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19 June 2023

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How sustainable supply chains enable business transformation

Supply chains underscore sustainability and serve as the core of an organization’s ESG-related goals and objectives. With this in mind, supply chain leaders are taking the necessary measures to safeguard resources while identifying new opportunities to drive results. EY teams conducted a global supply chain survey, the EY Supply Chain Sustainability 2022 Report, which polled respondents from countries like Argentina, Canada, and the US for insights from the retail, technology, and agriculture sectors. The findings indicate that several executives have long-term goals for sustainable supply chains, but only some have the acumen, programs, and technology to assess their progress. Some challenges included costs and a need for a strong business case to justify expenditures. According to the US Environmental Protection Agency, more than 90% of an organization’s greenhouse gas emissions and around 50% to 70% of its operating costs are attributed to supply chains. As such, executives can clearly realize significant sustainability-related benefits to greening their supply chains in the long term. The study discovered that eight in 10 supply chain leaders are gearing their initiatives toward more sustainable operations. They are increasing efforts toward decarbonization, proper use of natural resources, ethical sourcing, and fair trade. They are also trying to increase innovation, lessen risk, and realize a greater return on investment for ESG-related initiatives. In the Philippines, many manufacturers, retailers, and local governments have taken steps to reduce plastic use in favor of more environmentally friendly materials. For example, several cities have implemented ordinances banning the distribution and/or use of single-use plastics for onsite dining. Several cities have also banned the distribution of plastic bags in their establishments. With the Philippines counting as a significant contributor to the plastic problem, accounting for 750 thousand metric tons of plastic waste entering the ocean in 2010, the Philippine Alliance for Recycling and Materials Sustainability (PARMS) and its member companies have committed to the Zero Waste to Nature, Ambisyon 2030 (ZWTN 2030) initiative. The initiative aims to divert waste from landfills by recycling materials and resources, supported by strategies and a roadmap with specific implementation timelines and targets to ensure that none of the industrial or post-consumer packaging waste generated by PARMS members ends up in nature by 2030. In addition, with the government’s passage of Republic Act No. 11898, also known as the Extended Producer Responsibility (EPR) Act of 2022, obliged enterprises established their own EPR programs for the EPR registration deadline in February. With the Act now being implemented, there is greater anticipation that the country will see a significant increase in its overall recycling rate. While the EPR Act initially covers plastic packaging, the coverage will gradually expand to encompass other materials as well. This article will delve deeper into the most salient insights from the report with the aim of supporting executives in achieving their sustainability-related goals. LACK OF TRANSPARENCY AND ROI-BACKED SUSTAINABILITY EFFORTSThe demand for supply chain-related visibility has increased with the burgeoning expectations of employees, regulators, and stakeholders. Consumers are becoming more mindful of ESG-related matters, such as sustainable sourcing, organizational health, and work conditions. The report showed that supply chain visibility was a top priority that year for executives, compared to it being a second priority for previous years. In addition, there is a crucial need to assess risks and plan for disruptions and crises. However, only 37% of respondents reported end-to-end supply chain visibility. Collaboration programs, data analytics, and digital tools can help businesses set KPIs and establish overall governance. Organization-wide visibility is a comprehensive initiative, and companies can use it to assess program effectiveness, track resources, and understand labor conditions. Management can also capitalize on technology to identify and home in on operational efficiencies. Notably, the report revealed that 33% of organizations lack a business case for sustainable supply chains, whereas almost half of the respondents reported that their companies have difficulties in measuring sustainability-related returns. Consequently, lacking a solid business case could lead to a shortage of financial support for long-term efforts. FOCUS ON END-TO-END SUPPLY CHAIN TRANSFORMATIONAs much as 61% of businesses reported that cost savings and efficiency were primary motivators for undergoing supply chain sustainability initiatives. Even so, financial gain was not the only benefit. According to Andrew Winston from a Harvard Business Review Whiteboard Session, organizations should prioritize four elements to concretize return on investment for supply chain sustainability: 1. Cost reduction. Improve operational efficiency, lessen material waste, and minimize carbon footprint. 2. Revenue growth. Assess how sustainable supply chains influence market share, profitability, and stock price. 3. Supply chain risk management. Create long-term sourcing strategies and manage compliance and regulatory risks. 4. Intangibles. Delve into sustainability’s relationship with brand reputation, customer loyalty, and talent retention. Moreover, 55% of supply chain executives expect improved operational risk management in the next three years, whereas 31% already reported more efficiency and productivity. Regarding long-term returns, 54% of respondents said they expect an increase in share price or other benchmarks of shareholder value. TAILOR-FIT SUSTAINABILITY-RELATED INITIATIVESExecutives must determine how sustainable supply chains fit into their business strategies. Businesses can structure their efforts by identifying how supply chains enable their goals. Deploying technological capabilities to improve visibility can boost supplier and stakeholder engagement. Organizations can broaden their RoI metrics to include intangible impacts and sustainability results. Given the ever-changing nature of the global market, companies need to go beyond standard business-case drivers such as customer loyalty, market share, and revenue. Enterprises should adopt an end-to-end approach, focusing on cross-functional collaboration, planning, and distribution to identify new opportunities. C-LEVEL CONSIDERATIONSAround 10% of respondents stood out in terms of progress in sustainability-related areas, and their organizations are realizing considerate benefits. One thing they have in common is their considerable focus on transparency. More than half (57%) of this group have public-facing sustainability goals. In terms of material gain, almost half of these trailblazing leaders have already reported a better employee experience. Compared with other respondents, these executives are reaping financial gains despite focusing less on cost-saving measures. At least 25% have reported increased revenue from their supply chain sustainability initiatives, while 43% expect an increased share price in the next three years. Lastly, the data show they are more likely to use sustainable supply chains to protect their corporate brand. Supply chain sustainability has become increasingly important as global market expectations evolve. Organizations are starting to identify financial and nonfinancial opportunities of ESG-related efforts, and executives who know which KPIs to prioritize are already reaping the benefits. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co. Benjamin N. Villacorte is a partner from the Climate Change and Sustainability Services team of SGV & Co.

