How to Use Supply Chain Analytics to Accomplish Your ESG Goals
By Marc Fuentes | September 23, 2021
11 minute read
Is your company ESG compliant? Profitability is not the only benchmark stakeholders consider today.
Economic, Social, and Governance (ESG) factors are now solid criteria for a socially responsible supply chain management, influencing your company’s appeal to investors and consumers.
In addition to attracting investors and building your brand, ESG metrics are fast becoming critical for compliance reasons. In the US, the ESG Disclosure Simplification Act of 2021, although still a bill, will further enforce the importance of ESG reporting, and supply chain stakeholders are in a rush to toe the line.
Whatever your ESG goals might be for your businesses, advanced supply chain analytics is the answer to helping you achieve them.
In this article, we’ll be discussing how to use supply chain analytics to accomplish your ESG goals and identify growth opportunities.
- Set Your ESG Target
What objectives are you trying to accomplish? Supply chain ESG goals are essential because they provide clear and measurable yardsticks to evaluate your efforts. Additionally, businesses that have goals are ten times more likely to achieve them, going by a Harvard Business Study.
Objectives are the foundation of every effective strategy. They are crucial to finding ESG compliance solutions for the long haul and one that all stakeholders in the supply chain can agree on.
Knowing the need for an ESG strategy is also necessary because it offers a clear path to the solution once there’s a concise destination in mind. So how exactly do you set these goals? A one-fit-all approach isn’t possible because, usually, ESG compliance needs vary from one company to another, depending on the niche, size, and local jurisdictions.
That said, the key lies in first identifying the ESG challenges you’re facing and using these specific problems to map out a solution reflective of the issue.
In our case today, we’ll consider the example of better contract management performance and obligation. Perhaps you’re trying to improve your Contract Analytics to establish inclusivity and guide better vendor or supplier selections. This could be informed by a history of deception among previous suppliers or contract clauses like automatic renewals slipping under your nose. With specific goals in mind, there’s one more thing to do: getting the green light from stakeholders and other key decision-makers who need to be in agreement.
- Set Your Budget
Why would you need to set aside a supply chain ESG budget?
Well, most importantly, calculating a budget for implementing an ESG goal makes it clear whether a specific solution is feasible or not, enabling you to determine the scope of implementation or consider your options.
Perhaps you may need to expand your team of data analysts to help with contract analytics, which would inflate your operating costs. Or you may be thinking about Content Intelligence Cloud as a more cost-effective solution. Either way, there is a need to justify the ROI of the project. Beyond that, a budget or estimation is also important because it provides tangible proof to get funding from your board.
To properly craft a provisionary expense list, you’ll need to consider any new personnel or software you’ll be bringing on board to facilitate the new ESG supply chain management strategy. A little assistance from the finance department may be necessary. Supply chain analytics can help assess this increase in expenditure to determine if the ROI will be worth the capital.
With Content Intelligence Cloud delivered by Adlib Software, your accounting department can better find, extract and process financial statements often lost in unstructured data streams or hidden in complex structures. This information can then serve as a guide to estimate how much it’d cost to add a new data analyst to the team. Additionally, onboarding costs of new software, based on statistics around a market average, can be approximated as well. With funds and goals in hand, now comes the crucial chapters defining how to use supply chain analytics to accomplish your ESG goals.
- Determine ESG Regulations
Crucially, your ESG strategy should be made off the back of a specific ESG risk and compliance issue or regulation. Let’s remember our goal of better contract management, performance, and obligation.
In this case, we could look through vendor or supplier proposals and contracts to determine significant supply chain ESG concerns that stand out as a red flag.
Considering the case of a multinational doing business with manufacturers in California, you’ll have to be mindful of the state’s Global Warming Solutions Act. This regulation imposed over $360,000 against companies like Chevron USA, among others who were non-compliant. As a result, determining if your supplier is submitting their Greenhouse Gas (GHG) emission reports may be a vital criterion for proposal analysis and contract offers or renewals.
So why is this important, yet it seems like your supplier’s problem?
