Combined CollABorative May 2024 - IFS x Sustainability

IFS Combined CollABorative: Tech Talk Session – IFS x Sustainability

Date of Meeting: 13 May 2024 10:00 AM US Eastern Time

Sophie Graham and Caitlin Keam Presentation:

Slide: Agenda

• I'm going to whiz through a couple of points of context on sustainability. Why are we talking about it so much and some of the key trends that we are seeing. And then how businesses are reacting. So, a bit of scene setting background, some of the key trends in sustainability to watch. And then I'll touch on as well, what we are doing at IFS. And we can talk about our approach at IFS, how we're reacting to some of these trends and where we see some of the opportunities are, really importantly. And one of those for us is clearly around our customers and how we support our customers with their sustainability goals. And I'll hand over to Caitlin then to talk through some of the product capabilities and some of the new and exciting innovation that we're developing in R&D.
• We're really keen to hear from you. Everything that we do in terms of sustainability for customers is very much led by real world needs and things that we hear from customers. And so in terms of Q&A and discussion, we'll definitely make sure that we have enough time to get to your questions. But we'd love to hear from you. What are your top priorities? What are some of the pain points that you're feeling and what are some of the trends that are most important to you?

Slide: The incentive to act

• I'll dive into a bit of the context and I'm going to start off with one that's probably not talked about very much, and that's talent attraction. Why are we acting on sustainability? And I'm seeing this more and more in terms of where I get involved with the business, through things like intern open days and in job interviews. We always seem to have the questionnaire. What are you doing on sustainability even if it's not a sustainability role? So new joiners certainly are very interested in sustainability, and we actually see it's a factor choosing the companies that they want to work for. So essentially people want to work for companies that are part of the solution rather than part of the problem.
• In terms of opportunities, we also see new markets opening up through green solutions. So, greening your product can help to make a product more attractive to customers. It can actually get that greenium. So, customers will pay more for a greener product. And we actually see the sales from those products growing much more quickly. The flip side of that is, if you're making claims there's more scrutiny than ever. So, we do see, and this is a theme that will come through, that transparency is key to building trust, but you need to have real clear scrutinised data behind the claims that you're making about green and sustainable products.
• Sustainability is clearly also being driven by the finance sector and I came from a bank before I joined IFS and I could see there, banks were caught in some of the first wave of climate risk reporting, certainly here in the UK. And there's a real angle now towards access to finance being easier if you have clear sustainability targets, a road map, and it's not so much about where you are now, but where you're going and how you're going to get there. So showing that you have a clear path towards acting or sustainably, to managing your financial risks through things like climate change is really important when it comes to access to finance, dealing with your investors, dealing with your lenders. We're also from a bottom line perspective seeing that sustainability can be ever more clearly tied to efficiency gains which result in cost reductions. And that's of course really important, especially in some of the sectors that our clients operate on to make sure that you can meet those margins.
• Now all of this is in the context of increased regulation, and I've got two points here that both relate to the EU corporate Sustainability Reporting Directive, the new regulation that's come out in the EU affecting close to 50,000 companies and deliberately trickling down to catch those companies that might not be directly caught but have either suppliers or customers who might be caught by this regulation. And within that, it really takes sustainability reporting far beyond best practise currently and beyond anything we've seen with ESG reporting previously. When it comes to regulation, and there are over 1000 data points within that regulation which are mandated to have audited. So, we not only see this increase in ESG data that needs to be reported, but it needs to be the level of financial quality data.
• And that very much ties to my last point, this is useful investment decisions and the ultimate aim is that flows of finance are directed towards more sustainable activities, so investors in the finance community can actually differentiate between what's sustainable and what's not sustainable compared to your peers. All of that comes at a cost and some of the costs are pretty high watering. The one there on €600,000, I believe, is just for the audit and assurance fees associated with CSRD and that comes directly from the regulators itself. And what that doesn't encapsulate is all the change that needs to happen within the business then to comply with the regulation. Because it's not just about your endpoint, your disclosure, your report, it's very much about how do you make your business fit for the future.

