manufacturing sector, for example, best practice companies have achieved
savings of 40% through energy efficiency initiatives, as the table below demonstrates.
€22.5
billion
the potential annual
saving on energy
spend in the European
manufacturing sector,
based on current best
practice.
Collaboration can play a fundamental
role in helping businesses to
identify and implement energy
efficiency initiatives. 2degrees has
been working with a leading global
supermarket group to manage an
online collaboration network of
around 500 of its food suppliers.
The table opposite reveals the main
areas of focus for collaboration in that
network and the substantial potential
combined savings in energy that those
areas represent for the 500 suppliers.
Low range
(€M)
High range
(€M)
Capex
(€B)
Solar panel installation 16 38 0.5
LED/more efficient lighting 57 117 0.5
Air compressor efficiency 51 114 N/A
Refridgeration 223 444 0.7
Voltage optimisation 73 104 0.5
Transportation efficiency 70 99 0.1
Total (€M) 490 916 2.3
Energy
Estimated energy savings from efficiency initiatives
2degrees Strategic Consulting Project, 2013
45
40
35
30
25
20
15
10
5
0
Energy Efficiency Savings %
Sources: Department of Energy and Climate Change, Energy Consumption UK 2010, 2012; Office of National Statistics,
Detailed Production, 2011; Next Manufacturing Revolution Survey responses; Literature review
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Best practice companies
Industry-wide average
company efforts since 2002
Manufacturing sector average
background improvement
7. www.2degreesnetwork.com 6Joining Forces
Stateside Food
Pizza production company,
Stateside Food was aware of
RS-45, as a R22 replacement
gas, but wanted to seek advice
from the 2degrees managed
Asda Sustain & Save Exchange
about its merits and risks. With
the advice received they are now
strongly considering RS-45, over
a new ammonia plant, potentially
saving €600,000.
Arla Foods
Dairy company, Arla, realized
savings of 6% of its total site
electricity bills within one year of
upgrading to LEDs. The company
shared its experience through
one of the ‘fully-linked’ supply-
chain collaboration programs
on the 2degrees prompting other
suppliers to soon follow suit.
Case studies
Energy efficiency also brings a range of hidden financial
benefits, including improved energy security, eased load on
transmission and distribution assets, and reduced need for
new assets including line reinforcement and power plants.
Branston
Before investing in new voltage optimization technology,
UK potato company Branston, wanted to seek further
advice. It engaged with the Tesco Knowledge Hub, an
online collaborative platform powered by 2degrees.
As a Tesco supplier, Branston was able to talk to other
companies who were already using the technology and
hear their experiences and feedback. As a result of these
conversations, the company installed the technology,
which is expected to deliver a 5-8% reduction in
electricity use and cost.
Walkers Crisps
A study of the upstream energy usage for Walkers Crisps
(owned by PepsiCo) identified that substantial energy
was being used by potato farmers humidifying their
produce in order to maximise their revenues because
they were paid by weight. Walkers then spent 10% of its
potato-frying energy removing this additional water.
Changing the contract eliminated this misalignment,
saving the supply chain €1.4 million p.a.
Energy
8. www.2degreesnetwork.com 7Joining Forces
As raw materials become more scarce and costly, resource
efficiency and waste management have become pressing
issues for companies today. Furthermore, business is
beginning to recognize waste as a potential resource instead
of an unwanted burden.
From 2002 to 2009 in England, total waste halved and waste sent to landfill dropped by
two thirds, driven in large part by legislation and significant increases in landfill taxes.
Many companies are leading the way in re-using, recycling and re-selling their waste,
but there is still much more that business can do. Recent research has indicated that if
the UK manufacturing sector followed best practice, further savings of $800 million p/a
could be achieved.
Collaborating with your supply chain in a fully-linked way has the potential
to bring a number of benefits when tackling waste:
• A joint waste management scheme across the supply chain can help achieve
economies of scale for sorting and transporting waste and building recycling facilities
• A network can help match internal material supply with demand
• Increased dialogue between retailers and manufacturers can set the criteria for the
design of innovative new packaging and products
This last point has been identified as a major
source of savings for business. The Carbon
Disclosure Project 2013 S&P 500 Climate
Change Report discovered that the biggest
savings in the past year have been achieved
by sustainable product design, with the 334
participating companies revealing collective
savings of $1.2 billion.
Such re-design opportunities can deliver
substantial improvement, but require
stakeholders along the whole value chain
(packaging convertors, manufacturers/
fillers, retailers and waste management) to
work together and collaborate to deliver the
necessary innovations.
