Top 5 Regulatory Compliance Issues Facing Financial Services in the Next 5 Years

by Michelle Armstrong, TYS Global VP of Value Solutions Consultant and Nick Picone, TYS VP of Advisory Practice

In today’s swiftly and sometimes frantically evolving financial landscape, the banking sector faces an array of complex regulatory challenges. From environmental sustainability and cybersecurity to operational resilience and financial integrity, banks must navigate a labyrinth of compliance issues critical to their success and sustainability. Amidst this dynamic environment, innovative solutions like Trust Your Supplier (TYS) are emerging as key enablers, offering banks an efficient and secure way to manage supplier due diligence and compliance.  

This blog delves into the top five regulatory compliance issues facing banks in the next five years, highlighting how technologies such as TYS and strategic partnerships with entities like Moody’s, RapidRatings, EcoVadis, and Dun and Bradstreet can play a transformative role in meeting these challenges. We will explore the complexities of each regulatory area and how leveraging TYS can aid banks in complying with these evolving requirements and gaining a competitive edge in the banking industry. 

  1. Climate Change and ESG (Environmental, Social, and Governance):

OCC and Global Regulatory Frameworks: The Office of the Comptroller of the Currency (OCC) in the United States, alongside global regulatory bodies, are increasingly focusing on how banks address climate-related financial risks. This includes the development of risk management frameworks that incorporate climate-related risks in their lending and investment practices. 

ESG Compliance: ESG compliance involves adhering to standards and regulations related to environmental conservation, social responsibility, and governance ethics. Banks are expected to integrate ESG factors into their operational and strategic decisions. This includes aligning with the EU’s Taxonomy Regulation, which classifies sustainable activities, and adhering to the Sustainable Finance Disclosure Regulation (SFDR) for transparent ESG disclosures. 

  1. Cybersecurity and Data Privacy:

EU’s DORA: The Digital Operational Resilience Act aims to consolidate and upgrade digital operational resilience requirements across the EU financial sector. For banks, this means ensuring their ICT (information communication technology) systems and tools are resilient against cyber threats. DORA also emphasizes the importance of robust risk management frameworks and regular testing of ICT systems. 

Data Privacy Regulations: Banks need to comply with various data protection laws like the General Data Protection Regulation (GDPR) in the EU and the California Consumer Privacy Act (CCPA) in the United States. These regulations mandate stringent data handling practices and grant individuals greater control over their personal data. 

  1. Artificial Intelligence and Fintech:

Regulatory Focus on AI and Fintech: Banks using AI and fintech solutions must ensure these technologies comply with existing and upcoming regulations. This includes addressing algorithmic bias, maintaining transparency in AI-driven decisions, and ensuring the security and privacy of customer data. 

Sub-Contracting and Vendor Management: Under DORA, banks must manage the risks associated with outsourcing and sub-contracting technology services. This includes ensuring that third-party providers comply with the same operational resilience and data protection standards as the banks themselves. 

  1. Operational Resilience and Business Continuity:
  • DORA’s Emphasis on Operational Resilience: DORA requires financial entities, including banks, to establish and maintain effective and comprehensive strategies and processes to ensure operational resilience. This includes responding swiftly to, recovering from, and adapting to ICT-related disruptions. 
  • SOX and Financial Reporting Integrity: The Sarbanes-Oxley Act of 2002, a result of corporate scandals like Enron and WorldCom, focuses on enhancing the accuracy and reliability of corporate financial disclosures. Banks must ensure that their financial reporting processes are transparent and free from fraud, which is a part of maintaining operational resilience. 
  1. Anti-Money Laundering and Combating Financial Crime:

Bank Secrecy Act (AML & CFT): The Bank Secrecy Act, along with Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) laws, requires banks to monitor and report activities that might indicate money laundering or terrorist financing. This includes maintaining proper records of transactions, filing reports for suspicious activities, and implementing robust customer due diligence (CDD) measures. 

Global AML/CFT Compliance: The regulatory landscape for AML and CFT is global, with banks needing to comply with international standards set by bodies like the Financial Action Task Force (FATF) and local regulations in their jurisdictions. 

Cross-Cutting Themes and Compliance Strategies: 

  • Technology Investment: To comply with these diverse and complex regulations, banks must invest in advanced technologies like AI, machine learning, and blockchain for better risk management, transaction monitoring, and reporting. 
  • Training and Culture: Cultivating a culture of compliance within the organization is crucial. This involves regular employee training on compliance topics, ethical conduct, and awareness of the legal implications of non-compliance. 
  • Proactive Risk Management: Banks should adopt a proactive approach to risk management, continuously assessing and updating their compliance programs to adapt to new regulations and evolving risks. 
  • Stakeholder Engagement: Engaging with regulators, industry groups, and other stakeholders is vital for staying ahead of regulatory changes and understanding expectations. 
  • Audit and Assurance: Regular internal and external audits are necessary to ensure compliance with SOX, AML/CFT laws, and data privacy regulations. 

Integration of Trust Your Supplier in Banking Industry Compliance 

As banks navigate the complex regulatory compliance landscape, especially in areas like supplier due diligence, technologies like Trust Your Supplier (TYS) play a pivotal role. TYS, a blockchain-based platform, revolutionizes how banks manage and verify supplier information, ensuring compliance and enhancing operational efficiency. 

Strategic Partnerships Enhancing Compliance and Due Diligence: 

  • Dun and Bradstreet: Utilizing Dun and Bradstreet’s vast database enhances banks’ ability to conduct thorough background checks, assess credit risk, and maintain compliance with AML and CFT regulations.  
  • EcoVadis: EcoVadis brings sustainability ratings into the mix, enabling banks to align with ESG compliance by evaluating their suppliers’ environmental and social impact. 
  • Moody’s: Collaboration with Moody’s provides banks access to critical credit ratings and risk assessments, which are integral for evaluating suppliers’ financial stability and risk profiles. 
  • Rapid Ratings: Partnering with Rapid Ratings allows banks to leverage financial health data, offering a comprehensive view of supplier risk, which is vital in assessing small and medium-sized enterprises. 

Leveraging TYS for Enhanced Compliance: 

Automated Compliance Questionnaires: TYS simplifies the compliance process by providing automated questionnaires tailored to banking industry standards, including SOX, GDPR, and DORA. This automation ensures thorough and consistent supplier vetting, which is crucial for regulatory adherence. 

Blockchain Advantage: The blockchain foundation of TYS offers unparalleled transparency and security in supplier information management. This feature is particularly beneficial for complying with data privacy laws and mitigating cybersecurity risks. 

Operational Resilience: By streamlining supplier information management, TYS directly contributes to the operational resilience of banks. It provides a robust framework to manage supply chain disruptions, a key aspect of business continuity planning under regulatory frameworks like DORA and OCC regulations. 

TYS: A Tool for Proactive Compliance Strategy 

Incorporating Trust Your Supplier into the banking industry’s compliance strategy offers a proactive approach to meeting regulatory demands. It not only assists in complying with current regulations but also positions banks to quickly adapt to future changes in the regulatory environment. The platform’s integration with strategic partners like Moody’s, Rapid Ratings, EcoVadis, and Dun and Bradstreet further enriches its capability to offer comprehensive, multi-dimensional supplier assessments. This integration is crucial for banks aiming to stay ahead in the compliance game, ensuring they are reactive and forward-thinking in their compliance and operational strategies. 

In the ever-evolving regulatory landscape of the banking industry, platforms like Trust Your Supplier are not just tools but essential allies. They enable banks to manage supplier risks effectively, ensure compliance, and maintain operational resilience. As we continue to explore the detailed aspects of banking regulations in our upcoming posts, the role of innovative solutions like TYS in aiding compliance and enhancing due diligence processes will be a recurring theme.  

Conclusion 

Over the next week, we will dive deeper into these topics, unraveling the complexities and nuances of OCC regulations, DORA, the Bank Secrecy Act, data privacy laws, and SOX. We’ll examine how these regulations will shape banking practices’ operational, strategic, and ethical dimensions. Each post in this series will offer in-depth insights and practical guidance, helping banks and financial professionals navigate these challenges effectively. Stay tuned as we dissect these themes individually, providing a clearer understanding of what lies ahead in the dynamic world of banking regulation. 

Trust Your Supplier (TYS) Featured in Forbes Article

Reimagining Supplier Onboarding and Compliance with Blockchain – How Trust Your Supplier (TYS) is revolutionizing the procurement process.

Award winning research journalist Kate Vitasek, has featured Trust Your Supplier (TYS) in a Forbes article chronicling TYS’s journey using blockchain technology to solve supplier onboarding and compliance issues. 

Blockchain technology is transforming the way businesses manage supplier onboarding and compliance, and Trust Your Supplier (TYS) is at the forefront of this revolution. TYS is a blockchain-based platform that streamlines the onboarding process by creating a digital identity for suppliers, allowing them to share their information with multiple customers at once. This not only saves time and reduces administrative burden but also improves data quality and security. 

The TYS platform was born from a collaboration between IBM and Chainyard, which began in 2018. The partnership quickly moved from idea to innovation, resulting in the creation of the first blockchain-based, decentralized platform designed to manage supplier information. The TYS network has expanded to include companies such as Lenovo, GSK, Nokia, BT, American Express, and Pearson. 

The benefits of using the TYS platform are significant for both suppliers and their customers. On average, onboarding times have been reduced by 67%, leading to cost savings of nearly $500 per supplier for purchasing organizations. For suppliers, the ability to be onboarded with additional companies almost instantly allows them to start work after a deal is sold, eliminating the administrative burden of managing the same or similar data across multiple customers. 

As the world continues to embrace blockchain technology, the future of digital identity is rapidly approaching. Groundbreaking efforts like TYS signal the dawn of a new era in data ownership, where suppliers will have unprecedented control over their data, leading to enhanced regulatory compliance, security, and data quality. The journey to this data-centric future has begun, and its potential impact is nothing short of transformative. 

#SupplierOnboarding #Blockchain #TYS #DigitalTransformation #Procurement #ProcurementCompliance #SanctionsCompliance #RiskandCompliance  #ProcurementInnovation #RiskAssessment #RegulatoryCompliance #ProcurementLeadership #CPO #DigitalIdentity #DataOwnership #Forbes #KateVitasek

Navigating the Global Chessboard

Essential Insights for Senior Leaders Ensuring Organizational Success Amidst Geopolitical Turmoil, Regulatory Shifts, and Ethical Challenges

by Michelle Armstrong, TYS Global VP of Value Solutions Consultant

In our rapidly changing, interconnected world, the unique blend of empathy and strategic insight has become indispensable for senior leaders. Confronted with challenges ranging from geopolitical upheaval to rapid technological changes and pressing ethical dilemmas, leaders must look beyond traditional management tactics. This blog highlights the crucial role of empathy, not only as a soft skill but as a strategic imperative, in guiding decisions and actions that navigate these complex issues effectively. It’s a call for leaders to become empathetic visionaries, adept at steering organizations through the intricate realities of our global landscape.

Key points that senior leaders need to understand for continued success in their organizations without impacting their supply chain, relationships, and corporate responsibility:

  1. Navigating a Conflict-Ridden Global Landscape: With political violence at its highest since WWII, understanding geopolitical dynamics is crucial. Organizations must be vigilant about how conflicts, especially in regions like Gaza, Ukraine, and others, can disrupt supply chains and create regulatory challenges. Leaders must develop strategies to mitigate these risks, including diversifying suppliers and investing in robust risk management systems.
  2. Adapting to Regulatory Changes in AI and Technology: The explosion of AI and the impending regulations, particularly in the European Union, necessitate a thorough understanding of how these changes affect business operations. Companies should prepare for compliance with AI regulations and explore how advancements in technology can optimize supply chain efficiency and data management.
  3. Addressing Economic Instability and Debt Sustainability: The economic fallout from recent crises, including high inflation and interest rate hikes, will impact global markets. Leaders need to be proactive in managing financial risks, understanding the implications for their supply chain financing, and adjusting their strategies accordingly.
  4. Understanding the Dynamics of the Global South: The evolving geopolitical influence of countries in the Global South, like those in the BRICS bloc, will have significant implications for global trade and politics. Companies need to be aware of these shifts and consider their impact on international business relations and supply chain decisions.
  5. Balancing Security and Rights in Business Operations: The tension between security needs and fundamental rights is becoming more pronounced. Businesses must navigate this landscape carefully, ensuring that their operations and supply chain practices respect human rights while maintaining security and compliance with local regulations.
  6. Engaging with a Disconnected Society: With a trend toward news avoidance and increased reliance on social media, businesses need to rethink their communication and engagement strategies. This includes understanding the shift in how people consume information and the growing role of influencers.
  7. Responding to Backsliding International Commitments: The weakening of international cooperation and commitment to Sustainable Development Goals (SDGs) requires businesses to take a more active role in promoting sustainability and ethical practices, both in their operations and in their supply chain.
  8. Mitigating Risks from Environmental and Humanitarian Crises: Increased displacement and humanitarian crises, driven by conflict and climate change, can impact supply chains and corporate responsibility. Businesses should develop strategies to address these challenges, including sustainable practices and humanitarian aid initiatives.

In conclusion, senior leaders must prioritize a comprehensive understanding of these complex global issues. They should integrate this understanding into strategic planning and operations to ensure resilience, compliance, and responsible practices in their supply chains and broader business activities. This approach will not only safeguard their operations but also contribute positively to global stability and progress.

Revolutionizing Pharma Supply Chains: Navigating Risks and Embracing Digitalization for a Resilient Future

by Michelle Armstrong, TYS Global VP of Value Solutions Consultant

Abstract 

The pharmaceutical supply chain is grappling with significant issues of medicine shortages. This study adopts a risk management approach to identify key risk factors affecting the pharmaceutical supply chain, using the Malaysian pharmaceutical industry as a case study.

