Nowadays, our society is facing some of the greatest challenges the world has ever known: endangered animal and plant species, ocean pollution, global warming, working conditions close to slavery in some countries , harassment and discrimination at work…
Sustainable Business Strategy is now becoming more and more relevant among businesses to face these issues. It is also more often a requirement from multiple board members around the world.
How can a company develop its ESG strategy thanks to a Source to Pay solution?
This question was one of the main topics at Ivalua NOW 2022, in Washington D.C.
Discover Daniel Vargas‘s feedback, Senior Advisory Consultant at Fluxym, who attended this event.
Why were ESG principles at the center of Ivalua NOW 2022?
The Environmental, Social and Governance (ESG) principles should be part of the DNA of every company around the globe. However, many companies were created years ago without these principles in mind. It is only very recently that governments and businesses have put more effort into it, and there is still a long way to go. From a very personal point of view, I think this was pushed mainly thanks to the enablement of communications. Indeed, it was finally possible for millions of users of various products to see the actual damage that not so friendly practices related to those products or their waste management were doing to the oceans. Likewise, millions started to realize how animals were going into extinction because of production and consumption. The advent of communication turned into a very inquisitive wave and has evolved to unmask other controversies: people being treated close to slavery in many factories around the world, discrimination, and many others we are familiar with.
As expected, companies that have not reacted to fix these elements have been seriously economically and reputationally injured. Each day without taking measures is crucial to their existence. Indeed, more and more consumers are against these practices and are willing to change their consumption habits. They would rather change their consumption patterns even if it means paying more or avoiding buying at all a product that does not have “Acceptable” ESG practices.
The supply chain regarding the ESG principles
The supply chain is getting more complex every day and has not been just a chain for quite a while. It behaves like a very complex matrix with multiple “tentacles” around the world. It is hardly impossible to find a product without at least a component related to a supply chain. Take a fruit in a tropical country for example. You may think that fruits have no components or part numbers, but many steps were required to grow this fruit: buy seeds, transport them, get equipment to take care of the plants, get some additives for the soil, buy scissors to cut it, get protective clothes for the farmers, etc. Items like clothing, soil additives or scissors for example, had to be bought somewhere on the planet right? Take this to a larger a scale, like airplane production, part numbers come from countless cities around the world. Similarly, those Tier 1 suppliers may have countless Tier 2 suppliers with countless locations too. That is how complex supply chain networks are built.
Having visibility on this is quite a challenge, and visibility is key for Sustainable Business Strategy and ESG principles. Why? Simply because a business cannot say they comply with ESG practices in place in their company or territory if said business acquires products from a company that does not comply with fair salaries or that uses kids for their manufacturing process. In a very direct and automatic relation, acquiring something from a business that is not in ESG compliance overturn your Sustainable strategy.
How e-procurement is key to ESG principles adoption?
From May 2nd to 4th, we at Fluxym went back on site for Ivalua Now 2022 held in Washington DC. We were able to see how e-procurement solutions are a success factor for companies to develop their Sustainability Strategy. They enable you to include elements related to the ESG principles all along the procurement flow into the tool, with full accessibility and traceability.
These elements include:
- Questionnaires for ESG compliance when onboarding
- Collaboration tools with suppliers when already onboard
- Risk management evaluation on ESG indicators for supplier and sub tier suppliers (extended supply chain)
- Enablement of automatic ESG clauses in contracts
- ESG criteria to be included in awarding
- Spend analytics linked to ESG data and Carbon footprint
These types of tools are enablers of the strategy. As mentioned before, it is not a matter of complying within the business perimeter, it is about complying as a whole chain. Ivalua could help our clients enable important elements of their sustainable strategy and ESG principles. Let us show you how!