Why decision quality is critical for resilient, sustainable and future-ready energy supply chains

April 18, 2024

Speaker: Sri Vaidyanathan (Shell)

Abstract:

Global energy supply chains, historically driven by financial efficiency whose fragility was brought to focus during the pandemic. The pandemic and supply chain chokes of the recent years has exposed the vulnerability of these supply chains. Considered together with the need for decisive actions towards a net-zero future, structure and priorities within global supply chains are in urgent need of reconsideration.

Supply chains are essentially networks of various organizations, including suppliers, manufacturers, and retailers, aiming to deliver products or services to the end consumer. When these products cross multiple international boundaries like in complex-energy supply chains, the chain becomes global, bringing about interdependencies among the organizations.

While the laser focus on financial efficiency has offered benefits in the past, changing consumer preferences, investor and regulatory pressures will demand that together with financial efficiency decision-making within organizations must also include considerations of sustainability, human rights and other factors to push for resiliency and sustainability.

The future of supply chains should pivot towards robustness, founded on principles like sustainability, collaboration, transparency, and diversification. This is essential for tackling economic vulnerability, climate change, and societal disparities. Embracing this model could foster economic and societal well-being without compromising the environment. Recent research points towards the positive correlation between sustainability and resilience within supply chains. Collaboration, seen as a "team sport" in this context, can be immensely beneficial. Joint efforts by buyers and suppliers lead to energy supply chains being at the forefront of delivering low carbon energy solutions that the world needs.

This is where decision frameworks will be critical to drive responsible decision making. Decision frameworks in energy supply chains must be retooled from a singular focus on financial efficiency to seek win-win outcomes that balance financial efficiency with sustainability. Through collaborative approaches like proper opportunity framing and open dialogue with the supply chains, solutions can be found which are both sustainable and financially efficient. For instance, products can be fundamentally re-designed to use less materials or responsibly sourced materials. These decision frameworks can spur innovation in areas like wind turbine maintenance, designing more efficient electrolysers or sustainable fuels which are crucial for the future of energy.

However, transforming these complex supply chains isn't simple, given their historic focus on short-term gains, this is why strategic decision frameworks are crucial to drive a reshaped vision for global supply chains, emphasizing long-term collaboration and shared benefits and responsibilities. The integration of digital technology can further enhance transparency and traceability, pivotal for the chains' future success.