Role of Process Mining in enabling ESG compliance
Overview ESG progression in BFSI Industry :
Undoubtedly there is never seen focus on environmental, social, and governance issues post-pandemic Covid-19. Although the financial sector has been investing in CSR activities for the last few decades, the momentum has been building due to the rising economic impact and climatic changes.
The BFSI sector is getting ESG compliant in their bouquet of products, operational processes and in their enterprise-level strategy. Below we show the key elements under the ESG framework that financial institutions are trying to address.
Environmental
- Address Climate change impact
- Energy consumption
Social
- Equity and inclusion
- Privacy
Governance
- Accountability
- Transparency
It is now well established among the BFSI industry leaders that ESG integration cannot be achieved without the right technology adoption. Under this, the primary action is to drive the digital agenda in the organization by the transformation led initiatives. In the past, the adoption was primarily in the operation and the process side of the business however, now ESG framework is becoming relevant in product innovation due to the following factors:
– Pressing climate change issue
– Growing participation by industry players
– Increased focus on customer experience and satisfaction
How do efficient processes help in ESG compliance:
As per a Nielsen survey,
[1]around 81% of respondents feel that companies should invest in environmental improvement. Sustainability has become an imperative aspect of business brand and credibility. Adopting sustainability without accurate reporting is not going to help businesses, the underlying transparency is the key in the eyes of the customer, consumers and investors.
Digitization drive and the power of digital technologies such as process mining and robotic process automation (RPA ) can transform companies into greener businesses.
Process mining is a technique that uses data from business systems to gain insights into organizational processes and identify areas for improvement. Process mining can play a crucial role in promoting environmental, social, and governance (ESG) principles in transformation journey for any organization.
How Process mining and RPA help in transforming regular business to green business.
Process mining is a cutting-edge technology which uses the event logs and digital footprint in the process and presents it into a nice visual end-to-end process which can be used to identify any deviation or bottleneck.
It can be used to detect process irregularities and highlight the root cause, then, RPA helps in developing an automated solution to remove the human interventions and simplify the business processes.
To get transformed into a greener business, one must think about its impact on existing employees, alignment with organization strategy, and current energy consumption.
Initiatives such as process mining help you apply frameworks which can achieve green goals. As a first step in creating the framework, we need to address the following questions using process mining.
– Identify the process bottleneck
– How to digitize the process
– Automate the critical, error-prone and repetitive processes
Companies lagging on the ESG metrics are going to have mounting pressure since market regulators in the European Union and the US have increased their oversight on these metrics. In this backdrop, investment in ESG reporting is at the centre of discussion among the leaders. Streamlining data, automating processes, data quality and data governance forms the basis of transparency in regulatory reporting. Process mining techniques can identify areas for automation and areas requiring frequent monitoring in order to provide full transparency, audit trails, and compliance adherence all this in near real-time.
Impact of process mining on ESG:
By providing a comprehensive and data-driven understanding of business processes, process mining enables organizations to identify areas for improvement and prioritize ESG initiatives that can have the greatest impact.
– Environmental impact: Process mining can help organizations reduce their carbon footprint by identifying areas where they can optimize their operations and eliminate waste. For example, process mining can help identify areas where manual processes can be automated, reducing the need for paper-based transactions and reducing energy consumption. By automating manual processes and reducing paper usage, process mining can help organizations become more sustainable.
– Social impact: By providing transparency into business processes, process mining can help organizations ensure that their operations are compliant with relevant regulations and that they are adhering to ethical principles. For example, process mining can help identify instances where customers are being mistreated or where there are potential conflicts of interest, enabling organizations to address these issues promptly. This can also improve the overall reputation of the organization, which can have a positive impact on ESG performance. Process mining can identify areas where organizations can improve customer experience and satisfaction by providing faster and accurate services, which contributes to a positive social impact.
– Governance impact: Process mining can help organizations improve their governance practices by providing a more accurate and transparent view of their operations. For example, process mining can help identify areas where processes are not being followed correctly, enabling organizations to take action to rectify these issues and improve compliance with internal policies and regulations. This can help prevent financial fraud and other unethical practices, which can have a positive impact on ESG performance. With proper governance framework, organizations can ensure that their processes are compliant with regulations related to ESG, thereby, reducing the risk of financial penalties and reputational damage and improving governance outcomes.
Achieving ESG target using process mining:
The gap in achieving the carbon emission target is because of lack of transparent reporting. The need is to achieve the following :
– Daily tracking of carbon emissions in day-to-day operation
– Tracking carbon footprint at each step
– Identify the best alternative processes with lower carbon footprint
Through Process mining, the carbon emission footprints can be mapped at each digital footprint for any business process. Thereby, any intervention in the path can give a completely transparent view of emission increase or decrease at every step in the process.
In summary, process mining can play a leading role in helping organizations achieve their ESG goals by providing a data-driven approach to understanding business processes, highlighting areas for improvement, and enabling organizations to make informed decisions and take action to drive positive ESG outcomes that can have the greatest business impact. By providing organizations with the transparency and visibility needed to monitor their operations and identify areas for improvement, it can help to promote sustainability, responsibility, and accountability.
The way forward:
ESG-compliant targets cannot be achieved without the integration of technology such as process mining and RPA. The is a need for BFSI transformation leaders to look at adopting technology from the perspective of ESG in order to build a sustainable organisation. Please notes this is the first part of our write-up on sustainability. In our follow-up to this article, we will cover more technical discussion regarding the data aspect and data-related issues that the industry faces while moving towards ESG compliance.
This paper is co-authored by Sanmati Sovitkar ( Sr. Consultant and Chief Architect at Tata Consultancy Services)
[1] https://nielseniq.com/global/en/landing-page/the-changing-story-of-sustainability/
