Using technology to develop a sustainable business model | BDO Canada
- Good day, everyone. My name is Stephen Payne, and today we'll be looking at using technology to develop a sustainable business model. Just a quick introduction. As I mentioned, my name is Stephen Payne. I'm a partner at BDO of BDO Canada.
From a perspective of my industry that I focus on is energy and natural resources as well as I focus on the technology offering within our ESG and sustainability practice. Just a housekeeping note. The session is or we can ask questions during the session. From what I understand is it's on the right-hand side, there's a chat option. So please place your questions there and we'll be happy to answer them as we go along or towards the Q and A session at the end.
So let's get started. The first thing that I wanted to do was before we actually get into the technology and look at how technology can help you on your sustainability journey is just to explain a couple of the drivers that are behind this whole ESG sustainability movement. And just one clarification and just how, when I describe ESG and sustainability at BDO we kind of interchange the words. ESG and sustainability for the purpose of this presentation is the same. It's the same, has the same meaning and you'll see and you'll notice as I describe these slides and as I go through the presentation, I interchange the words. So the first thing is what's important to note is from a ESG sustainability initiative, it's a journey, it's constant positioning, you're in a constant position to assess how you are progressing and then look at ways to improve on your progression.
So if we look at what is driving this, what is making organizations, you know, move into a sustainable platform, move to comply with ESG rules and regulations? And it's driven by a couple of different factors. Investors and stakeholders. Investors today if you think of it, they are looking, no longer looking at a short term. They're looking at long-term investments. What's important to many investors out there is the ability to look at an organization and understand how they are with regards to ESG.
Are they working well in their community? Are they diverse and inclusive? Are they adhering to a carbon reduction? You know, are they monitoring emissions and so forth. And also global supply chain, right? So if we're looking at an organization that, you know, you may, within Canada, they may be certain rules and regulations, but if you have partners, vendors and offices outside in let's say Europe, or in, you know, Asia, the way that they operate interacts and affects your ESG standards and how compliant you are. So that is really the risk side as well as is it's not just, you know, how you are operating here in within Canada, but it's across world. This is a global movement. The other is regulation. So those regulations may be from the local government, may be from regulations in other governments outside of Canada.
But once again, it affects how you need to be within your sustainability platform. And then finally here, and the other driver is our people, the talent that work for organizations, vendors. We talked about, if a vendor is offside with ESG then ultimately you become offside and then communities. So if an organization is interacting with a community, whatever industry they're in, there are certain, you know, you have to be certain compliance, there are compliance rules that you have to adhere to, and the, what you need to monitor is any nonconformances and how you going to mitigate those non-conformances. Next is is the part that assists in figuring out how well you're doing once you get on your journey.
And, if you look at a couple of the factors below, holistic. What that means is that it applies to the entire organization. It's not just to one specific area to the operational side or to the financial side or to the engineering side, it's across the entire organization. It needs to be transparent. Information needs to be available. People need to be able to take a look at it and assess it and also it needs to be reportable and measurable.
And that's where the technology base is going to fit in. As we get closer in the, you know, as we get through this presentation and closer to the technology we'll talk about how the technology platform facilitates in assisting that. This slide basically outlines within every organization what are the capitals that drive sustainability? This is integrated reporting, and typically an organization will report on their financial capital and their manufacture capital. So financial capital is your pool of revenue that you're generating, or that the organization is realizing.
Manufactured capital is your assets, inventory, anything that you are either purchasing, leasing, or creating. So that would be the two areas that you typically report on. And then there's also the human capital, how you're investing in your people. What's also important now with ESG and sustainability is how you're reporting and budgeting and forecasting on your intellectual capital, social capital and natural capital.
Natural capital is how you investing in the environment and that is a key area with regards to lessening your carbon footprint, looking at emissions and so forth. Depending on once again on the industry and the type of organization. each one of these capitals has different levels that you have to achieve. So what we gonna look at is when we get to the actual application, a couple of screenshots, we'll look at how the application or technology can assist with monitoring the different capitals, looking at the investment from your financial capital across the organization and how you're scoring and how your stakeholders, i.e investors, board of directors, you know, C-level within a company can access and see how that, how your capital is being invested across the organization.
The next part that I just wanted to mention from again, from a technology perspective is the maturity of your ESG and sustainability journey. So you may be just starting out, looking at how do we get to be sustainable through as you see, what we call activating then through compliance, proactive, strategic, and then purpose driven. So what's important from this slide.