Waste
$1
billion
the additional annual
revenue that General
Motors claims it
generates from the
reuse and recycling
of by-products
(Next Manufacturing Revolution Report)
9. www.2degreesnetwork.com 8Joining Forces
Interface
This international carpet tile
manufacturer worked with
its yarn supplier to enable it
to send discarded fishing nets
from developing nations for
reprocessing into nylon yarn.
The resulting carpet tiles have
improved eco-credentials while
providing an income for poor
communities from cleaning up
their shorelines.
Design innovation through collaboration
Estimated savings from resource
efficiency and waste management
initiatives that could be realized in the
supply chain of leading supermarket
as a result of knowledge sharing and
collaboration initiatives.
Bakers Basco
Bakers Basco Ltd is an example of 5 different companies -
Warburtons, Premier Foods (Hovis), Fine Lady Bakeries,
Allied Bakeries and Frank Roberts - collaborating
together to not only supply product to customers in a
common basket (Omega basket) but to also operate a
highly successful combined waste recovery division
that recovers misappropriated equipment from abusers
or recyclers, and also clears locations such as markets
where equipment would have gone to landfill.
Waste
Adnams
Adnams found that half of the carbon footprint of its
beer arises from the production of the glass bottle. So
it created a lighter bottle, reducing its CO2 emissions
by 415 tons per year and saving 624 tons of glass.
It achieved this by working with multiple parties
to understand requirements of the packaging and
using good design as well as emerging materials and
technologies to create innovative solutions.
Low range
(€M)
High range
(€M)
Capex
(€M)
Waste reduce/reuse 4 105 N/A
Diversion from landfill to
anerobic digestion
15 25 N/A
Water reuse/recycling 31 127 252
Total savings (€M) 50 257 252
Case studies
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While not a new concept, buying
groups are a perfect example
of collaboration in action. When
companies join together to make
purchases, the following benefits
can be achieved:
• Lower prices – economies of scale
are created by increased volumes, realized
by aggregating purchase orders across
organizations. A buying group can usually
negotiate lower prices than any single
member would be able to on its own
• Streamlined process – when
suppliers join together, the supply chain process
can be faster and more efficient
• Information sharing – ongoing
benefits of a buying group can include sharing
of information such as new technologies, market
developments and historical spending behavior
Procurement
10-35%
The potential
savings of a buying
group, according to
procurement and
purchasing consultancy,
The Buying Support
Agency
Tesco Buying Club
Through its ‘fully-linked’
collaboration program on 2degrees,
Tesco launched The Buying Club
in 2013 to help its suppliers invest
in energy efficient lighting. The
club realizes up to 25% savings
on the cost of equipment, resulting
in approximately an 80%
reduction in lighting energy bills.
Typhoo is one of the first companies
to sign up and expects to cut 900
tons of emissions from its factory as
a result of the new lighting.
PepsiCo India
Under its collaborative farming
model, PepsiCo India provides
technical and financial support to
around 24,000 potato farmers.
This includes tie-ups with banks
and insurance firms to offer the
farmers better deals and credit
at a lower rate of interest.
Casestudies
11. www.2degreesnetwork.com 10Joining Forces
27%the proportion of
estimated empty freight
truck journeys in the EU
(Next Manufacturing Revolution Report)
Distribution
Throw rising transport costs into the mix and
distribution becomes one of the most urgent
issues for companies today.
To try and combat these increasing costs and
complexities, collaborative initiatives are emerging
where multiple retailers and suppliers combine
and collectively manage transportation networks,
sharing trucks, warehouses and routes.
In 2008, 37 leading retailers and manufacturers
in the UK food and beverage sector started a
collaboration scheme in order to share trucks
on certain routes. This initiative followed a pilot
by Nestlé and United Biscuits that significantly
reduced empty return legs.
The collaborative network has reduced
UK heavy goods vehicle transportation by
c. 320 million km. Some of the initiatives that
members undertook included:
• Sharing trucks to minimize empty mileage
• Using advanced scheduling technology for
real-time logistics planning
• Switching distribution from road to rail
In addition, interactive tools and best practice
sharing helped companies to improve the
efficiency of their supply chain.
In response to a consumer market which demands access
to products anytime and anywhere, business distribution
models have become increasingly complex. Products are
sourced and distributed globally using multiple transportation
methods, with much of the process now outsourced.
DHL Case study
Logistics provider DHL has
introduced ‘mega warehouses’ as
part of its service offering. The
FMCG sector, in particular, can
benefit from bigger warehouses
closer to cities, to serve (online)
customers as quickly and cost-
effectively as possible. Economies
of scale result from higher
utilization, up-to-date efficient
technologies and automation and
an integrated order fulfilment and
distribution network.
