Jan 15, 2013

Why Global Business Services (GBS) drive sustainability, and why it matters to the CEO

January 15, 2013 - It is not about the carbon footprint of G&A - there is much more at stake. Despite all the posturing and fanfare, many organizations still don't see "sustainability" as a critical boardroom topic (see BCG survey here). The reason why CXOs and GBS leaders can be aligned on the sustainability agenda is because GBS does impact the company's sustainability strategy, in the real sense of the term. 

Sustainability is about building resilience and optimization of resources to enhance three macro areas: economic sustainability of the company; social sustainability of the human resources directly and indirectly touched by the company; and finally, sustainability of the company's environmental footprint. This is the real formulation of the concept. When framed like this, sustainability is a surprisingly useful framework to manage the current market volatility - and has much to do with the concept of "antifragile organization" introduced by Nassim Taleb. And indeed, GBS organizations do help getting there. 

First of all - economic sustainability. This is about doing more with less, responding to fluctuations without getting revenue, cost or asset intensity out of balance. It is, no doubt, CXO-worth stuff. But it t is also like driving a car at high speed - which CXOs figuratively always did, but this time on a mountain road. You want to have a good car, and you want to be a good driver. 

GBS' focus on industrializing back and middle office operations does help, and not just keeping the cost of G&A in check - after all, that is unlikely to be much more of 10% of cost. Instead, GBS enable business lines to operate better front end and risk management processes, be they order to cash in developing markets or transaction monitoring, or enabling stronger sourcing analytics. On the asset utilization side, the current volatile demand and supply environment often throws inventory optimization off kilter - and part of the solution can be found by industrializing the heavy-duty analytics required to optimize inventory.

Second, the social sustainability case. This is about people, and what your business does to them. 

Within the boundaries of an organization, massive talent imbalances in both developing and developed markets aren't just the HR Director's nightmare anymore - they have spread over to the rest to the C suite. The development of new leaders and in general workforce planning are significant issues. Companies able to develop human resources at scale have a significant sustainability advantage. GBS models have proven able to both harness talent creatively, and create livelihoods where employment was previously difficult - offshore, near-shore, and onshore. The industrialized operations model typical of the best global business services is a modern type of factory, staffed with highly educated white collars, in a time when economist have indicated that large scale employment typical of factories is exactly what is needed for the protection of now-fragile middle classes. Given this, it is not surprising that Genpact, a mid-size company with limited sustainability reporting experience but whose operations generate livelihoods for hundreds of thousands of people, achieved a Global Reporting Initiative (GRI) A+ rating with its first sustainability report. 

Outside of the organization, the social sustainability case relates to a company's clients and to the upstream supply chain. In the case of financial services, for example, a GBS function can help ensure the quality of client operations processes like anti money laundering (AML) or Know-Your-Customer (KYC) that ensure the integrity of a financial institution dealings. The appropriate operations of client contact centers, often run by shared service environments, are also the front line in supporting clients in sometimes sensitive situations - such as in the case of healthcare or financial services. And finally, sustainable procurement practices are much easier if a GBS takes the heavy lifting related to the discovery and analysis of supplier data. 

Third, the environmental case. This is what most people intuitively think of, and it is indeed a part of the story. Here, the most material role of GBS is fairly counterintuitive, and certainly not related to the relatively small footprint that shared services' buildings represent. Instead, think of innovation: global, industrialized operations are the best placed to drive usage of remote collaboration technology and practices, such as those represented in our unified collaboration environment. By doing so, they can experiment and drive adoption at scale of a modus operandi that can significantly reduce travel related footprint - which represents most of service industries energy and carbon footprint, for example. 

In manufacturing industries, GBS organizations can help the rest of the business monitor and manage energy and carbon footprint, when they centralize the related analytics-based activities and coordinate the collection of the data that typically takes place in the supply chain. GBS sourcing analytics can also support the analysis of traditionally elusive "scope 3" footprint measurement, that is the footprint embedded in the product and raw materials sourced from the suppliers. 

All of the above will be part of the charter of the operations of the future - a theme we discussed some time back in a webinar and in a recent blog. We all better get ready for it, as 2013 isn't going to be a straight-road stretch - rather visualize an alpine hairpin: watch the road, and make sure you have the right car in the right conditions. 

About the author

Gianni Giacomelli

Gianni Giacomelli

Chief Innovation Leader

Gianni serves as Chief Innovation Leader where he drives and sponsors Genpact’s strategic initiatives aimed at sustaining clients’ transformation into digitally-enabled companies. He also co-leads the Massachusetts Institute of Technology (MIT) efforts to set up a Collective Intelligence Design Lab.