How AI is Driving a More Sustainable Future for Retail Supply Chains

The retail sector continues to face mounting pressure to meet higher standards of social and environmental responsibility. A recent survey found that over the next three years, 90 percent of organizations intend to ramp up their investments in ESG in response to both regulatory pressures and growing consumer preferences for sustainable products. Seventy-three percent of millennials now say they would spend more for sustainable products.

Consumers have grown increasingly clear about their preferences for sustainability and they’re putting their money where their mouths are. A new study found that more than 80 percent of consumers are willing to pay more for sustainably produced goods, which is especially notable at a time when shoppers are tightening their belts amid inflation and higher costs of living. Some consumers are willing to pay a premium of 9.7 percent more for products that meet higher environmental standards, the study found.

Companies are focusing especially on improving data management systems and incorporating artificial intelligence, with 58 percent of organizations reporting they plan to improve ESG data collection with AI. It’s easy to see why: This technology has already proven extremely efficient in its ability to simplify and automate data collection and compliance processes. AI is rapidly becoming a critical component of the drive toward sustainability as tightening global regulations have made it increasingly difficult to maintain compliance and efficiency without sophisticated digital systems.

As AI evolves, it's poised to take on an outsized role in supply chain operations. Future applications are on track to extend into autonomous decision-making where AI systems will not only predict but also make real-time adjustments to supply chains without human intervention. Advanced AI is likely to manage most end-to-end supply chain processes, from raw material acquisition through to customer delivery. This deeper integration promises to transform traditional supply chain models into dynamic, predictive networks that can more adeptly respond to global challenges and market fluctuations while ensuring sustainability.

Brands and retailers are understandably eager to leverage AI in their supply chains, but in truth many have not yet created the digital infrastructure to do so. One major obstacle preventing businesses from realizing AI’s potential is the lack of organized, centralized, real-time data. To overcome this, companies need to start creating a central repository of supply chain data at the purchase order, SKU, and factory levels.

The foundation for optimizing the benefits of AI for any organization lies in the ability to interconnect thousands of proprietary data points from multiple data sets across your enterprise. That requires aggregating all data from early-stage planning through the creation of product specifications, onto sourcing, costing, and logistics, and including detailed information on all suppliers along the supply chain up to the Nth tier. It’s only once businesses have established effective data management that they can begin unlocking AI's full potential.

Building the Data Foundation for AI

Digitalizing with a multi-enterprise platform ensures that data is current, accurate and accessible, setting the foundation for leveraging AI. These platforms provide real-time supply chain visibility, allowing businesses to monitor their supply chains continuously, identify potential issues before they escalate, and make informed decisions based on accurate, up-to-date information. Establishing this robust digital infrastructure is the key to equipping AI with the data it needs for predictive analytics and automated decision-making.

The right multi-enterprise platform is already deploying AI in innovative ways, and its capabilities are continually expanding. Its recently launched AI-powered chain of custody tools significantly enhance traceability by automating documentary verification and documenting the chain of custody of all materials. This AI toolset proactively assesses compliance risks and ensures that every link in the supply chain meets your company’s standards of sustainability and prepares all chain of custody documents necessary to comply with global ESG regulations. By automatically scanning and vetting all documents against multiple databases of blacklisted entities and identifying gaps or missing documentation before shipping, this technology dramatically simplifies compliance with global ESG laws like the Uyghur Forced Labor Prevention Act.

Find a platform that's utilizing AI to reimagine quality management. For example, AI-powered PO Line Risk Rating functionality optimizes quality inspections by leveraging AI to analyze thousands of data points around risk factors such as product type, materials used, and country of origin, assigning a percentage risk score to each purchase order line. These capabilities allow businesses to proactively identify and address high-risk PO product lines so they can prioritize quality inspections around high-risk items, reducing inspection costs while increasing product quality.

A multi-enterprise platform serves as an intelligent connector of data from ERP systems, supply chain partners, NGOs, and sustainability databases, offering brands and retailers a unified view of their supply chain while tying external data to specific SKUs and purchase orders. The platform’s supply chain maps illustrate the relationships between vendors and factories, and even visualize key performance and scorecard metrics such as audit results, certifications and risk levels so compliance managers can see at a glance any vulnerabilities in their supplier base. By centralizing key supplier data, this technology is also instrumental in helping businesses meet their requirements, including their Scope 3 carbon reduction goals, allowing them to collect and assess emissions data, efficiently implement improvement plans, and track and measure their progress.

As retail looks toward a more sustainable future, AI and advanced data management systems will be essential for creating responsive, responsible supply chains that can adapt to regulatory changes and market demands. By investing in the right digital systems, retailers can future-proof  their operations, ensuring they're not only meeting today’s standards but are also prepared for the challenges and opportunities of tomorrow.

Eric Linxwiler is senior vice president of TradeBeyond, a company that connects retail supply chain operations from product development to delivery.