Category Archives: CSR

How Do You Sustain Sustainability When True Value is Long Term …

… and the brunt of the cost is short term?

AlixPartners recently published an article over on Mondaq on how The Fourth Dimension In Strategic Sourcing, Sustainability, Can Drive Value which caught our attention because Sustainability can drive value, but most organizations under cost pressures, which are rampant in our current inflationary economy, don’t choose the sustainable option as it’s typically a higher expense in the short-term.

Moreover, the big value is investing in suppliers that invest in new technologies that will be more sustainable in the long run. However, due to the cost of implementing these new technologies, the up-front costs are higher as the suppliers have to stay in business until the new technologies start to deliver returns. For example, the following are major improvements to sustainability:

  • suppliers utilizing, investing in, or building their own renewable energy grids (solar, wind) to avoid using the energy produced by the local coal/oil burning plants
  • suppliers re-designing production lines and methods to minimize waste (through cutting of metal, processing of food, etc.) and to ensure any waste they create can be used as an input to another production line (melting and re-fab of metal scraps, animal feed, etc.)
  • suppliers investing in their own water purification technology to re-use water in the manufacturing process
  • suppliers investing in product redesign research to minimize use of scarce rare earth minerals/metals and to increase use of reclaimed minerals/metals
  • suppliers investing in reclamation technology to maximize recycling of products created with metals/minerals

… and the following, highlighted in the article, are minor improvements …

  • sustainable supplier selection as everyone is going to try and secure the most sustainable supplier of the lowest cost suppliers, leaving less sustainable suppliers or more sustainable suppliers at a higher cost that the CFO/CEO will not let Procurement pay for the majority of organizations (the small, sustainable, suppliers cannot massively scale overnight)
  • eco-friendly packaging and waste reduction as this is not new and many organizations are already be doing this to the extent eco-friendly packaging is available
  • energy-efficient products and services as this is not new either and as companies replace end-of-life products, they have been choosing more energy efficient products for a while now with the increase in energy prices over the last five to ten years, and the truth is that this is usually a small dent on their total energy footprint
  • carbon footprint reduction as that is the goal, not a specific action that can reduce carbon footprint, and. most importantly, significant reduction requires significant investment (reducing travel and forcing the CEO to give up the private jet and fly first class only goes so far)
  • collaboration and reporting because while you need to understand your footprint, and sometimes shaming goes further than incentivizeation, reporting doesn’t actually increase sustainability unless action is taken …

IF PE firms, with billion dollar funds, won’t actually invest in supply chain (which includes sustainability) improvements, because you typically don’t realize the bulk of the value until you (significantly) pass the five (5) year mark, how can you expect short-term thinking CEOs and CFOs, trying to impress Wall Street or attract PE funding, to actually put their money with their big mouths are and invest in true sustainability?

If you have answers, we’d love to hear them — comment on the LinkedIn post.

Ignite Wants to Spark Your Sourcing Success with Actionable Analytics!

the doctor has written about many Spend Analysis vendors over the last decade*, including Ignite Procurement, which is one of the few newer vendors that he expected would soon breakout of their (Nordic) niche and start expanding, something which they are now starting to do having tripled their customer count in the last 6 months to over 200 customers.

The reason for this expectation? They earned their top right status in the Spend Matters Spend Analysis Solution Map when the (quadrant) maps still existed and the doctor was responsible for grading them as a Top 5 Best-of-Breed Mid-Market focussed Spend Analysis player located in Western Europe / the UK.

Founded by ex-BCG (Boston Consulting Group) consultants in 2017, with the first version of the platform launching in 2018, the key players not only have a firm understanding of spend analysis, but what analysis capabilities a customer needs to find their spend waste and their opportunities. Plus, they understood since day one that spend analysis in a vacuum is not that meaningful and is most meaningful in the context of negotiations, supplier management and development, contract obligation management, labour compliance and ESG reporting, for example. Negotiations work best when they are fact based, supplier development efforts are best focussed on those suppliers where improvements would result in considerable cost reductions or value generation, contracts are meaningless if not adhered to (and the resulting overspend completely unnecessary), labour violations in the supply chain can result in huge fines to your organization, and exceeding your carbon caps can be even more expensive (not to mention the fines if you don’t properly report). (And yes, this is a bit of foreshadowing.)

