How BMW & Accenture are Building a Responsible Value Chain | COP26 | Accenture

(PLAYING VIDEO) RACHEL SCHAFER: Hello, I am Rachel Schafer, SustainabilityLead Accenture Operations. And I’m very happy to be your host for today’s session. We allknow how critical it is to achieve net zero and the value chain is abig part of that equation. Today’s session includes multiple panels thataddress sustainability within the value chain. It will be a fun and fast-moving session.So before we dive in to our first panel, let me set some context. As you heard in the video, at Accenture, webelieve sustainability is driving new value and growth and permeating everything thatwe do.Value chains have a critical role to play as businesses work to become morerelevant to a wide base of stakeholders, operationally and financially resilient andenvironmentally and socially responsible. So what will you experience in today’ssession? First, we will start with a short panel on Better Business, Better World,using a digital thread to balance the three R’s, relevance, resilience and responsibility,to create a responsible value chain. Our two panelists are Kris Timmermans, Headof Accenture Supply Chain and Operations and a member of the company’sGlobal Management Committee. And Maddie Walker, Accenture’sUK and Ireland Industry X lead, which means she focuses on digital manufacturingand engineering across the value chain. Second, I will take you through procurement’srole in the responsible value chain.Then Jesse Hanger will discuss strategies toidentify the risk of child labor in the supply chain. Jesse is Accenture’s Coupa Business GroupLead and has more than two decades of experience leading operations, logistics and enterprisetransformation for global organizations. Josh Matthews from HFS, will take us throughsome of his key findings of the HFS recent CPO Study. Josh is an Associate Director atHFS. He leads research on sustainability, energy and utilities, as well as a broadspectrum of business and emerging technology.We will finish with a fireside chat highlightinghow BMW is building a responsible value chain with sustainable sourcing. And I will beintroducing you to those speakers later. We hope to have a few momentsfor questions at the end, but please do put your questions in the chatat any time during our conversation today. We’ll be sure to follow up if we’re notable to get to them during the event. Lastly, for those of you joining in person,please be aware that there will be a grab and go lunch at the end of our session.So Kris and Maddie with that, let’s begin. Kris, starting with you. You speak often of howbusiness leaders can reimagine their value chains, not just to positively impact their businessbut also, society and the planet. Can you share with us what that looks like?KRIS TIMMERMANS: Yeah, sure, Rachel. I’d be happy to and also, welcome everybody. It’s also greatto be here in Glasgow today. And, Maddie, feel free to chime in whenever you whenever you want.To your question, so if we look at supply chains, they’ve actually been constructed for cost.Let’sbe fair, they sit on cost of goods sold, they cover the spend with suppliers. And so, for mostindustries, they are the biggest item of cost. And actually, if you look at where we’veended up now is if you take a product, working process, so it’s not the finished goodyet, that product and its component would travel around the world a couple of times before it’s theend finished goods. And so, it would actually do the operations, the manufacturing operationsin every cost-effective location in the world and it would be routed in such a way that itcan avoid tariff structures between countries.So if you look at that world, there is no surprisefor us that actually 60% of the global emissions are from the supply chains. Actually, 50% ofthe emissions come from the supply chains of only six industries. So you look at food,fast-moving consumer goods, fashion, construction or the mode of electronics they cover to 50%.The other thing I observe is that actually supply chains have set up tax efficient hubs, taxefficient supply chain and procurement hubs. What basically means that if you provide decisionmaking power in a local tax efficient hub or a global tax efficient hub in the world,you can charge the countries with tremendous transfer pricing.So you’re taking the profitout of these local geographies into the tax efficient hub. And so, you’re taking the taxablebase away from local authorities and they would use that money normally to fight climate change,to invest in the energy transition and so on. So if you look at this world, it comes asno surprise that 77% of the chief supply chain officers are telling us that they want torun operations in a different way and they are thinking about this in a multi-dimensionalview.So not just for the sake of cost, so the shareholders, but also to covermultiple stakeholder groups. And so, actually if you look at this environment, it’s digitaltechnologies that for the first time today, can actually create tremendous transparencyand they can help provide the intelligence for these leaders to weigh every decision againstnot just the cost and business metrics, but also against the impact on society and the planet.And so, I’m actually portraying to you that there is a world instead of trade-offs, it’seither cost or society in the planet that there is a new optimum emerging. And that’s whatRachel called the triple R, the resiliency, the relevancy and the responsibility.So for me, resiliency in the supply chain means it can recover from ashock to the supply system faster. Relevancy means it can more flexiblyfollow demand in a cost-effective way and responsibility is the fact that it can do allof this in a way that’s good for society trust and for the planet. RACHEL SCHAFER: Thanks Kris, that’s great.So digital really ispoised to do great things for supply networks. Tell me a little more about what thatlooks like? How does adding intelligence to your supply network actually change it? KRIS TIMMERMANS: Yeah, maybe let’s go back and continue on the triple R then, Rachel, so resiliency, relevancy, responsibility.If I take first resiliency, this is obviously the buzzword of the day. Thelast week and a half in the SAP 500 earning calls, the CEOs used the word supply chain disruption3,000. So this is, obviously, a CEO agenda topic. Just look at it. The report that we issuedyesterday, with 1,200 CEOs, actually half of them called the higher frequency of extremeweather inflicted supply chain disruptions, one of their top three priorities for the future.Top three risks for the future. And only 7% see that they’re investing enough tofundamentally do scenario modeling, to fundamentally create the visibility that theythat they need.So it’s clearly a CEO topic, but it’s become a governmental topic.It’s a topic for authorities. A couple of months ago, the Biden Administrationissued the executive order for resilient and responsible supply chain and they are actuallylinking resiliency with responsibility. And so, in this context, about 18 months ago, we designedwith MIT, a stress test for supply chain. So it’s a standard to stress test the vulnerabilities inyour supply chain. And so, the way we do this is we digitally model the multi-tier supply base,we then apply a number of disaster scenarios to that supply chain and then we identify the keyvulnerabilities that exist in the supply chain of our clients.And there’s a lot of learningswhen you do this. Actually, I see a lot of choices being related to the choice of businesspartners, the locations of your supply chain, being a critical item for risk and there’s abit of a word of advice here. Like all of us, when we do investments, we spread the risk, butwe’ve forgotten some of this in supply chain. So actually, what you should do is reallyanalyze your critical items, your critical SKUs and just make sure that none of them have morethan 