Start Your Sustainability and Profitability Journey with Our New E-book

[Transcript]

[00:00:00] Jan Griffiths: This is the Auto Supply Chain Prophets podcast, where you'll hear from experts of all facets of supply chain in the auto industry to help you prepare for the future. I'm Jan Griffiths, your co-host and producer.

[00:00:17] Terry Onica: I'm Terry Onica, your podcast co-host. Let's dive in.

[00:00:23] Jan Griffiths: Hello, and welcome to another episode of the Auto Supply Chain Prophets podcast. Let's check in with my co-host, Terry Onica. Terry, what have you been up to?

[00:00:31] Terry Onica: Well, I'm excited that today we're going to be talking about the eBook that I've been mentioning on the podcast for the past few months. It's finally ready and it's going to be launched in two weeks and you can find it on autosupplychainprophets.com and I am excited to be here with Alexis and Cathy, my colleagues that joined me in writing the eBook, and the eBook is entitled 'Delivering on the Promise of Delivering: Automotive Sustainability and Profitability.'

[00:01:03] Jan Griffiths: Boy, there's two words you don't see together very often; automotive sustainability and profitability. You tend to think of them as two separate things, but in this eBook, you're very cleverly bringing them together. And I absolutely love that. But let's check in with your co-authors today, shall we? Cathy Fisher, welcome back to the show.

[00:01:25] Cathy Fisher: Thank you, Jan. I'm so delighted to be able to share with you folks what we've been working on in terms of recognizing not only the intersection of supply chain and quality, but also recognizing now how ESG fits into that realm as well.

[00:01:40] Jan Griffiths: So, tell us a little bit about your role, Cathy, and your contribution to the eBook.

[00:01:45] Cathy Fisher: Certainly. Well, of course, I'm the president of Quistem and we work with automotive manufacturers, helping them transform their management systems into money making machines. And one of the things that we really encourage alongside of management systems, implementation and maintenance is integrating those management systems so that you are more profitable.

[00:02:03] Jan Griffiths: Great. Alexis, welcome back.

[00:02:07] Alexis Scipio: Thank you for having me. I'm thrilled to be back.

[00:02:09] Jan Griffiths: Remind our audience what you do and what is your contribution to the eBook.

[00:02:15] Alexis Scipio: I'm Alexis Scipio. I am the founder of The Thrive Point. The Thrive Point is an Environment, Social, and Governance, also referred to as ESG, consulting firm. We have a niche for helping tiered suppliers set up sustainability strategies to make sure they are addressing the OEM's requirements.

[00:02:34] Jan Griffiths: Love that.

[00:02:35] Alexis Scipio: My contribution is just that there's been this beautiful foundation set and ESG has an overlay that's perfect for this structure through the 24 Essential Supply Chain Processes.

So, we found an opportunity to kind of merge our work and there's this beautiful convergence and we do believe that there's a clear connection between profitability and sustainability.

[00:02:55] Jan Griffiths: Terry, what's your contribution to the eBook?

[00:02:57] Terry Onica: Well, my contribution into this is supply chain and IT. So, as we talked about in our first two ebooks, the intersection of supply chain and quality and IT, now we're layering in sustainability into that because it's becoming so important to the automotive industry. So, that was my role is to bring the supply chain perspective. So, the three of us ladies, we unsiloed and we put this eBook together.

[00:03:22] Jan Griffiths: As a recovering VP of Supply Chain in the automotive industry, I want to know. Why is ESG so important and why should our listeners start taking this so seriously? And I'm really interested in and intrigued with this idea that automotive sustainability and profitability go together in the same sentence. So, alexis, take it away.

[00:03:45] Alexis Scipio: So, there's a plethora of reasons why sustainability is so important and can lead to profitability. I believe there's a direct correlation to kind of knowing your systems. I think that companies that tend to have a stronger sustainability strategy are more familiar with their suppliers. They have a better partnership with their supply base, right? On that social piece. They understand their supply chains and the complexities of their supply chains, because they're tracking down to the raw material, you know, just making sure they're staying ahead of any compliance regulations.