Slide: Connectivity between impacts, risks and opportunities

• I wanted to share this graph from the World Economic Forum and they come out with a global risk report every year, which is fascinating read and I encourage everyone to take a look. But what you see more and more is the link between environmental, social and economic risks. And if you look especially at the long term risks, you'll see that the top four are all related to environment. So extreme weather events, critical change to the systems of the planet, biodiversity loss and ecosystem collapse. With that, over half of global GDP being moderately or highly dependent on nature. And resource shortages as well. So natural resource shortages. And what you can see if you look at the top left area is that has to be then connected to things like migration, population changes, health issues and chronic health problems. Obviously the pandemic comes to mind when you think about things like infectious disease and the supply chain shocks that that pandemic brought. So, what we're seeing is really if you're looking at your business from a point of view of how is it going to be fit in the future, you really have to take this much broader approach to risk management than companies might have previously had. So, thinking about those environmental, social and governance risks and how they might impact your business, but also your value chain. So, your suppliers, your customers.

Slide: Financial Times montage

• And I've just taken this straight from the Financial Times that recently ran an article the cost and the $9 trillion cost of the world meeting its climate goals. And where is that going to come from? And they actually said that 70% of that is expected to come from the private sector. So, what we're going to see over the next decade or two is a real shift of flows of finance away from those less sustainable activities and towards more sustainable business models and activities. And what that means is you've really got to be thinking about, in the context of this urgent climate crisis, the extreme weather events depicted here. How is your business going to be resilient to that? How are you going to adapt and change your business model?

Slide: Sustainability trends and how businesses are reacting

• In the context of all this, let's look at some of the three main trends that stand out to me and then how businesses are reacting. I've talked about the evolving regulatory landscape and I mentioned the EU corporate Sustainability Reporting Directive. I know we have a couple of people on from North America and we're seeing North America also leading the way in terms of ESG regulation, but also funding. In many ways California is even ahead of the EU when it comes to things like climate regulation. We see this context globally of evolving regulatory landscape fast moving. And a key difference between ESG reporting and financial reporting is that ESG or sustainability reporting will look at your value chain impacts. So, I heard recently procurement is in the eye of the storm and I like that turn of phrase and unfortunately for our procurement colleagues, I think it's absolutely true. So, we're looking at Scope 3, being our value chain impacts for carbon emissions, for example. And they are estimated to be at over 90% of your company's carbon footprint. When we think about due diligence for human rights, that might well lie in your supply chain, not in your Tier 1 suppliers, but several links down your supply chain. So, some of those biggest risks might be where you have the least visibility and the least leverage. So, value chain impacts and how you understand and deal with your supply chain and value chain. Environmental social impacts is really key here.
• The second trend that I want to mention is ESG data and I think with Caitlin coming up in a minute, we're going to talk a lot about the role of data and good data, in terms of how companies deal with sustainability. But the point is that we're starting to use ESG data really for investment decisions, for resource allocation, for asset investment that's going to be over many, many years so we need to have faith in the quality of that data. We also need to be confident that what we're putting out externally is not greenwashing, that that holds up to scrutiny, can pass external audit. So ESG data and the faith that we have and that is going to be a key trend in terms of what we're seeing under that evolving regulatory landscape.
• And the final one I want to mention on a positive note is that there is a huge amount of innovation and technology coming into support businesses with this challenge. So, to think about how we can use systems such as your ERP systems to provide you a single source of truth with that environmental, social and governance data that ultimately sits across your business and requires decisions across different business areas. So, looking at sustainability software and things like AI and how those innovations can support you is really crucial.

Slide: Sustainability Embedded in IFS Cloud

• How are we seeing businesses react to this? Well, the first one is that, no surprise, we're seeing a lot of increased disclosure. One of the things I want to highlight again is that this is not just about putting out a report. It's not just about putting out those thousand ESG data points in a void. It's about the context.
• And that means thinking about how that data is being used in your business to embed sustainability in day-to-day decisions. And indeed, when you look at a lot of the regulations, they'll talk about data points or plans, but it's really about what you do through the year before you get to the point of reporting. And outside of that report that matters and that is what they're trying to get to.
• And so ultimately what we're seeing is that, businesses are reshaping their business models to be more sustainable and to take into account sustainability. So, with our customers, for example, we're seeing a lot of trend around servitization and moving to servitized models of businesses rather than a take, make, waste, production. So, when seeing servitisation, circular manufacturing, these sustainable business models really coming to the fore. And all this means that sustainability is really becoming much more strategic, seen as a value creator and a growth driver rather than a nice to have or a compliance tick box.