12 June 2023

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The role of micro transformations in organizational growth

The global market and economy continually grapple with various disruptions and crises, and it has become imperative for chief information officers (CIOs) to maintain day-to-day operations with a reduced margin of error. It is incumbent on CEOs to balance technological investment with budget constraints while executives continually face the pressure of showing their clients and stakeholders the value of their operational strategy.The burgeoning demand for investment value underscores the importance of micro transformations in businesses. Micro transformations are incremental yet substantive initiatives that target an organization’s key performance indicators (KPIs) based on their overall business strategies. Compared to traditional projects, micro transformations can help identify bottlenecks and strengths of pre-existing processes. CIOs can use this agile methodology to generate value for their companies.Organizations can effect sustainable change across their people, processes, and technologies by focusing on gradual changes rather than larger-scale and time-consuming efforts. Micro transformations can help businesses adapt to and address disruptions while targeting their most valuable KPIs.Launching a new feature such as an automated customer service chatbot to address customer-specific pain points and adopting the cloud to streamline internal processes are examples of micro transformations. Another example of a micro-transformation project is the implementation of an online deposit account opening solution. In a remote world, financial institutions benefit from a completely digital, user-friendly and seamless customer experience. We see this demonstrated in some digital banks that allow the opening of deposit accounts with only a mobile phone. The ability to open a deposit account at any time and place provides immediate customer value.It should be noted, however, that micro transformations should also be guided by an overall transformation strategy to ensure that all micro transformation initiatives are cohesive. The small victories resulting from smaller, bite-sized technology upgrades can create instant value for organizations while paving the way for more robust digital initiatives, projects, and solutions later on.ADDRESSING DIGITAL TRANSFORMATION FATIGUEDigital transformation can be a cumbersome and intimidating process that may appear promising at the start but fail to deliver results. On the other hand, micro transformations can target benchmarks that would be most impacted by a new offering or service, reducing the time it would take for businesses to realize gains. Organizations can further develop operational efficiencies, risk mitigation, and resource optimization by clearly delineating KPIs.For example, an up-and-coming startup envisions a new strategy after having difficulties with launching its first product offering. This strategy involves interfacing with potential clients and investors while bolstering the former with recent market research. Getting fresh perspectives can help management focus on and refine critical areas most relevant to their strategic priorities. Considering the customers’ needs is vital in formulating a sustainable business plan, which organizations can do via smaller-scale initiatives.If one were to dissect a micro transformation, one could say that it is underpinned by more than just the solution and execution of the work. It also goes beyond automation and changes because it entails continuous improvement and deep process design efforts. This process incentivizes organizations to think big while creating an agile, scalable plan to materialize gains. By returning to the drawing board, companies can identify market opportunities and streamline their day-to-day operations, even if it means upending pre-existing processes. Micro transformations involve adapting to change with a data-substantiated, systematic approach coherent with the organization’s business strategy.REDUCE COMPLEXITY, ADD CONNECTIVITYTraditionally, an organization focuses on initiatives involving collaboration platforms, feedback mechanisms, and workflow plans. While these could yield positive results, siloed efforts often require considerable micromanagement, which could introduce more variables to an already complex system.Micro transformations take a more systematic approach by focusing on project-centered priorities. Data is fed to the appropriate teams, ensuring that the same workflow plan governs everyone. Knowledge is provided to the digital system, which continuously evolves with each project stage. This consolidated approach gives organizations a level of connectivity that would have been a challenge had they abided by standard and traditional practices. Micro transformations assist businesses with streamlining their day-to-day operations to adapt and respond to different risks, which could boost client and customer confidence.As companies pivot into the digital space, micro transformations allow them to capitalize on value-driven core capabilities and identify market opportunities without immense commitments. This streamlined process allows management to deconstruct silos and test the waters with less risk than traditional, larger-scale transformations. In this case, end-to-end digital transformation may be able to help businesses materialize value faster with minimal disruptions to day-to-day operations.ELEMENTS OF MICRO TRANSFORMATIONS1. Processing of data and identification of KPIsIdentifying and articulating KPIs are vital to micro transformations. Organizations can strengthen their overall strategy using analytics-driven data by focusing on metrics that directly impact the business.2. Optimization of KPIsOnce the organization has identified its KPIs, management can identify opportunities and pain points of the company. Consequently, they can refine their product offerings and address underlying areas of improvement.3. Engagement of clients and stakeholdersCommunicating with stakeholders at different points of the project is essential for the success of micro transformations. Organizations should align initiatives and engage interest to foster investor confidence.4. Identification of appropriate technologiesTechnology underpins successful micro transformations, and the former is requisite for implementing changes on an organization-wide scale. By leveraging suitable technologies, businesses can engineer KPI-specific solutions and implement agile application frameworks for various strategic initiatives.GETTING STARTED WITH MICRO TRANSFORMATIONSMicro transformations are holistic approaches that create business value based on their strategy-related benchmarks. This manifold process allows companies to enhance their operating models based on insights-driven data. Management must select projects carefully, delineate the appropriate KPIs, and focus on customer experiences and needs to boost confidence.While micro transformations can yield immediate gains, instant gratification is not the end goal. Ultimately, it is a systematic approach that can help organizations position themselves in the global market and pave their way toward bigger digital transformation agendas. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Armand N. Cajayon, Jr. is a technology consulting principal of SGV & Co.

30 January 2023

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Digital government: Creating real connections (Second Part)