The core of the Ignite “Spend Management” solution is the analytics offering which, like most spend analysis solutions, has two core components:

1. Data Management

It’s very easy to get data into the Ignite Platform. In fact, it can be as easy as dragging-and-dropping a file onto the browser pane as Ignite allows you to define all of your taxonomies as well as your standard file format mappings to those taxonomies. It can then detect if the data is new, incremental, or updated and allow you to add, add only new records, update existing records, or even load the file into an entirely new cube.

When it comes to taxonomies, you can start with your own or built-in and then, during analysis, you can define and redefine taxonomies on the fly, with reclassification as simple as dragging-and-dropping. You can also define and update mapping rules quickly and easily as well, fixing errors or updating classifications as the need arises.

Data enrichment is easy-peasy compared to generic analytic platforms or suites as they support a number of financial metric, industry classification, currency exchanges, commodity intelligence, CO2 emission sources, and risk metric sources out of the box and provide a full integration platform with APIs, pre-built connectors, and timed data pulls (via SFTP, for example) for those who need custom integrations.

The platform also supports multiple tables and spend cubes and allows you to work on global tables and cubes or local tables and cubes for what-if analysis.

But most importantly, it’s one of the few best-of-breed platforms with a fully integrated visual data flow manager where you can define the entire loading, mapping, enrichment, classification, and automated analytics, reporting, and notification process, including automated supplier normalization.

2. Analytics

The Ignite Platform has just about everything you would expect from a modern analytics platform including arbitrary dimension selection, formula-based dimension derivation, easy (powerful metric based) filters, multiple chart and widget types, easy drill down, easy view/report modification, and ad-hoc analytics.

It also comes with a full suite of out-of-the-box analytics to help you identify potential savings opportunities through contracting (off-contract spend), renegotiation, supplier (re) negotiation, supplier benchmark improvements, spend consolidation, invoice management, payment term rationalization, price improvement, etc. Contract coverage, PO Coverage, key supplier coverage, and a suite of KPI reports are also available out-of-the-box (including a spend development dashboard that can go beyond just spend to impacting metrics such as OTD, quality incidents, etc. if you track the data in the supplier management module).

It’s ability to identify supplier-based (re)negotiation and development opportunities is extremely good and based on its proprietary Ignite Matrix that maps “share of wallet” vs EBIT Margin (which it calculates using mandatory government disclosures and integration with appropriate feeds, such as Enin in the Nordics, and appropriate adjustments) and scatter plots the results to help you quickly identify where your business is contributing to a supplier’s high profit margiin (and where the supplier has room to negotiate without jeopardizing its stability).

On top of this they have also built:

3. Supplier Management (Information / Performance / Risk / Compliance)

With its strong data management underpinnings, the Ignite Spend Management platform can store any all supplier related you wish to track and analyze, which not only allows deep spend-related insights by supplier, but performance and risk (metric) insight by supplier, with the ability to track and compare over time.

In addition to providing a full Supplier 360 view across all data captured in the platform, the Supplier Management capability includes standard campaign management where a buyer or supplier management can create questionnaires for supplier data augmentation and collection of relevant data and documents for supplier performance / risk / compliance management.

4. Contract Management (Governance)

Due to its strong data management underpinnings, the platform can also store all relevant contract meta-data in addition to the contract documents and allow users to manage, report on, and automatically annotate spend that is covered by a contract (as well as determine if it was billed, and paid, at the contracted rate using the appropriate payment terms). Also, as with most contract management plays, it can support tasks and alerts and the linking of contracts to tasks and alerts.

5. Scope 3 Management / Carbon Accounting

The best foundation for a carbon calculator / carbon reporting application is a true analytics platform that can support the definition of all of the appropriate Scope 1, 2, and 3 Categories of relevance to the organization and/or required by the appropriate authority to which reports must be made; the integration of data feeds to allow for the appropriate carbon emission calculations; the collection of actual data from suppliers that can supply it; the generation of the appropriate reports with the appropriate calculations for mandated reporting; and the tracking of changes over time. This is precisely what the Ignite Procurement platform supports.

The entire platform is easy to use and the UX is quite modern, but you don’t have to take our word for it — you can see a three minute demo on their webpage … just scroll down to the Meet Ignite Procurement section. So if you’re looking for an analytics platform that can provide you actionable spend insights on your contracts, suppliers, and ESG that you act on to reduce waste and increase value, you should make sure that Ignite Procurement is on your shortlist, especially if you are in its current target marketplace in the EU/UK.