Slide: IFS Sustainability Roadmap – our journey

• I want to just talk about what we're doing at IFS. When I joined in 2021, it was really about getting those basics right. And for me, it all starts with the governance. Sustainability can be everyone's problem, which means it can be no one's problem, and you can have a lot of passionate people across the business, but they'll all have slightly different interests in sustainability, and they'll all have what they see as their day job separately. So, getting the governance right is absolutely critical. We have a board sponsor and we report into the Board on sustainability. A deep dive once a year and more regular sustainability updates. We then have an ESG sterco that I chair that has that has key C Suites and executive members from across the business that helped to make some of those difficult resource allocation decisions. And then we also have a network of sustainability business partners that we launched last year.
• One thing that we did in in 2022, so coming out of those first few months into 2022 when I joined in late 2021, was designer strategy. So probably familiar to many of you that you'll have lots of different great things happening across the business. And how do you pull those threads together into a coherent strategy? And for us, it's really about thinking about where can we have the biggest impact. And many of you might be also doing a materiality assessment or looking at double materiality assessment as part of your regulation preparation. That tells you basically where can you have the biggest impact, where is it most impactful for your business? So, what sustainability issues of which there are many, are actually most relevant for you and for you as a business owner growth driver.
• We then designed a strategy and started to embed and integrate that into our business as usual, and that's where the role of this sustainability business partner network really came to the fore. So now we have a group of senior leaders across the business who are nominated by their executives to drive sustainability as part of their day job. So, it's not that they are within the sustainability team, but they're part of a broader network that are trained up on sustainability, senior enough to make decisions. And to really drive this as the subject matter expert in their function.
• This year it's all about embedding that approach and tracking impacts, and now we've got a strategy. We've got a road map and we've got a mechanism to embed this into the business. So, we are really looking at three priorities and one is sustainability by design. So how do we make sure that we think about sustainability not as an afterthought, but as we're planning everything from events through to how we are managing our financial reporting, we're thinking about sustainability, how we manage our supply chain. Another priority is preparation for that CSR deregulation. So we're kind of working backwards from our first year of reporting and working very closely with our external auditors in terms of making sure that we will be compliant with that. And finally, around supporting our customers and really stepping up and scaling our ESG product capabilities.

Slide: Framework & targets

• So, I touched on our on our sustainability strategy and here is the sustainability framework that we use, which is essentially around 3 pillars. The first one being excellence in our own business. So, looking at what we do as a company and that covers everything from diversity, equity inclusion, our environmental impact, our reporting and our transparency and our supply chain management.
• The second one around supporting our customers and this is really where we see that we can have the biggest impact across the industry is that we support, by helping them with sustainability solutions.
• And then finally a broader impact and this is more some of our longer standing Community programmes such as IFS Foundation, education programme, which are really important touch points, not just in the communities where we operate, but with our employees as well and with our colleagues.

Slide: Decarbonization strategy: Reduce, Replace, Engage

• And against all of these, we have targets which we measure and report externally, and we also have specific strategies in different areas, as you can imagine.
• Decarbonisation strategy I've just shared here as an example. I think carbon and decarbonisation is probably one of the top things that we hear from customers. Our strategy is based around reduction of carbon emissions first and foremost, but then replacing with greener alternatives and really engaging with the value chain to identify ways that we can reduce our scope 3 emissions.
• We also have a multi year carbon offtake agreement, so we're investing in high quality carbon removal credits to balance some of our emissions. But we work with a carbon offset broker for that, and engage in a number of very exciting projects over the next couple of years.
• We have a science based target that takes us to 2030 and I know that many people on this call again will be either in the process of setting one or have a science based target validated. So, it would be great to hear from you and your experience with that.