And to be completely honest, even we'll go into the fact that they're able to attract talent and retain talent as Gen Z and Gen Alpha, they're yelling it to the world that they find sustainability very important and both as a consumer and looking for employers that have morals that align with them. So, we are seeing a direct correlation in companies that have sustainability strategies and being able to navigate, manage and predict unforeseen events.

[00:04:50] Jan Griffiths: I love that. Cathy, you're no stranger to publishing eBooks now, are you?

[00:04:56] Cathy Fisher: No.

[00:04:57] Jan Griffiths: You've published two eBooks on the intersection of quality and supply chain. But why did you add ESG?

[00:05:04] Cathy Fisher: What we were looking to do was update the information that Terry and I had put together in the previous two eBooks, recognize the intersection of supply chain and quality. And so, we went out to the field to kind of get some feedback about what advancements have been made, especially since COVID and the initial publication of those two eBooks that we did shortly after COVID, and we found not only was there some pretty significant improvement in terms of the elevation of supply chain being recognized within organizations, especially at the C-suite, but more importantly, that the key topic on everybody's minds and lips is ESG, especially in the past 12 months, that has really been a main focus and not just from a supply chain standpoint. We're actually seeing ESG as a topic across the organization and even at an operational level as well.

So, we realized that the direction we needed to take the discussion in this third eBook is really supporting this idea of how do you bring ESG into your organization from an operational level, as well as, you know, integrating it into your supply chain activities. And then from there being able to recognize what maybe we already have available in the work that we've done in the past that will support the ESG expectations, whether it be demonstrating to customers or other stakeholders, fulfillment of requirements, and even ESG reporting, which is now a big mandate.

[00:06:28] Jan Griffiths: Terry, I've heard you talk about ESG often when you're talking about MMOG/LE. What's the link there?

[00:06:36] Terry Onica: So, in MMOG/LE Version 6, which came out last year, we actually added requirements to address ESG. So, now there are industry requirements in supply chain board. So, where we added requirements is that in your strategy, when you're looking at supply chain at your plant level, you need to be thinking about ESG. So, making sure you're identifying opportunities to address ESG to become, you know, again, more efficient, to reduce your carbon footprint.

The other area that we added is now that you have to require ESG to your suppliers now as well, too. So, definitely it took a big importance in MMOG/LE Version 6. And Cathy, I wanted to have you talk about how we're seeing it play out in the quality standards.

[00:07:30] Cathy Fisher: Well, just recently, in fact, I think it was February 23rd, ISO released an amendment to all of its management system standards, which is kind of a first of its kind. I've never seen them do an amendment in the 30 plus years that I've been tracking ISO management system standards. And the essence of this amendment is essentially adding a requirement into identifying or understanding the context of the organization to evaluate how climate change is a topic if it is an issue for an organization. And keep in mind, ISO put this new requirement in all of its management system standards, and the language is very similar. We call it the high level structure across those management system standards. So, that statement or that requirement was added into ISO 9001. So, think about how does your organization's quality management system or the products and services that you're providing, what issues around climate change are those bringing up? How is your operations from an environmental or even a health and safety standpoint, having an alignment with climate change and you know, how are you impacting that within your business as well? That's a pretty big change and it's interesting the feedback that we've been hearing from a lot of our clients since that change came out and we've been talking with them about what does this look like for your business? How do you address it? In many instances, larger organizations can point to corporate structures that are addressing either through compliance or, you know, a dedicated sustainability function, how as a corporation they are addressing ESG or just climate change or any of those topics themselves, but where there's a lot more, let's say unknown, is how is this addressed at the operational level? Because it's not just about reporting. It's not just about saying something on your website or posting a sustainability report as part of your annual report. It's what are we doing in our operations? What are we doing when we're designing our products? And we're producing our products and even delivering our products, thinking supply chain that is materially affecting the environment. And also, are we considering social responsibility and governance as part of the overall operations?

[00:09:47] Jan Griffiths: That's fascinating.

[00:09:48] Terry Onica: And we feel this is going to be new, obviously, because of these new requirements to a lot of people at the plant level. They're not going to be familiar with this. And so, that's why the three of us teamed up. We said, 'We need to be able to help them,' because we know off the bat, this is not going to be something that's inherent to them. And we're really excited because upon doing research, I think this is the only eBook or information out there on how to help the plant to look at ESG within their facilities and to educate IT, supply chain, and quality on how to meet these ESG requirements. So, we're super excited to be able to help.

