 Hello everyone and welcome to the next episode of DSCI Insights in Action. I have two great distinguished guests with me today to cover the topic of the ESG Research Digital Supply Chain Institute did recently and those are the insights which can take you to the next level of comprehension what's going on in supply chain. With me today I have a privilege to have Marisa senior principal research lead supply chain management from APQC. Marisa welcome. Thank you Marca. And I have my dear colleague Greg Moss who is the director of data and change management from Digital Supply Chain Institute. Welcome Craig. Great to be here Marca. Great to be with you also Marisa. Thank you Craig looking forward to it. So I know you have been cooking a lot in your special kitchen related to applied research and the Digital Supply Chain Institute is particularly proud of the partnership we have built with APQC. So Marisa let's start the conversation together with you and Craig as a fireside chat so it can be more interesting for everybody but I would like to start from you focusing on one thing. What are some of the most significant findings from the survey regarding the current stage of ESG integration in supply chain. A lot of conversation around it plans strategies but integration is something not that many people speak about. It's true it's true. So I think when I look at the findings from this research some of them were reaffirming and some of them were a little bit concerning and I think it was reaffirming to see that ESG factors are widely considered as an important part of supply chain. But on the concerning side we saw a pretty big gap and Craig you were one of the first to notice it between the value that organizations are placing on ESG and their actual integration of those principles into their core strategy and operation. Yeah I couldn't agree with you more and you know I often say to companies it's easier to say something than to do something. So what I see a lot of is companies are reacting to pressure from regulators they're reacting to pressure from customers but and they're saying yeah we need to do something but they're not quite at the point where they've integrated the action into their strategy and made it operational. So it's it's really very insightful especially understanding that the pressure now is coming from various different side it comes from the regulator it comes from the actually end buyer and you know it comes from the overall understanding and you know care about the planet. So having these in mind were there any surprising insights or unexpected trend revealed you know by the survey data you had related to supply chain management. Sure I'll share two things that kind of I thought were interesting when we looked at the data by region and then also comparing manufacturing with services organizations. So one of the questions that we were looking for answers to is what specific goals related to ESG have organizations already implemented and when we looked at it across the board we saw some significant similarities but when we delved down into region for example both Europe and the Americas put ethical business practices at the top but in Africa and Middle East it was social inclusion and diversity and then for Asia PAC it was waste reduction and recycling. So seeing the differences by region was really kind of interesting and then when we look at it by manufacturing versus services I thought that it wasn't surprising but it was again like reaffirming to see that manufacturing is ahead when it comes to goals related to waste reduction recycling emissions reduction water conservation that kind of thing versus services where there was much more of a focus on the social inclusion and diversity and those ethical business practices. Yeah I think a couple things jumped out to me Marco. One of the things that jumped out to me was that companies are not consistently using it in how they select suppliers. So if you think about that whether it's an environmental issue like carbon in the carbon footprint or it's a human rights in the supply chain issue companies have to take into consideration what their suppliers are doing in order for them to meet their own ESG goals related to that what we saw is a lot of companies are using ESG criteria in supplier selection a little bit but not consistently. So that to me means that kind of gets back to the lack of integration into overall strategy and operation. So that was one thing that jumped out to me quite a bit. The other thing was and I'm going to go back to like the drivers what's driving it. We heard consistently that it was really customers and regulations that are the top two drivers with investor spring number three in the list. If we think about that it also points to the fact that it really are economic issues that are driving the behavior. So it's not that companies are doing it because they think it's better for the environment they're doing it because they think it's going to be better for their business which personally I think is a great thing because we want to integrate those issues that thinking into how a company strategy operates. So they're not thinking of it as ESG is over here and our business is over here. You're trying to integrate it into the in together. So I like that trend toward it being customers and as well as regulations that are driving the change in behavior. I would like to see a little more action where it's being integrated into the supplier selection process. So it's very interesting that the things you have shared looking into different geographies and then different drivers related to geography and then as well who are the main stakeholders driving the focus on ESG being outside of the organization at this stage. That means that there are a lot of opportunities actually for the companies to evolve in their ESG journey. And that brings me to the next question is what are the primary challenges that organizations face when integrating ESG principles into their supply chain operations according to the data which you got from the survey? Marissa, you want to go first again? Sure, sure. So not surprisingly the number one obstacle or barrier they're facing is cost both time and money from that perspective. But right behind that is a lack of reliable data from supply chain partners and suppliers up and down the supply chain. And I think that's a critical piece that Craig was alluding to that if you you know I think it kind of goes back to the old garbage in garbage out saying if the underlying data that you're using for making your decisions isn't reliable then the decisions are questionable. And I think that's one of the biggest challenges that companies are really going to have to deal with. They need to make