* Not all on SI, many write-ups are on Spend Matters, behind the revised paywall.

Carbon Calculation is Great, But What You’re Really Concerned About is YOUR e-Liability

A few weeks ago, we ranted that Carbon Tracking is Important — But a Calculator or a Credit is Not a Solution! The reasons that credits were not a solution were that most “credits” were iffy at best, and downright fraudulent at the worst. The only solutions to carbon are actual reduction or proven capture. But that’s a diatribe for another rant. A calculator is not a solution either. It’s important to understand YOUR carbon footprint, but simply understanding your footprint is not addressing your footprint. Plus, it’s not just your inbound footprint you need to worry about, it’s your outbound footprint as well. You are NOT responsible for any carbon in your organization associated with products or services that are being sold to another business. You are only responsible for the carbon footprint of products are services that are being sold to a consumer or that you incur in running your operations.

In other words, what you need to be tracking and addressing is your e-Liability, which was well defined in a recent Harvard Business Review article on accounting for climate change. And this is not scope 3 carbon tracking or ESG reporting under the GHG protocol which contains flaws that result in the same emissions reported multiple times throughout the chain by different companies and other emissions being completely ignored. All emissions need to be captured ONCE and allocated as appropriate between the different entities in the supply chain, depending on which business is the last business to acquire the products or services that the emissions are directly correlated with.

Note the concept of direct correlation. All of the GHG produced mining a rare earth mineral is direct GHG associated with that rare earth mineral, and is passed up the supply chain to the buyer who buys that ore to process it, whereas all of the GHG produced by the CEO flying around on his private jet just because he can is indirect GHG that is the liability of the corporation that needs to be accounted for, and offset in someway, but that cannot be passed on to an organization that buys its ore (as it was not GHG absolutely necessary to extract the ore).

The best part of the HBR e-Liability recommendation by Kaplan and Ramanna is that it is based on financial accounting principles which track liability inflows and outflows the same way an accountant or economist would track inflows and outflows. It’s mathematically sound, makes perfect sense, doesn’t double count, and properly used, won’t miss anything either. If you want calculator, get a proper e-Liability calculator.

But remember that understanding your e-Liability is only your first step. The next step is to find ways to actually reduce your GHG footprint by reduction of unnecessary activities, production process improvement (including energy and water efficiency), and product design improvements. (Not BS credits.)

Carbon Tracking is Important — But a Calculator or a Credit is Not A Solution!

We need sustainability. But that’s a heck of a lot more than just calculating the carbon in your supply chain or buying credits from an unknown seller of dubious origin. However, in the last two years, we’ve seen dozens (upon dozens) of startups that, as of now, do just that — and only that.

If they have plans to do more, that’s great, we need more — a lot more, but for now, all they are adding is unnecessary duplication of capability and confusion to a space that needs more clarity.

First of all, you don’t need a custom “carbon calculator” to compute your carbon footprint. All you need is the data on the products you produce — specifically, how many units you buy, the carbon output by the factory on an annual basis, and how many total units it produces. Then, you can compute a carbon contribution by product. (Yes, this is a bit simplified, but you can have the factory track daily production by product and daily output and improve the estimate if you like. It’s still a simple calculation.)

And, most importantly, you can do all of these calculations easily in any Business Intelligence (BI) or Spend Analysis Tool. Just load the factory carbon / GHG output for a day and the number of products produced per day in a tracking table and create a derivation dimension for carbon and each GHG you want to track and that’s your output per product. Then, on your product purchase table you create a derived dimension that calculates how much carbon (and GHG) the products you bought contributed. Dump the table and there’s your report, which you can format how you like.

And you can even do all this work in, gasp, Microsoft Excel if you don’t have a spend analysis tool — you don’t need someone to build a custom mini spreadsheet tool to do this for you (or pay for it).

But even worse is an unregulated someone who will take your money and invest it in “carbon offsets” for you. Especially when the enterprises that someone invests it in may or may not be doing anything that’s actually reducing the amount of carbon in the atmosphere. The reality is that, today, many “carbon offset” investments are a complete and utter scam, as per this John Oliver segment, and many more that look like they are doing activities that will capture atmospheric carbon are just wasting time and money. For example, just planting a tree does nothing if the tree doesn’t survive. In many areas of South America and other locales undergoing rapid deforestation, especially where droughts are common, the climate quickly becomes similar to that of a semi-desert part of the year — and a young sapling in this climate generally won’t survive without irrigation. Also, if the entity doing the planting decides to plant a non-native species of tree that they believe should “grow faster”, chances are those trees won’t survive the climate either.