Second of two partsTo better understand how lives are changing in the connected world, EY launched a new research study with over 12,000 respondents of working age called Connected Citizens. This global study looked at what these respondents value, their top concerns, and how they feel about the impact of technology. The study then aimed to examine their expectations of the function of the government, the provision of public services, and the nature of the interaction between those in power and those under it.In the first part of this article, we discussed the impact of technology in a more pervasive role, broader concerns from citizens regarding the impact of technology, and the seven Connected Citizens personas identified in the study.In this second part of the article, we discuss four key areas government can focus on to better engage with the public: agile and innovative policymaking, inclusive digitization, responsible data use, and public engagement and participation.AGILE AND INNOVATIVE POLICYMAKINGGovernments need to better anticipate the needs of the population and prevent crises before they arise. For example, governments can introduce new social safety net programs (like guaranteed minimum income or universal basic income) for low-income, disadvantaged populations.Case in point, in some countries, clearer rules regarding employment status and rights, as well as portable benefits plans that maintain coverage as employees move geographically, change employers, or experience periods of unemployment or self-employment, are some of the new policies being explored to combat income insecurity for those in precarious work, such as the self-employed and gig economy workers.Other initiatives include more flexible and lifelong education and retraining programs that help workers remain relevant and competitive, skills road maps that assist governments in understanding future-forward skills and jobs, personal learning accounts that provide workers with funds to learn new skills, and active labor market policies (ALMPs) to aid the unemployed and low-income workers in finding employment or retraining.INCLUSIVE DIGITALIZATIONDigitalization is necessary to quickly modernize public services and give citizens the same level of service as the private sector. However, governments must accomplish this while leveling society and making sure that no group is left behind.Broadband and 5G networks, among other investments in high-speed digital infrastructure, are required to ensure connection throughout a nation.Governments can also assist in supplying individuals with online-accessible devices and running programs to increase digital literacy, providing people the knowledge and assurance to connect with digital services. However, companies must also make sure that individuals who are not online have access to services in alternate ways. Citizens already comfortable with technology have higher expectations for the quality, expediency, convenience, and cost-effectiveness of service delivery.Governments can take a number of actions to address these citizens’ needs. The digital National ID system is a step in the right direction to help make it simpler for users to access a variety of services. They can also increase the use of smart websites and mobile applications that offer one-stop access to numerous government services and push notifications with timely information; develop integrated digital platforms that allow data sharing between various government systems so that people only have to enter personal information once; fulfill service demands end-to-end digitally; promote AI-powered chat bots to engage with users and conduct transactions; and create a true omnichannel experience enabling users to access services on various platforms and through various devices.Governments will be able to design their services with the aid of design thinking, customer experience laboratories, and data analytics as they progress toward more proactive and even predictive service delivery.RESPONSIBLE DATA USAGEMore data than ever before is being created, stored, and analyzed for the benefit of society, but there is also debate and controversy surrounding the expanding usage of data. New regulatory, legal, and governance structures are required for nations to take advantage of opportunities while also managing possible risks for citizens. Policymakers will need to carefully consider concerns like data privacy, surveillance technology, the equity built into algorithms, and the integrity of the information ecosystem. The recent controversial SIM Registration Law is one example where people are anxious about the access to their personal data.Governments are already tightening the laws governing how personal data is used. Furthermore, most governments already have laws that grant citizens active control over their data as well as the right to know