Slide: Sustainability Business Partners embedded across functions

• This shows that sustainability business partner network. I just want to point out you can see here the job titles, these are senior people, head of Procurement, Director of our global facilities, SVP of Marketing. We use this senior network to really drive sustainability and we've trained them up through the external course provider. We actually use the Cambridge Institute of Sustainability Leadership. There are many out there, but this is really how we are going about embedding it within IFS business operationally.

Slide: Reporting on progress

• And just to close on this section, how do we report on progress? I think this transparency is really key to building trust, and we release an annual sustainability report. We have a three page ESG fact sheet. I'll shamelessly plug them as they just came out a couple of weeks ago and we're trying to make sure that they're read and they don't just linger online because it's a lot of work that goes into those reports and fact sheets. But ultimately what we want to do is pull out facts from that, we want to use that and be able to just in real time use the data behind that, to not only make our own business better through the year, but also talk to customers, talk to partners about what we're doing. So, we have these annual reports and they are really important in terms of transparency and sustainability. But we also try and do engagement activities through the year.
• So that sums up some of the key trends that we're seeing, how businesses are reacting and then how we are approaching sustainability at IFS. You heard that one of the key pillars for us is supporting our customers and that's really where we see that we can have a biggest impact.

Slide: Strategy and Vision

• This is our strategic update showing you where we're going, strategy and vision, what we have, and our plans. But really the most important thing is that everything we do, has to be consistent with everything Sophie just said. And if I take away the key message from her two sections, it's this is embedded in your business strategy, your business processes, and any software that you use to run your business has to go in this direction. So, it is the cornerstone of our strategy and vision. Sustainability embedded. Yes, you need extra tools and modules and products to help you on the disclosure side of a lot of this. But our approach is to do that in a way that we're starting at the source, which here we're calling it data at the source. But it's really as we focus on these growing requirements for ESG disclosures. We're not saying, oh here's 1000 input fields, or here's a nice UI on top of the regulations, if we're placing that data where it has a logical place in your business processes, then we're actually from the beginning, going beyond that reporting output. But to your social data that you need is sitting in human Capital Management module and your HR teams can actually start doing stuff. We saw in Sophie's section the regulations that are coming out in in the EU and other regions around the world are very closely following that one. It's beyond report on your energy, water waste. The KPI is in there say, describe your transition plans to a low carbon economy. Describe how you’re trying to do it verbatim but describe how you're contributing to circular operations. Describe how you are embedding sustainability in your business strategy. These are now regulated topics, so if you want to embed it or not, you have to. Then we're working with all the other product teams on this. It's a big project, it's not just new modules. One of the first ones that we did was we worked with our finance team to bring in more data for your utility consumption directly in finance, so you can start getting kilowatt hours and kiloliters there, as you're inputting your financial data anyway, and then you can start having these consumption insights next to your financial insights. But not everything will have a logical place. Not everything can be in an ERP, there's not one solution that's going to do everything that's needed. So, our focus is just really on where we at least already have dates or where we can work with our existing modules to add more, and then still have the ability for third party data. So that's kind of the foundational data at the source approach of sustainability embedded.
• Then on the right hand side, I had our sustainability applications in R&D, and that means new products, a new team to support it and these three on the right hand side I would say is the responsibility of the sustainability applications teams around what we bring to support the ones on the left hand side. So, we are working on a new module for sustainability management focusing on the CSRD, the corporate Sustainability Reporting Directive, those regulations coming out in the EU. But there's a lot around interoperability with other standards and we've heard from some of our customers that even other regions outside of the EU are just saying that well if you follow this, it supports our local requirements because the standards that they're following have the same or similar KPIs in there.
• We have also collaborating with PWC UK to support us, and this is why point 2 in our strategy of standardisation is so important, because we absolutely don't want to go out there and let anybody be doing ESG in a slightly different way. I think historically that's been a bit of a challenge. I hear from Sophie's team we'll get there. We get questions from customers and investors and here and here and the people are asking things in different ways. And now we have teams of people answering all these things and surveys and everything, it's getting a lot, and how do we just make sure we follow the world of standardisation and advocate for that a bit.
• Then we have a product we have it for Scope 1 & 2  carbon emissions, so your direct emissions and your emissions from purchased electricity, heat, steam and cooling. This is an App essentially. We're working on Scope 3 now, your indirect emissions. And for this we have partnered with a company called Climatic. Climatic gives us scientifically vetted emission results. So, we're sending them a data point. They have emission factors. They do the calculation, give it back to us. They have a climate Advisory Board, so again this is giving us that standardisation and credibility of partners around us that support us. So, we can keep focusing on the data.
• Then we have no silos. Sophie showed you the network of sustainability business partners. No one in that network wants to go and be doing something here, asking this person for something here and trying to only figure it out in domain. Sophie also mentioned the procurement being in the eye of the storm. A sustainability team is working on this, turning data into information, how can the procurement team get access to that as real time as possible, and I'll approach in IFS and in IFS Cloud is to bring this back into the organisation through lobbies, interactive dashboards that you can work on in each different area.
• Then going to the 4th part of our sustainability embedded strategy is this business strategy part. So yes, everything I spoke about supports this already, but this means that every single product area or part of IFS Cloud, I'm working with on bringing sustainability into their road maps and into their strategies because this effects everything. It affects supply chain, it affects procurement, it affects manufacturing, and we just want to have increased visibility in your supply chain, optimization and efficiency in your business operations.
• Then we have a new initiative within IFS Cloud that is almost like phase two from emission tracker emissions tracker is you have to get your results of scopes to report on it for ESG and regulations. And Sophie mentioned people on the call from North America, the ACC is proposed in that report on Scope 1 & 2 and Scope 3 is debatable. Yes, it comes and goes but at some point, it's most likely going to going to come in and stay. But then once you once you have that, you have to reduce the emissions. And this is where looking at embedded carbon intelligence into IFS Cloud. So, thinking about carbon currency or commodity. If you're working around an IFS Cloud and you're purchasing something, you should be able to see the emissions impact there on the source on that transactional level. That will help with your decarbonisation strategy, your net 0 targets. Additional mechanisms coming in the EU, there's a carbon border adjustment mechanism, that's a tax as carbon intensive goods hit the border. So now you need to know the emissions of your goods and where they're going at the same time. So really beyond the scopes of reporting.
• So in summary, this is it and everything I'm going to show you on the next slide is this again, but with some pictures, but really so you can have a snapshot view of where we're going and what we're thinking. The next slide will show you the example that I gave of data at the source.

