How to Integrate Sustainability into Procurement Practices and Impact Sourcing with Everest Group's Rita N. Soni

Jeff Kavanaugh: Welcome to the Knowledge Institute podcast, where we talk with experts on business trends, deconstruct main ideas and share their insights. I'm Jeff Kavanaugh with Infosys Knowledge Institute, my guest today is Rita Soni, who leads Sustainability Research and Impact Sourcing at Everest Group, a leading analyst firm. Welcome, Rita. Thank you for joining us.

Rita Soni: Thank you so much, Jeff. Pleasure to be here.

Jeff Kavanaugh: Well, first of all, let's just jump in. What role does sourcing play in a company's operating model?

Rita Soni: If you go back to sort of the basic principles of sourcing, it's focused on what are the things that the business does well versus what are the things that others are doing better. So procurement, sourcing, whichever term we want to use, leads that initiative to get those resources into businesses, be it physical or services or technological.

Jeff Kavanaugh: It's just fascinating the choices people make and the huge impact that it has. So speaking of impact, sustainability affects so much of a business and sourcing because it literally involves all this procurement and all this sourcing plays a big role. So broadly speaking, how does sustainability fit both when you look at sourcing and even broader?

Rita Soni: In order for procurement to be strategic, they need to be more present in all of these spaces, and sustainability is an important part of that. And specifically when we look at impact sourcing, it's about how outsourcing can be impactful based on who's hired. We don't usually like the term outsourcing anymore, but it is a thing. It's a very big thing.

At the bottom line, there's a lot of money that's spent on it. There's a lot of people involved with it. And so impact sourcing as a concept named by Rockefeller Foundation about a decade ago was really about how do we make this industry more impactful based on who they bring in.

Jeff Kavanaugh: Just to clarify, you're focused more on services sourcing, not hardcore product sourcing.

Rita Soni: Exactly.

Jeff Kavanaugh: It's talent.

Rita Soni: I mean, we are focused on technology and talent services, but this could apply to anything you're building. Folks that are coming into your building and doing all kinds of activities like cleaning and your cafeteria folks. We're focused on the technology side. But yes, this is absolutely the focus.

Jeff Kavanaugh: You've been doing this for a while, and we talked before about where procurement came from and all the past. How is this area of impact sourcing evolving? How is it different than before?

Rita Soni: When we were talking earlier, I was reminded, I came to this industry from time at GE working in manufacturing, hardcore looking at cost-cutting, but also looking at quality and looking at procurement as this strategic function. And then came into the global services industry and didn't necessarily see all of those things until impact sourcing came to the fore. And when Rockefeller created the concept, there was a lot of focus on developing countries because this space, this sector has done so much for...

If you look at India, for example, it put India on the globe. It was no longer the country of little children with bloated bellies. It was now a tech giant. So I think a lot of the focus for Rockefeller was initially developing countries. Can we replicate what's happened in India and the Philippines and parts of Latin America in Africa, for example? But what's evolved over time is entrepreneurs as well as executives and these leading companies have realized there's inequity literally every part of the globe.

So it's become something that's happening in the United States and in Europe, be it looking at the refugee crisis or looking at second chance hiring, or even... There's a small company in Arizona that's working inside a women's pris-on. So I think this idea that there are people that are getting excluded from this industry, and it's fairly easy to bring them in, be it that they need some training or maybe they need some technology, if we look at people with disabili-ties. Perhaps they need screen readers or different kinds of desks, but they can be brought in.

And not just brought in because it feels good to bring them in. They're brought in because there's a business case to do it. The business cases are that there's lower levels of absenteeism, lower or better retention, better quality. And oftentimes if you're moving to a geography where you don't have a presence, say you're a consumer brand, it's a way to enter into those markets and get your brand known, et cetera. So just a number of benefits to it. There's no drawbacks except for needing to bring them up to speed.

Jeff Kavanaugh: Do you have a sense for the size, both what's going on today and what is the potential? I'm not sure if you'd meas-ure that in people or dollar or...

Rita Soni: We mostly measure it in people. We do look at the dollar figures as well, but that was something that we did two years ago. We did a full state of the market and found that there was about 350,000 people out there that we would identify as impact workers.

Jeff Kavanaugh: Is that the US?

