Pressure to improve transparency across supply chains presents businesses not only with considerable challenges, but opportunities as well. By deploying the right data and emerging technological solutions, firms can gain broader and deeper information capable of supporting better business decisions.
They can also facilitate the capture and collation of relevant data for reporting purposes. This includes meeting stakeholders' growing expectations in complex areas such as environmental, social and governance (ESG) matters.
From environmental impacts to human rights, how effectively are you using technology to gather timely, relevant and high-quality information?
Collecting data for sustainability reports
International Swiss firms face a multitude of reporting requirements in different jurisdictions around the world. These requirements can vary widely depending on the firm's industry and geographical footprint.
Anyone who has tried to routinely capture relevant data for regulatory and their own sustainability reports will know that it is no easy task. Companies' ERP frameworks are generally not designed to collate data on an end-to-end value chain. It is especially difficult given the sheer breadth of aspects involved, from resource consumption to emissions reporting, workforce diversity to legal angles, up to and including marketing and branding-related perspectives. Though some data can be found inhouse and some at Tier 1-n suppliers, a significant amount is spread out over a large number of third parties and is non-proprietary in nature.
International Swiss firms face a multitude of reporting requirements in different jurisdictions around the world. These requirements can vary widely depending on the firm's industry and geographical footprint.
They are subject to global initiatives such as the Task Force on Climate-related Financial Disclosures (TCFD), regional initiatives such as the EU Taxonomy, and national initiatives such as Switzerland’s mandatory climate reporting for large companies, among many others. There is also mounting pressure from investors and consumers for greater transparency in general, with demands that vary by market.
As a result, many businesses are beginning to look at how they might be able to integrate specialized ESG and sustainability reporting technology into their systems landscapes. The good news is that technology providers are investing in this area, with some niche providers already offering solutions.
Mapping the impacts of a value chain
Put simply, the challenge is to collect the right data in the right places and present it in the right format. This requires a transparent view of a business's value chain and its impacts.
Take the cocoa industry as an example: we worked with a Swiss chocolate producer interested in gaining a detailed understanding of how its value chain impacts communities and human rights, workforce diversity and deforestation, as well as in quantifying the CO2 impact per ton of chocolate sold. Our approach brought transparency about the product's journey, from cocoa tree to the moment when a consumer indulges in a piece of chocolate.
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To make a complex scenario more digestible, we placed a clear focus on four essential questions:
- Which stakeholders are involved in the value chain?
- What are their roles in the value chain?
- What process drives the value chain?
- How do the value chain partners interact with each other?
Contemporary value and supply chains can easily include dozens – sometimes hundreds – of participants, spread over many countries and continents. That makes putting technology to meaningful use absolutely indispensable.
In the chocolate producer's case, some special challenges included adding hundreds of farmers in remote areas of developing countries to a digitalized value chain, tracking bags of cacao on their journey from their places of origin around the globe all the way to the production sites, and linking these to their respective environmental and social aspects. There was no off-the-shelf technology available capable of coping with the full range of information needed for effective mapping.
Making sense of available solutions
We have seen a growing availability of appropriate technologies sprout up to meet the rapid increase in demand we mentioned. Offerings range from cloud services and standardized point-solutions with limited functionality, to more complex machine learning algorithms, natural language processing to understand unstructured sources, all the way to Internet of Things and advanced blockchain solutions.
Which technology is right for a particular business depends on that business’s precise requirements, of course. This is another area where external specialists can be critical to successfully integrating value chain traceability solutions that generate enhanced operational excellence, reduced risks and compliance exposure, and a greater ability to communicate the story to consumers and markets.
One useful approach can be to produce a virtual version of your value chain, also referred to as a "digital twin". This digital twin covers the various steps, from raw materials through to the items being shipped to customers, and can help establish transparency across the entire chain. The virtual model can be used for scenario analyses and inputting real-life data in order to gauge which disruptions could occur and how they might impact the end-to-end supply chain.
In essence, it unleashes the full potential of data and emerging technology to generate insights into your value chain and, in doing so, enables you to improve your resilience, transparency and ability to master the next storm.
The following questions can be helpful when looking at technology options, assessing the current and potential reach of your existing systems, and determining what information is needed from partners along the value chain:
- Given that a lot of required data is typically non-proprietary – such as corruption indices, poverty indices and country information – how will you include them in your ESG reporting?
- As much of the required data is typically hosted in silo solutions as well as offline and unstructured sources within an organization, how will you access, validate and aggregate that data?
- In a budget-constrained world, what costs and resources are needed to achieve your goal, including process engineering, systems, maintenance and development?
Eight steps for more ESG transparency across your value chain
To navigate the common questions and your own organization's circumstances and needs, we suggest a flexible approach that should involve the following steps:
Step 1: Frameworks
Establish a clear understanding of the reporting frameworks to which the business is subject
Step 2: Blueprint
Set up a reporting blueprint (which information, how to gather and aggregate data, etc.) along the baseline of People – Systems – Processes
Step 3: Assessment
Conduct an as-is / maturity assessment
Step 4: Gap Analysis
Perform a gap analysis (blueprint versus as-is status)
Step 5: Planning
Design a transformation plan to meet reporting requirements and determine who will be responsible for sponsoring and delivering it
Step 6: Requirements
Translate the reporting requirements (functional / non-functional) into a catalog of requirements for a potential technology solution
Step 7: Selection
Identify, select and contract a technology solution
Step 8: Transformation
Initiate and perform the transformation with an integration partner
In conclusion
The landscape of regulatory and other stakeholder expectations continues to become more complex and the pressure on businesses in Switzerland continues to mount. Early involvement of all stakeholders along your value chain is a mission-critical success factor – this might include validating and considering more co-operative approaches. Dealing to a significant degree, the right approach for effectively satisfying a firm's data needs lies in technological solutions.
Harnessing the right technology and deploying it on the right systems can facilitate the journey to greater transparency. That includes collecting and disseminating data in a way that is easier for the business, more useful for investors and more comprehensible to stakeholders in general. Done correctly, it can also future-proof your approach and KPIs for ESG-related reporting, thereby helping you understand and prepare for both current and evolving requirements.