The research utilizes Fuzzy Failure Mode and Effect Analysis and Data Envelopment Analysis for risk assessment. The study finds the pharmacy node as the riskiest, with unexpected demand and scarcity of specialty drugs as major risk factors. To mitigate these risks, the study advocates the use of digital technologies like big data analytics and blockchain. 

Introduction
Medicine shortages in the pharmaceutical industry pose serious challenges, impacting health outcomes and the broader healthcare system. These shortages lead to increased healthcare costs due to the use of alternative medications and managing patient health complications. The study aims to understand the root causes of these shortages and how digital technology can address them, ushering in the Pharma 4.0 era. 

Pharmaceutical Supply Chain and Risk Factors
The pharmaceutical supply chain (PSC) is intricate, involving multiple stakeholders and extending across countries. It’s segmented into three levels: sourcing, distribution, and consumption. The supply chain’s complexity and unpredictability often lead to inefficiencies and disruptions. 

 Key risk factors include: 

  • Disconnections and lack of accountability among supply chain partners. 
  • Long lead times and the “bullwhip effect,” where demand changes cause supply fluctuations. 
  • High operating costs due to maintaining optimum inventory levels. 
  • Transportation-related risks like delays and damage to goods. 
  • Impact of natural disasters, political instability, and pandemics on the supply chain. 
  • Regulatory challenges include documentation, changes in standards, and drug recalls.

Methodology
The study adopts a risk management approach using Failure Mode and Effects Analysis (FMEA) and Data Envelopment Analysis (DEA). FMEA helps identify potential failure modes in the supply chain, while DEA is used to calculate risk-based efficiency. The methodology involves fuzzification of risk factors, risk assessment metric development, and the use of Fuzzy Inference System (FIS) and DEA for evaluating failure modes. 

Results and Analysis
The study’s application to the Malaysian pharmaceutical supply chain reveals: 

  • High-risk factors at the manufacturing node include delays in raw material supply due to overseas suppliers. 
  • The distributor node faces moderate risks due to transportation and inventory management challenges. 
  • The pharmacy node shows the highest risk, particularly due to unexpected demand surges and lack of substitute drugs. 
  • The DEA cross-efficiency method highlights the varying risk levels across different nodes of the supply chain, emphasizing the need for targeted risk mitigation strategies.  

Managerial Implications
The study suggests a framework for incorporating digitalization into the pharmaceutical supply chain to mitigate risks. Key recommendations include: 

  • Collaborative technologies for information sharing to manage inventory and reduce the bullwhip effect. 
  • Blockchain technology for drug sharing networks, improving data transparency and trust. 
  • Utilization of data analytics and AI in manufacturing to address supply delays and enable more effective forecasting. 

Conclusion
The study concludes that medicine shortages are a pressing issue in the pharmaceutical supply chain, exacerbated by complex risk factors. Digital technologies, especially big data analytics and blockchain, are crucial for addressing these challenges. The proposed framework for digitalization aims to enhance the efficiency and resilience of pharmaceutical supply chains.  

Trust Your Supplier (TYS): Empowering Suppliers in the Digital Age

Exciting news is on the horizon as Trust Your Supplier (TYS), our revolutionary supplier management platform, achieves a significant milestone by securing its place at the center of Dr. Elouise Epstein’s Spider Map. This accomplishment marks a pivotal moment in TYS’s journey, highlighting its commitment to empowering suppliers and reshaping the landscape of risk and compliance management.

Empowering Suppliers with Data Ownership:
TYS stands out as a groundbreaking solution that prioritizes supplier empowerment. At its core, TYS is designed to give suppliers complete ownership and control over their data. This is a game-changer in the supplier management space, as it introduces the concept of digital wallets for suppliers, providing them with a secure and efficient way to manage their information.

Digital Wallet Concept:
The digital wallet concept is at the heart of TYS’s innovative approach. By enabling suppliers to have their own digital wallets, TYS allows them to store and manage crucial data securely. This not only streamlines the data-sharing process but also ensures that suppliers have autonomy over their information, fostering a new era of transparency and trust in supplier relationships.

A Milestone in Dr. Elouise Epstein’s Spider Map:
Dr. Elouise Epstein’s Spider Map serves as a testament to TYS’s exceptional capabilities and potential. Positioned at the center of this influential map, TYS is recognized for its commitment to supplier empowerment and data ownership. This strategic positioning reinforces TYS’s role as a leader in the supplier management landscape.

Revolutionizing Risk and ESG Markets:
As the Risk and ESG markets undergo significant transformations, TYS emerges as a frontrunner, ready to revolutionize these industries. With a robust data foundation and the digital wallet concept, TYS provides cutting-edge solutions and insights that are poised to shape the future of risk and compliance management.

