Driving Sustainable Supply Chains through Digitalization in Pakistan

Leveraging Digital Technologies for a Greener, More Efficient Future in Agriculture, Textiles, and Trade

by Amir Jahangir

In recent years, digitalization has emerged as a powerful force for addressing sustainability challenges in supply chains, particularly in least-developed and developing countries. In Pakistan, where traditional industries like agriculture, textiles, and manufacturing form the backbone of the economy, digitalization holds the potential to modernize and create more resilient, transparent, and sustainable supply chains. With technologies such as artificial intelligence (AI), blockchain, and the Internet of Things (IoT), Pakistan has an opportunity to align its economic growth with sustainable development goals (SDGs) while improving efficiency, reducing waste, and ensuring inclusivity.

Enhancing Supply Chain Transparency

One of the critical challenges in Pakistan’s supply chains is the lack of transparency and traceability, particularly in agriculture and textiles, two of the country’s largest sectors. According to the Pakistan Bureau of Statistics, agriculture accounts for about 23% of GDP and employs 42% of the workforce. Similarly, the textile industry contributes 8.5% to GDP and accounts for 60% of total exports. By integrating digital technologies such as blockchain and IoT, these sectors can vastly improve the traceability of products from their origin to the end consumer.

For example, blockchain technology could enable cotton farmers and textile producers to track the movement of goods across the supply chain, ensuring compliance with organic certifications and sustainable practices. This would not only enhance the credibility of Pakistan’s exports in international markets but also help small-scale farmers gain access to premium markets where sustainability certifications are increasingly in demand. Global trends show that consumers are willing to pay higher prices for sustainably sourced products, and this could be a key factor in increasing Pakistan’s export revenues.

A similar success story can be seen in Bangladesh, where the Enhanced Integrated Framework (EIF) helped establish a Centre of Innovation for the garment industry to introduce technologies like AI and blockchain to improve transparency and productivity. Pakistan’s textile sector could follow suit, implementing digital training programs that focus on environmental compliance and labor safety standards, thereby reducing waste, improving worker conditions, and meeting international green standards.

Reducing Waste and Increasing Efficiency

Waste reduction is a pressing concern for Pakistan, especially in agriculture, where post-harvest losses are estimated to be around 40% for fruits and vegetables, according to the Pakistan Agricultural Research Council (PARC). Digitalization offers an opportunity to mitigate these losses. By leveraging AI and IoT technologies, farmers can use precision agriculture to optimize water usage, reduce waste, and improve crop yields.

In regions like Punjab, where irrigation remains inefficient, AI-driven systems like the Land Information Management System (LIMS) can monitor soil conditions and optimize water use, addressing the country's looming water crisis. This can contribute to more sustainable farming practices, aligning with Pakistan’s National Water Policy 2018, which aims to improve water resource management. By utilizing IoT sensors, farmers can monitor environmental factors in real time, preventing spoilage and ensuring more efficient supply chain management, especially for perishable goods.

Moreover, implementing blockchain technology can enhance the visibility of supply chains by ensuring that perishables such as mangoes and citrus fruits — major export commodities — reach international markets in peak conditions. Blockchain-enabled traceability would allow farmers to monitor the journey of their produce, minimizing spoilage, reducing unnecessary waste, and ensuring a more efficient distribution system.

Paperless Trade Facilitation and Cross-Border Efficiency

Pakistan’s reliance on inefficient, paper-based trade procedures is another key bottleneck to supply chain sustainability. Moving towards paperless trade can significantly reduce the carbon footprint and increase efficiency. According to the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), digitalizing trade regulatory procedures in Pakistan could save between 32kg and 86kg of CO2 equivalents per transaction. These savings are equivalent to planting millions of trees across the country and significantly lowering trade-related emissions.

In 2022, Pakistan took a major step in this direction by launching its Pakistan Single Window (PSW) system, a platform designed to streamline international trade processes by integrating 74 different government departments under one digital interface. The PSW is expected to reduce clearance times and improve the ease of doing business by eliminating the need for multiple physical documents. According to the World Bank, reducing delays at ports could save Pakistan up to $450 million annually in logistics costs, while also lowering the carbon footprint by reducing paperwork and physical trips. The PSW is projected to cut transaction costs by 20%, significantly improving the sustainability of Pakistan’s trade logistics.

