Pssst… The secret to unlocking the full potential of procurement lies in embracing the power of data. With a wealth of raw information at our fingertips, it’s crucial to transform this data into actionable insights that fuel informed decision-making. Learn how to satisfy your thirst for actionable procurement data by leveraging cutting-edge tools and strategies to turn raw information into valuable insights that propel your procurement operations to new heights.
Rob Handfield, a distinguished professor of supply chain management, emphasizes that digital transformation in procurement is only possible with clean data. When discussing procurement data, we’re really talking about the importance of usable, clean data.
Despite the vast amounts of data captured, only about 5% is analyzed. With the rapid growth of emerging technologies, we have more data than ever, yet we need more insight. So, how can we convert this information into intelligence?
Visualizing a New World of Data
Data visualization is a game-changer in making complex data more accessible and understandable. By presenting data in a visually engaging format, procurement teams can quickly identify patterns, trends, and relationships that might be concealed within raw data. Utilizing data visualization tools like interactive dashboards and detailed reports allows valuable insights to be easily communicated and understood, empowering teams to make data-driven decisions.
Moreover, data visualization can help procurement professionals monitor key performance indicators (KPIs) in real-time, track supplier performance, and identify potential bottlenecks in the supply chain. By embracing this visual approach, organizations can transform their procurement processes and drive efficiency across the board.
Collaborative Minds, United Goals
To unlock the full potential of procurement data, it’s crucial to involve diverse perspectives and expertise. Cross-functional teams, composed of members from various departments, can work together to analyze data and develop innovative solutions. This collaborative approach enables organizations to leverage their employees’ unique skills and knowledge, fostering a culture of open communication and teamwork.
By breaking down silos and encouraging collaboration, organizations can tap into the collective wisdom of their workforce and drive data-driven decision-making across the enterprise. This united effort leads to more effective procurement strategies and promotes a culture of continuous improvement and innovation.
Embracing the Power of Predictive Analytics and Machine Learning
The combination of predictive analytics and machine learning offers a powerful toolset for procurement teams to uncover hidden insights and make more informed decisions. By analyzing historical data, these advanced techniques can identify trends, forecast future outcomes, and recommend actions to optimize procurement processes.
For instance, procurement teams can use predictive analytics to optimize inventory levels by identifying patterns in demand and adjusting stock levels accordingly. This ensures organizations balance carrying costs and stock availability, ultimately reducing waste and improving efficiency.
Similarly, predictive analytics can help identify supplier risks by analyzing factors such as financial stability, delivery performance, and compliance. This enables procurement teams to proactively mitigate risks and maintain a resilient supply chain.
Machine learning can further enhance procurement decision-making by continuously learning from data and refining its predictions over time. This allows organizations to uncover cost-saving opportunities, streamline processes, and stay ahead of the competition in an ever-evolving market landscape.
Cultivating a Data-Driven Culture
In her Procurement Magazine interview, Dawn Tiura explained that procurement should be the central hub of a successful enterprise with a culture of service-driven curiosity. This mindset should also extend to mining the gold within data.
When Satya Nadella became Microsoft’s CEO in 2014, he emphasized creating a data culture to make better decisions based on quality data. Under his leadership, Microsoft has transformed into an organization that values data-driven decision-making, recognizing the immense potential of quality data to drive innovation, efficiency, and growth.
So, does your organization have a data culture that includes your suppliers?
To extract the most value from your data, involving stakeholders within and outside your enterprise is crucial. The procurement department must lead in fostering a data-driven culture, harnessing the potential of technologies like AI and blockchain.
As a service provider, your success is my priority.
By embracing diverse perspectives, leveraging data visualization, and harnessing advanced analytics, your organization can unlock the full potential of procurement data and drive meaningful business outcomes.
by Nick Picone, Trust Your Supplier VP of Advisory Practice
In my last post, I shared my thoughts on the coming regulatory headwinds and potential financial implications that all companies that lack efficient and effective supplier management capabilities will eventually face.
Today, I want to share insights from conversations I’ve had with leaders across the supply chain, procurement, and compliance officers at the various conferences I’ve attended with my team over the last three months.
Risk is Increasing
Nearly every discussion I had involved an extraordinary level of intellectual curiosity about what my company TYS does and what I saw in my day-to-day role as we partner with companies across the globe on their risk and compliance transformation initiatives.
I explained that nearly everyone understands they lack the comprehensive visibility across their supplier base to effectively manage risk and compliance at scale. I also shared a reasonably bold opinion that many companies I am meeting with face the increased risk of a supply chain extinction-level event due to a perfect storm across their small and middle-tier suppliers.
Some people challenged my position – which you expect – or mentioned that the level of risk I was referring to did not apply to their company which I was also willing to debate. The good news is that nearly all were interested in understanding why I thought the way I did and what I was looking at or seeing that shaped my view.
I explained that small and medium-tier suppliers are most at risk from this “perfect storm” we all face. It is especially important to recognize that these small and medium-tier suppliers could also be strategic and to understand the risk most companies face today by only focusing on their top-tier suppliers due to cost and complexity issues. In other words, companies generally have very little clarity into the situation beyond the first-tier suppliers until it’s too late.
Pre-COVID Survival
Before the pandemic and the world-changing events of the past few years, many small to medium-sized companies were practically on life support, and continued to exist because of favorable lending standards and the abnormally low cost of capital over the previous fourteen-year period. These historically low rates and easier access to credit provided a lifeline to businesses, particularly small and middle-tier suppliers who barely made it and primarily relied on regional banks to provide access to capital.
The Perfect Storm
Today, the problems we face as a society are well known. We find ourselves in a new environment; the optimal operating conditions of the past have quickly eroded and created the previously alluded to perfect storm characterized by exploding interest rates, tightening lending standards (especially across regional banks), inflation, geopolitical risk, and shortages across the supply chain. These events, taking place concurrently, are creating the most challenging financial climate – and operating environment for business – in at least fifty years. As a result, there is a dramatic increase in the risk of a significant shock to the global financial system that begins with regional banks and will ultimately impact companies and consumers.
