Ardent Partners analyst and editor, Matthew York, recently sat down with Pierre-Francois Thaler, a procurement industry veteran with nearly 20 years of experience in the B2B and sustainable sourcing industry. Pierre-Francois is also the co-CEO of EcoVadis, a provider of collaborative supplier sustainability and rating solutions that procurement organizations can leverage to drive ethical, sustainable sourcing practices and support corporate social responsibility (CSR) programs. Founded in 2007, EcoVadis’s solutions analyze 150 procurement categories and 21 CSR indicators within 110 countries; and its solutions are used by more than 30,000 companies. EcoVadis is headquartered in Paris but has many office locations across the globe.
In speaking with Pierre-Francois, the topic was what new challenges, risks, and innovation that procurement teams will experience in 2018. And on that note, we also wanted to know how EcoVadis has been preparing to support CSR programs and sustainability initiatives worldwide. A couple of things immediately came to mind.
The Need to Scale, and to Innovate
A chief concern of EcoVadis customers, one that Pierre-Francois hears regularly, is their inability to scale risk management processes to cover more Tier-1 and Tier-2 suppliers. New regulations are emerging worldwide that mandate enterprises to gain more visibility into their extended supply chains, like the UK Modern Slavery Act. There is also more pressure for companies to take a more systematic approach to CSR and sustainability; and it creates challenges for companies that need to scale quickly to do that. Another challenge is for companies that are already industry leaders in CSR and sustainability to look closer at the positive side of sustainability; and how they can achieve greater performance and make a deeper impact with new materials and markets.
Leading the Way through Uncertain Times
There is a lot of disruption and uncertainty in today’s international political climate, particularly on this side of the Atlantic. Over the past 15 months, the Trump Administration has bluntly stated its intention to curtail domestic environmental and financial regulations and withdraw from international agreements on climate change and free trade. Meanwhile, other countries and governing bodies have been filling the leadership vacuum left by the U.S. on these and other CSR matters.
In Europe, Pierre-Francois see more ingenuity in companies of all maturities that use procurement to drive sustainability into their supply chains. But in the U.S., he sees a widening gap, not just between the U.S. and Europe as a whole, but also between the practices of Fortune 200 and Fortune 2000 companies. According to Pierre-Francois, this latter group seems to have improved from just a few years ago, due in part to customer demand for addressing CSR and sustainability issues, like worker rights, climate change, and environmental impact; but also because of government mandates.
States and state governors, like the State of California and its former governor, have been driving some of this change. In 2010, long before President Trump took office, Governor Arnold Schwarzenegger signed into law the California Transparency in Supply Chains Act. And in the wake of the Trump Administration’s decision to withdraw from the Paris Climate Accord, governors and mayors from across the U.S. pledged their continued support of the agreement.
Tech Innovation will lend a Helping Hand
Technology trends, like artificial intelligence (AI), machine learning, blockchain, and the Internet of Things (IoT), have been disrupting organizations for the past few years. EcoVadis has taken notice, and Pierre-Francois sees value in both the short- and long- term arc of these technologies.
In the short term, AI and machine learning are most valuable to EcoVadis, said Pierre-Francois. In fact, one of the reasons EcoVadis executives decided to raise funding last year is because they believe that innovation in the CSR space is “ripe for investment.” After all, EcoVadis processes millions of pages of sustainability ratings documents, which is a labor intensive process. They wanted to find an automated and “smarter” way to parse through all of these documents in a fast and accurate manner and help their customers to scale processes. Machine learning and other augmentative tools can perform much of this heavy lifting and free up procurement staff to undertake more strategic work.
Another tech innovation that will be important in the CSR and sustainability space is Blockchain, precisely because it can drive visibility into products and transactions. Another challenge that many companies face now is how to incentivize organizations to gain visibility beyond their first-tier suppliers and into their second- and third-tier suppliers. One of the primary advantages of Blockchain, Pierre-Francois believes, is that users will be able to gain end-to-end supply chain visibility, which under current methods is time and labor intensive. But Blockchain is not mature enough to be operationalized at the user level. It needs more development.
In the meantime, EcoVadis is also monitoring how factories and manufacturing companies use connected devices / wearable technologies (aka, “the Internet of Things”) to help them understand workplace hazards, safety issues, and worker accidents. They can derive a lot of intelligence from worker biometrics, which can help organizations think holistically about business operations (i.e., worker locations, their vitals, their surrounding environment, etc.) that can help improve workplace safety and worker health. For these purposes, alone, digitization, automation, and AI are going to be very important for EcoVadis and will be very important for procurement teams, too.
Final Thoughts
Corporate social responsibility, like ethical and sustainable sourcing methods, is becoming increasingly important in procurement, forcing Chief Procurement Officers (CPOs) and their teams to muster all available resources to gain visibility into supply chains and source more ethically. Like any job, without the proper tools the task can be insurmountable. But in talking to Pierre-Francois, it is clear that niche software providers, like EcoVadis, are enabling procurement and supply chain teams to automate processes and scale their CSR programs; and to make it easier to gain visibility into (and ultimately control over) their supply chains in order to be corporate change agents. Stay tuned – EcoVadis has some exciting things in store for 2018.
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