We're not gonna go through every one of the different maturity levels, but what's important here is the technology platform applies across this entire spectrum, meaning that if you're just starting out, you're starting to look at how your strategies, your objectives and your roadmap, that is where you can start with the platform. And then once you start your journey and start looking at your progress, looking at your metrics, and then going through your constant reassessment and looking at improvement, that is where the technology platform facilitates that as well. So typically when we going through this journey to become ESG and sustain, and compliant with sustainability, we look at three factors, governance, what the organization needs to, the programs that you need to go through, your policies, procedures, your mission, vision, and so forth, then the strategy. Once we identify the governance we look at at goals and objectives, and how are we going to lay that out and then what risks are going to prevent us from doing that. So risks are blockers, risks are events or physical risks, that will prevent us from achieving our strategy and our governance.
And what we also implement are controls and mitigating activities to remove or minimize those risks. But what's key though is once you've got your governance, strategy and risk management in place, and your strategy laid out and your roadmap in place is the targets and measurement and reporting. And that's what this technology platform actually focuses on. And why is that important? Because it's great to come up with a report, with an ESG and sustainability report, but once that's in place, how do we know that we are achieving the targets and measurements and objectives that we set out in that report? How do we know that we're getting to that net zero position, let's say 2030, or 2050, or whatever the objectives are for that organization? How do we know that we've improved our, you know, relationship or interaction with our local communities? That is where the technology base will come in, the platform will come in and assist with that and we'll take a look at how it does that. So it gives you the ability to set your targets, to set your baseline, to track. It gives you the ability to assign activities to various resources or individuals within your organization.
So within every organization to achieve this, you know, sustainability or compliance, individuals need to be, will have responsibilities. And how do you monitor that? That's where the technology platform comes into play, because it looks at each individual what activities they need to achieve, and then how that is helping progress through. And then once again, a constant loop with regards to room for improvement and, you know, reassessing and relaying out your plan. And then finally what's important here is it needs to be auditable.
So we've seen a lot of organizations once they get their ESG and sustainability program in place, their reports are done that the monitoring is done in Excel. Excel can monitor this information but the question is you can't audit Excel. So you need a system that is auditable, that is ISO certified and that is what the platform is that we support. And once we get into a little bit more of the platform, we'll see that. But that that's what's important here is the word auditable is the ability to see changes, track changes, track whoever made those changes and a time and date stamp as well.
And then finally on the journey... Sorry. Jumped too many slides here. Let's now take a look at the actual technology platform. So what is this technology platform? The ESG technology platform that we support is called XGRC. It is a software as a service account a cloud-based platform and what that means is, is that all you need is a website, a URL to access, a user a license and away you go.
So, that platform brings together. It's holistic as I mentioned before. It looks at all avenues of the organization and all the different departments, and it brings them all together to enable your metrics and enable your ability to measure performance and progress within your sustainability journey. So it allows for real-time decisions to be made.
It's on a mobile device, or it's on a tablet, or it's on a web browser. It's independent of device which is very important. And what's important here is to be able to assign corrective actions. It's modular, which is great.
So you can start small, you can start with just one specific module and then grow into the other modules. But what's important here it has stakeholder management or engagement, stakeholders would be investors, stakeholders could be local communities, stakeholders could be employees, stakeholders could be vendors. So you set up your relationships with them and then any nonconformances that that you may incur with that stakeholder, you identify the activities that you go through to mitigate or remove them and prevent them from happening again.
The next thing is your enterprise risk management. We talked about at the beginning about risks that could be in place or prevent you from achieving the sustainability journey. So it has a full enterprise risk management platform within the solution. And what that allows you to do is you identify your risks, you identify your maximum foreseeable loss, and then mitigating controls and how the controls are going to minimize or reduce or eliminate these risks and the outcome of these risks. And then you identify individuals that are responsible for making sure the controls that are put in place are adhered to, and are constantly being looked at for improvement. The event and incident management module, we've got a couple of screenshots to show you there, what that does is any time something happens with regards to the person gets injured or there's a nonconformance with a stakeholder or some inspection happens and the objectives of an organization are not being met.
We record the event or the incident, and we record all the pertinent information that will then flow up into the dashboard. So within every one of these modules, it also flows, information also flows up into your dashboards for your KPIs and for analysis and review. The other area here that you can do, if permits are important to you and of responsibilities of a permit. When I say important to you if that applies to your industry or to your organization. The checklists are audited.
