A few weeks ago, supply chain technology vendor Assent held its user conference, Evolve 2023. It was a virtual event but unlike so many pandemic-era virtual conferences, this one packed a lot of intense content into each session. (To watch replays of the event sessions, click here.)
Much of the content concerned a number of critical supply chain issues especially in areas like forever chemicals (PFAS), forced labor, etc. One of the keynotes was given by famed activist Erin Brockovich – the water contamination advocate who was the subject of a major motion picture.
The days of evaluating supply chain software on features and functions like catalog management, pricing schedules, RFP support, standard terms and conditions, etc. are over. The better solutions must:
- Provide deep insights throughout the entirety of one’s supply chain no matter how many tiers deep it runs or how many subcontractors, temp-workers, etc. that these suppliers employ.
- Know and maintain timely records regarding the ownership of each supplier (e.g., is the firm or its key shareholders a rogue nation, an entity on a restricted list, or, some other disqualifier).
- Know how a supplier treats its workforce: employees and contractors. Are these people prisoners, slave labor or facing other restrictions on their personal liberties? Does the supplier provide a livable wage to these persons?
- Identify how each supplier impacts, positively and negatively, the local populations where it interacts. Are they enriching or exploiting these communities? Are they polluting the local environment or denuding it of natural resources?
The Evolve 2023 show had speakers, with authority, address a number of these timely and important supply chain requirements. Here are some of the more notable quotes I heard:
Your supply chain is where most of your firm’s ESG (Environmental, Social & Governance) data will come from.
In fact, I’d add that HR, Supply Chain and Operations are the big three in collecting and reporting ESG data. HR, because of its knowledge of people, workforces, compensation, time off, benefits, etc. is a natural for reporting Social and Governance components of ESG especially as it pertains to internal (i.e., Scope 1) data reporting requirements. Supply Chain should be the responsible entity for understanding what is going on in a company’s supply and value chains. These ESG requirements are about external entities and include a number of Social and Governance data elements (i.e., Scope 3). Operations can provide a number of internal production data elements (e.g., offgassed emissions, particulates, electric consumption data, etc.).
For many firms, the carbon emissions within their supply chain are 11.5X greater than their own internally created emissions. Supply chain matters, a great deal, in ESG reporting.
ESG is an area where you get credit for showing your work.
I love the quote and I’d like to add to it. For a couple of decades now, businesses have been selectively identifying which statistics they would share with investors, press, local communities, etc. When reporting was voluntary, many companies cherry-picked the data points that reflected well on their company and omitted others that were less favorable. As a result, we often learned of firms adding jobs but never about mass layoffs or the impact those layoffs had on local communities.
Now, businesses must respond to a rapidly growing number of global regulators and their reporting requirements. ‘Showing the work’ could be really hard for many firms to do as their current systems just don’t track all of the needed elements and, when some data is known, it may not be as timely or granular as it could/should be. If your firm thinks it can get all that it needs from its ERP software, think again.
PFAS (i.e., forever chemical) risk is everywhere.
One of the more eye-opening presentations concerned the enormity of the PFAS problem. While the slide below points to this, there was more (a lot more) to the story.
For example, the sheer number of compounds that fall under the ever-growing list of regulations is over 12,000 and many firms simply don’t know what compounds were used by suppliers in the making of components, sub-assemblies, feed stock, and other componentry. Many firms don’t add PFAS compounds to the products they sell but they have no idea if PFAS were used in the manufacture of subcomponents, repair parts, etc.
Businesses can no longer feign ignorance of these compounds and they can’t necessarily assume all of their subcontractors (across the length and breadth of their supply chain) have correctly and completely documented these compounds. Remember, these compounds can show up in the most unlikely of places (e.g., as a coating to keep seals pliable and slippery) and inside your firm’s complex machine tools (e.g., as O-ring coatings inside hydraulic cylinders).
The ubiquitous nature of these compounds is staggering. They appear in products like fire-fighting foam and gaskets. And, for diginomica readers, they also appear in virtually all printed circuit boards. Worse, businesses that have these compounds in their products may need to consider the implications that arise when customers dispose of or recycle these products. If there a reverse logistics mechanism to recapture these items and prevent them from entering the earth’s water supply, air, etc.?
Time is running out for firms to: understand their PFAS exposure, reengineer products and components to eliminate their usage, and, identify different suppliers that (can demonstrably prove that they) do not have PFAS in their offerings. If this article doesn’t convince you, watch the Assent videos.
This show was about a number of things. Some were obvious to-dos for corporations and others more sub-rosa. The overall messages were likely:
- The definition of a great supply chain technology has definitely changed and it includes a number of new requirements around ESG and in-depth supplier knowledge.
- The pace of regulation is now breathless. It’s galloping a lot faster than many supply chain or other top executives realize. I’m not sure some firms can even catch up let alone get ahead of the potential requirements and their business/product requirements.
- Knowledge about one’s suppliers, all of them including subcontractors and temps, is now a necessity. Firms cannot assume all of their suppliers are operating fairly towards workers, communities, etc. Likewise, firms can’t assume their suppliers are doing right via PFAS, environment, honoring restricted entity lists, etc. Assumptions might have worked before but are not viable anymore as your suppliers’ bad practices will become your firm’s problem, too.
But the hidden points are also worth noting. These include:
- Your firm’s supply chain team may have great planners, logistics and procurement specialists, but do they also have (or have access to) great chemists, scientists, etc.? The chemistry of supply chain management is becoming quite important.
- Your supply chain team may not be as current as they should be regarding the ethical, social and governance issues that must be considered with all tiers of suppliers. The new considerations are about more than just time and cost: they are about people, communities, ownership, ethics and more.
- Supply chain leaders will need to drive change and bring new perspectives/awareness to other leaders within the firm. They can’t just introduce new technology. They must see this new landscape for what it really is: an education, change and business management challenge.
The next Assent show should look at other suppliers (e.g., energy providers, water providers, reclamation providers, biochar firms, etc.) that are altering the production landscape for the better. The market (and Assent’s customers) needs more solutions that do more than report supply chain status – they need solutions that improve upon that state.