Slide: Utility Bill Information

• This is the utility bill information and new feature coming in IFS Cloud Finance. Where on your manual supply invoices it's the ability to have your kilowatt hours, kilolitres, the data behind this is mapped to the CSRD categories, and this data integrates to missions tracker Scope 2. So, if you you're using this, you're inputting your data. We're not saying now go put your kWh data in an emissions tracker. We just bring this through, send it to Climatic for the emission results and your scope 2 is done. So, we're really thinking of this holistically as we work on sustainability management, it'll be same thing, use the same data for the KPIs that you have to report on for your energy consumption, energy consumed within your organisation. It's the same data used from different sources.

Slide: Sustainability Management

• The next one is our sustainability management module. We're building out a KPI library based on the Corporate Sustainability Reporting Directive, and it is new. Our first version of it is coming in our release in November this year, and it's really focusing on those CSRD KPIs. Having approval work flows in there, having an audit trail. This is data and KPIs that are going to be audited. We're also taking as much as we can from IFS and IFS Finance that understands audits already, so leveraging all of that. And then we will work on going into next year interoperability with other standards. So there's the ISSB, the international Sustainability Standards Board, and they've already announced interoperability with CSRD, but we will just make sure that we have that alignment in our products. And then as the CSRD evolves, industry standards will come out. They just announced that they've pushed it out. But we'll just follow that and stay consistent with the regulations as they grow and change.
• CSRD is aiming to get a high degree of interoperability standardisation also with the voluntary standards. So, they actually said the global reporting initiative which some of you may have heard of, that's the most popular voluntary sustainability reporting standard currently that is fully interoperable. So, what we're doing here with CSRD would essentially enable you to comply to that voluntary standard as well. We're looking at CSRD and trying to simplify, trying to get that standardisation and the regulatory bodies are doing the same, which is helpful.
• When we started out with our very, very first level thinking of this, we're basing everything on GRI because CSRD wasn't in place yet. And it was just in draft for ages and we weren't going to go build something that's in draft. And now that it's there, and interoperability is coming out so fast and seeing other global regions adopting CSRD, we did a lot of research to get to this point and make sure that we're going down the most future proof path that's there. And every time I speak to customers, it's just getting confirmed over and over again.