25% with the same supplier, more than 25% running through the same port, more than 25%running through the same routes in the world. And so, as you’re re installing thesesupply chains, you’re rebuilding them, my advice is also to fundamentally apply ESG,the United Nations Sustainable Development Goals, build that in to your rebuild of supply chainbecause it actually is such a small incremental cost and it’ll make your future ready, ratherthan trying to do all these investments later on. The second one, relevancy.This is where it’sabout following the demand more flexibly, but also doing it in a cost effective way, soyou don’t price yourself out of the market. This is where digital technologies havefundamentally created a lot of progress around applying machine learning to do betterforecasting and a sense of demand. It’s about creating control towers that give you end-to-endvisibility and that allow you to structurally get early warning signals. It’s about digitalmanufacturing to create the flexibility. Now there’s another thing here and this is wherethe consumers they’re telling us loud and clear, if you want to be relevant, make suremanufacturer or retailer, make sure that your products are more sustainable and make surethat the way you operate is more sustainable. I’ll give you an example in the car industry.Today, us as car drivers, two-third of us have a sustainability mindset for the first time inhistory. Actually, 97% of us would want to change brand for a more sustainable vehicle at the end.That brings me to the third example, which is actually around responsibility.And so, let’s takea zoom in on environmental sustainability. And so, it comes with no surprise,it starts with supply chain. The emissions in supply chain are on average5.5 times that of the rest of the organization. Actually, I was talking about six industries thatgenerate almost 50% of the emissions. Each one of those industries actually have Scope 3 emissionsof more than 80% out of their total emissions. And if you look at Scope 1, so emissions fromyour own operations; Scope 2, emissions that come from your energy usage, our clients havea path to success there towards the promises that they’ve made. For example, in renewableenergy, there’s no trade-off anymore. It became more cost effective to go renewable than before.So, you know, it’s easier to find that path. In Scope 3, however, that’s where peopleare struggling and it is an important element. It’s actually through Scope 3that you can fundamentally change the behavior of your suppliers and youcan create a positive ripple effect in so many countries in the world, even countriesthat are falling behind in terms of regulation. MADDIE WALKER: And actually, Kris, this is wheredigital helps.Accenture’s recently created a digital platform to manage about 100,000 suppliersand the platform collects sustainability data across environment, human rights and inclusionand diversity. But what’s really interesting in terms of how they manage those 100,000suppliers is once I’ve collected all this data, it then gives predefined actions to reallydefine how suppliers can act more responsibly and do things more responsibly. And I thinkthat’s a really good example of how digital can help us in terms of the next stage.KRIS TIMMERMANS: Yeah, it’s a great example, Maddie. So if you – let’s just summarize when youput the triple R together and you measure against the combination, you could fundamentally constructsupply chains that are more ready for today, but they are also more future ready.And it’s digitaltechnologies that generate you the intelligence, the transparency to find this new optimum. RACHEL SCHAFER: That’s great. Thank you both, Kris and Maddie.It definitely sounds like we’re in a new era for value chains. Maddie, over to you. Krismentions being able to bake all three of these R’s into every aspect of the value chain. Can youshare some incremental ways that digital is used and can make that happen?MADDIE WALKER: Thanks, Rachel. I think, if I can elaboratea little bit more, I think digital tech can be used in many different ways. And, you know,if you think about there’s a 30% goal in the UK to the government’s plan to drive resources andenergy efficiency. I think digital can be a really important part of that. When we talk digitalthread, it’s kind of one of those buzzwords, but it can actually have a really immediateimpact.If you think about how we can use data across the end-to-end value chain to reallydrive visibility across all different components of the supply chain, including manufacturing andengineering, that really helps us to take that and to take that data and extract it frommultiple different systems. And that’s really the R here. It’s not that in many legacyorganizations it’s easy to extract that data, but that enables us to suddenly get real-timedata and real-time visibility of exactly what’s going on across your supply chain and actuallythat enables companies to really use data to predict and monitor the consequences and determinewhat the actions are that they should do next. But it is important to say that digitizationalone doesn’t actually drive the different behavior.You know, get to the trade-offpoint, Kris, that you just mentioned earlier. I think you need to consider those trade-offsin every single decision that you make. So what we’re seeing is digital leaders arethe ones that are actually doing that. So they’re considering for every aspect of a valuechain, including product development, by the way, because when you develop a product, if you thinkabout and you design a product, if you think about actually how that product can be createdand made in a more sustainable, simpler way, that simplicity upfront sort of foldsthe whole way through the rest of the value chain from simplification in the supplychain, the amount of the number of different elements within the manufacturing process.So that’s really an important component. So you have to kind of break – you know, embed the threeRs into every single aspect of the value chain. And what we’re seeing is we are seeing change.So I think 7 out of 10 utilities companies, where I think to the point you just made the trade-offis becoming more straightforward, we’re seeing it being baked in and we’re seeing change happeningand we’re seeing new technology being used such as AR and VR and all sorts of great platforms.But, you know, there’s still a long way to go. So, for example, in the UK, I think as partof a recent survey that we did, only 15% of companies we would class as really employingthat kind of three R approach in terms of driving a different agenda around sustainability RACHEL SCHAFER: That’s great. So from a timing perspective,we’regoing to move right on to the last question here. It was really great to hear how theintelligent technologies can help us meet both business and sustainability goals.When we think about the responsible value chain, I know that environmental sustainability is animportant part, but there is more to that story.Kris, Maddie, I’m wondering if you could tellus what the parameters are? Both of you can chime in here for a responsible value chain. KRIS TIMMERMANS: Yeah, so when I – let maybe start off here, Maddie. So when I think aboutresponsible supply chain, responsible value chain, I would consider three measures andI used to call them triple zero, so zero carbon, zero waste, zero social incidents andthere’s the triple again. So I think I’m creating a bit of an image of myself of triple.But I’ve evolved personally that thinking into something more positive.So instead of thelack of something, about creating something. So if I take them one by one, on net zero carbon. Let’sbe fair, net zero is not the ultimate goal, is it? It’s the goal for now, but we got tothink about operations that actually really drive a continuously negative operationalthinking. So continuously positive, contributing to the environment. I love