© Paradee Paradee | Dreamstime
Digitizing Supply Chain Esg

Keep Good ESG Data by Digitizing the Supply Chain

Aug. 23, 2023
This shift in focus—away from squeezing suppliers and towards collaborating with them—will bode well for brands that want to perform in ESG efforts.

What’s clear from Deloitte’s Global Chief Procurement Officer Survey 2023 is that environmental and social governance (ESG) is now firmly on the corporate agenda. This year, it leapt right up the CPO priority list, from seventh place to second.

Elevating ESG, however, is tough to deliver. In practice, it is hugely dependent upon good supplier data, which is notoriously hard to achieve and maintain. Exploring why turns the spotlight to its source: suppliers. So, are suppliers themselves the reason we struggle with data?

The answer is yes, but only reactively. Where we really should turn the spotlight is towards the experience suppliers receive as they serve big manufacturing brands.

Letting Data Live across Teams Will Harm It

The way in which big brands work with suppliers creates too many entry points for their data. Each digital tool which employees use to engage suppliers is an opening. And by default, suppliers deposit their data in whichever tool they’re expected to use.

For example, when working with a major brand, suppliers are expected to use different tools for placing orders, sending compliance surveys, assessing performance, and doing many other tasks. Furthermore, most employees across the business work with suppliers in some way. Each time the parties work together in one of these tools, it stores the supplier’s data. Then, when we step back and look at all the data across the brand, as a whole, it is very compromised.

When the master dataset is created this way, it gets peppered with duplicated, incomplete and outdated entries. Regrettably in this format, it misguides decisions—including those which shape ESG activity.

The Best Team to Own Supplier Data Is Overrun

Brands can reverse these weaknesses by addressing the data problem. But someone needs to do it. Despite so many teams contributing to and using supplier data, there is no one perfect owner for the job.

There is a function, however, which is closest: procurement. As they already run the relationship with suppliers, chief procurement officers (CPOs) can probe adjacent issues, such as data.

A consideration, though, is that procurement teams already have mandates, which they are stretched to deliver. Eating into the function’s bandwidth is the necessity to tackle inflation, demand surges, driver shortages, and other issues. Also waiting for the function’s attention is digital transformation, an area in which it seriously lags.

Put Data at the Heart of Current Strategies

Looking at Deloitte’s latest survey results, there is an opportunity for CPOs to work smart. There is a clear path for procurement to fit the brand’s data goal at the heart of its top two strategies: “increasing supplier collaboration” and “investing in digital transformation.” Supporting this approach is in the interest—and arguably the responsibility—of all C-suite executives.

How then can fellow supply chain managers get involved? First, we can help procurement’s collaboration strategy by reforming how every employee sees suppliers. Too often, suppliers are just a means to save costs. And while saving costs is important, it’s not everything. Untypically, cost savings slipped off the podium in this year’s survey, into fourth place. This shift in focus—away from squeezing suppliers and towards collaborating with them—will bode well for brands that want to perform in ESG, but only if everyone in the organization can adopt the mindset.

If they do, brands can offer suppliers a better experience, which will encourage them to contribute to improving data. It is human nature to want to give back. Further, we learned in a recent HICX survey that suppliers are 20% more likely to “go the extra mile” for brands they rate as customers of choice. Therefore, it’s likely that suppliers will want to participate.

But a willingness to hike data quality is not enough. In addition to company mindsets, brands must tackle a second obstacle: digital processes.

Redefine What It Means to Digitize

Next, we can help procurement to revamp the tools through which everyone engages suppliers. We know that too many entry points pull down data quality. The opportunity, then, is to guide the way in which procurement digitizes so that the brand and function can gain control. Thinking about processes in this way is real digital transformation.

Today’s situation makes maintaining reliable data very hard. Any attempt to cleanse data is undermined by the inflow of new data from multiple sources. It’s like trying to clean the ocean. The rate at which new pollution enters the ocean outstrips most efforts to remove it. And in both cases, it makes sense to control the inflow.

In a digital environment, this means fitting a solid data foundation. In practice, this is a central repository with one monitored front door through which all new data must enter. Master data can be sent to other tools. The rule, however, is that they can only borrow the data, and never alter it. Good data lives in this foundational repository, where it is looked after.

A word of caution though: Be aware of quick fixes. A deeper look at the “multiple entry points” situation reveals a deeper integration challenge. Established tools, such as source-to-pay suites through which procurement and finance work with suppliers, don’t always mix well with newer tools on the market.

One remedy is to use established suites fitted with newer features. But this fails to address the data quality goal. It reminds me of the famous quote by Henry Ford: If I had asked people what they wanted, they would have said faster horses. Using old suites fitted with new features is like using a faster horse. It’s a stopgap. Rather, let’s stop good data’s tendency to evade ESG leaders when they need it most, by tackling the underlying problems once and for all.

Building for the Future

Truly digitizing, of course, gives suppliers a better experience too, which drives the collaboration goal—and sets in motion a virtuous cycle.

Now, suppliers who once fed the ESG data problem can contribute to its solution. Leaders who help their CPOs to collaborate with suppliers and digitally transform, for the enterprise, can steer supplier behavior and keep good data. And this, as we know, is the fuel to ESG success.

Costas Xyloyiannis is co-founder and CEO of HICX, a provider of supplier experience management solutions. He founded HICX in 2012 to address the challenges of bad supplier data in the enterprise. He holds a Master’s degree in computer science from Imperial College London and has 20 years’ experience in helping some of the world’s largest companies to take control of their supplier data and deliver a superior supplier experience.

Latest from Global Supply Chain

25560070 © Yuliia Brykova | Dreamstime.com
#137750581@Enanuchit|Dreamstime
Supply Chain Stability Improving
#64128824@Igor Groshev|Dreamstime
Preparing for Longer Conflict in the Red Sea: