Coupa on driving meaningful ESG impact
The term ‘ESG’ can mean a lot of things to different stakeholders such as regulators, customers, investors, employees and functional leaders — including procurement. ‘Environment,’ ‘society’ and ‘governance’ can be such broad, overwhelming concepts that the details of what each goal means in terms of an organization’s strategy and process can get lost in translation. There’s an additional challenge for procurement organizations that seek to extend these varying ESG objectives out to the supply base/chain not just for regulatory compliance, but also in terms of creating and protecting core economic (and reputational) value.
To discuss some of these ESG challenges, Jason Busch and Pierre Mitchell talked with Donna Wilczek, Coupa EVP Strategy and Innovation to understand how digital technology and community input is helping businesses comply with growing government regulations forcing ESG change.
First and foremost: before a company can begin to implement ESG strategies, it should articulate clear ESG goals and translate them to the roles and responsibilities of functional stakeholders (and suppliers) within business operations.
“At Coupa,” Donna said, “we worked with our customers to create an ESG framework. We broke down the entire business spend management process, asking, ‘Where are all the potential touch points that have an environmental, social or governance impact? We then got to work building solutions and today have more than 100 configurations available for companies to use to reach their ESG goals.”
According to Donna, Coupa finds that across their customer base, the environmental side of ESG is primarily concerned with the reduction of carbon from supply chain and Scope-3 emissions. For governance, companies must ensure that the third parties they work with follow global regulations such as the German Supply Chain Act, EU Corporate Sustainability Due Diligence Directive (CSDDD), and EU Corporate Sustainability Reporting Directive (CSRD). Similarly, regional variance plays an important role in informing the social impact of choosing which suppliers to engage.
“In South Africa,” Donna noted, “it’s about being in compliance with the Broad-Based Black Economic Empowerment Amendment. In the US, it’s different classes of inclusive businesses from veteran to woman-owned and beyond. In the UK, there are small business payment regulations that require paying small businesses in a timely manner.” So, while a company can follow big-scale concepts that are broadly universal, Donna emphasized the importance of translating ESG strategy very concretely down to the execution level (which is where technology, of course, is pivotal).
Pierre picked up with how the Spend Matters team gets a lot of questions about how a company can dovetail its response to ESG requirements with business spend management. You must comply, obviously, but it almost always comes at an extra cost. “How does one make sure they’re in compliance while also getting some economic value? How do you operationalize this?” he asked Donna.
Donna pointed out that understanding the full end-to-end process can reduce waste and cost by addressing ESG inefficiencies. “When you look at many supply chain networks, the first thing you notice is the inefficiency,” Donna pointed out. “And what does inefficiency mean? Cost. For example, truck routes that cross over themselves repeatedly while also driving with empty loads waste mileage and unnecessary emissions. Fixing that both reduces the company’s carbon impact and improves cost.”
“But,” Jason pushed back, “how does procurement coordinate with others both in the supply chain and lines of business elsewhere?” After all, procurement as procurement alone can only have a limited impact on a company’s holistic ESG strategy.
Donna agreed that procurement can sometimes feel disconnected from the rest of the company. A CEO may publish their own points of view, write blog posts and talk about “A Grand ESG Vision,” but the RFPs Coupa receives for projects sometimes do not reflect these CEO ambitions. So, Coupa does extra legwork to bring the various branches of its customer stakeholders to each other. When the risk officer, the sustainability team, supply chain, procurement, finance and others are properly coordinating their actions, a holistic strategy towards achieving the company’s goals becomes easier.
Just as every part of the company must work together to enact an ESG strategy, every process and decision must touch on that strategy. “Let’s start with the basics,” Donna suggested. “When an employee is buying something, will you expose them to supplier diversity factors? Will you expand on their green status or sustainability items? Will you float these factors to the top of the queue so they can make an informed decision? When they book a flight, will you show them the carbon footprint of each option?” Obviously, the list can go on, but Donna maintained that if employees receive data around purchasing choices and their impacts, in the moment they are making a decision, they tend to make smarter decisions that fall in line with ESG imperatives. In this way, organizations move from simply reporting data to creating meaningful change.
But, as Pierre and Jason had pushed earlier, companies still struggle with balancing these imperatives with the broader one of keeping the value chains operating efficiently. “Of course,” Donna explained, “The Coupa platform enables customers to configure how and when the information is shared with relevant teams. For example, when the war in Ukraine started, our customers changed their workflows to automatically pause if they were doing business with a supplier in Russia. The risk team could then examine the business transaction — whether an order, sourcing event, contract, payment, etc. — and decide whether the business transaction conflicted with the company’s ESG commitment.” However, it is important to note that this was an exception to the ordinary flow of the business’s function. “Simply put, everyone plays a role in ESG,” Donna said. “But their involvement has to be appropriate. Not every transaction requires every person. You build processes that bring individual ESG issues to the parties that need to know. In this way, the business can operate smoothly with a risk aware culture that automatically redirects to the risk team as needed.”
ESG can seem too big of an issue for an entire company to effectively tackle at every moment. However, when it’s broken down into the various ESG elements and then meaningful choices are posed to the right individuals accessing and analyzing the right information, then ESG itself transforms from an impossible strategy to business as usual — and that will definitely be good for the planet, people and responsibly generated profits.
Donna spoke to Spend Matters about Microsoft as one example of a customer that is leveraging Coupa Supply Chain solutions to achieve its ‘carbon neutral by 2030’ goals. This includes using the Coupa platform to help transform its supply chain network using data to make smarter decisions, resulting in a 40% reduction of carbon emissions in parts of their supply chain; balancing cost to serve, time to serve, and emissions to serve customers.
Spend Matters advice to procurement is that business can no longer run from ESG changes: it’s not a matter of IF, but WHEN. Government regulations are evolving by the month and procurement should lead their organizations by breaking siloes to stay compliant and achieve CEO and board-level sustainability goals