Microsoft’scommitments there. So Microsoft by 2030, they will remove from the environment more carbonthan they emit. And by 2050, they’ve promised to have removed all the carbon that they have everemitted through direct operations or energy usage, electricity usage, since the company was foundedin 1975. So it’s an inspiring commitment. If I take the second dimension,this is about moving beyond zero waste. So it’s about embracing circulareconomy. It’s about recapturing, recycling, reusing materials to an extreme high degree.One great example there is the startup, Elvis and Kresse. So they have actually theyrecycle used fire hoses into very premium bags.So imagine carrying a very premiumbag made of material that saved human lives. I find that a very inspiring story.MADDIE WALKER: There’s a few other examples as well. So don’t forget Nova Nordisk. That’sa medical device manufacturer. You know, they are undergoing a global program to collect usedinjectable medical devices from people’s homes. So people take home, they inject, they usethe injection, they use the device and then, they return it back to the pharmacy. Butwhat we’re finding now is the logistics provider is picking up the returned devicesat the pharmacy, they’re taking them away, they’re recycling them, so there’s noadditional journey. So there’s no extra carbon. And, you know, that really creates the concept ofa closed loop and actually, what we’re finding is they’re saving 15 billion devices from landfillover the next 10 years.And that’s just sort of one example there around circularity.KRIS TIMMERMANS: Awesome. Another inspiring example there. And actually, what you see isthat digital technologies are so somehow used to design these programs to improve themand to constantly make them even better. MADDIE WALKER: I mean we’re seeing one isactually Mars. We’re doing work with digital twin. You know, one of the things that Mars are doing isthey saw a dream with pandemic that they suddenly had a huge demand for pet food. You know, we all- lots of people are suddenly acquired a pet, but actually a real drop in their confectionarydemand.So what we found there is they came to us and said how do we use digital threads and digitaltechnology to really improve the resilience and reduce waste? So we’ve done a project there wherewe’re really working with them to create a concept of a digital factory, but actually one of thekey things they wanted to go after was waste reduction and they worked out it could save themabout 25 million pounds a year.And we ran an MVP to just really better manage the amount ofproduct that gets put in packaging. And, you know, within eight weeks, we saw an 80% drop in waste.And that’s just from using sensors and IoT and accurately tracking how the lines are managing thethroughput. So there’s huge opportunities there. KRIS TIMMERMANS: And that brings me tothe third and last dimension which is sort of a stakeholder trust or earningthat stakeholder trust. And so, here, when I think about that aspect of responsiblesupply chains, there is a clear world of this trust being measurable. So I thinkmost people would call trust a sort of a fluffy concept, but you can make this verymeasurable. You can you can model the company, you can use rich data sets, internal and external,to fundamentally by different stakeholder group measure stakeholder trust and measureit by different stakeholder group. We’re working with a company called Arabesque.It’s a data company to help make that real. What we’re also seeing in this sort of stakeholdertrust is that it has an important societal dimension to this and it’s a matter of riskmanagement as well because you can lose that trust in a split second when something happens.And again, here, digital technologies allow you to fundamentally see some of these things beforethey happen.I’ll give you an example. So we created a human risk assessment algorithmand what it does it uses 37 data sets and it looks inside of the multi-tier supplier networksof a company for any area where the risk of human rights violations for child labor would be veryhigh. And so, this is the sort of transparency that it can create. Actually, I would say thatdigital technologies, this sort of intelligence, takes away the reason for not knowing.So there is not a single stakeholder in the world that would accept from acorporate leader that they say I don’t know. And so, I see this trend where corporateleaders are going to be held accountable for anything that happens in the multi-tiersupplier network. And this could be at the beginning of their chain, but allthe way down to the farm to the natural resources. This is where the Swiss governmentlast year, they issued a referendum. And in that referendum, some of the corporate leadersviolently reacted by saying, I can’t notice, I can’t be held accountable and that wasobviously sort of the wrong answer at the time.Now, look, we can go on for hours onthis. And we’re not going to do that, but I’ll hand it back to you, Rachel, for adeep dive into procurement and sustainability. And I believe we’re also going to be learningfrom BMW on some of the amazing things that they are doing. So big thanks, everybody.RACHEL SCHAFER: That’s great. Thank you, Maddie, Kris. I wish we had more time to getinto further details. I’m personally inspired by the impact that we can drive within thevalue chain. Like you’re saying, both on the environmental, as well as the social side of thesustainability equation. So thank you both for your passion to drive these initiatives forward.We are excited to move to our next discussion. But I know some of you may have questions forKris and Maddie. For those of you in person, they’ll both be available during lunchimmediately following the session. Our next set of discussions will be led by Jesse,Josh and myself and they’ll focus specifically on procurement’s role within the value chain.We all know that this is the decade to takeaction and deliver on emissions reductions. I’ll spend the next couple of minutes discussinghow can procurement get to work and take this type of tangible action to help enablecorporate sustainability goals? I am part of Accenture procurement operations, ourBPS team, which is a global team of professionals with deep procurement expertise. Our teamis procuring or buying products and services on behalf of our corporate clients. So we’rehelping them buy things like energy that fuels their facility, IT hardware or services, logisticspartners that helps get their products from point A to point B and then even the packaging materialsthat wrap up those different types of products. Our clients supply chains represents over onetrillion dollars in spend and when converting that into emissions, is equal to the amountof emissions produced by all of Italy. Our view is that procurement is very wellpositioned to address sustainability. And why do we believe this? Well, startingwith something Kris mentioned earlier, the fact that up to 80% and even morein some industries of total emissions are embedded outside of your organizationand in your supply chain.Additionally, 40% of emissions are driven by companies throughthe type of purchases they are making. Both of these factors are heavily influenced throughthe day-to-day decisions that the sourcing team is making. They are the ones evaluatingwhat to buy and from whom to buy it from. And as it’s becoming more important for companiesto take accountability for their supply chain emissions, procurement’s role has quicklyexpanded from a traditional financial transaction to an expanded strategic decision, onethat includes sustainability aspects. As we pivot our own Accenture procurement teamto address sustainability, our approach has been to leverage our deep domain expertise within ourteams, evolving their knowledge of what does it mean to be sustainable in each spend category.Forexample, our team is being reskilled to understand what type of