Supporting Data
It may seem bold to suggest that many – okay, a significant portion of a company’s supply base may not be in business in 18 months. I realize that it is impossible to predict the future. Still, it is possible to see around corners, especially when you have complete visibility over your supplier base and access to instant real-time intelligence.
For example, let me share several “sobering” present-day statistics that will illustrate just how much stress your small and middle-tier suppliers are under – particularly diverse suppliers.
A record number of small businesses folded during the pandemic, and African American businesses were unfortunately “the hardest hit” with a drop of 41%, followed by a 32% decline in Latino-owned businesses.” As a point of comparison, the decrease in white-owned businesses was 17%.
Those numbers are hard to accept for some, which is understandable because they surprise many.
The Opposite of Cynical – Clarity
I understand technically, the opposite of cynicism is optimism. However, for anyone to become optimistic – which I am, by the way – I believe you need a clear line of sight to understand your current reality – where you are, where you want to go, and what you must overcome to get there.
However, you can only achieve your goals with a solid and stable supply base that includes your small and medium-tier suppliers.
The two questions you now must ask – and be able to answer, how stable and resilient is your value chain beyond your tier-one suppliers? How do you really know?
Within the perpetually transforming sphere of technology and cybersecurity, it’s rare for a person’s influence to be so deeply felt, particularly when their role primarily occurs behind the scenes. Ravinder (Ravi) Sabhikhi, a Compliance Security Consultant (CSC) for Trust Your Supplier (TYS), is one such individual. Having maintained the company’s SOC compliance with no exceptions for three consecutive years, Ravi’s dedication and expertise have been instrumental in ensuring the highest security and data privacy standards for Trust Your Supplier’s clients.
A Rich Background in Technology and Business Development
Being awarded Employee of the Month at Trust Your Supplier in June 2023 highlights Ravi’s impressive repertoire of extensive experience and diverse skillset. His expertise has been refined through an illustrious background in cloud solutions, IoT solutions, advanced analytics, system solutions application deployment, technology planning, business development, and more across prominent organizations.
Ravi’s journey began when he moved from India to the United States after high school, with limited English skills. Despite the challenges he faced, Ravi persevered with the support of exceptional mentors and a remarkable work ethic. He pursued his education while working in the evenings, ultimately obtaining an undergraduate degree in computer science, a master’s in computer studies, and an MBA—all while employed. His determination and hard work allowed him to realize his own American Dream.
During his tenure as a Distinguished Engineer at IBM, Ravi collaborated with industry leaders on the strategy, architecture, and development of cutting-edge solutions using state-of-the-art technology. His significant contributions to both the company and the industry are evident, as are his multiple patents that demonstrate his credibility and expertise.
At Tata Consultancy Services, Ravi served as the Innovation Lead in the pharmaceutical industry, where he analyzed emerging technologies and trends to enhance operational efficiency and reduce costs. As the Vice President of Sales and Channel Strategy, he revitalized sales with a focus on the banking and financial sectors, further showcasing his ability to deliver results and create a business impact for customers.
Ravi’s international experience is equally impressive, having worked with clients worldwide and demonstrating a keen understanding of diverse cultural communication. This global exposure has undoubtedly contributed to his proven track record in relationship-building and problem-solving.
Trust Your Supplier’s Unwavering Commitment to Security and Compliance
Under Ravi’s vigilant supervision, Trust Your Supplier has consistently completed the TYPE 2 SOC 1 and TYPE 2 SOC 2 audits without exceptions, reflecting our unwavering commitment to client information security and data privacy. This annual accomplishment serves as evidence of the rigorous standards and initiatives that make TYS a dependable partner to our clients.
Ravi’s expertise in security is further emphasized by his understanding of the intrinsic link between blockchain technology and security. A secure environment and comprehensive training have become ingrained in TYS’s DNA, ensuring the highest level of protection for their clients’ data.
Outside of his professional life, Ravi cherishes time with his family, including his wife of 44 years (!), two children, and various hobbies such as walking, exercising, and playing racquetball. His positive attitude and dedication to his work make every day enjoyable as he collaborates with nearly every department within the company on various projects and activities.
With Ravi continuing to excel in his role, TYS clients can rest assured that their sensitive data is in the hands of a skilled and dedicated professional committed to upholding the highest security and compliance standards.
Data knowing is a significant and intimidating problem that almost all organizations face, yet they need the data culture and cycles to do something about it. Beyond focusing solely on the consequences of bad or missing supplier data, we have convened a panel of industry experts and thought leaders to closely examine the data challenge from the following three critical points: 1. Data consequence 2. Data culture 3. Centralized planning & supplier oversight data framework. – Supplier Data: What You Don’t Know Can (And Will) Hurt You
The above link is to a webinar on which I was a panel member with Tom Redman and Greg Tennyson. From its title, you can see that we were talking about the importance of data.
Of course, data being important is not a new revelation. Nor is it a subject that hasn’t received significant attention in the media. However, despite its ubiquitous presence, many organizations still need help turning their vast amount of raw data into actionable knowledge. The question is, why? Of even greater importance than the why is how do we fix it – how do we convert our data currency into tangible returns?
During this panel, we answer this latter question.
Data “Street Cred”
Tom Redman and Greg Tennyson are recognized industry thought leaders. Tom, who graduated from Florida State University in 1980 with a PhD, Statistics and worked with AT&T Bell until 1995, when he started his company “The Data Doc,” has written extensively, including a compelling article on data for the Harvard Business Review.
Greg has a procurement pedigree going back to the late 1990s with companies like Oracle, SalesForce, and Coupa. As for me, my experience dates as far back as the early 1990s in the positions of software engineering and program management with IBM.
In short, individually and collectively, we have a deep understanding of not only technology but data as well.