Looking Ahead:
The future looks promising for TYS and its stakeholders. By putting the power back in the hands of suppliers and offering innovative solutions, TYS is set to drive positive change in the supplier management landscape. As industries evolve, TYS remains dedicated to staying at the forefront, delivering value, and shaping a future where data ownership and transparency are paramount.

Trust Your Supplier’s latest achievement in securing a central position in Dr. Elouise Epstein’s Spider Map underscores its commitment to revolutionizing supplier management. With the digital wallet concept and a strong focus on data ownership, TYS is well-positioned to bring about transformative changes in the Risk and ESG markets. As TYS continues to pave the way for a new era in supplier empowerment, the future holds exciting possibilities for the platform and its users.

Resolute Resolutions: Steering the Supply Chain with Year-Long Focus

by Michelle Armstrong, TYS Global VP of Value Solutions Consultant

As we embark on a new year, the omnipresence of New Year’s resolutions is undeniable, whether it be on social media, in conversations, or in the news. For many of us, the commitment to these resolutions begins fervently in January but tends to wane as quickly as the holiday decorations are put away. In the supply chain realm, these resolutions take on a strategic and operational significance.

Plan and Play Smart
A key resolution in supply chain management is the adoption of real-time visibility for both supply and demand, enabling effective scenario planning and inventory optimization strategies. This visibility is critical for adapting to changes and making timely, resolute decisions. Integrated Business Solutions are essential in this regard, enhancing the synchronization of supply chain risk and real-time planning. The economic fluctuations affecting sales, operations planning (S&OP), forecasting, demand response, supply, and inventory planning emphasize the need for an agile approach with high visibility. 

Taking Out the Garbage: Data Hygiene
Another crucial resolution involves tackling ‘garbage data’ – data that is inaccurate, unusable, or untrustworthy. Cleaning up and ensuring data reliability is fundamental. The steps to improve data hygiene include: 

  • Audit: Assessing the current data situation and identifying issues in data collection processes. 
  • Standardize: Creating consistent reporting processes aligned with organizational goals. 
  • Deduplicate: Utilizing automation to reduce duplication and human error. 
  • Verify: Testing the reliability and accuracy of the data post-clean-up. 

Strengthen Your Business Networks
The cost of disruption in the supply chain extends beyond finances to brand perception and customer satisfaction. Achieving 360-degree, real-time visibility across the entire end-to-end supply chain is vital. Integrated platforms that allow instant information sharing with suppliers, partners, and third-party providers are essential for transparency, fast decision-making, and enhanced customer satisfaction. 

Closer Scrutiny of Materials Suppliers
Materials suppliers, often less scrutinized than contractors, now face increasing scrutiny due to economic and regulatory pressures. Ensuring compliance with health, safety, quality assurance, environmental protection, and ethical practices is paramount. Supporting suppliers in demonstrating their compliance with supply chain risk management practices is crucial in navigating the complex maze of global and regional regulations. 

Embracing Technology and Innovation
Incorporating technology and innovation is pivotal. Digital transformation can significantly streamline operations. Integrating advanced analytics, AI, and IoT technologies can revolutionize supply chain management. 

Fostering a Culture of Continuous Improvement
Encouraging a culture of continuous improvement is essential. This involves open communication, regular training, and celebrating milestones to align the team with organizational goals. 

Adapting to Change and Overcoming Challenges
The supply chain industry faces numerous challenges, including market fluctuations and global disruptions. Balancing steadfast commitment to resolutions with the flexibility to adapt is key to resilience. 

Conclusion
As we progress through the year, let’s focus on these resolutions with strategic planning, data management, strengthened business networks, and rigorous supplier scrutiny. Let’s make this year count by staying focused, resilient, and committed to our goals in the ever-evolving landscape of supply chain management. 

GHG Protocol Decoded: Tech Solutions for Scope 3 Reporting

by Michelle Armstrong, TYS Global VP of Value Solutions Consultant

 

Scope 3 emissions, often referred to as “value chain emissions,” are a part of the Greenhouse Gas Protocol’s corporate standard for greenhouse gas accounting. These emissions are generally the most significant share of an organization’s carbon footprint but are also the most complex to manage and mitigate, as they involve activities not directly owned or controlled by the reporting company. Scope 3 includes both upstream and downstream emissions and encompasses a wide range of indirect emissions sources.