packaging produces lower emissionsor which airline partners are progressively investing in sustainable aviation fuels or whichIT services results in a lower carbon footprint. So what you can see on the screen right now isAccenture’s framework for embedding sustainability into our procurement processes. This visualoutlines the five steps that our team is taking to embed sustainability into the procurement process.So let’s get a little deeper into each step.Starting with steps one and twoand ‘m on the operations team, so sorry for the detailed slides, but we likedetails in the Operations group. So really, the first step is to take a step back and lookacross your company’s spend areas and determine where do the environmental hot spots sit. Tohelp bring these steps to life, we analyzed our clients one trillion dollars in supply chainspend and we equated those dollars to emissions. And so, for our clients, the common hot spotsare logistics, IT and energy to name a couple. So now that we know the category hot spots, thenext step for a client would be an exercise to determine what can be procured differently toreduce emissions in those hot spots.It’s really not a job done in isolation by procurement,but more of what we call a team sport, requiring inputs from new sustainabilityexpertise within the company or the design team, construction or facilities management. But it istime well spent because some of the most basic decarbonization levers that can beenabled through the sourcing process can conservatively reduce emissions by 6%. Applying the same 6% to Accenture’s client spendwould result in significant emissions reductions, equivalent to eliminating 170,000 householdselectricity emissions. Much more can be done, but this is a relatively straightforwardframework that produces tangible results. Step three in our framework ensuresthat all procurement decisions shine a brighter light on how well the biddingsuppliers rank from an ESG scoring perspective. And as part of our new standardsourcing scorecard, all suppliers will now be ranked from an ESG environmentalsocial governance perspective. Ultimately, each client of ours will weigh in these scores,these ESG scores differently, but the key takeaway is that this type of scoring is threadedin to the final decision making scorecard. Step four. This includes sustainabilitymeasurement. It could really be a presentation all on its own and I do believe there is a sessionon Friday, but suffice to say for this session, new types of data will be needed on an ongoingbasis to track ongoing results for these new types of sustainability initiatives.The dataneeds to be deep enough and it needs to be collected across a variety of sources. Think KWHon a utility bill, miles traveled on a freight bill or type of packaging bot on a packaginginvoice. All of this data needs to come with that type of backup documentation to help ourclients report these figures with confidence, as well as defend their reporting when itcomes to new types of sustainability audits. All right, last step. Final step is evolvingthe strategy, really achieving sustainability in procurement means that procurement will need towork in systematic ways, working across internal as well as external stakeholders.It canbe a little daunting at the beginning, but there are some key stepping stones to getyou started. Start small, look for those already that are pivoting towards procuring sustainable. For us, it was our energy group. Our clients were dictating that we pivoted to buy renewable energypretty strongly within the last five years. So we were able to leverage some of those best practicesand embed them into other spend categories.Look for key suppliers that are on their ownjourney to become more sustainable and partner up. And then, not on the slide, but one of myfavorites is to recruit those with passion on this topic because really those are the individualsthat will push these initiatives forward. Imagine the power and the impact that we canhave together if procurement organizations around the world transformed to shine a brighterlight on sustainability at each and every buying intersection. The collective emissions impactcould be massive, but it could also help reshape procurement’s position to provide morepurpose and impact within the organization. This is our passion and our roadmap to do our part to help the planet, people andprotect our clients profits. Now, we are going to shift tosomething that’s a little bit harder, harder to talk about, harderto impact for the better, let’s hear more about the social aspectswithin the value chain from Jesse, and how we can work together to make positive change.JESSE HANGER: Thank you, Rachel. In this world, 160 million children are involved in harmfulchild labor. That works out to nearly one in ten who are compelled to work tosupport themselves, to support their families, it’s for survival.Child labor in Central Africa mines the cobalt that’s sent to Asia to be refinedand used to make electric vehicle batteries. Child labor in the South Pacific is usedto produce the majority of the world’s palm oil, key ingredient in soaps and detergents.Child laborers in South America and West Africa produce the cocoa, that chocolatiers in Europeturn into candy bars and other products. Sadly, the global pandemic and the resultant lifestyleand supply chain disruptions that it brought, took a toll and the number of childrenin the labor force has actually gone up.It had decreased by 20% from 2000 andto 2019. These children spend their days and their nights working in the fields and onthe streets as servants, cleaning and cooking in sweatshops, in factories, in quarries andin mines. Roughly half are in a hazardous job, putting them at risk of serious injury or death.A third don’t get any education, up to 75% are working without any sort of equitable pay orpay at all. Children like Igbal, a Pakistani child who was sold into bonded labor as acarpet weaver at age four or Sultan, he left school before he could read and write.He wanders around neighboring villages of Lebanon selling chewing gum and boxes of tissue. Sothat he can bring home the $5 that his mother and his three sisters need to survive or Nazarene,growing up on the border between India and Nepal, she ran away from home at 7 years oldto avoid being in a forced marriage, ended up in a sweatshop where if she didn’tproduce the five to six hundred pieces a day, she didn’t get the $2 she’d been promised.These children miss out on education,socialization, recreation and rest. They lose opportunities to participate in their communityand in religious and cultural activities. Harmful child labor takes possibilities fromthem, dreams, goals striving for more, all gone. At a young age, they reach a point where theyhave no choice, but to be put in positions where they lose the opportunitiesto be everything that they can be, to be what they want to bebecause no one was there. Nasreen used to wonder if the peoplewearing the jackets that she had stitched could feel her pain. So as forward-lookingorganizations, we continue to analyze the work we need to do to protect the planet for thenext generation. That’s why we’re here.For what are we working if not to protect the childrenof that next generation and future generations, helping them can go a long way to helpingthe planet as a whole. If we, as a society, move children out of having to focus onsingular needs, they have the opportunity to advance with society, to focus on makingthings better. This should be what we want to achieve and it is what we can achieve.As the adults, we’re the ones impacting children through care, through protection, throughbeing the ones who are there for them. Children should know through us that theycan obtain more than shelter and survival, more than food and nutrition.And childrenshould through us be encouraged and educated. Children should know they can live free fromfear, safe