2degrees worked with a leading UK supermarket to identify savings through
optimizing distribution capacity in its supplier network. It found a cost saving
potential in the range of €0.1-0.4 billion. Applied to the wider FMCG sector, this
represents an estimated 4-15% saving potential through shared transportation and
further savings potential of up to 20% through shared warehousing.
12. www.2degreesnetwork.com 11Joining Forces
Strategic
benefits
Innovation
We have already seen how collaborative
behavior can drive innovation, for
example in product design and packaging
which reduce waste and increase
efficiency. Only by sharing information
and seeking synergies beyond its direct
operations can a business access the
knowledge, skills and talent to enable it
to innovate.
Competitive advantage
The sharing of knowledge and best
practice does not, as some might
assume, impede competitive advantage,
but can actually enhance it. Innovation,
the advantages of speed and scale
and greater access to resources are all
key factors to achieving competitive
advantage.
Risk reduction and
security of supply
Collaboration strengthens relationships
throughout the supply chain, benefiting
both the suppliers and the retailers.
Suppliers are incentivized to participate
and invest in retailer-driven efficiency
initiatives in order to secure longer-term
contracts and future security. Retailers
are in turn incentivized to invest in and
engage with their supply chain, in order
to ensure security and quality of supply.
Transparency
and traceability
Modern supply chains are increasingly
complex, often with a global reach and
involving multiple sub-contractors.
Recent food scandals and major
health and safety failures, such as
the Bangladesh factory disaster, only
highlight the importance for complete
supply chain transparency and
traceability. Only by truly engaging and
connecting with its supply chain can
a company minimize risk and build
customer confidence.
Brand reputation
Such customer confidence is an influential
factor in building brand and establishing
the reputation of a business. Today’s
consumers want brands which they can
trust and which can demonstrate social
and environmental credentials.
So far, we have demonstrated tangible examples of how
working collaboratively can have both an immediate and
long-term impact on a business’ bottom line. However,
there are many further benefits which are harder to
quantify, but no less compelling:
13. www.2degreesnetwork.com 12Joining Forces
Strategic
benefits
IKEA
Brand Reputation
Swedish furniture and textile
company, IKEA, works with
WWF and other local partners
to help cotton farmers introduce
more sustainable growing
practices. The share of more
sustainable cotton in the IKEA
range increased by 50,000 tons
in 2011, accounting for almost
25% percent of its textile products.
By advertising this fact to
customers, IKEA acknowledges
the ‘green’ marketing benefit of
this initiative, reinforcing the
integrity of it its brand.
Innocent Drinks
Risk Reduction
Innocent Drinks, a large user
of blueberries, recognized that
there are very few growers of
blueberries in the UK. It therefore
built a longstanding relationship
with the leading grower with
long- term contracts. The grower
accepted a lower price for his
produce in return for the surety
of the off-take and was able to
invest in his business to improve
his yields and service to Innocent
Drinks.
Case studies
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e: www.2degreesnetwork.com/enterprise
More organizations are facing up to the challenges of
resource efficiency, security of supply and sustainable
innovation for their customers. They realize the needs to
compete not just as a brand, but as an entire supply chain.
This means that communication, co-operation, collaboration are not mere ‘buzz’
words. These are the tools for a better, more efficient, sustainable and, ultimately, more
profitable business.
As a crucial element in a broader sustainable business strategy, collaboration is essential
to achieve significant cost savings in the areas of energy, waste, procurement and
distribution, as well as generating important strategic and long-term benefits.
But change requires the commitment of senior leadership and the engagement of
operational management along the value chain. To seize these very real opportunities,
companies must look beyond their immediate boundaries and start a conversation
with a wider network of suppliers, peers, colleagues and consumers to drive practical
operational change.
Make it happen. Start your conversation today.
Conclusion
About 2degrees
2degrees Enterprise helps major corporations cut costs, reduce risk and grow by being
more sustainable. We help them do this through a unique approach we call ‘fully-linked
collaboration’. This transforms business practices and makes it simple and efficient for
organizations to work closely and at scale with their suppliers, internal operations and
customers - driving smarter, faster, sustainable business growth.
Our online service enables our clients to collaborate with hundreds or thousands of
stakeholders to achieve significant and measurable outcomes. This is made possible
through an innovative combination of our at-scale leading technology platform, our
experienced engagement managers and unique collaboration processes.
Making Sustainable Business Happen