As I mentioned before, that is key. You can do an audit assessment where you go through, look at the checklist, look at your controls and on a periodic basis do a scorecard and see how well these controls are mitigating your risks and reducing the outcome. Your strategy and objectives and targets are identified right at the beginning and then how are you progressing and aligning to that. And then also it has a legal register and legal appointments. So what that means is you can apply legal requirements and municipal bylaws laws for around 37 different countries around the world.
And with these bylaws, you can actually track your conformances and are you adhering or aligning with them to be a sustainable organization from a legal perspective. So our typical deployment is we work with the stakeholders, with key members of an organization. If the organization is just starting off, if it's a small organization and it's not mature in the ESG space, sometimes it's a CFO.
Other organizations have chief sustainability officers, you know, in that case. But we work on your objectives and strategies and activities that you want to achieve on your sustainability journey. Then we import all those metrics into the application and then we start monitoring and reporting. So as we progress through, as we, certain events happen, we report that. We look at how the lines backed our strategy and objectives, and that all filters up into our dashboards and KPIs.
And we're gonna take a couple of look, look at a couple of KPIs that are standard within the system. Your controls, how well and effective they are in mitigating risk. If you are working with the environment with regards to your energy, your water, emissions, waste, and biodiversity, how you're achieving, you know, you set your baseline and how well you're achieving or complying with those metrics, you know, your feedback and closeout ratio, how long you set that in order to interact with this community, I need to have feedback within X amount of time, how well you are performing there. your risk assessment, your carbon footprint, and so forth, and your sustainable growth trajectory.
So if we look at this slide again, highlights how the technology platform is a constant secular way, secular way of assessing your objectives, looking at improving on how your sustainability journey operates and so forth. We started off with the strategy and objectives. We look at the risks and controls that are in place that could prevent your strategy and objectives from achieving will being realized. And then we identified controls to mitigate them and ultimately we constantly look at our performance, our KPIs, and so forth.
And then it, as you see, you go back to the beginning and you constantly rework this platform. So that's the important part. This is a learning tool technology and it has artificial intelligence in it, which we're gonna take a peek at some of that of where this will help guide an organization to helping with the activities in place to not, you know, to prevent you from achieving your compliance. We talked earlier about your six capitals for sustainability.
So this is an actual screen shot from our KPI dashboard section, where we have our six capitals for sustainability. And as you'll see here at financial capital is the first and then within the detail section here below, it actually outlines the different key areas that make up each one of the capital. This is the natural capital, making up your natural capital over here. And what it's showing you is that can even go down to specific areas that you measuring within your natural capital in this case and color-code it based on your performance and based on measurement. So this would reach you reach out into other systems. There is an open API that can reach out into SCADA, can reach out to IoT, can reach out to other technologies, ERP systems to pull this information, and then present it on this dashboard.
This dashboard is real time. This dashboard is on, as I mentioned any device. So at any point in time I can see how we are. You know, if we set up our goals for a specific organization and industry, how are we going to allocate our financial capital across the other capitals in, you know, throughout the organization to see that we are conforming to sustainability. Next is a sample incident window and within the sample incident windows, so this is when something occurs and in this case, this is an accident and it is compliant with health and safe safety, ISO standard 45001.
The system is also compliant with ISO standard quality 9001 and environmental 14001. So what happens is when there is an incident you identify what actually occurred. You can see that it's a built in with mapping software so if you need to identify to a specific area where this incident occurred, you can record it. It has entire workflow about the sequence of events that happened from when the accident was first reported throughout to resolution. The individuals that were involved with the accident.
If there were assets that were involved with the accident, this is key. And why is that important? So you can start looking at metrics about how, if it's a vehicle, or if it's a machine or something of that sort, you'd like to start looking at trends, that that information is all filtered up to your dashboards and then if it comes up on your KPIs to assist with making decisions there. The other thing that's important here is if we look down at the bottom here as I've highlighted, it's highlighting a risk assessment that was done.
So the risk assessment was set at a 3,000 level, and then with the controls in place, it reduced your maximum foreseeable loss down to 10. So what that means is that the, even though this incident happened a risk assessment was picked up, your artificial intelligence goes out and finds all the risk assessments that apply to this incident. And it says that in fact, the outcome or the consequence to the organization was mitigated, or there were factors in place to make sure that you know, if this wasn't an accident, that someone just got hurt. No one actually got severely injured and so forth because of the controls you put in place to mitigate the potential threat. So that's what's key there.