Based on the above, you must know that the panel discussion would be uniquely insightful because we weren’t tackling the data question from a conceptual or theoretical basis. What this means is that during the 60 minutes, we didn’t just talk about the challenges with data but what you can do “about” getting the most from your data using my 3-Point Supplier Data Plan.
The 3-Point Supplier Data Plan
“Partner, Mitigate, Comply is at the heart of the 3-Point centralized planning & supplier oversight data framework. Going forward, I will call it the 3-Point Supplier Data Plan.” – Sai Nidamarty
So, what is the 3-Point Supplier Data Plan?
During the panel, Tom, Greg, and I discussed at length the specifics of the 3-Point plan, including how you can introduce it to your organization. By the way, you can use this 3-Point link to access the on-demand recording of the session.
In the meantime, at a high level, here is a quick overview or outline of the supplier data plan:
Point #1 – Partner
Enterprise data drawn from many data sources are generally inconsistent, incomplete, and unreliable for decision-making. Partnering & investing with automated tools to onboard, manage and monitor a single source of truth for the entire supplier base
Enhance authenticity and provenance, creating a data culture with a single source of truth
Collaborating with suppliers for the exchange of information
Establish relationships with comprehensive 3rd party data providers in monitoring supplier risk in real-time; take appropriate actions to mitigate
Point #2 – Mitigate
Data and transactions MUST be transparent with an immutable audit trail
Simple, quick discovery of qualified, trusted suppliers
Nearly touchless supplier onboarding – A faster turnaround of query resolution and proactive alerts enabling better & timely strategy realignment
Monitoring risk is now at least equal to monitoring spend & margins for procurement organizations
Governance of data management throughout the supply chain
Integrate with a range of immutable ledger technologies
Point # 3 – Comply
Maintain control of authenticity throughout the supply chain – enhancing supply chain visibility and risk.
Comply with regulative reporting and compliance regulations (SCDDA, Diversity/human rights laws, insurance)
Meeting internal objectives on compliance (e.g. ESG)
The continued evolution of a globally compliant supplier base
Blockchain uses digital signatures, data encryption, and cryptographic function to protect the integrity of the data.
Once again, I invite you to use the above links to access the on-demand version of the webinar.
I would also suggest that you stay connected with us, as we are planning to do a special live – open mic Q&A session, where we will specifically discuss the 3-Point Supplier Data Plan in much greater detail. Follow us on LinkedIn or Twitter for updates.
“Digital transformation will not happen without women in procurement.” – Kevin Peesker, President Worldwide SMC & Digital at Microsoft
In a captivating August 2019 article in Italy’s The Procurement Magazine, Jon Hansen shared an insightful interview with the then-president of Microsoft Canada, Kevin Peesker. Today, Mr. Peesker holds the title of Microsoft’s President Worldwide SCM & Digital.
In the article, Hansen highlights a powerful statement by the Microsoft leader: without more women in tech – and STEM professions overall, digital transformation will not happen.
Let’s explore the significance of this statement and the role of women in the digital transformation journey.
Compelling Figures: Time for Progress
When a top executive from a global technology giant like Microsoft emphasizes the importance of women for digital transformation success, the world takes notice. But will this attention lead to sustainable and progressive change? It’s time to move beyond mere agreement and take action to bring more women into the technology industry with equal opportunities and pay.
According to Tech Funnel’s April 2023 article, a mere 25% of workers in technology are women, and an even more disappointing 11% occupy executive positions. These statistics are from 2023 – four years after Hansen’s article.
Additionally, gender diversity in tech leadership fell from 86% in 2020 to 59% in 2021. However, a few positive notes also emerged during this time, like the percentage of women working for Apple increasing from 30% in 2014 to 35% in 2021. And overall, the percentage of women in the tech industry grew by 2% between 2019 and 2021.
Despite these small victories, we cannot ignore the following data:
57% of women in tech feel burned out at work, compared to 36% of men.
1 in 5 women in tech is considering leaving their job.
75% of women in tech are consistently asked to handle more administrative tasks.
So, where does this leave us – men and women alike – in the quest for gender equality in high-tech?
Overcoming Digital Transformation Challenges with Women at the Helm
Digital transformation is impossible without more women “in” procurement and leadership positions across various industries. The key to digital success lies in where that “in” resides.
Tech Funnel reports that gender-diverse leadership teams are “48% more likely to outperform their competitors.” Additionally, diverse management teams generally produce better EBITA results, with HBR stating that margins for more diverse companies are higher than those struggling to gain traction.
Focusing on the tech industry and, more specifically, the digital transformation of the procurement industry, a 2019 Deloitte global survey of CPOs revealed dissatisfaction with their digital transformation strategies, and this was just before the pandemic.
In 2023, numerous reports cite poor data quality, lack of transparency, and failure to adopt technology as the top challenges CPOs face today.
While the lack of women in leadership roles in the tech industry – or any industry – may not be the sole or primary reason for companies’ struggles with digital transformation, it is undeniably a critical factor. A 2018 study on “the influence of gender on the adoption of technology among SMEs” is an excellent starting point for understanding our roles and impact on adopting cognitive procurement solutions, including AI.
Let’s keep the conversation going and empower women to shape the future of technology.
Did you know the average number of webinars a company hosts annually averages between 23 and 25? I moderate a good number of webinars, but considering how many companies there are and multiplying that by 23 to 25, the total number is beyond fathomable.
The question is, how do you sift and choose the right webinar out of an abundance of options?
For me, the webinars I get the most from are those in which there is frank, at times thought-provoking discussion between industry thought leaders that provide unique insights you can’t get anywhere else.
Of course, the challenge is that many topics have been covered ad infinitum. When I agreed to moderate a panel discussion regarding missing or dirty data, my main concern was what more could be said that still needs to be said.
Panel Power
It turns out there is a great deal left to say – especially when you have an incredible panel. I know that the panel for this upcoming webinar, “Supplier Data: What you don’t know can and will hurt you,” is one such panel.
