ALBANESE ON THE IMPORTANCE OF MELDING ESG AND SUPPLY CHAIN

For Michelle Albanese, a great thing about being a subject-matter expert in ESG while also working in procurement is, the combination largely revolves around acting as a consultant. Such a role at large organizations means working as an internal consultant on ESG matters. Meanwhile, working with suppliers means guiding them and engaging those external stakeholders in ESG matters. Either way, it provides more influence than many realize.

“You’re the customer, and you can help steer them in many different directions,” says Albanese, a Toronto resident who runs MiRA Sustainable Solutions. “It’s a key role and the supplier, should really listen carefully to what their customers are asking about, whether it’s products or services, and how they’re responsible with regards to ESG and sustainability.”

MiRA Sustainable Solutions gives senior-level support and advice to help organizations navigate environmental, social, and corporate governance (ESG) targets. ESG is a framework that considers the needs of, and how to generate value for, stakeholders, like employees, customers and suppliers and financiers.

But Albanese’s journey into procurement and ESG was anything but direct. She earned a bachelor’s degree in environmental toxicology from the University of Guelph. Soon afterwards, she earned a master’s degree in environmental and health sciences from the University of Waterloo. At the time, a degree focusing on climate change or sustainability wasn’t an option.

“If I could go back, I would take one, but it didn’t exist,” she now says. “So, I got a bachelor of science in environmental toxicology with a minor in statistics because that’s really all there was for the environment. You were either an environmental engineer or you took an environmental science degree. I chose that undergrad and then I got my master’s in health and environmental sciences, so I really kind of stuck with the environmental sciences.”

Albanese has kept her knowledge current, earning certifications as her career has progressed. Among others, she has taken the Corporate Value Chain (Scope 3) Accounting and Reporting Standard Training through GHG Protocol, and the Climate Change & the Task Force on Climate-Related Financial Disclo -

“Before that role, I wasn’t really in procurement, or trained to be a procurement professional,” Albanese says. “I was more on the consulting side, responding to RFPs. So, I was on the supplier side, so to speak. I then found myself on the other side, working at the bank in a strategic sourcing department.”

Green Procurement

Albanese brought her environmental expertise to that role. In 2013, the discussion still focused on “green procurement,” with concepts like sustainability and ESG less commonly talked about. But the field evolved quickly to integrate more topics, like human rights, diversity, inclusion, and supplier diversity. Today, these issues are often referred to collectively as ESG.

At the bank, Albanese acted as head of responsible sourcing and supplier diversity; manager of corporate responsibility reporting; and manager, responsible procurement, among other roles. She moved on in 2021, eventually setting up MiRA Sustainable Solutions, which she now runs as senior consultant, owner, and sole proprietor.

“I’ve been in different consulting roles throughout my career, and what I enjoy about it is that you get to work with different types of companies on different types of projects, helping them solve their problems – it’s always different,” she says.

Albanese focuses on helping clients solve their ESG and sustainability challenges. Those challenges vary among clients, and Albanese works with companies of various sizes and structures. Publicly traded companies among her clients deal with specific mandates related to ESG and what they must disclose. Privately held companies aren’t necessarily mandated to disclose as much as their public counterparts. Her client roster varies by both size and industry. They include mining, manufacturing firms, and professional services providers, among others.

“It’s about helping them solve problems,” she says. “Some need a strategy. It ranges from their operations to their supply chain. Companies are now looking outside their operations. It’s about helping them look at an ESG strategy – where they can reduce risk, what do they need to disclose – but in terms of supply chain.”

With a fast-growing list of things that must be disclosed, more clients are looking for help with their supply chains, Albanese adds. ESG is complex and changing, and supply chains have third-party partners such as suppliers. Organizations must understand where risk lies and what to do to engage those suppliers. For example, many organizations are looking at the carbon emissions of their supply chains, with those emissions divided into scope 1, scope 2, and scope 3. Scope 1 covers direct emissions from owned or controlled sources, while scope 2 covers indirect emissions from generating purchased electricity, steam, heating, and cooling consumed by the reporting company. Meanwhile, scope 3 includes all other indirect emissions across a company’s value chain.

“Scope 3 is confusing to companies because it’s got 15 categories of how you can measure carbon emissions” Albanese says. “And this is just one example of one ESG topic that they’re struggling with. There are other issues, like human rights and modern slavery. A typical day for me is just helping these companies look at their supply chains and try to figure this all out and come up with that strategy and an engagement plan.”

Albanese speaks at colleges and other venues on responsible procurement and supply chain issues. She discusses term definitions and what they mean to practitioners. She also networks and reaches out to people who need help with their companies’ ESG programs.

Albanese has had opportunities to learn and create an impact. Yet, a few instances stand out from her years in banking. Her work in biodiversity conservation, for example, was especially rewarding due to the tangible outcome of seeing habitat and land protected. The impact of such work remains for years, she notes.

Working for a large company can create an impact that ripples across many employees and multiple lines of business, Albanese says. Anything accomplished internally has a substantial effect. Larger companies often have larger supply chains that can be influenced. Efforts can pay off – the bank won a green purchasing award, and a program Albanese ran won a supplier diversity award. While she appreciates the recognition, Albanese says she got the most satisfaction from helping suppliers improve their ESG and supplier diversity performance.