Digitalizing Business Processes for Productivity and Sustainability

Digital transformation in business processes offers vast potential for improving efficiency, reducing costs, and contributing to environmental goals. The textile and garment sectors in Pakistan are prime candidates for adopting digital technologies to streamline production, cut waste, and customize production processes. A major initiative in this regard is Pakistan’s adoption of Industry 4.0 technologies — AI, automation, and IoT — to transform its manufacturing and supply chains.

A notable example is the Khaadi Digital Transformation Project, which uses digital tools to manage its supply chain, from fabric production to store deliveries. The use of IoT and data analytics has allowed Khaadi to improve inventory management, optimize raw material use, and reduce waste during production. These initiatives contribute to the company’s sustainability goals by minimizing excess inventory and ensuring efficient use of resources, which aligns with global environmental standards.

Additionally, the Pakistan Textile Exporters Association (PTEA) has recognized the need to incorporate sustainable practices, particularly in the face of rising international demand for ethically produced goods. The PTEA’s collaboration with various stakeholders to introduce digital platforms is geared towards reducing the environmental impact of textile manufacturing, where excessive water and energy consumption remain issues of concern.

Traceability and Certifications to Boost Exports

Digital traceability systems could also play a critical role in certifying organic and sustainable products, particularly in agriculture and textiles. Pakistan’s high-value crops, such as Basmati rice, fruits, and cotton, have enormous potential in international markets. Traceability systems, similar to the blockchain-based coffee traceability project in Rwanda, could allow Pakistan to certify its products as organic, fair-trade, or sustainably produced.

The global demand for traceable and certified products is rising. In 2023, Pakistan’s agricultural exports totaled $4.7 billion, but the country could tap into even more lucrative markets by enhancing the traceability of its products. For instance, introducing blockchain-based systems in the Basmati rice value chain could boost trust among international buyers, allowing Pakistan to compete more effectively in premium markets like the European Union and North America. Similarly, ensuring transparency in textile production could allow Pakistani manufacturers to command better prices for sustainable and ethical products in global fashion markets.

Digitalization offers immense potential to drive sustainable supply chains in Pakistan, benefiting key industries such as agriculture, textiles, and manufacturing. By adopting AI, blockchain, and IoT technologies, Pakistan can enhance supply chain transparency, reduce waste, and improve efficiency, all while aligning with global sustainability goals. However, the government and private sector must work together to ensure that these digital tools are accessible to all, particularly in rural areas where most of the agricultural workforce is based.

If scaled up and integrated into broader national initiatives like the Pakistan Single Window and Industry 4.0, digitalization could revolutionize the country’s supply chains, making them more sustainable, inclusive, and globally competitive. The time is ripe for Pakistan to embrace digitalization as a core pillar of its sustainable development strategy.

What the SIFC is Missing in Establishing the Digitalization and Sustainability Narrative in Pakistan

While the Special Investment Facilitation Council (SIFC) has made notable efforts to market Pakistan, there are critical aspects missing in its approach to establishing a comprehensive digitalization and sustainability narrative for Pakistan. Despite its ambitious goals, the SIFC's current strategy reveals several gaps that could hinder the effective integration of digitalization into sustainable supply chains.