I record and transcribe every dry run. For those unfamiliar with a webinar dry run, besides testing the connectivity regarding picture and sound, we engage in an off-the-cuff assessment of the subject we will discuss when we go live. I have done many of these – in fact, I have lost count, but this one was a little different. I am almost tempted to use this recording in place of the live event on May 18th. Just kidding, but you get my point.
However, I will share a small excerpt of the transcript from the session with you because when you read it, I know you will want to sit in when we go live. Below is just a small sampling of what you can expect – not only concepts but tangible insights and answers to enable you to think of data differently.
Do we see it beyond, let’s say, the narrow scope of, well, there’s supplier data, there’s information, but overall understand the repercussions of data?
Tom Redman ·10:32
What were the repercussions here, Jon?
Jon Hansen ·10:34
Well, to start off, let’s put this way. The customers ended up being charged $150,000 on their credit cards, even though they only had a $10,000 limit. Let’s go to the next one. Another customer charged $674,000 for airline tickets, while others are paying free travel vouchers by paying taxes, associate fees, and they were told, oh, by the way, that was a mistake. We cancel all your flights. And then there’s even in terms of this data and the reach of it struggles, in terms of suppliers, in terms of engagement, in terms of filling orders. I mean, with Peloton, that cost them dearly. And they had to revert from going their usual route of shipping product by transport. They had to go to air transport, which increased their cost challenges. There Rotax, Bombardier, and again, this goes and ripples through the supply chain.
Jon Hansen ·11:39
The Russia that bombed Ukraine, and they found out that they had the Rotax and the Bombardier parts in there. So now there’s a big investigation. There’s potential sanctions, but it’s not only that company, the companies there Rotax and bombarding, but it also what will that do in terms of relationships? I mean, this is like, do we think about it in these real.
Sai Nidamarty ·12:11
Impact?
Jon Hansen ·12:11
Do you see what I’m saying?
Tom Redman ·12:13
Not yet. Who has actually been hurt by these?
Jon Hansen ·12:21
Okay, now that’s an interesting question. That’s why I asked these. Who does get hurt by this? I mean, maybe that’s what we have to look at with data. Who gets hurt when data isn’t accurate? To what extent does it impact the marketplace? What happens if, for example, with the Rotax and the Bombardier situation, where now all of a sudden, the whole supply network, including the smaller suppliers that contributed to the building of this product, get sanctioned and fined? What impact will that have on Bombardier’s customers, employees, the business? Do you see what I’m saying? I mean, it’s not just a balance sheet consideration here.
Greg Tennyson ·13:02
I’m following.
Jon Hansen ·13:03
Go ahead.
Tom Redman ·13:04
I’m sorry, Greg.
Greg Tennyson ·13:05
Yeah. No, I’m following, Jon. It’s a reputational risk. It’s the impact to the employee for loss of jobs. It’s the supplier losing revenue because now they have sanctions, they’re disbarred from doing business, etcetera. So the implications are far and wide.
Jon Hansen ·13:21
I think that’s really the whole messaging here. It’s like the Peloton. It wasn’t a question of whether or not they had the data. Reports show that they had the data available. They just didn’t know how to read it. They didn’t know how to recognize what the data was telling them. So even if you have data and everyone does, even if you cleanse that data and the process for doing that, I mean, reading it and being able to anticipate what it means, that seems to be a struggle for a lot of companies. Am I wrong?
Tom Redman ·13:57
I don’t know. Like, still, most of this I find maddeningly abstract. So what happened? Is Peloton as a result. I mean, is Peloton out of business? Right? Have sales tanked by 30%? Have people been fired, by the way? These things happen all the time, right? Yes, there is potential things that can happen. Right. But why are you looking at these not similar ones. Why aren’t you looking at the bad counting in the census, which caused three is it three or six? number of states to be misassigned their right number of representatives, which over ten years they don’t get the money they deserve of the 1.5 trillion that the government disperses annually?
Tom Redman ·14:53
I wrote a report one time in Peer and Sloan Management Review that synthesized this and said a good starting point for the cost of bad data for a company is 20% of revenue. Right. By the way, I mean, I do appreciate the need. For example, Boeing Seven is it the seven three seven max, which the sort of angle of attack sensors failed, crashed a couple of planes, cost 430 some people their lives. Right? Think of $100 million. Delayed all those planes from coming out. Right. Whipsawed through the supply chain. Those are tangible things that have happened.
Sai Nidamarty ·15:49
So you bring good points, Tom. There is a McKenzie study that is published, and I will get the links to that. There is 1% EBITDA big organizations lose because of supplier disruptions that companies don’t even know how to really manage or calculate it. Right? And that is all happening because of a lot of supplier disruptions, not having the proper supplier data, those kinds of things. Right? 1% EBITDA is a big number to really manage their supplier data in a way that they’re actually doing their whole supply chain with a lot of proper insights and coming out with accurate data. Right? Microsoft’s CEO said that data culture is very important for us. Every decision that we make should be based on the right data that we are having, and that way we can make the right decision.
Jon Hansen ·17:23
You hit it on the head and Greg, you put in the comment about Boeing 737 was a $2.5 billion impact. And Tom, when you mentioned about Peloton yeah, the CEO got fired. They lost a huge amount of money, market share. April Harrison indicated in the chat that they had a major recall of parts. What’s interesting about this, and this is what I wanted to bring out in these discussions is to turn it from a conceptual one to drilling down. What exactly are the impact in real world circumstances? What are the impact in terms of, again, $2.5 billion impact, greg, that’s significant. That’s money, but that’s lives and all other kinds of factors in there, let alone the damage to their brand.
Greg Tennyson ·18:03
Right, right. Completely agree.