Slide: Emissions Tracker

• I’m giving you a bit of a view on emissions tracker. In the screenshot that I picked out for you, this just shows our IFS Cloud connection to mentioned it is an app, so we do integrate to that utility bill, electricity data that supports Scope 2. Our Climatic partnership gives us more than 50,000 emission factors over 300 regions. And then we put a lot of effort recently into Scope 2, to just ensure that it is location based and market based and the ability to have any EACs or Renewable Energy Certificates depending on what region you're in, so that you can start tracking and looking at your Scope 2 reduction mechanisms as well. And then now we're working on Scope 3, 15 categories. We've got two of them in already, and we're just going to keep going through the categories.

Slide: IFS Cloud Emissions Tracker

• This is a nice view of emission tracker. This is just a minute video. It's a little different to IFS Cloud, but just showing you the setup, the connection with emission tracker. So, we do just need to know your emission sources, then once that's mapped in, we get Climatic to select the best emission factor for you, or you choose your own. And then we really wanted to have in this 12-month data view because if you have no data, that's totally wrong. You must have estimated or extrapolated data in there, and then if it is estimated data, we just have a view. You can see that little symbol for estimated data. So, you can quite quickly just get a sense of what your data is looking like and maybe your estimates turned actual. Then you can come in here and update it. And then of course the dashboard you you're going to have to report on it, so you're going to want to have a dashboard, track it, track your progress track against your targets, and you can pull this out for reporting as well.

Slide: ESG Lobbies

• Then Next up, just a view of the lobbies.  It also helps you to start seeing ESG data that already exists in IFS Cloud. So, for these lobbies, it's not that we went to the other product areas and did our data at the source initiative, we just initially took the GRI standards, and then we switched to CSRD, but we're taking the data that's already there in IFS Cloud and servicing up for customers in a way that we can do already while we're working on this on this module. We have a team sitting in the background understanding the data, mapping the data, so let's just bring it out for you.
• We're working on these seven categories, Environmental, Social and Governance and we have select KPIs on each, which we will just keep adding to and we'll keep adding different categories. Some of them is the CSRD explicitly asked you to report on your payment practises, and this is operational data that already exists in an ERP system, so we just put that ESG layer over it and help you with the reporting side.

Slide: Support for Circular Manufacturing

• So now we're on the business strategy side. I mentioned earlier that everything we're doing is about embedding this. And I just pulled out some examples for you of what we already have in IFS Cloud. It's not an exhaustive list, there is more, but these are the ones that I just think have a lot of impact and a lot of alignment to CSRD. So that's what I was doing when I when I was looking at this for your interest. So here this is what I was trying to remember verbatim. A description of your application of circular business practises. You have to do a whole lot of work to actually get to a point where you have anything to say about that. And depending on your industry, there's very, very different ways of approaching this and things that you need to do. I just linked it to our support for remanufacturing. We have a second release version of Remanufacturing, bringing in goods back into the system and being able to work with them again. Supporting circular manufacturing and circular operations.

Slide: Eco Footprint

• Then the next one that I also wanted to just mention, that's already an IFS Cloud is a module in IFS Cloud called Eco footprint. This was released back in 2008 and it's in manufacturing and you can roll up emissions and substances. From part level to a product. I'm working really closely with this team on how we can take eco footprint to the current requirements around life cycle assessments. There's a lot in there ready that can support it and also how we linking eco footprint to CSRD metrics. So here CSRD report on your substances of concern, and these are substances that you can already track and manage with eco footprint along with your hazardous materials and hazardous waste. It's about taking those modules in IFS Cloud as well as making sure that they work really well with the new modules and reporting outputs that we work on.