Once again, it brings it forward based on the incident. And then down at the bottom here it starts showing you other related incidents. So the system starts to compare and say, you know what? There are other incidents potentially involving same people, same assets or same circumstances, and starts to mirror that information together, or blend them together and say, you should take a look at those as well, because that will help you also assess and look at ways of improving and potentially instituting new controls because it's starting to identify new risks that are in place that are going to affect the, you know, the way that, that the outcomes of potential further incidents within the organization. For those that have never seen this before, this is called a bow tie risk assessment. And this is another module within the system and it feeds directly of the enterprise risk management module.
So what is this and why is this important? In the middle here is the event that can occur. In this case, reading off the screen here it says injury to a subcontractor. So that's the event that could potentially occur. And all these blue boxes here are the potential threats that could cause the injury.
But what you do is you put in place certain controls that identify or try and mitigate or minimize the impact of these threats to cause the event. So this could be any event. This is just in this case, an example of, you know, a health and safety event but it could be any event. You know, this could be a reduction of carbon footprint or emissions or whatever it is here is the event that could potentially happen. These are the controls here.
And then as I mentioned, your threats. Down below here, the color, of course, the dark green would be the most effective control. And red would be it's a control in place, but it still needs to be audited because it's not actually being that effective with regards to mitigating or preventing this threat from actually influencing the event.
And then there's also the ability to prioritize. So these yellow boxes have come out. It says prioritize the control so that the controls are in place ahead, those that are more effective, are in place first to try and prevent or mitigate the event from happening. Over here is the consequence. So the red boxes are what can happen. So you can see a financial harm, environmental harm, community harm, legal harm.
These are different outcomes or the consequences. But then you also have the ability here for your recovery. So these other boxes here that the green boxes and the red boxes are recovery mechanisms.
So, how do we minimize the consequence? So in the event that our controls over here don't prevent the event from happening and it does go through, here's a consequence and this is what it can put in place to minimize that. So what this does is it's a visualization of the ability to to do a risk assessment. It's automatically created so you, from the enterprise risk module once you've identified your risk and controls are going to potentially you know, prevent and then mitigate your risks from achieving sustainability.
It's a visualization, it's automatically created, as I mentioned and then it allows you to add additional controls here to try and as I mentioned, mitigate or prevent this from happening, or at least if it does happen, then what are the minimization here on the consequences? So a great tool and really well executed there of how it works. This is a sample dashboard. The sample dashboard here of what the, you know, as I mentioned, there's dashboards across the entire platform. This one here is specific to health and safety again, is what these dashboard, this dashboard is presenting here.
And it's by business unit, it's by date, it's by a different area. So if you have multiple branches, multiple offices or multiple locations, it will then present this information to you real time. And this information is available as I mentioned on any device for review and for analysis. Again, the most important thing is to keep in mind that the whole idea of the dashboards and the way that you see your information is to give you a platform and to give you the ability to constantly review your sustainability journey and offer room for improvement. Any questions before we continue? We are running a little ahead of schedule here. So if there are any questions that you'd like me to address, okay.
Okay. The question I'm just seeing... There is actually there's a 10 second delay so I'm just waiting for question here. If I believe that the question is, "What is the average time required to implement this platform into a small government model? In for example, a Northern delivery region." Excellent question.
The system as I mentioned is modular and when its, depends on which modules you implement. So within your sustainability journey once you have your strategy defined and well-defined, then to implement it you start off with your strategy and objectives and your enterprise risk. Or if you could go straight into setting up your health and safety, if that's important there too, and then how you interact with your stakeholders. We typically phase.
It's a phased approach and we work on getting the core platform up and six weeks to, could take up to three months that's dependent on the organization. And that would take you through implementing the platform, setting up your business units, setting up your security, setting up your, the people that work there. There's a, you know, an HR module, as I mentioned that comes with it that has certifications, has training and interaction and you know, throughout the organization as stakeholdership. And so take about six weeks to two months to lay out the first phase and then subsequent phases can come after.
Where it does additional time may happen is you're gonna have to integrate. If you wanna integrate this to a full HR system, integrate this to ERP, integrate this to some other system, to let's say, an enterprise asset management system. If you have that kind of system, it will take longer but definitely can get something stood up in six weeks. Any other questions? And hopefully that answered the, that was a, the answer would have clarified your question.
Just waiting for the delay. Well, thank you everyone for attending. And we will move into, onto the next question and answer session and to see if there are any other questions before we complete this topic.