Sai Nidamarty ·18:07
Yeah. And Tom, to your point, right. How is that impacting? Are people getting fired or are companies losing money? People may not be getting fired, but companies are losing money. It is affecting their revenue, it is affecting their profit margins, but no one is able to really articulate it in a proper way. Right? Because look at it right now, we are working with a client. They are a very large client, and they have almost 100 plus ERP systems. When each ERP, a lot of things are coming from acquisitions and they don’t all have proper data management. Data culture. Right? They’re creating a lot of data inaccuracies, a lot of mismatches, and that is actually driving their inefficiencies, driving a lot of costs and all that.
They understand it, but they don’t know how to fix it because all these organizations are creating their processes and change management so complex that they’re creating the problem. It is impossible without clean data. That’s precisely what I’m trying to allude to. Right? That change management makes it so difficult because it is all done by people and the processes are becoming so complex that this is becoming a very big problem.
Jon Hansen ·19:56
And what’s interesting, and you see this is the whole thing of what I want to do with this first step, and this is very much what it’s going to be like, the discussion. I’m not looking for consensus or Q and A answers. I’m looking at this from the standpoint of this kind of roundtable type of discussion where, Tom, you sit there and say, yeah, but what does that mean? What about this? Because I think there’s not enough clarity here. And when it comes down to the data culture statute, we got to create a data culture that everyone can make better decisions. Well, what’s a data culture? And I mean, even in a Harvard Business Review article, they’re talking about, yes, it’s a cornerstone creating a solid data practice foundation.
by Nick Picone, Trust Your Supplier VP of Advisory Practice
“Regulatory fines and penalties for non-compliance are steep. In 2018, non-compliant firms were subject to $3.945 billion in penalties and another $794 million in judgments related to SEC investigations and complaints, while FINRA imposed $61 million in fines.” – What’s the True Overall Cost of Non-Compliance?, complysci (2019)
As illustrated by the above excerpt from a 2019 article, compliance challenges were an issue even before the pandemic hit. But when you learn that there were $3.945 billion in penalties – which is a significant number, in my opinion, what does it really represent? Is it a call to action or such an incomprehensibly large figure that makes you think, “wow,” and move on to pressing “right in front of you” demands?
Let’s face it, with the pandemic, war in Ukraine, persistent inflation, and a myriad of other “challenges” that we are facing, if it doesn’t affect you directly, $3.945 billion is someone else’s problem.
Even when you break down the numbers and demonstrate how non-compliance costs firms “nearly three times the cost of being compliant,” it does little to create a sense of urgency beyond passing awareness. By the way, the actual dollar figure for non-compliance in fiscal 2017 was $14.82 million. Conversely, the estimated cost to ensure your organization was compliant with existing regulations at that time was $5.47 million.
The Lens of Inertia
Like high blood pressure, inflation, and the fact that Netflix seems to cancel great series for no apparent reason, we all know compliance is “important,” but we can’t do anything about it, can we? There are so many other, more granular things to worry about from a collective and personal standpoint.
For example, at one of the many conferences I have attended over the past two months, it was alarming to see firsthand how many people had name badges that said “former” or “looking for work.
“My point in all this is that we have to, first of all, recognize the realities of the general mindset in our industry. How can you expect a procurement team to worry about carbon footprint and conflict minerals when there is so much economic uncertainty? Even in good times, there is a long history of “risk recognition and inaction.” A McKinsey 2006 survey provides compelling evidence of how risk avoidance was more a state of mind than an actual event.
While not as acute, the challenges we faced in 2006 are no different from those we face today regarding compliance. The question is this: why will our response be different this time?
One reason I think it will be different this time is that the cost of non-compliance increased by 2,650% from 2017-2019, which is the definition of exponential growth.
Ideal Conditions For A Speed Trap
“A hidden scaffolding of financial incentives underpins the policing of motorists in the United States, encouraging some communities to essentially repurpose armed officers as revenue agents searching for infractions largely unrelated to public safety.” – New York Times (2021)
According to one report, the average police officer writes 100 to 150 tickets each month. While that number can vary from city to city, town to town, it is safe to say that when it comes to moving violations such as speeding tickets, there is a noticeable police presence, e.g., speed traps at the end of the month. Yes, this is an anecdotal observation, more than a scientific conclusion. But does that make it any less accurate?
Here is the reality. During tough economic times, government deficits increase. There are primarily two ways to plug deficits. The first is to cut spending and the direct and indirect taxation of people and businesses. This approach rarely happens.
When you look at the size of fiscal deficits and all the fines that businesses across the globe will eventually face, you can see how governments understand that they have a unique speed trap set from an enforcement perspective, as companies have no good way to effectively and efficiently manage their large and extended supply networks from a compliance perspective.
To be clear, this is not an anti-government rant. It is a reality.
If you disagree with me, google the term “sin tax.”
According to one of many definitions, “sin taxes are usually placed on the sale of cigarettes, liquor, tobacco and other goods that are considered dangerous to individuals or society.”
There is a clear parallel here when you think about conflict minerals, global warming, modern slavery, data privacy, etc.; these are also societal issues that negatively affect us all.
Stay tuned for Part 2: How To Avoid The Non-Compliance Speed Trap (What’s The Opposite of Cynical?)
by Sai Nidamarty, Trust Your Supplier Co-Founder & CEO
Let’s get the cursory narrative regarding the cost of missing data out of the way first.
We have all heard Peter Drucker’s business maxim, “If you can’t measure it, you can’t manage it,”. It is a timeless guidepost of how we run our businesses. By the way, Peter never actually said that, but that is a story for another day.
Then we can turn to the various articles and studies over the past few years reporting that bad or poor-quality data costs the U.S. economy $31 trillion annually. That’s a big number, and so is the finding that 90% of the world’s data was created in the last two years.
The above are all facts and verifiable. But what do they really mean? What does missing or inaccurate data really cost on a practical, everyday level?
There are better venues for a deep analysis than the limitations of an article or blog post. My focus today is to start a dialogue enabling you to transition data strategy from a broad horizon concept to an actionable on-the-ground understanding. In other words, you already know that data is important and that there are consequences for missing or inaccurate data. What’s needed now is to answer the question, what will you do about it?