the investment of the time the money and the resources and they also really need to figure out this data piece. Yeah I couldn't agree more about the data piece and in fact we're doing some research right now with Harvard Business School looking at the idea of a framework that we put together at DSCI called data trading where companies would be able to trade strategic data with each other for their mutual benefit. And ESG is a great example of that to be able to get more reliable carbon data or more reliable working hours data you know like in the human rights on the supply chain one of the consistent problems is excessive working hours on a global basis. So if you're able to make sure you're getting reliable data on working hours or on carbon output that helps you to be able to have more reliable reporting internally because now also going back to the regulations the reporting is more and more driven by regulators. So you have to have reliable data to be able to file reports that are going to meet the criteria that regulators put forth. One other quick thing I want to highlight is really a lack of employee knowledge about what they need to do was another thing Marissa I know that really jumped out to me. Yeah well maybe let's talk about that a little bit because it's easy to set the strategy but then you got people need to know what you want them to do in terms of doing it over to you on that one. Yeah that that was a huge piece of it you're right I think we saw something like 76 percent of employees are not really sure how to operationalize the strategy and that's the thing that ESG has been struggling with over the last several years which is companies make very public pronouncements of will be net zero by this year or will reduce our emissions by this percentage and that's great to have the goal but what they need to make sure they're following up with is the action well how to accomplish that goal inside the organization and that's where we're seeing this gap that the employees are saying they don't really understand how to operationalize that how to turn that strategy into action and that's where I think there's a lot of opportunity for organizations to include employees in the conversations on how to achieve it so it's something that they're a part of not something that happens to them that really can and as you said you know if it's in line with the overall organization's bottom line goals missions and so forth then it shouldn't be as challenging to say here's how we're going to go about doing it and if they provide those resources that are needed the equipment the technology the human investment. So this definitely brings us towards you know the the notion of half glass half full or half empty right and in that sense you know how do we see the gap which is evidently there in a sense of integration and implementation as a threat or the opportunity and I think we are all more on the opportunity side through everything what you what you shared and I think one thing which I see that is missing there is especially the employees are not sure about how they can come up to the strategy then creating certain linkage to KPIs which will you know reflect DSG goals can be a way forward but rather than me talking about it I would like to hear you know both of you about like what are some actionable recommendations you would provide to the companies looking to improve their ESG performance in the supply chain operations. Over to you Marissa. Oh okay well I think Craig has already hit one of them which is that not enough organizations are incorporating this as a criteria in terms of supplier selection so that you're building it into that front-end piece there to align your practices with your stated values and I think also we saw that while it's an important piece there is a need to really make sure that the strategy doesn't get overlooked and I think what we found was like something like 20% of organizations don't have an articulated ESG strategy they may be working to hit the regulator targets and trying to respond but without an actual strategy what they're going to find is that they're in the passenger seat and it's going to be handed to them from regulators and from customers and rather than end up that way I think it's important for company leadership to really sit down and clearly articulate the vision that they're looking to achieve and then they can cascade that down through all levels of the organization and get the employees on board and understanding how to accomplish it. Yeah there's a couple things I would add and I completely agree with what you just said but the first one is let's take a look at the goal setting process itself right you you said something Marissa that really resonated with me is too often the goals are set and they're pushed out so I think that it's really important to have cross-functional collaboration in goal setting and get the different departments involved in the goal setting to make sure that the goals are practical given their operational responsibilities and that their performance incentives are aligned with integrating these new ESG goals. We see a lot of companies where the performance incentives are not in alignment with the new goals that are being put in place so that's one cross-functional collaboration. The other thing that I would highlight is I think if you look at ESG it's a really really broad topic so in environment you can have carbon you can have water consumption power consumption use of hazardous materials just a host of things on the S pillar everything from human rights in the supply chain to DEI to data privacy is really considered by some companies an S issue companies need to pick where they want to really excel to achieve a competitive advantage you can't be great at everything across the board but you should pick those areas that are really core to your business that are aligned with your business strategy and seek those to really excel to become a competitive advantage. Excellent point. I really like your your inputs and if I can try to summarize is like you know it's a great opportunity for you if you are willing as an organization to focus on the right area of ESG which resonates with the business where you are and the geography needs where you operate and then as well deliver the value to the customers and then cross collaborate across your value chain but this has been really super interesting insights and definitely we should deep dive more into one of the next episodes but I would like to thank you both for first of all deep diving into this topic with your teams and sharing with us the initial findings which we can take forward in one of the next episodes so once again Marisa and Craig thank you very much for being with us