[00:10:23] Jan Griffiths: Alexis, I remember when we did your episode, you talked about the number of ESG, I think it was customer requirements that are out there, it was some crazy number. What was that?

[00:10:36] Alexis Scipio: It was 762.

[00:10:38] Jan Griffiths: It's probably grown since we did your episode. Wow.

[00:10:42] Alexis Scipio: Can you imagine? I like to have the visual of that circus act where someone's trying to keep all those plates spinning, right? So, you'll have regulations on fair labor. You'll have regulations on conflict materials, and it's just constantly trying to stay abreast of things that are changing with rapid speed. So, I think the most important thing that we try to focus on in such a dynamic environment, and I think great leaders are really good at this, is trying to kind of filter through the noise and say what foundationally out of all of these topics are likely to stick, like it's likely to stay around, and if good leaders hone in and focus on those and make sure that their systems are robust enough to support that; that's where they'll win. So, those are things like supply chain integration, making sure that you have robust technology and systems, at the end of the day, ESG is an immense amount of data to manage, right? So, you have to have tools that are large enough to carry that and make it into reports that are digestible. And then again, talent, attraction, and retention. If you focus on these topics, especially when we're focusing or looking to the future of Gen Z and Gen Alpha, a lot of the academia is now in incorporating sustainability, right? Regardless of what discipline or what school you're in: engineering, business, liberal arts, sustainability is becoming kind of embedded in that curriculum. So, if you just focus on a few key areas in the midst of all the noise and confusion, you're very likely to be well positioned.

[00:12:13] Jan Griffiths: I love that when I ask you that question, you knew that number right off the top of your head. You didn't even have to research it, right? And that's a big number. I'm sure people don't understand the scope. They have to comply to or with at a customer level and that it is really that complex. It's just mind boggling. And I love the fact that the three of you have taken your individual expertise: Alexis with ESG, Cathy with quality and management systems, Terry with all her supply chain and material systems, to bring it all together because you're right, I mean, I don't think there is any document that brings it all together in a nice, readable format that's automotive specific, because so often, in automotive, we don't get things that are specific, that are looked at through the lens of the automotive industry. And all three of you have been in the auto industry for a long period of time. Sorry, I guess all four of us have, right? But we're able to bring that experience to the table. And as I've said before with your eBooks, a leader in the auto industry does not want to have to look at 762 different requirements, figure out where all this information is, look for it, and put it all together in a digestible format. And you've done that for them. So, I applaud you all, you know I would rather have an ice pick in the forehead than go through all those content requirements to do that. So, I'm so glad that you've done it for our audience. But Terry, let's talk a little bit about technology. How does technology support ESG?

[00:13:56] Terry Onica: Well, like Alexis said, technology is going to be really key in this. There's going to be a lot of data and you know me, I hate spreadsheets. I think it's going to blow up spreadsheets. So, I think you're going to have to learn how to leverage systems. When you look at ESG, there's three key areas that come out to me where automation can help right off the bat. Now, in the eBook, I outlined several areas where you can look towards automation to help simplify your ESG, not only reporting, but internal gathering of information. One area that I know our customers are finding a lot of benefit is out of supplier relationship management tools. And I'm going to drop a couple case studies on the website; one is from grammer, and one is from AVL, but they're talking about how important it is to be able to track all this with your suppliers, right? As we mandate this down the supply chain, you have to have a good tool that's going to be able to tell you the position of your suppliers. The next area is in your transportation management system. So, you're going to have to be able to identify entities and products that could be associated with compliance, like the UFLPA. So, you're going to be able to need to know if you're getting shipments coming from those regions. So, that's going to be really important. And then, last but not least, obviously ERP, ERP can help you right size your inventory, reduce premium freight, be able to schedule better. And when we make all those areas in ERP more efficient, we are obviously reducing our carbon footprint. So, those are just some of them that come to mind right away. But in the eBook, I outlined several areas where you can look to automate.

