Responsible Value Chain – technology

The changes involved in value chain management should herald a shift in emphasis among many businesses away from pure economic gain towards making a difference to the natural world and how societies work. Stakeholders including investors and employees are increasingly discriminating between businesses on this basis. In this article, we focus specifically on the technological issues and remedies that are proving useful for companies keen to make their value chain more responsible.

Technology in responsible value chain management

Getting the right technology in place to support responsible value chain management might be perceived as being as simple as establishing the key technology requirements, choosing a provider, and implementing the solution. But is it really that easy? No. Most businesses will find it hard to understand the requirements of a system that must solve a problem that’s not yet fully understood, using data that does not yet exist, and with a team that lacks the operational capability to run the solution. Indeed, it is also important to understand that the involvement of technology in this context goes far beyond the enablement of individual businesses to comply with legislation or build better reporting capability through the value chain for decision-making. The needs of responsible value chain management transcend businesses and industries, and will involve technologies that make business activity more transparent, verifiable and accountable, including social media platforms and blockchain technology.

Same, but different

However, technology change in pursuit of more responsible value chain management does follow established paths for technology change more generally: the business will lead its requirements analysis based on both the overall business strategy and the specific objectives driving the change (for example, regulatory compliance and improved decision-making). The key difference in value-chain-driven technology change stems from the need to incorporate ESG information that’s typically external to the organisation – from suppliers and other entities within the chain – and to make that new information run alongside existing factors such as price, quality and quantity. Those needs complicate both the design specification and the path towards integrating a new solution with existing systems. The change will almost certainly require revised or entirely new business processes, which of itself will be a significant change project for all those affected – including those outside the organisation expected to provide data for processing. 

The CSRD and CSDDD compel businesses to engage and collaborate with others within a supply chain on a level beyond that required for usual commercial purposes. The communication involved needs to cover the legal responsibilities of all to achieve legal compliance, and also to agree on how the technology, information flows, and data security and handling will work to best effect. Starting with the existing systems and processes, a wholesale examination and review of what’s in already place vs. what’s required for the future should lead to a model of new capability that in turn leads to technology choices to blend the best of existing and new systems and processes. For some client businesses, that gap analysis can be straightforward, but for many it will be an involved exercise best conducted with agile development, testing, implementation and training approaches over several months. The fact that there are hundreds of solutions available (we’ve already identified and talked to more than 400) across an array of complementary technology platforms and applications means tailoring to suit the needs of businesses in different sectors is essential, and not for the faint of heart. We therefore work through a path of advising, co-designing, implementing, and operating to help achieve each client’s goals.

Tools for the job

Although there is no single solution to achieving the technology state for more responsible value chain management, we have developed approaches that make taking stock of the ‘as is’ situation, requirements analysis, collaboration, design and implementation more manageable and efficient than would otherwise be the case. Those approaches take into account the need for data validation and auditability; third-party risks; mechanisms for cross-collaboration and partnering; and the internal orchestration of teams and disciplines such as finance, IT, legal, and sustainability. Our approach involves using life cycle assessment and other tools for individual products and services, to establish for each the product or service sustainability impact; company impact; supply chain risk; supply chain traceability; and business ESG rating for all elements within the value chain. Examples of the tools include SimaPro, EcoChain, Sweep, CarbonCloud, RiskConnect, Ecovadis and Powerchain. There are pros and cons to the applicability of each tool, and most rely on making estimates in lieu of hard data, but when applied according to the specific strategic and sustainability objectives for each product or service in concert, we establish an overall picture that can help shape the technology requirements. Key to the use of such tools is establishing where in the overall value chain the business and its products and services lie – and the ESG impacts most affected.

To discuss any of the themes raised in this article, or to arrange an initial assessment of your organisation’s technological readiness, contact Birthe van der Voort, Andrea Vogel of Frits Klaver.