Rita Soni: No, global.

Jeff Kavanaugh: Globally.

Rita Soni: And with that number, we actually were able to make a pledge at the newly launched Clinton Global Initiative that we think that number should be much larger. So in effect, we made that pledge on behalf of you and others in the industry that that number can grow.

Jeff Kavanaugh: Put me on the spot. Did we sign up for that?

Rita Soni: You did.

Jeff Kavanaugh: Good.

Rita Soni: You did, of course. So we made a pledge that the number could go from 350,000 to half a million within three years. The amazing news is that last year we were able to do a public update after one year of this pledge, and we think we're within striking distance of that half a million already. There's a lot of disruptions that are taking place right now, especially with Gen AI and uncertainty in the economy.

The last year and a half of uncertainty affected this space, but we do think that we're still going to go with the three-year target. We can probably go with something bigger.

Jeff Kavanaugh: Do you see governments and NGOs receptive, getting the kind of support that you want from it? Because they might want to do this, but there's a lot of competing interests.

Rita Soni:It varies country to country. In South Africa, they do have a policy specifically about impact sourcing. In places like Egypt, they have policies around hiring people with disabilities that cuts across all industries. In the United States, there have been a lot of these economic zones that are giving individual companies support to do this. And the form of the support is often the space that the NGOs operate, which is in training, in up-skilling, in facilitating things like transportation and other things that could potentially.

Jeff Kavanaugh: Well, putting a plug-in for the Infosys Foundation, both in the US and elsewhere, that's a big part of the training for computer science training educators. And I'm wondering that might be an area as well to look at.

Rita Soni: Exactly. Exactly. And the fact is that there's a lot of philanthropy out there that's supporting up-skilling and training, and then that just becomes a pipeline for these jobs because you're not just training for training's sake, you're train-ing so that someone can have a livelihood.

Jeff Kavanaugh: What are some of the more surprising things? Because people would think this is a good idea. What are maybe some examples of where you've seen this really be successful?

Rita Soni: So there was a partnership that was created with a smaller Indian company called DesiCrew, and they took me to one of their centers, and it was filled with women of varying ages, but from the community that the center was based in. And they were doing the exact work that you would've seen in the Bangalore Infosys campus. So that to me was very exciting to see. That this work could be done anywhere and this is way pre-pandemic. Now post-pandemic, what we're seeing is large businesses are adopting this practice, which is exciting and can help us with these numbers.

But I think what's also interesting is how different groups keep coming up as needing support for inclusion. So for example, there's a business that was operating in the Caribbean, and they realized that almost a very large number of their staff were solo parents, many of them women again. So we know that there's a gender gap within this glob-al services industry. It's actually getting filled with women that have a harder time with a job. So be it work from home or flexible work schedules or childcare.

And of course, those are not just issues that women care about. Everyone cares about those things, but those are often the things that are keeping them out of the workforce. And so businesses are finding if we can solve for that, we have a new workforce. The other surprising thing that we've learned is the services delivered continues to grow and evolve. Instead of it being a race to the bottom. Instead of data entry going away because we've got scanners that can do the data entry or we've got AI or gen AI that's figured it out.

For example, self-driving cars. There's a slew of people that are out there that are training the models on how to do self-driving cars. And again, I saw this at a center where the employee was looking at this screen and she's like, "See that car? I can actually see another car behind that car through the windshield, and we need to make sure that that other car is tagged." I think the surprising thing is that the space just keeps evolving and more and more services need to be delivered, and it just becomes a bigger and bigger opportunity.

Jeff Kavanaugh: What do you see for the next few years that business leaders can do to take or continue this evolution to be practi-cal, hit the bottom line while advancing towards these goals? I mean, you're in a perfect position as an analyst look-ing across the industry.

Rita Soni: And I like the soliloquy there of how things have evolved. I would add one more that businesses have set targets for, say supplier diversity. And setting those targets, having measurable goals is important, but also keeping an eye on what was the outcome that you wanted out of that as opposed to blindly following those measures. So what I am hoping to see in the next five years is that all of these initiatives start to come together and not rob Peter to pay Paul, but more complement each other.