how it is being used, such as the Philippine Data Privacy Act of 2012.Regulators must take into account how businesses use data in their AI systems. The general public is becoming more aware of the issues with algorithmic decision-making, namely in how it can result in discrimination against particular groups or result in poor decision-making. The regulatory setting needs to increase public confidence in these developing new technologies.Governments, public service providers, enterprises, and other organizations will need open governance systems at the institutional level to show how the data rights of people are protected.Organizations could also pledge to be open about the automated decision-making tools they employ and the safeguards they have in place. Governments will also better manage risks, guard against negative consequences, and foster the necessary trust as more organizations adopt these ethical design and governance best practices.PUBLIC ENGAGEMENT AND PARTICIPATIONTop-down governance methods will no longer be regarded as efficient nor legitimate in the future as many citizens demand shared, transparent, and participatory decision-making. Governments can have the opportunity to interact with citizens on problems that matter to them by gathering citizen feedback on a massive scale, thanks to new digital e-participation tools like social media, smartphone apps, and online digital platforms. Vox populi may take on a new digital meaning in the future.However, governments can ensure that citizens are not just consulted but also able to influence important choices. Many people are experimenting with various engagement methods to find, discuss, and decide on a variety of topics. For instance, Australia, Ireland, and other nations have employed deliberative citizen juries to jointly develop answers to difficult social and economic problems.Initiatives for participatory budgeting which give residents a say in how public funds are spent are gaining popularity. More than 180 policy laboratories have been established globally to foster ideas and serve as a testing ground for policies in areas like education, health, and justice. Additionally, government-sponsored hackathons have proven to be a successful tool to get people involved in developing new responses to pandemic-related economic, social, and technological concerns.Most governments and public institutions around the world are starting open data programs and establishing platforms for data exchange, emphasizing making data broadly accessible to third parties, especially citizens, to support the creation of original solutions to challenging issues while enhancing accountability and transparency. These are all crucial projects that can help governments in a networked world better serve all their citizens.TRUE DIGITAL INCLUSION VIA CONNECTED CITIZENSThanks to advancements in data and technology, governments now have a unique chance to better serve their populations. However, as with any revolutionary possibility, there is an inherent risk: that the desire to digitize as much and as rapidly as possible leads to a one-size-fits-all strategy that actually fits only a few citizens, further separating people from government.The Philippine government in particular has acknowledged the global megatrend of disruptive technologies that pivot transformation in various sectors — augmenting economic development and improving citizen well-being.To address economic recovery, the recently published Philippine Development Plan for 2023 to 2028 takes on the underlying theme of transforming the economic and social sectors and institutions for a prosperous, inclusive, and resilient society, with the digitalization of government services in the forefront of its transformation agenda.Included in the priority bills of the 19th Congress is the passage of the Open Access in Data Transmission Act that will improve competition and promote regulatory efficiencies in the digital market, and the Critical Information Infrastructure Protection Act and Cybersecurity Act that will strengthen the security and resilience of the Philippine cyberspace. These legislative national government agendas will pave the way to more and better programs, resulting in better government services delivery.By understanding that different people have different levels of digital maturity and access, governments will be able to better plan digital service delivery mechanisms that meet all of the needs of their citizens. Governments can do this to increase their effectiveness and efficiency, address digital exclusion to reduce social inequality, and contribute to the creation of more equitable social services for all. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Marie Stephanie C. Tan-Hamed is a strategy and transactions partner, EY Parthenon partner and PH Government and Public Sector leader of SGV & Co.