“I worked with hundreds of suppliers on improving their environmental, social, or ethical policies, practices, doing education, and because at the time we were one of the first banks to do that, a lot of the suppliers would say, ‘you know, no one has ever asked us these questions before.’ That was really challenging because then you had to really home in on how to educate and help them understand what you’re trying to accomplish together with them.”

It is satisfying to pioneer such work while also having some suppliers express gratitude because the questions helped them focus their internal sustainability efforts. It also helped to alert suppliers to this shift in procurement.

“When you work for a larger company like that and you have a big supply chain, you can impact so many companies and so many suppliers and help them along the way. I found that was rewarding,” she notes.

Albanese gets the same satisfaction from results in supplier diversity: “It’s when you are able to bring in a new, diverse supplier that everyone is just wowed with; to me, that means more than an award. It’s nice to get that external recognition, but I think it’s the outcomes of what you’re doing that make the difference.”

The pandemic highlighted the importance of the role played by supply chain and procurement professionals, Albanese says. Yet, some organizations struggle to realize that, perhaps because procurement, while it saves costs, is not usually a revenue-generating function.

As well, ESG should be integrated into procurement, Albanese says. When tied to ESG, procurement offers value beyond getting goods and services for the right price, in the right quantity, and other typical metrics of the field. For example, melding ESG and procurement can help to protect both an organization’s brand and its reputation.

“There are a lot of things that are outsourced; there is a lot of third-party outsourcing,” Albanese says. “You can’t really put a price on that and that includes making sure that you’re buying from other responsible companies. That’s where ESG comes in and integrating that into the whole cost and quality and all the other criteria that you have in a procurement project.”

The Value Of Esg

Some still think that ESG adds no value, Albanese says. Yet, risk mitigation is a benefit to companies that engage in ESG practices. Those practices strengthen a company by making the organization more resilient and increasing governance. Many organizations, especially large companies, are gradually realizing the value of aspects of ESG policy, such as supplier diversity, she adds. “It’s really just good business to do it,” Albanese says. “It’s part of doing business and making a company stronger.”

Albanese considers herself a life-long learner and looks for opportunities to stay up to date on ESG and supply chain issues. That can include taking courses, reading white papers, and otherwise trying to absorb new information. Acquiring that knowledge is something she plans to continue. Albanese enjoys the combination of procurement-supply chain and ESG work because, despite challenges, it’s possible to engage with many companies to create ripples that cause change.

Companies will need support to navigate this terrain. Albanese looks forward to continuing to help provide that support, for example by sharing her knowledge while speaking at colleges and universities.

“Supply chain is so dynamic and challenging on its own,” Albanese says. “The more we talk about it the more we realize, there isn’t one right answer. Companies need to start going that direction and then just take steps and figure it out along the way. I feel like I have done really well in the supply chain-procurement space, and I want to continue that as much as possible.”

Outside of her business, Albanese spends time with family – her husband and two schoolaged daughters – as well as a Tuxedo cat name Milo and a fish named Giraffe. She enjoys boating, swimming, and other water-related pastimes. She also bought herself a foldable kayak during the pandemic. She is an avid tennis player and golfer and loves the outdoors. Hiking and skiing are also among her interests.

While supply chain can sometimes be overlooked by those starting their careers, the profession provides opportunities to deal with multiple stakeholders on various topics, Albanese says. It also offers various areas in which people can focus, including contract management, negotiating, as well as ESG, which should be integrated into the knowledge base of those working in the field. A practitioner need not be an ESG professional to do ESG work in the supply chain, she says, although there is now more training available on the topic.

“ESG can be part of anyone’s supply chain or procurement role and integrated into their day-to-day activities in terms of, how are you going to score the RFP? What kind of criteria are you going to put out there?” Albanese says. “There are so many different ways to engage.”

Another development in ESG is a framework for climate-related financial disclosures through the Taskforce on Climate-related Financial Disclosures, or the TCFD. The Financial Stability Board (FSB) created the taskforce to recommend on the types of information that companies should disclose to help investors, lenders and others assess and price a specific set of risks related to climate change. Another initiative, coming in September and called the Taskforce on Nature-related Financial Disclosures, aims to give financial institutions and companies a complete picture of nature-related risks and opportunities. For example, says Albanese, a food company will need to report how they’re working with farmers and how those farmers impact the land, what chemicals they’re using, how those chemicals affect local populations, and so on.

“It intersects with climate change because if you’re cutting down trees, you’re not getting the carbon sequestration, you’re not helping climate change because you’re taking away a carbon sink,” Albanese says. “Climate change is also shifting how plants grow and how soils release carbon or the permafrost in the Arctic and how that’s going to release carbon with the temperature going up. Biodiversity is going to be impacted by temperature shifts. Their reporting is going to be guided separately, but the impacts of climate change and biodiversity are intertwined. Companies will have to start looking at the biodiversity impacts in their supply chain.”