What we really need is a few internationally regulated organizations that create requirements and standards for an operation to be a real carbon offset operation and auditing requirements that must be met in order for an operation to be certified as being a true carbon offset operation — before it takes a dime of your money. Otherwise, yet another organization just wanting to do good is NOT enough.

And then, we need these companies that care to take the next step and provide meaningful guidance to global enterprises as to the steps these global enterprise clients can take to reduce their carbon footprint — technologies they, and their suppliers, can invest in to reduce carbon and GHG production, alternative raw materials and components they can use in their designs that produce less carbon in their mining and production, and ways to reduce consumer demand for carbon intensive products. (Which, by the way, doesn’t have to reduce profit — conscientious customers will pay more for sustainable products, especially if those products now last longer as a result!)

In short, we need actions, not calculations!

It’s Not Just Beds Burning Anymore, it’s the Planet. What Impact Are Your Efforts To Stop it Having?

Four decades ago, when sustainability was only a concern for the environmental extremists because, thanks to industrialization and burgeoning globalization, we had other disasters to deal with (hunger in Africa, aboriginals being forced from their land [sometimes with fire], the global AIDS epidemic, etc. — see Billy Joel’s We Didn’t Start the Fire, which took us through 1989 [the year, not the 2014 Taylor Swift release], and the doctor chronicled the next 20 years here in an unofficial Part II). And even though we still have all these disasters, and many more, the planet is in upheaval with every type of natural disaster occurring everywhere all the time. In fact, climate-related disasters have tripled in a mere 7 years. 7 years! We’ve gone from disasters increasing over the span of thousands of years during natural planetary cycles to disasters increasing in the span of mere years due to global warming thanks to the rapid increase in carbon and GHG emissions as a result of 150+ years of industrialization and rapid deforestation and wetland destruction. (Forests and wetlands have historically acted as carbon sinks for all of the carbon released by life, it’s historically primitive actions, and traditional disasters that resulted in the destruction of forests [and when trees die or get burned, all the carbon they captured is released]).

Now it’s true that, on average, even the largest of corporations on its own could only make a small dent when the depth of the problem is considered, but if even ten of the largest corporations in an industry teamed up, they could make quite an impact. (And if the largest retailers teamed up, think Amazon and Walmart and Target, and insisted on a maximum carbon footprint per product — think of the impact that would make.)

For details on the impact that can be made today, you should download the new Ecovadis Network Impact Report, 3rd Ed. which points out that Industry-level collaboration is one of the best levers available to companies looking to build more sustainable value chains and scale their positive impact. EcoVadis Sector Initiatives (SIs) are a highly effective vehicle for this. Six initiatives spanning a diverse range of sectors — from chemical manufacturing to health — are using the EcoVadis solution to share best practices and collectively address sector-specific challenges across their often highly interconnected supply chains. Our data shows that participation in an SI helps buyers improve their supplier engagement and enables rated companies to improve faster than their network peers.

More specifically, companies engaged in a Sector Initiative outperform the [Ecovadis] network average by 5.3 points — not only do companies that try to better than those that don’t, but companies that work with peers on the right objectives do better still.

But this is only one reason you should read the latest Ecovadis Network Impact Report, 3rd Ed.. Another reason is because, if you don’t, you won’t see how Ecovadis, which in 2022 officially became a “purpose-driven” company under French Law, has continued to grow at a rapid rate and how it is starting to make a global impact. When your customers represent 4.8 Trillion in global spend, you are starting to get somewhere. That’s 4.5% of GDP, and if Ecovadis could grow 30% year-over-year for nine years, that 4.5% could become 49%, close to the tipping point where we’d finally start making significant progress. (Which means if we can survive until 2032, we could start making real progress on sustainability and environmental stabilization. Not as fast as we need to, as parts of the planet will literally start burning by then, but Ecovadis and its peers may still save some of us.)

And, even if you don’t think Ecovadis is the answer for you (even though 945 organizations do and the number increases every year), the report will still educate you on the five key pillars of a sustainable procurement platform. And once you understand those pillars, you can assess, monitor, improve, report, and continue the wheel.