So you're not going to a supplier only because they're diverse and then removing your business because they've gotten funded because they did so well, and they're no longer diverse. Rather, you're looking at their employment practices or you're looking at is there impact sourcing happening here? And again, I'm going to say the DEI phrase as well. The inclusion piece to me is what matters. And not that you're using the right terminologies or being politically correct or any of that. It's inclusion for a business reason.

So I completely agree with integrating and measuring and being more concrete and leveraging the social sector like NGOs to reevaluate and make sure that you've met those targets and see that there's some true impact, be it socie-tal or environmental. Kind of back to the basics of procurement too. Let those that know that part of it, do that and let the businesses keep going and growing from the benefits of learning what's working, what isn't.

Jeff Kavanaugh: In our earlier discussion, you mentioned you see part of the sourcing is companies want to reach new markets either to put operations up there or to sell into them. Talent in the sourcing aspect becomes an issue. What are some things that you're seeing both as challenges and also possible tools or services leaders could take advantage of to overcome that?

Rita Soni: We've seen a lot of really interesting things happening in emerging markets, be it partnerships with local outsourcers or local providers or working with employers of records that you don't need to set up a whole HR system to do that, or even recruitment firms that are doing a lot of that sourcing of talent. But I think the main thing in going to these new markets is to be patient. We were initially talking about impact investing, and I think one thing that's happened in this space of trying to do good is we've forgotten that some of these things take time.

I even sort of have this rant on the ESG front that, "Oh, there's so many standards. There's so many things. There's so many different ways of reporting." And I'm like, "Oh." You know financial reporting took 200 years to settle down, and even then it's still changing. So let's be a little patient with these spaces and then celebrate the successes.

Jeff Kavanaugh: Maybe a duality where you let it evolve at the same time, you just have two or three or some small number of the big metrics you're heading towards while you're sorting through the new gap.

Rita Soni: Exactly.

Jeff Kavanaugh: I have to ask it, what do you see with AI or generative AI playing for sourcing and sustainability overall?

Rita Soni: I think there's the pros and the cons on the sustainability front. It's often more about the environmental impact of a lot of this computing power.

Jeff Kavanaugh: Smart buildings have really benefited from advanced analytics.

Rita Soni: Exactly. So I think at the end of the day, there are pros and cons, but I think probably the part of the con that doesn't get enough attention is... Well, it gets talked about, AI and ethics. How is the AI getting created? Is there explainabil-ity? Are we able to really remove the bias without it becoming a ridiculous situation like we've seen? I think the oth-er piece is how are people impacted? And one is making sure that talent is trained to use the AI, because at the end of the day, this is supposed to be our...

I think about the Microsoft paperclip. I think of that as this is going to be a better version of that paperclip. So I think one is making sure that it is a tool that's useful for most folks. And two, that as jobs get eliminated, because they will, that's what happens with each of these things. The efficiencies. We're also training talent to take on the next challenge and to take advantage of the technology to solve other problems. So for example, I recently visited a cen-ter, their client was the x-ray machines that we see at the airport.

And right now it's literally a person who's just looking at it. They're training that system to at least be able to recog-nize some of the most egregious things. Now those agents are then learning about density of materials and looking at different things. And maybe they've never traveled before, but they're still getting this kind of experience. As the technology evolves, the greater number of opportunities that are out there, impact workers can be doing all of those same things.

Jeff Kavanaugh: Well, wrapping things up, what is it that a business leader should look at as they look at sourcing, look at sustainabil-ity, look at these RFIs, and they're trying to figure out what to do. What's some advice you would give?

Rita Soni: So I think that the best advice I can give is instead of paying attention to what's happening in the headlines and re-acting to those things, I think it's more about what's going to benefit your business and help you reach all of those goals that you've put out there. Businesses are putting out excellent sustainability goals. See procurement as a part-ner in meeting those goals, be they environmental or social.

Jeff Kavanaugh: Well, thanks a lot for the very interesting discussion. The Knowledge Institute podcast is an Infosys Knowledge Insti-tute production. Be sure to follow us wherever you get your podcasts. And visit us on infosys.com/iki. Yulia De Bari and Christine Calhoun produce the podcast. Dode Bigley is our audio engineer. And I'm Jeff Kavanaugh of the In-fosys Knowledge Institute. Keep learning, keep sharing.