The regulations and guidelines around Scope 3 emissions vary depending on the region and the specific regulatory framework. However, there are some general aspects to consider:

  • Voluntary vs. Mandatory Reporting: In many regions, reporting Scope 3 emissions is still voluntary but is increasingly being encouraged or required as part of broader sustainability reporting frameworks. For example, the European Union’s Non-Financial Reporting Directive (NFRD) encourages companies to report on their Scope 3 emissions.
  • Standards and Protocols: The Greenhouse Gas Protocol provides the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions, including Scope 3.
  • Corporate Sustainability Reporting: Companies may choose to report Scope 3 emissions as part of their sustainability or corporate social responsibility (CSR) reporting. This is often done to improve transparency, manage risks, and identify opportunities for reducing emissions in the supply chain.
  • Investor and Stakeholder Pressure: There is increasing pressure from investors, customers, and other stakeholders for companies to report and reduce their Scope 3 emissions. This pressure often drives more detailed and rigorous reporting and reduction strategies.
  • Sector-Specific Guidelines: Certain industries have specific guidelines or expectations for Scope 3 reporting. For example, the Science Based Targets initiative (SBTi) provides methods and guidance for companies to set science-based targets for reducing greenhouse gas emissions, including Scope 3.
  • Local and National Regulations: Some countries have specific regulations or guidelines for Scope 3 reporting. These can vary significantly and may be more or less stringent than international standards.
  • Integration with Broader ESG Goals: Scope 3 emissions reporting is often part of broader environmental, social, and governance (ESG) strategies and goals within organizations.

Technological Approaches for Measuring Scope 3 Emissions

Measuring Scope 3 emissions involves complex data collection and analysis due to the broad range of indirect emission sources across a company’s value chain. Technology plays a crucial role in this process, with several key approaches:

  • Life Cycle Assessment (LCA) Tools: These software tools analyze the environmental impacts of products or services throughout their entire life cycle, from raw material extraction to disposal. LCA tools can be instrumental in quantifying Scope 3 emissions related to product use and end-of-life stages.
  • Supply Chain Analysis Software: These platforms focus on mapping and assessing emissions within a company’s supply chain. They help identify hotspots of high emissions and opportunities for reduction by analyzing supplier data and activities.
  • Carbon Accounting Platforms: These comprehensive tools enable companies to track and manage their carbon emissions across all scopes, including Scope 3. They often feature dashboards, reporting capabilities, and scenario analysis to support strategic decision-making.
  • Energy Management Systems (EMS): While primarily focused on direct energy consumption (Scope 1 and 2), EMS can also contribute to Scope 3 analysis by providing insights into the energy use and associated emissions of leased assets, franchises, and outsourced activities.
  • Blockchain and IoT: Emerging technologies like blockchain and the Internet of Things (IoT) offer new ways to track and verify emissions data across complex supply chains, enhancing transparency and accuracy.

Data Sources for Scope 3 Emissions Measurement

Scope 3 reporting platforms gather data from a variety of sources:

  • Supplier Surveys and Self-Reporting: Direct communication with suppliers to collect data on their emissions and environmental practices.
  • Industry Averages and Benchmarks: Utilizing established databases and benchmarks to estimate emissions for common processes or products in the absence of specific data.
  • Public and Proprietary Databases: Accessing government or commercial databases that provide emissions factors and environmental impact data for a wide range of activities and materials.
  • Sensor and IoT Data: Collecting real-time data from sensors and IoT devices embedded in products or supply chain operations to monitor emissions.

Reliability and Approaches

The reliability of Scope 3 measurement can vary significantly based on the data quality, the methodologies used, and the comprehensiveness of the analysis. Approaches that incorporate primary data from direct suppliers and use robust, widely recognized methodologies (like those recommended by the Greenhouse Gas Protocol) tend to be more reliable. However, even with the best tools and intentions, Scope 3 measurements often involve a degree of estimation and uncertainty, especially when relying on secondary data or industry averages.

Watch-Outs When Sourcing Scope 3 Reporting Software

  • Data Quality and Transparency: Ensure the software supports high-quality, verifiable data collection and offers transparency about its methodologies and data sources.
  • Customization and Scalability: The platform should be adaptable to your specific industry and supply chain complexity and scalable as your business and reporting needs evolve.
  • Integration with Existing Systems: The software should integrate seamlessly with your existing ERP, CRM, and other management systems to streamline data flow and avoid silos.
  • Compliance and Standards Alignment: Verify that the software supports compliance with relevant regional regulations and aligns with international standards like the Greenhouse Gas Protocol.
  • User Support and Training: Adequate user support, training, and resources are essential to ensure the successful implementation and ongoing use of the platform.