Data Challenges
In an upcoming webinar, we will convene a panel of industry experts and thought leaders to closely examine data challenges from the following three critical points:
Data consequence
Data culture
3-Point centralized planning & supplier oversight data framework
When we talk about “data consequence,” we are not talking about broad-stroke generalizations but a fundamental and accessible understanding of impact.
For example, a news article reported that due to a data glitch, Hawaiian Airlines charged dozens of customers “hundreds of thousands of dollars in credit card fees.”
One customer reported being “mistakenly charged more than $150,000,” even though they have a “$10,000 limit on their Hawaiian Miles credit card.”
While another customer was charged $674,000 for airline tickets, others obtained free travel vouchers by paying taxes and associated fees. You can imagine the frustration when the airline canceled their flights.
Beyond a financial mess, the airline’s reputation also took a significant hit. How do you measure that in dollars?
Unfortunately, examples like the one above are not rare or isolated incidences limited to the travel industry. Nor do most cases present themselves in such a prominent and noticeable way. Data quality erosion is an even bigger problem because you may only recognize it once its impact is evident on a larger, less manageable scale.
Creating The Right Culture
Given the volatility of supply networks in the post-pandemic world, it isn’t surprising to hear the C-Suite talk about supply chain visibility, resilience, and risk management.
A recent post by Nick Picone regarding a contentious issue about inflationary price increases between a large, national grocery chain and Frito-Lay underscores the importance of data visibility and transparency.
But how do you get to the point of leveraging tools and technology to move from data darkness to data insight and understanding?
A May 2021 article in Procurement Insights highlighted the importance of creating a data culture starting at the C-Suite level. According to the author, CEOs must “recognize the importance of data beyond a conceptual perspective and see it in a practical bottom-line context.” Citing everything from “customer satisfaction and regulatory compliance” to employee empowerment, they make a strong case for “becoming a data-driven organization.”
The 3-Point Supplier Data Plan
Partner, Mitigate, Comply is at the heart of the 3-Point centralized planning & supplier oversight data framework. Going forward, I will call it the 3-Point supplier data plan.
The 3-Point supplier data plan focuses on providing tools and data for organizations to efficiently partner with trusted suppliers, mitigate risk, and ensure ongoing compliance.
In addition to data consequence and culture, during the upcoming webinar, the panel will get into the specifics of the above 3-Point plan highlighting how you can introduce it to your organization. Register to save your seat.
Recently, I was on a panel at Wake Forest University, School of Law, NC on this subject, and it triggered my interest in digging deeper into this space. Chainyard has been involved in ESG via its SaaS platform, Trust Your Supplier, since 2020. I occasionally participate in the Hyperledger SIG on Climate Change where many different topics are discussed. The goal of this article is to share my thoughts as I continue to expand upon that knowledge in the coming months.
What is ESG?
ESG expands to Environment, Social, and Governance. There have been many subsets of it in the past, but the current incarnation is a result of concerns about the climate, environment, and social justice. ESG is complemented by DEI which looks at diversity, equity, and inclusion in society and at the workplace.
Businesses have an impact on our Earth. It includes human and machine activity, and the use of natural resources including water, fossil fuels, raw materials, and minerals. These can result in greenhouse gas emissions like CO2, pollution of the air we breathe or water we drink, deplete natural resources, generating vast amounts of waste, etc. The ESG framework measures the degree to which a corporation adheres to sustainable and environmentally responsible practices.
Organizations have relationships with customers, partners, people, and communities. ESG measures the social impact on people both internal to the company and customers and supply chain partners. Many questions arise such as how workers are treated, do they get living wages and good healthcare, are the labor practices acceptable, are the communities they serve benefitting, etc.
Governance refers to a corporation’s management practices related to ethics, regulatory and legal compliance, and transparency in reporting. Companies have to establish policies, procedures, guidelines, and measurement frameworks to achieve these goals. “DEI” or diversity at the workplace, equity in opportunities and wages, and inclusion are all part of governance activities.
According to Moody’s, a 2022 survey of their customers found among other insights,
“Customers also indicated that rising customer expectations, environmental, social, and governance (ESG), and future of work, are the trends expected to affect their business the most”
Saving the Planet
Fixing the damages caused to the environment by human activity requires a multi-pronged approach. Though it is generally accepted that the main contributor to the climate crisis is CO2 emissions, the environment has been seriously injured by many factors; key among them being the disposal of plastics, which is now the major cause of ocean pollution and the extinction of many species.
To address the crisis, there are several projects put in motion by NGOs, governments, and global institutions. Some of them are voluntary and others are imposed by regulation. These projects fall under several categories such as:
Emission Reduction
Carbon Farming and Sequestering
Migration to electrical energy
Transition from Fossil Fuels to Renewable sources
Carbon Offsets and Credits to compensate for emissions
Carbon Insetting through corporate self-improvement initiatives
Plastics Management
Plastic Waste collection, sorting, recycling, and disposal
Discontinue single-use plastic items.
Measuring the impact of micro-plastic pollution
Land and Water Management
Forest management (re-forestation, conservation, and afforestation)
Restoration and protection of coastal wetlands and marine life
Carbon-Friendly Agriculture
Waste Management
Efficient and effective collection, sorting, and recycling of industrial and household waste.
Reprocessing electronic waste to extract valuable metals and reduce the discharge of toxic chemicals into the environment.
Excess inventory sharing by enterprises with others.
Manufacturing products using sustainable processes and raw materials.
We are all familiar with how our government is pushing for a rapid transition to Electric Vehicles (EVs) and renewable energy from wind and solar power.
Carbon Offsetting, Credits, and Insetting
We need to understand what strategies corporations are using to achieve net-zero goals. Corporations make commitments to the industry or the government about becoming carbon neutral or reducing their emissions. In order to meet those targets, they invest in projects that address in part or full those commitments. These projects can be internally triggered, or the corporation can fund third-party projects.