from violence and protected from abuse. Leaders throughout history haverecognized the social responsibility to elevate the weakest and poorest among us. FromThomas Jefferson, to Winston Churchill, John Paul II, their ideals echo in the words of NelsonMandela. A nation should not be judged by how it treats its highest citizens, but its lowest.So in 2015, world leaders gathered at the United Nations.They made a bold commitment to allchildren and their right to childhood. Crucially the signatories of the agreement promised toensure this would happen for all segments of society regardless of income, gender, geography.And they promised that those the furthest behind, the most removed from society, would be reachedfirst, governments, churches, businesses, work in different ways to help societiesimprove and grow. And like any group, they work best when working in concert.The pledge to leave no one behind must be upheld, only then we realize its potential totransform the lives of children across the world, guaranteeing a childhood thatwill help them grow and flourish.So where are we now? Regulatory authoritiesaround the world are requiring companies to mitigate child labor in their supply chains.We heard earlier 28% of investors are giving preference to companies that make ESG factorsan integral part of their business. 66% of consumers say they will support companies whoare working to eliminate the risks of child labor and other ESG concerns in their supplychain, companies that make ethical choices. These are real numbers and they’re leadingbusinesses to take real action for change. Now there will be a cost to change. One studyestimates it at over $800 billion to remove child labor, but with a $5 trillion benefit. That’s adirect return on investment of over six times. Now where do we start? Well, I work for Accenture.So let’s start with data and visibility.Earlier, Kris Timmermans said that a responsiblesupply chain, one of those triple R’s, is customer centric. So let’s take the children and makethem our customer and put this issue, put them in the center of our thinking and decision making.For a similar problem, Accenture partnered with the Global Emancipation Network and Splunk, thedata to everything platform, to develop Artemis, the world’s first human trafficking contentclassifier. A machine learning based solution, Artemis uses a risk scoring engine to analyze dataand indications of potential illegal activity. With Artemis, Accenture helped law enforcementagencies crack down on human trafficking. It did its job successfully augmentingtheir capabilities and their capacity leading to prosecutions in the United States.This tool might have found our four-year-old carpet weaver sooner or in the future, preventedNazarene from ending up in a sweatshop altogether. What we’ve learned has application across manydifferent industries, like banking and hospitality and, as well, across different parts of the ESGspectrum, like carbon emissions and child labor. So today, we’re expanding our efforts with otherpartners, including NGOs and technology companies. Now technology is not a magic bullet, but it isunrelenting and well outside of normal business hours, it will go on searching across thesupply chain, across those tier one suppliers, their suppliers and their suppliers suppliers,potentially creating transparency in the supply chain back to the source of the rawmaterials, the cobalt, the palm oil, the cocoa, in search of that most preciouscustomer, children.And if it finds them, that visibility will allow businesses to workto protect children and maybe even provide some options on what to do next because theanswer isn’t always switching suppliers, which avoids the problem and can make things worse.Sometimes the answer is making investments in education, in appropriate working hours, in fairliving wages. And when those investments are made, we will have a very different story to tell aboutchildren, about how businesses are protecting them and building up our collective future. RACHEL SCHAFER: Thank you, Jesse. This is work is trulyso crucial, of the utmost importance, so encouraging to hear that we’re actuallysteering technology in the direction to meet these so important social considerations.Thank you for that. I’d like to now switch gears and turn the micover to Josh Matthews with Horses for Sources, who will be discussing a recent studythat they did with the CPO community related to sustainability.Over to you, Josh.JOSH MATTHEWS: Awesome. Thanks, Rachel. I think some of you have been lucky enough to have apre-glimpse at my slides and I might try and one-up you on the level of detail in some ofthem. It’s awesome to be here with you. I mean we’ve heard a lot about how sustainability justcannot be native without procurement. It touches absolutely everything. But I want you to bearsome things in mind before I really get into it. One is that CEOs and boards until now arenot involved enough. Some are involved and even in that case, it’s not enough to justhave a mandate, to just have a strategy. Investments too often playing catch up toregulations still. A couple of things to think about as well circulating in your heads, I wantyou to think about where the environment ranks in your priorities across ESG.So whether that’scompany, whether that’s procurement? Also, think about how easy or more likelydifficult collaboration is right now within your ecosystems. So this is roughly – sothe flow that I’m going to take you through and you should be seeing some numbers up on the screenthere. The one thing to take away from this under the 353 is the type of job roles that we lookedat and that we surveyed. So general exec managers, sustainability leaders, procurement, supplychain and operations and you’ll see why I’m drawing attention to that later on. So the first bit of this, how does sustainability manifest at an organizational level and how doesit then link down through the supply chain and into procurement? So what we found is that 40%when you see it will said that sustainability is led within their organizations by a dedicatedteam or a chief sustainability officer. About a third on the right, when it comes tosupporting sustainability, think procurement supports. And the big thing here, 27%, so about aquarter thought that their CEO or board supported sustainability within their organization/I mean that’s too low.And as I said earlier, it’s not just enough even for the ones who areinvolved, it’s not enough to have that mandate or a strategy and this is why. And if there’s onething you take away from today, it’s going to be on the next slide. So we asked the rest of theorganization, so everyone apart from procurement, where they thought that sustainability fellwithin procurements priorities? And over half of all of them, especially on the generalexec management and sustainability leadership, so over half thought it was a top three priorityand then, and look what happens in the middle when it comes to procurement leaders it drops off anedge down to 22%.Now that’s hugely problematic. And we saw the same pattern when we asked hownative is sustainability within organizations? What the recent change and importance ofsustainability has been? What people’s thoughts on the future? It’s the same pattern as always.There’s just a fundamental disconnect. I think the things to take from this clearly,those at the top whether it’s CEO, board, sustainability leadership team are not translatingtheir strategies into roadmaps, into metrics and targets and breaking it down throughout the wholecompany and especially in procurement.But also, if you’re on the procurement side, sustainabilityor sustainable sourcing rather is a priority at the highest levels within your organization.And it’s coming, it’s coming down from the top, it might not be tomorrow, it might not be straightafter COP26, but it is happening and that really needs to be an open conversation throughout theorganization at all levels, but there are barriers to this. And frustratingly, they’re the samebarriers that we’ve seen for over the last 10 years, way before I joined HFS when everythingsurrounded, so proverbial digital transformation and any kind of emerging technology.It’s data, it’s alignment, it’s silos, it’s C-level leadership, cultural change, you’llhave heard all of that before.There are platforms and tech companies out there who are trying topivot their technologies to address a lot of these problems, but honestly, the conversations we’rehaving with procurement and even sustainability leaders is that it’s not enough just to havesomewhere that you can dump data and integrate workflows and processes. As important asthat is, if you can’t get the data from the ecosystem and throughout the supply chain,then we said we’re in a huge, huge problem and the same barriers when we asked specificallyabout procurement and sourcing barriers, we also asked a lot about how people perceivedor are awaiting sustainability versus cost for a variety of sourcing categories.Thestarkest one came through was in the difference in how the rest of the organization thoughtsustainability was weighted in energy sourcing versus procurement teams who no way it’s waydown. It’s way low and the same, there’s a disconnect whatever the category is. We’ve heardsome over the last hour or so about IT packaging, corporate travel. It’s the same disconnect.Now so what’s driving sustainability in a lot of these organizations? And I want to start withbenchmarking at one point just looking at ESG spend.So we found that in a second that mostcompanies are spending less than 2% of on ESG. But the more important thing and there should bea slide in the middle with some nice data to look at, is that a lot of separate questions found thatthey were citing COVID-19 resiliency, efficiency, transparency as drivers for sustainability.Almost everyone in the study as well, sees sustainability as an opportunity, sees it in thewin-win, that I think everyone here has realized. But over half are planning either no change ora decrease in their ESG spend. I mean that is worrying.And then when you map it againsthow do they expect regulations to change, it’s a pretty good match. So there’s a callto policymaking here. Like we can talk between ourselves about how inherent business value isin sustainability and whether that is efficiency, resiliency, transparency. But if there’s noframework to work within, if there’s no visibility into the future what might be coming and asa leg up to people still stuck in that legacy mindset of sustainability, being costly or anice to have, we’re going to struggle. But also, you can’t afford to play catch up clearly.Now if we do all see it as an opportunity and we really believe that, then we need to get aheadof the curve and that investment really needs to come now. So a bit on I asked youearlier to think about where the ESG fell in your priorities and we’ll see that ina second. But from the general aura, you would think that the environmental side, net zero andemissions would come top. And it does appear in the data that the priority list you would think,looking at media or just general conversations, that is how it ranks when we serve it.And we askthe question in several ways, we’ll get to it. We’ll get to it in a second, so that you cansee for yourself how it nicely breaks down to Scope 1, 2 and 3 emissions. Then it comes downto – there we go, labor, human rights and health and safety and transparency. And this againwas surprising is how low down transparency, diversity, circularity come in almost everyquestion and every way that we ask this question. I don’t need to explain to this room whynet zero and decarbonization is important and social and governance factors are clearlya priority.They’re clearly in there, but it’s a note to make sure your focus needs to span netzero and all 17 UN Sustainable Development Goals. That will help especially on the transparencyand the visibility, that will come down and that will filter in to more visibility intoemissions and a general state of collaboration. So I’ve touched needing more than somewhere to putthe data and I’ll pull up some quotes from some of the procurement and sourcing leaders that we spoketo in a second, but that’s what they’re telling us. And there’s going to be an agriculture,agritech business on the right that was pretty brutal on this fact that they don’t see any valuein just having a platform or technology that can bring together data and process.They need firmsto use their ecosystems, you mentioned Microsoft earlier, plugged into practically everythingon the planet to bring data to their customers or to open source that data. I think we need tofind a fundamentally new level of collaboration through the ecosystem. We have the tech, coming back to digital transformation, as horrible as a phraseas it’s still is. It’s a proverbial – it’s people, process, technology, if you’ll allow me to useanother one and it’s also data and it’s change management. So much broader than technology.And just to finish off with the imperatives that hopefully, some of you have taken away that I’llhave gone through throughout the last ten minutes. But the one thing I wanted to finish on is I thinkpersonally, the biggest advantage that we have in sustainability and source of optimism on my end,is that we have goals. Like, yes, we need to get to net zero, move beyond as quickly as possible.We have 17 sustainable development goals, but this is a mile away from where we’ve been forthe last 10 to 15 years chasing this sort of vague specter of digital transformation.There is anend point. We can measure the starting points. It’s tough, but we can build roadmaps basedon that, filter it through the organizations, make it work throughout ecosystems, whetherthat’s competitors, suppliers, the whole thing. I’ve summarized this in about in 10 minutes andthere’s clearly a lot of data here. I’m not sure who won whether it was Rachel or me on the levelof detail on slides. But please do get in touch, whether it’s over lunch, whether it’s away,whether it’s virtual, in-person, email, LinkedIn, anything would always, always happyto discuss anything and everything, this study, sustainability. But for now, I’ll pass back overto Rachel, who I think is going to bring this to life with a case study. RACHEL SCHAFER:Sounds good.I think it’s a toss-upfor who had more detail, Josh. That is such good work through that studybut, obviously, still so much more to do to get sustainability on the map withexecutives and even procurement themselves. But, honestly, given that procurement is so heavilyinfluenced who gets hired into the supply chain, it really is a natural fit. So hopefully,we’ll continue to see some momentum there. All right, so great. The next and final sessionis related to BMW and how they are putting all of this to work. It’s a pleasure to introduceto you today, Mark Staiger, BMW Energy Management and Operations for the USA and Canada. Mark isresponsible for the overall energy management activities for BMW, including the responsibilityof fulfilling the renewable energy sourcing and energy efficiency targets. Mark’s joiningus today from Spartanburg, South Carolina. Along with Mark, we have Ryan Johnson, who’sjoining us virtually from Atlanta, Georgia. Ryan is Accenture’s North America Renewable EnergyProcurement Lead. He leads projects with both utilities and corporates addressing their powersupply, planning needs and more specifically, managing renewable power portfolios.All right, guys, really looking forward to this one.Ryan, I’ll pass the baton to you.RYAN JOHNSON: Very good. Great to see you, Mark. MARK STAIGER: Thank you, great tosee you here, Ryan, great to see you, Rachel. Thanks for the invitation.RYAN JOHNSON: Can you believe this global stage? Amazing. And it’s wonderful todiscuss this topic with an established