Vanguard Magazine

teCH WAtCH www.vanguardcanada.com AUGUST/SEPTEMBER 2019 41 way up the ESG market pyramid. Com- panies, asset managers and investors have been exposed to risks they were not aware of or prepared for. This fact has encour- aged the growth of supply chain sustain- ability assessments. Avoiding general risks all the way down supply chains is one mo- tivator for driving ESGs in supply chain. Another motivator is public relations. The Joe Fresh supplier building collapse in Bangladesh comes to mind here. PR clippings on companies are now being searched automatically by companies with AI techniques to determine news that may be positive or negatively connected to the corporation (it is more often nega- tively correlated from what I can see). Lastly, and possibly my favourite, is the "carrot" of driving ESGs. Some inves- tors believe that companies who have a strong handle on the wider positive envi- ronmental, social and governance benefits that their suppliers bring, are ultimately an indicator of how innovative and "high quality" suppliers may be. This is the type or argument you hear from many interna- tional governments about sourcing from them because of offset obligations. Israel comes to mind: a country with very high concentration of innovative suppliers, particularly in the cyber space. Sourcing from innovative suppliers should, in the long run, give a much bigger competi- tive advantage to the corporation than not. So, while they may be "contractually forced" into it via offset, in the long run, it should be quite beneficial to them. This is ultimately a multi-dimensional approach that recognizes the triple bot- tom line. When people and planet are dealt with morally, profits follow. After all, trust and a good reputation have always meant more dollars. As a new genera- tion of selective investors and customers comes of age, organizations lagging in this area will feel the negative effects. But it's not just the court of public opinion that needs attention. It's the inherent risk to equity value when the prevailing con- ditions for doing business are not sound. There are practical advantages to making changes beyond fiduciary duty and com- pliance with government regulation. But more often than not, it means a business model overhaul that begins primarily with re-evaluating procurement. My advice to big, global, publicly traded corporations is that they should think about the merging of their global offset strategies alongside their ESG strategies. It could be a win-win that ultimately supports companies' bid/capture and keeps sold strategies (i.e. global offset strategies) with driving maxi- mum equity returns for shareholders. I am certainly excited about what is to come in this space, especially as it transforms relationships with suppliers around the world, incentivizing procurement from companies that can dem- onstrate who their suppliers are and the long term environmental, social and governance implications from sourcing from them. Nicole Verkindt is the technology editor of Vanguard magazine and founder and presi- dent of OMX. She is a board member of the Canadian Commercial Corporation and was recently appointed to the board of the Peter Munk School of Global Affairs. Nominate companies for the Tech Showcase! REGISTER EARLY! Email: hpilot@pilothill.ca NOVEMBER 5 & 6, 2019 bestdefenceconference.com Early Bird Deadline is August 30, 2019

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