Finally, Albanese stresses, spending money gives organizations a voice. Where companies choose to spend sends a message to suppliers and allows them to ask questions about ESG to discover what impact their spending will have. That opportunity for discussion with suppliers is important, and there aren’t necessarily black and white answers.

“What’s neat about procurement is you get the opportunity to ask tough questions,” Albanese says. “Have those conversations and see if that supplier really aligns to your values. And if they don’t, then you may have that difficult conversation about contract renewals or things like that, but it opens up the door of the conversation because every time you spend money with another third party, you have significant control of who you choose and what the relationship could look like.” SP

I remember the early days of industry-specific apps built on the MAI Basic Four. The early days of Oracle and SAP and their acquisitions and assimilation of competing platforms, as well as their mantra of “we don’t get out of bed for any project less than $1 million.”

Microsoft‘s interest in acquiring SAP (The Mendocino Project); and the high rate of ERP initiative failures, for example the Veterans Health Administration Bay Pines incident and the FoxMeyer drugstore chain collapse; the emergence of the on-demand SaaS model solutions implemented at a low cost in months or weeks versus years. Why am I sharing this history?

Because it’s time we stopped pursuing the “digitization dream.”

I could write a paper on the high rate of e-procurement initiative failures. However, I’ll talk about the few successes to explain why we have to stop thinking about digitization and focus on digitalization.

An exception, the Commonwealth of Virginia’s eVA initiative, is an excellent place to start. eVA’s success wasn’t based on its focus on one suite or best-of-breed technologies, but its procurement leadership taking ownership of its progressive integration. Or, as the top Virginia execs put it, they would have and continue to have success with any technology.

Assistant VP of strategic sourcing and acquisition services at the University of Maryland, Baltimore Keith Gagnon, provides his take. Gagnon held senior executive positions in Virginia procurement at the state, higher-ed, and county levels.

“Stakeholder buy-in is one of those reasons,” he says. “From the beginning, there was internal buyin from the top down—from the Governor’s Office to agency heads, procurement directors, and agency staff. This internal buy-in and advocacy lead to external buy-in from vendors and the public. Another reason is that eVA’s tools and the data they gather are accessible and actionable. Buyers and suppliers can easily access a wealth of data on past and present procurements to aid them with their current work and inform them.”

One thing that impresses me regarding the stakeholder buy-in with Virginia is that over 20 years, there have been many personnel changes, including the Governor’s Office. Yet, eVA seems to be in the Commonwealth’s DNA. They prioritized people’s buy-in by understanding what they needed to do to achieve their objectives, established the best processes, and adapted technology to align with these two elements versus having people and processes adapt to the technology.

PEOPLE, PROCESS, TECHNOLOGY

Technology is evolving into an intuitive extension and an extended partner to the human interface. We are focusing on processes that are aug- mented or assisted by technology instead of being defined by it. Unfortunately, many still look to technology to improve their processes rather than the other way around. I call this the “technology-process-people” approach to automation – which is a form of digitization.

Alternatively, some have modified the approach by focusing on “process-technology-people.” It seems like the ideal approach because you establish the process before seeking the technology to automate it. This is called equationbased modelling. However, it is still digitization – and you have seen its success rate in the past. So let’s revisit the Commonwealth of Virginia’s success, where the state used the people-process-technology framework, or agent-based model, to digitalize (not digitize) their procurement practice.

A Cultural Imperative

In a 2007 interview, the director of the eProcurement Bureau for the Commonwealth of Virginia, Bob Sievert – who has since become CIO for the National Association of State Procurement Officials (NASPO) – got my attention when he said, “that government is not just a “single business,” but is actually comprised of many different lines of business.”

He also expanded on his “single business” comment. According to Bob, the recognition on the part of Virginia that government goes beyond an org chart that includes higher education, K-12, corrections, public safety, transportation, health, social services and construction and so on, meant that they understood the “special needs, special rules and special challenges” associated with the procurement practice of each entity, both individually and collectively.

What this meant is that eVA didn’t fall into the cost justification trap of becoming an enterprise “software” or digitization project. Its success came from understanding the unique requirements (or operating attributes) at the departmental or people level. They made eVA a cultural versus technology imperative.

I’d like to discuss clean data in the context of digitalization. Rob Handfield is the Bank of America University distinguished professor of supply chain management at the North Carolina State University Poole College of Management and executive director and founder of the Supply Chain Resource Cooperative based in Poole College.

In the conversations I’ve had with Rob, there’s a common theme: the digital transformation, for example, digitalization of procurement, is impossible without “clean data.”

Here is the tie-in to culture and digitalization versus digitization; regarding clean data, 95 per cent of executives identify “organizational and process challenges as the primary obstacles impeding the adoption of big data and AI initiatives.”

So the problem with “accessing and using quality data to its full potential is a people and process issue,” not a technology issue.

According to the May 2021 article Getting beyond the Twilight Zone of data uncertainty, creating a data (and digital) culture “is an essential cornerstone for laying a solid data (and procurement) practice foundation.” Based on the above, are you digitizing or digitalizing your organization’s procurement practice? SP

BY DR. NAVEED AHMED KHAN