leader in renewable procurement, such as BMW,doing great things. Okay, let’s begin. BMW has goals to reduce its Scope 1 and 2emissions by 80% and its Scope 3 emissions by 40%, all by 2030. BMW reportedin its 2019 Sustainability Report, that for every new BMW vehicle produced,0.3 tons of carbon emissions are created and this has decreased more than 55% since2016. Great progress is being shown. So how has your role as the North American EnergyManager shifted over this period and how will it change further to help BMW meet these goals?MARK STAIGER: Well, Ryan, my whole world has changed. I was an energy manager whoseobjective was to find the low cost alternative, to cheapest fuels, the cheapest energy thatwas out there for all our facilities here in the United States and Canada.Of course, we’vealways been into or after energy saving projects because BMW always believed in conservation,of course, whatever we don’t consume in energy, we don’t have to pay. Saves us money and, ofcourse, it’s good for the environment too. We’ve reduced our energy consumption since2008 by 60% here in the United States, which saves us plenty of money. Just to give yousome numbers, our annual energy consumption for natural gas and for electricity in the UnitedStates is around about 650,000 megawatt hours. That’s quite a chunk.We take this very seriouslythat even the compensation of our management is tied to achieving these energy saving targetsand the CO2 reduction targets of our company. I’m heavily focusing, of course, on our Scope1 and 2 emissions and for all of our sites. So resourcing and with the sources of the energyis really important to us, where is this energy coming from, how is this energy being generated?So we look past the price tag and we’re looking for innovations to save energy, really looking fornew ways to save energy away from the traditional, and new sources of fuel, new technology. BMWeven has a company called BMW i Ventures, a venture capital company, which is constantlybrowsing the market for upcoming startup companies which are helping us to achieve thesegoals. So this is a great opportunity for us and sometimes we invest in these companies. Global corporations like BMW can directlyinfluence and we can send a signal to the market that we are really looking for lowcarbon generated energy.We are really, really serious about this and to achieve this and carbonreduction and energy saving. We want this now. RYAN JOHNSON: I mean how does BMW thinkabout your responsibility for this and why not let the utilities that serveyou take the lead on procuring renewable energy rather than take that on yourself?MARK STAIGER: Maybe they should, it’s a little bit depending on the energy market where this is, butwe don’t want to wait on our utility company and to achieve these goals. We want to send a signalto the market. We want to be faster and we want to have a high pace there like our company is andwe’re not going to wait on the utility company to provide this, depending a little bit onthe market where we’re procuring energy. RYAN JOHNSON: Right, okay, so yeah, it soundslike your role has shifted to be part investor, part energy manager, part procurement, partsustainability which is not what you originally signed up for, but it’s an inspiring role for sureand it’s something that’s everchanging.Okay. Question two. So BMW’s largest manufacturingfacility not only in North America, but the world, is located in Spartanburg, South Carolina. Theplant is served by the regulated utility, Duke Energy. And it’s helpful to note that Duke Energyis also executing a clean energy strategy to achieve at least 50% carbon reduction by 2030. Andkeep that in context, I just said BMW has a goal to be 80% carbon reduced by 2030. So Dukeis at 50% carbon reduced by 2030. So BMW’s goal does not line up exactly with Duke and so,how do you reconcile the differences in target percentages and time frames and how does BMW seethe sustainability as a competitive advantage? MARK STAIGER: Well, Ryan, we’re here in South Carolinaregulated, as you mentioned, in a regulated energy market and we have to currently and we’re subjectto the current resource mix of energy production by Duke Energy. They have to provide the samemix to all the customers, including energy and generated by coal, natural gas, nuclear, hydro,solar, wind and other renewables.So they have to sell the same piece of cake to everybody.Currently, we make our energy green at BMW by buying wrecks, compensate this, but we want toget away from this. And together with Duke Energy, they enable us in this regulated energy marketto participate in the so-called, Green Tariff called the Green Sources Vantage Program theyopened up, where we can like in a free market, can go out and either invest ourselves orhave a solar developer invest in a solar farm here in South Carolina and the energy is producedon behalf of BMW and then piped through the Duke Energy network to our plant. So this is agreat opportunity for us to get away from wrecks and to make this energy more what we call atBMW, a high quality and sustainable energy.This, of course, we found the second thing. BMWwas always willing to pay more for renewable energy, but an interesting thing we found out waswith these power purchase agreements that we are taking on, long-term power purchases agreement,15, 20 year-long power purchase agreements with the solar farms and that we can actually hatchnow against volatility in the energy market with energy the risk of rising electricity pricesor natural gas prices in our territory.So suddenly, actually, and this doesn’t – wedon’t have to pay actually a premium for this. So we want to really improve the quality of ourrenewable energy on one hand, but it has really nice effect that we take off the volatility ofthe energy market as a side, really nice side effect. So we believe in that we want to actuallyhave high quality renewable energy where we live and breathe and not just buy wrecks somewhere ina different state. So this is what we – so we see this actually as a really, really big, alsocompetitive advantage and to keep our energy prices or the good energy in shape and then, ofcourse, this is what sets BMW apart, you know. RYAN JOHNSON: Right, right, right.And going back to the GSA Program, can you talk about the volumes associated thereand are you maxing out your participation in that program and how far does that go?MARK STAIGER: Good question, Ryan. And this program is regulated by the energycommissioner and by Duke Energy, so there’s a lot of rules behind this because we’re in a regulatedenergy market.We’re maxing out our participation which comes to around about 65% of our totalvolume of electric energy for the BMW plant here in Spartanburg, South Carolina. So for theother 35%, we still have to browse the market and find alternatives. And I think we’re ina good way. We found some options out there, how we can fulfill the other 35%. So we maxed outwhatever was possible to get into this program because it’s a very large portion. We have a heavyenergy use, as you can imagine or as you know. And, yeah, we are trying to find other solutionsand we found some and getting away from buying renewable energy credits.RYAN JOHNSON: Right, right. It’s interesting to see high quality brandslike BMW, also want to associate themselves with high standards and quality, you know, thoseare the words you keep using for renewable energy projects as well.And a large part of thatis being local within South Carolina. Okay. We heard earlier from Josh Matthews aboutthe importance of procurement to meeting future sustainability goals within corporations.How have you worked with your procurement team to meet the BMW energy goals and have youfactored in things like sustainability, you know, supplier diversity and how do youbalance that with the financial savings metrics expected from the procurement function?MARK STAIGER: Okay, Ryan, our procurement