23 January 2023

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Digital government: Creating real connections (First Part)

First of two partsAs people increasingly look to the government to defend their lives and means of subsistence during times of crises, most recently under the pandemic, public policy and the provision of services are now under unprecedented pressure. There is widespread demand among citizens for more digitally enabled public services, and many of them want more control over how these services are provided. However, a sizable portion of the populace lacks the ability or resources to use digital services.To better understand how people’s lives are changing in the connected world, EY launched a new research study with over 12,000 working-age respondents called Connected Citizens. This global study looked at what these respondents value, their top concerns, and how they feel about the impact of technology. The study then aimed to examine their expectations of the function of the government, the provision of public services, and the nature of the interaction between those in power and those under it.TECHNOLOGY IN A MORE PERVASIVE ROLEThe increased use of technology in daily life has been one of the most noticeable changes catalyzed by the pandemic. It changed how people work, play, shop, study, and socialize in mere months. According to the study, a majority anticipate using technology even more in the future than they would have otherwise. As much as 64% of the respondents anticipate that the pandemic will result in an increase in the use of technology.Although governments worldwide have sped up the process of digitalizing many public services, many still fall behind private sector offerings like online banking and shopping in terms of anticipated gains in service delivery (although healthcare services are viewed more positively). Over half of the people globally (53%) believe that governments and public services have used digital technology to successfully combat the pandemic. This shows that governments still need to make progress in their digital transformation before they can live up to the expectations of the citizens they serve.We are seeing similar trends in the Philippines, where the government is increasingly focused on implementing and sustaining digital transformation strategies to bring about a true e-government that would strengthen connections with citizens by using digital and technology to achieve economic transformation and more efficient delivery of services to citizens. However, both government and stakeholders alike need to understand the deeper issues around technology in order to truly make the most of it.BROADER CONCERNS REGARDING TECHNOLOGY IMPACTDespite the prevalence of technology, the study found complex attitudes towards it. Most respondents (72%) believe it improves life and will be necessary in the future to help address ever-more complicated challenges. However, there are concerns about its broader effects. Growing socioeconomic inequality.The most disadvantaged people frequently lack the resources to access new technology and the digital literacy skills necessary to use it. Another issue is the use of algorithms for decision-making, which some believe may be biased. Nearly a third of people worldwide (32%) believe that not all segments of society will equally benefit from technology. And 34% believe that people who are already wealthy and powerful gain more influence as a result of technology.Diminished human interaction.Concerns have been raised about how using communication technology can affect social cohesion, with 32% believing that technology will cause people to feel less connected to their community. Some of the most vulnerable groups may experience increased isolation in a more virtualized society where there is less physical interaction.Digital security and personal privacy.The quantity and variety of data produced and the rate at which it is gathered will grow as more people and devices are linked. This creates public anxiety over personal privacy and a lack of choice over how data is used. More than 4 out of 10 people oppose the sharing of data with both the government and the business sector, while 72% oppose government selling their personal information to the private sector.Additionally, governments can do more to explain the advantages of data sharing and reassure the public that it will be used responsibly. The study reveals some support for data use when people are aware of the use case, and if it presents advantages for them personally or for society as a