Slide: Planning and Scheduling Optimization

• The next one is our planning, scheduling and optimization engine and this is really in our service applications team. Scheduling, optimization and AI based of managing your service technicians and a huge carbon emissions benefit which the teams are continuing to work on, and the latest they've been working on here is support for electric vehicles so that you can also take carbon impacts, decision making as you're scheduling your workforce.

Slide: 2024 Planning

• Just bringing it back again, I've said a whole lot of stuff. Stuff that we're working on, stuff that we're doing now, stuff that we're going to be continuing to work on. I just wanted to bring your head into as a sustainability applications team, what's out 2024 focus and it's getting emission tracker to have Scope 3 and continuing to work on data integrations. I mentioned the electricity one, but we're working on Scope 1 integration now. Continuing to build out lobbies, release our sustainability management module with the CSRD KPIs and then working with all the product areas around sustainability embedded in IFS Cloud from a data perspective and from a sustainability support and their road maps.

Slide: IFS.ai

• We have IFS.ai and I'm not coming here and telling you something that's different or a different path or a vision. We're all going down the same journey, and if you saw on my slides I were showing you, I had that a lot that we're working on the IFS.ai data platform and this is the slide showing how we're working across all our products and all our industries, where's really how us as application areas leverage the AI services on a shared service layer. Our huge focus with IFS.ai is going and where we're going is a focus on the data. Automation, anomaly detection, all of that. That is just us getting our foundations right as we have that, then we go to the next phase that insights and your Copilots that can help you because we have the same data foundation, we can access all the different information and bring it together. But this is the IFS.ai path that isn't my slide. You can just see where we fit in here, where horizontal across everything as we support all the industries.

Slide: How we’re supporting customers – case studies

• We've almost already been supporting our customers even before Sophie and I came along and put in all our strategies and how we work with everyone. There's also a paper that that went out that says 38% of IFS Cloud benefits are already sustainability related. We've got the jumping point to go from, and now we just steer the ship in the direction that we have a lot of experience in and understanding in my consulting days of understanding comprehensive and climate risks, and supply engagement, and ESG reporting ensuring we do all of that, while helping our customers already. So here we just pulled out how we've been working with Volvo and circular operations and really, really cool stuff with Rolls Royce if you want to go and read that one, and that a lot of our customers are using IFS Cloud as they transition to different business models and ways of working and even into different industries like an oil and gas transition into clean energy. We have a lot of thought leadership around that. I think it’s a really cool place to be and exciting times ahead of us.

Questions / Answers / Feedback / Responses:

• F: Thank you very much for this presentation. It's actually something I've been pushing for quite a long time. It's really good. Unfortunately, we are not on IFS Cloud and we will not be for a few years. So that is my biggest issue there. Basically, what would help us a lot, and you it might be included, we're using IFS for scheduling and optimization. And what implementing this engine does to your organisation, I mean we have reduced the kilometres per service job with more than 10% as an example. We're working on increasing our first-time fix, which means that we don't have to go to a consumer twice or three times, but actually one which will save a lot of travelling back and forth. We are working on reducing the spare parts, etc. So, these are more operational KPIs, but with a huge environmental impact. So, I think you really have an opportunity. This isn't a question, I don't know what I'm saying here, but it's basically just an opportunity that if you would help us, if you would standardise these KPIs inside the tool, we would of course also be able to sell IFS internally with those standardised KPIs, because all service organisations are more or less looking at the same KPIs with a huge environmental impact. And they are not the same as the KPIs in these environmental reports that our company needs to do, they are more operational, but it would help a lot with adding more operational, service operations, operational KPIs into the KPI library. Non auditable KPIs so to say, more operationally focused. I mean you can even have a green checkbox near the KPI in a standardised dashboard just to visualise this. But I think you're onto something very good here and I see a lot of potential basically.
• R: Just before this call I came off our senior leadership call where I told them for ESG, we're not going to and shouldn't build a KPI library for ESG. We are a user of a KPI library that exist for the whole of IFS Cloud, and we own the ESG ones, but we're all leveraging the same library that has your operational ones and has everything, that's working in a way with that IFS.ai data platform that I showed you. So really it's just a KPI catalogue or library that's not siloed in the different modules or parts of your organisation, because ESG can't be like that. So we're the pioneer of the need for that, but it can't and shouldn't be just ours. Then we can work with everyone on your operational ones and understanding them or maybe some of your operational ones go away a bit because you use the CSRD one that's in there and everyone's always using the same one on CSRD.
• I don't think it's going to be the easiest. OK, we're done, let's go. But in terms of a discussion and thought process now, please just that's amazing feedback because this is where we have to go.
• R: And just to add on planning and scheduling optimization, I think that's a natural one for saving emissions, right? So, it's one of the first areas that we looked at. We've now got an area in our business value assessment of IFS tools that is sustainability and specifically around carbon emissions reduction. And I think planning and scheduling is where we see about 1/3 reduction on average of CO2 emissions. And also looking at things like what if you change to an electric fleet, what impact would that have? So, helping to think about what does it look like in the future as well.