team here at BMW is great and I teamed up with themand I talk to them every day because, as you can imagine, I buy all kinds of different formatsof energy, but they really teamed up with me. They involved from day one to browse themarket and for the target that we have, we really have to go after innovationsrather than the value and strictly cost savings approach. So we have to leave, okay,we’re buying the cheapest energy out there, we really have to go new routes, chart newterritories into new markets that have never been done before or never been entered before.Ill give you an example, buying renewable natural gas, we didn’t know how to do this.And we hadreally had to go and invent certain things totally new, totally new products out there and there wereno products to purchase renewable natural gas. So we really have to go look past our legacysuppliers for energy and new criteria, finding criteria to them and go out there with astartup mentality, also look into these companies, of course. We want to make sure these companiesare in a healthy state, that they have good business practices and socialbusiness practices of the suppliers. So this is something we really go after totallydifferent routes and there might not be even a lot of competition out there. Former times,our procurement was really used to that I come to them with like four, five, six differentquotes of suppliers and they can negotiate with them. Suddenly I’m coming with one supplierbecause they are the only company out there who offer such an innovative new product.Sothis is and the things had to change and they did and they really work well with us.So as I said before, BMW i Ventures helps us to chart new territories here, to find startupcompanies and this really gives us a competitive advantage to find these innovative solutions.RYAN JOHNSON: I love it. Okay, let’s move to Scope 3 emissions. So Scope3 emissions are of critical importance. The BMW Sustainability Report states that you willreduce supply chain emissions by at least 20% by 2030. And earlier, we heard Kris stated up that -stated that up to 82% of all automotive industry emissions are Scope 3 and part of the value chain.So what expectations do you have of your suppliers and could you explain the thought process behindencouraging your suppliers to incorporate the same renewable energy practices that you do? And whatsteps are you taking to educate those suppliers, especially in states like South Carolinawhere we understand you have roughly 60 to 70 suppliers right there in the state?Mark STAIGER: Absolutely.We’re very aware that the Scope 3 emissions make a large portionof our total emission and it’s very important for us to get the handlers down them as soonas we can. You heard what our target is at BMW, what we feel the right thing is to do, what wewant to do, but we expect the same thing from our suppliers and of our logistics providers,that they do the same thing in energy savings and MCO2 reduction, but it doesn’tstop there. We’re not only expecting the same thing from them, but we alsowork with them together as a team. My team works together with a lot of localsuppliers and logistics providers here in South Carolina, for example, to educate them andteam up with them about how they can participate in the Green Source Advantage Program and how theycan reduce energy and usage for their facilities, for their production.We share ideas. It’snot a secret and how to tell somebody how to save energy, so we really work together as a teamwith them. Also, of course, we learn from them too and, of course, when our supplier basetakes care of their Scope 2 emissions, this automatically takes – reduces our Scope 3emissions. So it’s a win-win for all of them and, of course, for our local community too.I’ll give you another example. We are working very strongly with our electric energy provider,Duke Energy, and trucking companies to electrify truck fleets in a heavy way, for chargingstations, and believe it or not, there’s not a real standard out there currently for chargingplugs for trucks. We really work together in the large community with the trucking companies,with Duke Energy, on charges, on infrastructure, so this is where we really teamed up with them.So it’s not an expectation out there and then they’re on their own, but we really work asa team with them to achieve these targets.So this is really great working with them. RYAN JOHNSON: Right, that’s great. Okay, really serious question. How soon can we expectthat all BMW cars will be manufactured using clean 100% renewable energy across the globe?MARK STAIGER: Good question, Ryan. This is already happening. Our plants worldwide, exclusivelysourcing green energy, green electricity. Some, if you have a deregulated energy market,we’re procuring renewable energy in markets like South Carolina, we currently buy wrecks, but weare transitioning as you saw in very fast and big steps to have high quality renewable energy.We’re working also, of course, on the gas side to get the natural gas taken care of. Currentlywe buy wrecks. We’re working on projects, for example, for renewable natural gas as youheard before and I’m actually get the MCO2 out of this this energy source too.So we are really, really working hard and there’s still a way to go, but whatever you buyfrom BMW is M carbon free.And, of course, we want to be on the forefront of this energy transitionto eliminate fossil fuel consumption, to focus on electrification and digitalization and to developM and get the expertise and reduce emissions. Not only we believe, we in this transition away fromcarbon and carrying fuel but, of course, also our customer who buy our premium products. They expectthe same thing. They look far beyond now and how much was the gas mileage of the car.They lookhow is this car made? Was there a lot of carbon put into the production of this car? So thisis the same expectation they have and it’s the same expectation we have on our whole production.RYAN JOHNSON: Awesome. I’m really looking forward to well, any word on a BMW electric minivanbecause that’s what I’m in the market for. MARK STAIGER: I’m not aware of a BMW minivan.RYAN JOHNSON: Thanks, Mark.I just wanted to show my gratitude to you and your team for takingon the leadership position in reducing emissions. It’s been an honor and a privilege to be ableto work with you and I know my team is extremely proud of the work that we have done together. Andnow we get to showcase that work to the world, right. So very much appreciate it.MARK STAIGER: Well, thank you, Ryan and Rachel, for supporting us on thisjourney.It’s been really successful and it’s really working really well for us, evenespecially since it’s coming out actually as a saving for us. You know, we are experiencing thismore and more especially in this volatile market and for natural gas and for electricity that alot of these projects are now extremely actually saving for us. They save us money, you know.RYAN JOHNSON: Right. RACHEL SCHAFER: That’s great. Thank you both, Markand Ryan. It does help to bring this topic to life when we hear firsthand how Mark’s sourcing rolehas evolved because of some of these new company environmental aspirations. Ultimately, allof us working in sourcing and supply chain are witnessed to this tipping point withsustainability.Its such an exciting opportunity to work in this space, one, which I know I feelprivileged to be a part of. No other time in my career did I feel such an immense opportunityto provide a legacy for good in the world. That concludes our session today. Special thanksto our attendees, both those in our live audience, as well as those joining virtually. Itwas a pleasure hosting on this topic. We hope you get a chance to join many otherCOP sessions, finding both inspiration and tangible ways to put these ideas to workin your daily practices. Have a great day..

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