In conclusion, technology offers powerful tools for measuring Scope 3 emissions, but the choice of platform and approach requires careful consideration of your company’s specific needs, the quality and source of the data used, and the ability to integrate and align with broader sustainability goals

International Sustainability Standards Board (ISSB)

by Michelle Armstrong, TYS Global VP of Value Solutions Consultant

Complying with the global standards set by the International Sustainability Standards Board (ISSB) involves aligning your business’s sustainability reporting with internationally recognized guidelines. The ISSB, operating under the IFRS Foundation, aims to provide a global baseline of high-quality sustainability disclosure standards to meet investors’ information needs. Here’s a guide for your business to align with the ISSB standards: 

Understand the ISSB Standards and Their Objectives

  • Overview of ISSB Standards: Familiarize yourself with the ISSB’s aim to standardize sustainability disclosures, focusing on providing relevant, reliable, and comparable information to investors. 
  • Scope and Relevance: Understand how these standards are relevant to your business, particularly in communicating sustainability-related financial risks and opportunities to investors. 

Assess Current Sustainability Reporting Practices

  • Gap Analysis: Evaluate your current sustainability reporting practices against the ISSB standards to identify gaps. 
  • Stakeholder Engagement: Engage with key stakeholders, including investors, to understand their needs and expectations regarding sustainability information. 

Integrate Sustainability into Governance

  • Governance Structure: Ensure your board and management are equipped to oversee sustainability issues in line with the ISSB standards. 
  • Accountability and Responsibility: Assign clear roles and responsibilities for sustainability reporting and disclosure within your organization. 

Enhance Data Collection and Management

  • Robust Data Systems: Develop or enhance systems to collect accurate and verifiable sustainability data. 
  • Quality and Consistency: Focus on the quality, consistency, and reliability of the data collected for sustainability reporting. 

Align Reporting with ISSB Requirements

  • Disclosure Practices: Adapt your sustainability reporting practices to align with the ISSB’s disclosure requirements, focusing on materiality, clarity, and completeness. 
  • Continuous Improvement: Regularly review and update your reporting practices to align with evolving ISSB standards and best practices. 

Prepare for External Assurance

  • Assurance Readiness: Prepare for external assurance of your sustainability disclosures to ensure they meet the ISSB standards. 
  • Transparency and Credibility: Use external assurance to enhance the credibility and transparency of your sustainability reporting. 

Implement Effective Communication Strategies

  • Investor Communication: Develop a strategy to effectively communicate your sustainability performance and risks to investors. 
  • Public Reporting: Ensure public disclosures are clear, concise, and provide meaningful information to investors and other stakeholders. 

Monitor Developments and Participate in Dialogues

  • Stay Informed: Keep abreast of developments and updates in ISSB standards and related regulatory changes. 
  • Industry Collaboration: Participate in industry forums and dialogues to stay informed and influence the development of sustainability standards. 

Train and Educate Staff

  • Internal Training: Provide training for staff involved in sustainability reporting to ensure understanding and compliance with ISSB standards. 
  • Building Expertise: Develop internal expertise or seek external support for interpreting and applying the ISSB standards. 

Conclusion
Aligning with the ISSB standards is a strategic move towards globally consistent and comparable sustainability reporting. It not only aids in meeting investor demands but also enhances the overall credibility and transparency of your business’s sustainability efforts. As these standards evolve, staying proactive in adapting and improving your sustainability reporting practices will be key to maintaining alignment and demonstrating your commitment to sustainable business practices. 

Task Force on Climate-Related Financial Disclosures (TCFD)

by Michelle Armstrong, TYS Global VP of Value Solutions Consultant

Complying with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) involves a strategic approach to climate-related risk management and disclosure. The TCFD aims to improve and increase the reporting of climate-related financial information. Here’s a comprehensive guide for your business to align with the TCFD recommendations: 

Understand the TCFD Framework

  • Framework Overview: Familiarize yourself with the TCFD’s four core areas: Governance, Strategy, Risk Management, and Metrics and Targets. 
  • Applicability and Benefits: Understand how the TCFD recommendations apply to your organization and the benefits of enhanced climate-related financial disclosures, including better risk management and more informed strategic planning. 

Integrate Climate-Related Risks into Governance

  • Board Oversight: Ensure your board of directors is informed about and oversees climate-related risks and opportunities. 
  • Management’s Role: Establish management-level roles responsible for assessing and managing climate-related issues. 

Incorporate Climate Change into Organizational Strategy

  • Impact Assessment: Assess the potential impact of climate-related risks and opportunities on your organization’s businesses, strategy, and financial planning. 
  • Scenario Analysis: Conduct scenario analysis to understand the resilience of your organization’s strategy under different climate-related scenarios. 

Manage Climate-Related Risks

  • Risk Identification and Assessment: Identify and assess climate-related risks to determine how they could affect your organization. 
  • Risk Management Processes: Integrate climate-related risks into your existing risk management processes, ensuring an organization-wide approach to addressing these risks. 