1. Lack of a Clear National Digitalization Roadmap: The SIFC's narrative falls short in providing a unified national roadmap for digitalization. A cohesive strategy detailing how digital technologies will be incorporated into Pakistan’s economic framework is crucial. Without a clear roadmap featuring defined targets, milestones, and accountability measures, digitalization risks becoming a series of fragmented projects rather than a strategic pillar of the country’s economic future.
2. Insufficient Focus on Inclusivity: The SIFC’s emphasis on digitalization lacks consideration for inclusivity, particularly for marginalized communities. The current narrative overlooks the need to ensure that the benefits of digital transformation reach rural areas, small farmers, and micro-enterprises. Addressing this gap requires a focus on bridging the digital divide and creating opportunities for underrepresented groups to engage with and benefit from digital technologies.
3. Weak Linkage Between Digitalization and Sustainability: While the SIFC highlights the role of technology investments, it does not adequately link these advancements to sustainability outcomes. The absence of a clear connection between digitalization efforts and goals such as reducing carbon emissions, minimizing waste, and improving resource efficiency undermines the narrative. Integrating sustainability as a core benefit of digitalization is essential to align with global ESG trends and attract investment.
4. Engagement with Domestic Stakeholders: The SIFC’s current strategy focuses predominantly on attracting foreign investment, with limited engagement with domestic stakeholders. For digitalization and sustainability to be effectively integrated into Pakistan’s economy, it is crucial to involve local businesses, industry associations, and civil society. Creating platforms for dialogue and collaboration can ensure that initiatives are tailored to local needs and realities.
5. Public Awareness and Capacity Building: There is a notable lack of focus on building public awareness and capacity regarding digitalization and sustainability. The SIFC has yet to launch comprehensive awareness campaigns to inform businesses and consumers about the benefits of digital transformation. Additionally, capacity-building programs are necessary to equip local industries with the skills to adopt and implement new technologies.
6. Measurement and Accountability: The SIFC’s narrative lacks a robust framework for measuring and reporting the success of digitalization initiatives. There is no clear system for tracking progress on sustainability goals or evaluating the impact of technology investments. Establishing measurable metrics and transparent reporting would enhance accountability and build trust among stakeholders and investors.
7. Leveraging the 250 Million-Person Market: Another significant gap in the SIFC's narrative is the underutilization of Pakistan’s substantial consumer base. With a population of approximately 250 million people, Pakistan represents a vast and diverse market with substantial economic potential. The SIFC’s strategy should incorporate how digitalization can harness this large market, driving sustainable growth and innovation. By focusing on the economic opportunities presented by this sizable population, the SIFC can better align its initiatives with the country’s potential and attract investments that cater to a broad consumer base.

A Foreign Investor's Perspective on Pakistan as a Potential Partner

From a foreign investor’s standpoint, Pakistan presents a compelling opportunity as a partner in business, social, and political realms. The country’s substantial consumer base of approximately 250 million people offers a significant market with untapped potential for digital and sustainable innovations. However, to fully capitalize on this opportunity, there are several critical areas that need attention.

Firstly, a clear and cohesive national digitalization strategy is essential. Investors seek stability and direction, and a well-defined roadmap with measurable targets and accountability will instill confidence in Pakistan's commitment to integrating digital technologies into its economic structure. Without this, the narrative of digitalization risks appearing fragmented and uncertain.

Inclusivity and stakeholder engagement are also pivotal. A narrative that ensures the benefits of digital transformation reach all segments of society—particularly marginalized communities and local businesses—will foster a more equitable and robust economic environment. Engaging with domestic stakeholders and addressing local needs will enhance the effectiveness of digital and sustainability initiatives, making Pakistan a more attractive investment destination.

Furthermore, the linkage between digitalization and sustainability must be clarified. Investors are increasingly guided by Environmental, Social, and Governance (ESG) criteria, and demonstrating how digital technologies contribute to sustainability goals will align Pakistan with global investment trends. Clear examples and measurable outcomes in this regard are crucial.

Public awareness and capacity building are necessary to prepare the local workforce and businesses for new technologies. Investing in education and training will not only facilitate the adoption of digital solutions but also ensure a more skilled and adaptable market.

Finally, a robust framework for measuring and reporting progress is vital. Transparency and accountability will build trust among investors, ensuring that promises of digital and sustainable transformation translate into tangible benefits.

While Pakistan offers significant potential for investment, addressing these gaps will be key to unlocking its full promise. By establishing a clear digitalization strategy, promoting inclusivity, linking technology with sustainability, engaging stakeholders, building public awareness, and ensuring transparency, Pakistan can position itself as a valuable and forward-thinking partner on the global stage. For foreign investors, these steps will signal a commitment to a thriving, equitable, and sustainable business environment.

About the Author

Amir Jahangir, a global competitiveness, risk, and development expert, leads Mishal Pakistan, the country partner institute of the New Economy and Societies Platform at the World Economic Forum. As a leading narratologist and an expert on Artificial Intelligence (AI) policy for technology, and governance, he is an alumnus of Harvard Law School’s Program on Negotiation (PON), affiliated with Harvard University, Massachusetts Institute of Technology (MIT), and Tufts University since 2008. Jahangir is also an alumnus of the National Defence University Islamabad, Islamabad, and the Harvard Kennedy School of Government on National and International Security, reachable at aj@mishal.com.pk and @amirjahangir on X/Twitter.