• Q: What about a Supplier portal/ Supplier Collaboration platform to:

• • facilitate collaboration and information sharing with suppliers to improve efficiency and solve problems collaboratively (Environmental, Compliance matters), self-documentation uploading capabilities
  • ensure compliance with various international standards and regulations, including tax laws, social and environmental regulations…
  • evaluate the Supply Chain/supplier risk through the ESG data synthesis
  • enhance internal communication between procurement, production, and logistic/distribution hub(s) to ensure alignment with the expansion strategy.

• A: In procurement, we have supply evaluation and rating. Where you could put in KPIs and you say OK for these suppliers, I want them to be ISO 14,001 and have their Scope 1 emissions etcetera. That's manageable. And you could use a portal or a form or something to get that in. In terms of a broader vision and path where I started in the beginning of what we should focus on as ERP with a lot of the operational data, while knowing there is this big need for understanding in depth data on your suppliers on full ESG. Do you have child labour in your value chain from the supplier getting the raw materials, 10 suppliers away, this is really more of a, we can throw our thoughts out kind of forum. I don't think an ERP should be the place to have all that data and start building out all your supplier data, but we need to partner with the right partners who are doing that and are doing it well. So, we've identified one, and they're building up near supplier databases of all ESG information and they have analysts vetting it. They have ESG experts, making sure it's coming through correctly. And then we want to, through APIs in procurement, tap into that and have that data in one place. And this was that idea of not just being the other one out there asking suppliers for information, but making sure that we can access good quality data that exists. So we could do, as you on board a supplier, it directly goes to them. They might have that supplier on their system already. Great. And it comes back. They also support the CSDDD, the Corporate Sustainability Due Diligence Directive. So now I have regulations that are stating this level of detail that you need to have for your suppliers, and it's just work with the people who are doing it well than just be another source for it. So a bit to that. And we can also do a bit of a deep dive session with our procurement team as well because this is really in their road map, which is what I think is really important. Procurement needs to go in this direction, that’s sustainability embedded.

• Q: The news - are they only available IFS Cloud?
• A: So, everything I talk about is IFS Cloud, except emissions tracker. Emissions tracker is a power app, which we're integrating to IFS Cloud because we need this calculation engine to get the scope 1 to 3 results which we feedback to IFS Cloud for sustainability management. So full sustainability management, IFS Cloud, Emissions Tracker as a power app. You can get it, you can use it, you just won't get that data integration. You'd have to manually input the data. But you get the Climatic partnership. And if you're on this path, if you're thinking of calculating emissions already or you're thinking about it, and you're on a future path to IFS Cloud, it could be a way of knowing, OK, I'm going to do it manually for a year and then next year or the next year, as you're start getting IFS Cloud, then you know that data integration is coming.

You can access the IFS Sustainability Report & IFS ESG Fact Sheet for 2023 here: 

https://www.ifs.com/assets/all-products/ifs-sustainability-report-2023

You can access the World Economic Forum – Global Risks Report 2024 here: 

https://www.weforum.org/publications/global-risks-report-2024/

Next Meeting: 18 June 2024 10:00 AM US Eastern Time
IFS Service CollABorative: Think Tank – Meet the Member with Ged Cranny of Konica Minolta

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