Develop and Disclose Climate-Related Metrics and Targets

  • Metrics Selection: Choose appropriate climate-related metrics that are relevant to your organization. 
  • Setting Targets: Set and disclose targets your organization uses to manage climate-related risks and explain how these targets align with your strategy. 

Enhance Transparency and Disclosure

  • Reporting: Prepare to disclose climate-related financial information in your organization’s annual financial filings or other public documents. 
  • Continuous Improvement: Regularly update and refine your disclosures as practices and knowledge evolve. 

Engage with Stakeholders

  • Stakeholder Communication: Communicate with stakeholders about your organization’s approach to managing climate-related risks and opportunities. 
  • Feedback Incorporation: Use stakeholder feedback to enhance your climate-related financial disclosures. 

Monitor Regulatory Developments

  • Regulatory Awareness: Stay informed about current and upcoming regulations related to climate disclosure in the jurisdictions where your organization operates. 
  • Compliance Preparation: Prepare your organization for potential regulatory changes or requirements related to climate reporting. 

Provide Training and Build Capacity

  • Internal Training: Ensure relevant employees and management are trained on the importance of climate-related risks and the TCFD recommendations. 
  • Expertise Development: Develop in-house expertise or seek external support to understand and implement TCFD-aligned disclosures effectively. 

Conclusion
Aligning with the TCFD recommendations is essential for forward-thinking organizations committed to addressing climate change risks and opportunities. It facilitates compliance with emerging regulations and positions your business as a leader in sustainable practices, enhancing investor confidence and public trust. By taking proactive steps in governance, strategy, risk management, and transparent reporting, your organization can effectively navigate the challenges and opportunities posed by climate change. 

Complying with the EU Corporate Sustainability Reporting Directive (CSRD)

by Michelle Armstrong, TYS Global VP of Value Solutions Consultant

Complying with the EU Corporate Sustainability Reporting Directive (CSRD)involves several key steps and considerations for businesses. The CSRD significantly expands the sustainability reporting requirements for companies in the EU. Here’s a guide to what your business needs to do: 

 Understand the Scope and Applicability

  • Determine Eligibility: The CSRD applies to all large companies, whether they are publicly listed or not. Specifically, it targets companies with more than 500 employees. 
  • Timeline Awareness: Be aware of when the CSRD requirements will apply to your business. The directive is expected to be applied in stages starting from 2024 for reports published in 2025. 

 Develop Robust Data Collection Systems

  • Data Collection and Management: Establish or enhance systems for collecting a wide range of ESG (Environmental, Social, and Governance) data. This includes environmental impact, social practices, and governance structures. 
  • Technology Integration: Consider implementing technology solutions that can help in accurately collecting and managing sustainability data.

Align Reporting with CSRD Requirements

  • Understand Reporting Criteria: Familiarize yourself with the specific reporting standards and formats that the CSRD mandates. This includes details on sustainability-related matters such as environmental protection, social responsibility, and treatment of employees. 
  • External Standards and Frameworks: Align your reporting with recognized sustainability frameworks and standards that are consistent with CSRD requirements. 

Integrate Sustainability into Business Strategy

  • Strategic Alignment: Ensure that your company’s strategy reflects a commitment to sustainability, as the CSRD aims for sustainability to be integrated into the business model. 
  • Stakeholder Engagement: Engage with stakeholders, including employees, customers, and suppliers, to understand their perspectives and incorporate their feedback into your sustainability practices. 

Establish a Sustainability Governance Structure

  • Governance Framework: Set up a governance framework for sustainability reporting, ensuring that there is oversight and accountability within the organization. 
  • Training and Awareness: Train relevant staff on CSRD requirements and the importance of sustainability reporting. 

Prepare for Assurance and Verification

  • Assurance Readiness: Prepare for external assurance of your sustainability reporting, as the CSRD requires assurance on the reported sustainability information. 
  • Transparency and Accountability: Focus on the accuracy and transparency of your reporting to build trust with stakeholders and comply with the directive. 

Stay Informed and Adapt

  • Regulatory Updates: Stay updated on any changes or updates to the CSRD and related regulations. 
  • Continuous Improvement: Regularly review and update your sustainability practices and reporting to ensure ongoing compliance and improvement. 

Communicate and Disclose

  • Effective Communication: Develop a communication plan to effectively disclose sustainability information both internally and externally. 
  • Report Preparation: Prepare your sustainability reports in line with CSRD guidelines and ensure they are accessible to stakeholders. 

Conclusion
Compliance with the CSRD is not just a regulatory requirement; it’s an opportunity to embed sustainability into the core of your business operations. By taking these steps, businesses can not only comply with the directive but also demonstrate their commitment to sustainable development and corporate responsibility.