That’s because even if you escape a penalty, brand image will be tainted by association, and stock prices are bound to take a tumble as a result.
To avoid such scenarios, you’ll need to compile a list of all region-specific ESG regulations, and again supply chain analytics, specifically intelligent document processing, can help with that. In California, you may need to consult policy reports by the Environmental Protection Agency, which regulates how your oil and gas industry partners, among others, operate. Using Content Intelligence Cloud, you can digitize or sift through a digital compilation of all these records. Via keyword highlights like “GHG or carbon dioxide,” your ESG supply chain management team can locate vital data fast and conveniently.
- Assemble & Sort Data
With our supply chain, ESG compliance problem defined, the data we need to map out a way to the solution now comes.
In this case, the data is locked up in contracts, which could easily number into the hundreds if your company has a vast supply chain network.
Also, these contracts could be in non-searchable formats, which contributes to substantial procurement challenges as staff may have to read through each copy painstakingly.
Let’s consider Amazon, for example. According to a Business Insider report, this eCommerce and supply chain behemoth has a cumulative workforce detailing a staggering 1,335,000 employees. Even with a substantial human resource department at your beck and call, manually combing through each of these contracts for every renewal, or to work out inclusivity ratios, is simply an impossible feat. Moreover, human error is bound to result in essential contract details going unnoticed.
But there’s a better solution.
ESG supply chain management teams can rely on the convenience of intelligent analytics software to ease contract sorting for new regulations and renewals.
First, using an intelligent document processing platform, your company can digitize manual contracts or extract electronic versions from your contract repository systems. Via natural language processing and machine learning, your business can classify these files by type or clauses.
Thanks to the cloud, the information is accessible across an organization’s widespread workstations, offering instant answers to contract processing needs.
For example, Found Management tapped into contract analytics software to process thousands of contracts in a rush to beat a compliance deadline. The company met new regulations by surface essential data at a moment’s notice for more straightforward evaluation.
- Establish Enforcement Measures
So what happens upon supply chain ESG policy violation? Without repercussions, laws wouldn’t be taken seriously or obeyed. Therefore, in-house enforcement measures are needed to ensure ESG compliance is not only achieved but also maintained. Otherwise, you’d have to create a new strategy for future supplier reviews during renewals or changes. So how can you make an internal ESG policy?
A good ESG sustainability program should have clear guidelines on what should happen to rectify any violations.
This could be drafted as a conditional clause for contract termination going forward, with monthly submission of GHG reports, for example, among contract obligations when onboarding suppliers.
It becomes easier for suppliers to extract this information into a central network with the right intelligent contract analytics solution. Enforcement officers can then access this information on their end of the network for verification and record-keeping purposes.
As you can see, an ESG strategy exerts extra work, and you might need to assemble a team, led by a director of sustainability perhaps, to oversee continuous implementation.
Beyond the executive level, you’ll need a handful of data stewards doing the essential groundwork, but with data automation technology, a limited team should suffice. With time, this sustainability team can incorporate other vital supply chain ESG goals and draft new policies as ESG risk and compliance regulations are revised quite regularly. The unit can further monitor the ROI in cases with tangible metrics, e.g., energy efficiency and gender inclusivity, to name a few.
Are you using intelligent supply chain ESG analytics?
If not, you’re not getting the complete data picture across the length of your supply chain, and you’re toiling under the weight of unstructured data and its challenges.
Automatic renewal clauses could slip by and hit you in the face when it’s already too late to avoid legal action. Meanwhile, your business brand image and investor appeal can also be tainted with the wrong selection of suppliers. The result of which is government crackdowns, dwindling stock prices, and wasteful operational processes. On the other hand, with advanced analytics powered by Content Intelligence Cloud, your supply chain subsidiaries can realize tremendous growth and unlock the comprehensive solution to mastering how to use supply chain analytics to accomplish your ESG goals.
With cloud Content Intelligence Cloud, you’ll be surpassing your objectives in no time and improving productivity in the process.