A generic approach followed in the industry
It is generally agreed that 1 offset or credit is equal to 1 metric ton of carbon dioxide emission (CO2e). A typical tree planted in a reforestation program takes about 40 years to sequester 1 metric ton of carbon. The same amount is roughly emitted by an automobile in about 3 to 12 weeks.
Carbon Offsetting
Carbon offsetting is a mechanism by which a company that has been emitting CO2 and is not yet ready to fix its process, technology, and operations, funds offsetting projects in the voluntary carbon market (VCM). For example, ACME Corp. which has been emitting 100 metric tons of CO2 could invest in the MOSS Project which supports the preservation of the Amazon rain forests to offset its emissions. For a novice, offsetting works as shown.
Carbon Offsetting – High-Level Flow
Some typical projects include:
Forest conservation
Wind farms, hydropower projects, solar power plants
Other renewable energy projects such as fusion
Landfill gas capture and management
Providing energy-efficient appliances to local communities such as the recent push in NY To ban gas stoves.
Farm power, methane capture, and biogas production, something very common in Asia and Africa
Waste management
Carbon Credits
These are regulated credits also referred to as Cap-n-Trade. The Government or the Regulatory Body sets caps on carbon emissions which translate into “Emission Allowances”. These allowances are available for purchase as “Carbon Credits. Business entitiespurchase “Carbon Credits based on assigned emission allowances. These allowances are gradually reduced over time to realize tangible emission reductions.
Carbon Credits Model
Carbon Insetting
Insetting refers to a Business Entity reducing its own emissions through the adoption of new technology, optimizing supply-chain processes and practices, and improving efficiency. Insetting is more important as it enables a company to take ownership and responsibility for its emissions.
Insetting
Actions a company may take include deriving more of its energy from renewable sources, management of resources such as water and raw materials, and enforcing ESG across their upstream and downstream partners.
Key issues in the Measurement and Reporting of ESG initiatives
Currently, there are many projects by various organizations in the voluntary carbon market. There is no consistent way to verify if these projects are genuine and truly deliver the benefits they promise. Some of the issues are:
Consistency in the application of policies and regulations
No single or integrated verifiable and trusted project registry
Too much focus on CO2 emissions though the environment is harmed by various other activities.
Potential Double Spend problem (accounting of credits and offsets)
Traceability of Offsets & Credits throughout their lifecycle from issuance to retirement
Transparency of project status and benefits
Consistent and verifiable (regulatory) reporting
Why Blockchain?
Blockchains have a bad reputation for being energy-intensive, and thus not climate or carbon friendly. Well, that comes from Bitcoin mining and other public blockchains that supported the proof-of-work (PoW) consensus protocol. PoW is very CPU intensive and consumes a lot of energy to solve a mathematical challenge essential for block verification and earning crypto. However, most other blockchains support better protocols such as proof-of-stake, BFT, or proof-of-authority which are much more energy friendly.
A blockchain is a valuable tool that can help address many issues. It extends enterprise solutions and can work cohesively with IOT and AI/ML technologies.
An immutable record of data enables “track and trace” of projects, the provenance of lifecycle events, and transparency. All this depends on stakeholders including applications and things recording data into the ledgers.
Smart Contracts can help with governance, enforcing policies and business rules, and managing tokens issued as offsets, credits, and incentives.
Decentralized Identity is a relatively new concept and can be applied to projects, people, organizations, and things. Every project can be assigned a DID and tagged with verifiable credentials by bodies such as Carbon Action Reserve, Verra, and the like. DIDs are cryptographically verifiable, universally resolvable, and enable Proof-of-Existence and Proof-of-Verification
Consensus protocols such as Proof-of-Stake allow validators to verify transactions and maintain consistency and integrity of the ledger
Privacy and Anonymity are very important for organizations. Using encryption and secrets, organizations can be transparent about their commitments and actions, yet implement privacy and confidentiality to avoid exposing their business secrets and intellectual property.
Three use case patterns where blockchain can augment ESG initiatives are:
Provenance, and Track & Trace of ESG Projects
Facilitating the trading and trustable record-keeping of Carbon offsets and credits (tokens)
Supporting risk, audit, and compliance reporting
These patterns cut across many domains such as supply chain, health care, real estate, and energy,
Organizations and Bodies involved with Sustainability Initiatives
It was enlightening to see the number of organizations and companies involved with climate initiatives and ESG.
Some of the notable ones are:
Verra is one of the most recognized and trusted providers of standards and guidelines for sustainable development. The Verra registry is a repository of certified and verified projects.
Climate Action Reserve is approved to serve as an Offset Project Registry (OPR) for the Compliance Offset Program under California’s Cap-and-Trade Program. They also maintain project registries and support various carbon offset programs.
GHG Protocol According to their website they provide standards, guidance, tools, and training for businesses and governments to measure and manage climate-warming emissions. One can download worksheets and tools to measure and record carbon emissions footprint.
The Gold Standard is another reputed and recognized organization that provides standards, verifies and certifies carbon projects, and maintains project registries.
Other organizations include
American Carbon Registry
CSA Group Registries
Climate, Community & Biodiversity (CCB) Standards: Certification to the Climate, Community & Biodiversity (CCB) Standards demonstrates that a project simultaneously addresses climate change, supports local communities and smallholders, and conserves biodiversity
Task Force on Climate-related Financial Disclosures (TCFD) – Increased reporting of climate-related financial information.
Verra – SD-VISta The Sustainable Development Verified Impact Standard (SD VISta) – Premier standard for certifying the real-world benefits of social and environmental projects, from gender equity and economic development to affordable clean energy and restoration of wildlife.
The United Nations’ Sustainable Development Goal 7 (SDG 7) focuses on reliable and clean energy modern energy services, as defined in its Target 7.1
Paris Accord on Scope 1/2/3 reporting
United States – Environmental Protection Agency
European Commission (2020) Circular Economy Action Plan
Open Earth Foundation
Hyperledger Foundation – Climate SIG
Many projects support ESG such as the MOSS Project, Toucan, Plastic Bank, Save The Planet, Klim DAO, and Greenly. The notable ones that need mentioning are:
Trust Your Supplier – Chainyard is a SaaS blockchain network focused on supplier risk and qualification. Workflows help customers capture supplier ESG initiatives and actions and get them verified through third-party verifiers who provide ESG rating scores.
TYS Captured ESG Information
TYS has standardized the information capture to gather ESG information that can be used by organizations to support Scope 1 & 2 reporting today, and a goal of Scope 3 in the future.
Title Chain – Borsetta is an evolving network that enables asset track and tracing of energy micro-grids, helps secure their title, and tokenizes the grid and energy production among other functions. Though it is not directly related to ESG, it mainly targets microgrids that support renewable energy ecosystems, including the energy they produce and the excess quantity sold to the national grid. Microgrids serve campuses and are seen as the future of community-driven energy production.
Digital Credentials for Carbon Accounting is an initiative by the British Columbia government in Canada. The initiative known as “Traction” set up under the Energy & Mines Digital Trust supports the BC Government’s requirement for certified annual sustainability reporting. The solution is built on a blockchain platform based on Hyperledger Aries and Indy and leverages the Decentralized Identity (DID) standards protocol. The mining companies collect data for sustainability reporting, which is verified by organizations such as PWC resulting in the issuance of a Verifiable Credential that can be shared with the government.
ESG and Blockchain (A conceptual architecture)
Earlier in this article, we discussed how a blockchain complements ESG solutions. Can blockchain add value beyond Carbon Offsets and Credits? Yes, there are many reasons.
The Blockchain can serve as an ESG BUS providing access to various services such as project verification and tokenization
Many institutions maintain verifiable registries of carbon projects, some enabled by blockchains, and others provide APIs. A decentralized identifier can be assigned to every project. Decentralized identifiers are a W3C-enabled standard and specification to define the structure, attributes, and architecture of DID and its constituents. DIDs are universally resolvable to “DID DOCS” which are JSON documents present authentication schemes, digital signatures, and service endpoints to access various aspects and details about the project.
The blockchain can record hashes (aka digital fingerprints) of data received from IoT sensors that track emissions or watch human activity, thus providing immutable tamper-evident proofs for later audit.
Carbon offsets and credits are offered by various organizations. A unified solution can act as an interface for enterprise blockchain to have access to those marketplaces and exchanges.
Enterprises having insetting programs can record the lifecycle of their projects against commitments, thus offering transparency into their programs. Solutions such as TYS capture and/or process such information in their risk assessment workflows. Blockchain “Oracles” assist in making those connections and ensuring the reliability of the source and the received data.
AI ML algorithms and third-party rating providers can calculate ESG scores. which can be recorded with proofs and signatures. Today many companies such as Bloomberg, Ecovadis, CDP, Moody’s, D&B, S&P Global, and other analytics firms provide the service and can secure their ratings on a trusted decentralized ledger.
Lastly, both enterprise and public blockchains have a role to play.
Summary
Governments across the world and global conferences such as the World Economic Forum-Davos, United Nations Climate Conferences held in Kyoto and Paris, and UN Climate Action i.e. COP27 are focused on actions to address climate change. The “E” in ESG is not just limited to carbon emissions but includes plastic waste and other human and industrial waste, non-carbon pollutants. and management of our forests, coastal and marine life. While Carbon offsets have been used as a tool by individuals and industries, it does not make them responsible for their actions. The impact of offset projects has been difficult to measure and report. Insetting as a goal puts more responsibility and accountability on corporations to improve their process and technology. Blockchains can help bring more trust, transparency, accountability, and compliance to ESG management. Also, it is unclear, how much of the geo-political events and industrial disasters are taken into account such as the war in Ukraine, the Norfolk Southern toxic spill in Ohio, or the dairy explosion that occurred in Texas.
About Chainyard
Chainyard is a boutique blockchain consulting and advisory firm based in Morrisville, NC. As the first Hyperledger Certified Service Provider, it has executed over 50+ projects. Chainyard’s Trust Your Supplier enables supplier risk assessment and qualification including ESG-related risks. To learn more, please send me an email or visit our website.
Managing one global business in an ever-changing world is tough enough but managing three?! Now, that requires nearly superhuman leadership skills.
Meet Sri Mudunuri, the co-founder of IT People Corporation, Chainyard, & Trust Your Supplier, who has been making a name for herself in the technology, staffing, and services industries. With 23 years of experience in the staffing and services industry and her desire to provide an end-to-end solution for her customers, Sri was moved to co-found Trust Your Supplier. Her motivation to become a leader stemmed from two female trailblazers, Indira Gandhi and Jayalalithaa, who played a significant role in shaping the future state of India. From a business perspective, Indra Nooyi, PepsiCo’s former CEO, and chairperson is Sri’s inspiration.
Apart from being a co-founder, Sri also plays multiple roles in the organizations she leads. As a CFO, she manages financial activities and ensures the balance sheet lines up. As a President, she is responsible for board meetings, compliance with state and federal laws, and managing certificationsfrom organizations such as WBENC and NMSDC. In addition to all this, she also manages the staffing side of the business, Workforce Solutions, and keeps the recruitment team on their toes.
The most significant obstacle Sri has faced in her career is proving herself to get the respect she (and all women) deserve. She noted that women must do more to get the same respect as men with the same title. But Sri’s persistence, ability to not take things personally, and work with trusted partners have helped her succeed.
Sri’s advice to women who aspire to become leaders is simple: follow your dreams, be decisive, and don’t be afraid to make tough decisions. Sometimes conversations and decisions are tough, but we’re tougher.
Let’s continue celebrating women’s history month by empowering and inspiring women to be anything and everything they want.
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