[00:15:32] Jan Griffiths: Great. Cathy, how does ESG relate back to the 24 Essential Supply Chain Processes?

[00:15:39] Cathy Fisher: As we look to the requirements of ESG and with Alexis's guidance and her expertise, we recognize that each of the 24 Essential Supply Chain Processes which we'd previously recognized or identified as relevant to ensuring supply chain performance and delivering on the promise of delivery, we started asking ourselves, through the lens of ESG, how do these processes really demonstrate that an organization is sustainable? What kind of data is available that reflects their environmental impact? What issues or considerations are related to those processes that may relate to social responsibility? And then certainly there's governance on quite a few of those as well. So, we looked at the 24 Essential Supply Chain Processes relative to ESG and actually created a mapping, again. This mapping's a little bit simpler though because we essentially looked at how ESG, those different, let's say, pillars of ESG, relate to each of the 24 topics. And in this new eBook, we have a diagram that lays that out so organizations can then review their 24 Essential Supply Chain Processes. And we put in as well a set of questions to guide them in exploring how each of those 24 Essential Supply chain processes may contribute to ESG within their organization so that they can readily identify data or other information that they can call upon to demonstrate their sustainability in their supply chain activities in particular.

[00:17:10] Jan Griffiths: That's great. And I believe, Terry, you've got a special offer that you're putting out there to our audience, right? Tell us about that.

[00:17:18] Terry Onica: Yes! We're offering any of our listeners out there a complimentary one hour discussion with Cathy, Alexis, and I to start this discussion within your organization, help you to develop an approach in going forward. And that meeting could lead to, you know, additional meetings that we might need to have to help your team get started. But that initial one hour, let's just talk about it and what's the approach we really believe will be beneficial and complimentary as well.

[00:17:48] Jan Griffiths: Well, and it's not very often that you can have a call with three experts with deep expertise in three very different fields. Well, not very different, but you know, three different fields coming together. Imagine the time safe that that would be to our audience. So, I'm thrilled that we're offering that. Now, when will the eBook be available, Terry?

[00:18:11] Terry Onica: The eBook is going to be available on April 22nd, for you to download from autosupplychainprophets.com. And also, on the exact same day, we're going to be doing a joint presentation to our QAD user group to start to introduce the topic to everybody and get them familiar with how they can approach these ESG requirements. So, we're really excited.

[00:18:33] Jan Griffiths: And before we let you go. I want to hear one thing from each of you that our audience can do, can start, an action that they can do right now to start to embrace ESG. So, let's go straight to Alexis first.

[00:18:47] Alexis Scipio: One thing I think manufacturers can do right now is just to see themselves in ESG. And, you know, ESG is approachable, like it's palatable. I think that there's very likely things that tier ones, tier twos, OEMs are already doing that are ESG relevant, especially if you're TS certified and if you're ISO certified, there are tasks that are already going on that could be captured in a sustainability strategy. So, I think it's important to take those wins and celebrate the ESG topics you're already delivering. And obviously you can download the eBook right away. It's a great resource. It'll walk you through all of these steps.

[00:19:24] Jan Griffiths: I love that. Cathy?

[00:19:25] Cathy Fisher: I think a great place to start, especially for larger organizations, is to look at what the corporate direction is regarding ESG. Understand how, as a corporation, your business is addressing sustainability and what resources may be available from the corporate standpoint that can then be deployed within the operations and relevant to the operational processes.

[00:19:49] Jan Griffiths: That's great, Terry?

[00:19:51] Terry Onica: Well, I have two things: one, get familiar with these requirements that are now in the quality and supply chain standards because it's coming your way. And then secondly, like Alexa said, download the eBook but get yourself educated and be proactive with the organization. It's your opportunity to say, 'I understand what's going to be coming my way. Let's start having those discussions on how we're going to manage this going forward.' So, that would be my two recommendations.

[00:20:17] Jan Griffiths: What I'm hearing is ESG is not going away. It is here to stay. And the sooner you take action and start to understand what it's all about and what it means to you and your organization, the better. And with that, thank you all for joining us today on the Auto Supply Chain Prophets podcast.

Are you ready to find the money in your supply chain? Visit www.autosupplychainprophets.com to learn how, or click the link in the show notes below.