whole. This is especially true when it comes to matters of public health. For instance, 52% of people worldwide favor utilizing personal data to track and prevent disease, while 47% support using it to set priorities for healthcare.Building trust in government institutions will be crucial in increasing the effectiveness and efficiency of government operations as well as utilizing public efforts to help design and provide better services. The study shows that citizens are willing to participate more in the delivery of public services in the future, with more than a third identifying more performance transparency as one of their top priorities to improve public service quality. Additionally, 42% said they would like to have a greater say in how public services are delivered in their community.THE SEVEN CITIZEN PERSONASWith the study showing how complicated global citizen beliefs, values, needs, and behaviors are, understanding these identities can assist governments in forging more reliable ties with their constituents. It identified seven different citizen personas through survey data analysis: Diligent Strivers, Capable Achievers, Privacy Defenders, Aspirational Technophiles, Tech Skeptics, Struggling Providers, and Passive Outsiders.Diligent Strivers are young proactive self-improvers keen to advance in life. They expect seamless digital government services to help them achieve their aims, are comfortable sharing their data with governments, and strongly believe in equal opportunities.Capable Achievers have an older age profile and are independent, successful and satisfied with their life. Pragmatic technophiles who embrace digital innovation, they trust governments to use their data appropriately but worry about it getting into the wrong hands.Privacy Defenders tend to be older, independent and comfortably off. They value technology and the benefits it provides them, but are extremely cautious when it comes to sharing their personal data with governments or private companies.Aspirational Technophiles are younger, well-educated city-dwellers. Motivated by success and new opportunities, they incorporate technology and data into every facet of their lives. They are excited by the potential for new digital innovations to empower people and improve society.Tech Skeptics are older, on lower incomes and relatively dissatisfied with their lives. Distrustful of governments and skeptical about the benefits of technology, they tend to be opposed to data sharing, even with a clear purpose.Struggling Providers are younger and tend to be in low paying, less secure work. They are above-average users of welfare services and are ambivalent toward technology, lacking the access and skills for it to significantly impact their lives.Passive Outsiders have lower levels of income and education. Detached from the connected world around them and generally reluctant to embrace change, they are relatively ambivalent on data sharing but tend to feel the risks outweigh the benefits. The attitudes each persona has toward technology and their level of access and comfort with digital services are significant. Despite being representative of the online population, the survey participants vary in their comfort level while utilizing new technologies on their own. This indicates that governments should shift away from a one-size-fits-all approach towards service delivery and increase the level of personalization to improve public policy design, deliver more efficient and effective public services, and deepen the relationship between government and citizens.For instance, Struggling Providers, who would require the most assistance, would likely be unable to utilize services and miss opportunities if some services can only be accessed through digital channels. This leads to a worsening of the structural inequality they already experience.We have seen this ourselves during the pandemic particularly in the education sector where students were given the option to participate in online classes, yet a significant percentage did not have access to devices or the internet and had to resort to analog options such as printed learning modules. In the second part of this article, we discuss four key areas government can focus on to better engage with the public: inclusive digitization, responsible data use, innovative and agile policymaking, and public participation and engagement. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.Marie Stephanie C. Tan-Hamed is a strategy and transactions partner, EY Parthenon partner and PH Government and Public Sector leader of SGV & Co.