an ESG, generative AI update

At the recent Infor Analyst event, the company hinted at some news it would soon release re: new ESG functionality and its generative AI capabilities. (Click here for a full recap of that analyst briefing.)  I spoke with Soma Somasundaram, Infor’s CTO and Products President, about these new developments. Here are the highlights of that conversation and the news that surrounded it. 

ESG 

Love or hate it, ESG reporting became a reality for US based businesses earlier this year (Click here for more on these new regulations). Reporting requirements issued by the SEC were finalized with larger firms on the hook to report this data.  European firms (especially those in Germany) have already been required to report many ESG data points.  (Click here to read about the first impressions of new SEC requirements.)  

There are several kinds of ESG technologies on the market today. Some are standalone tools that help companies map their data into the relevant fields on different ESG regulatory reports. Some tools can do that and also rollup data, allocate balances, account for different ownership interests and more. These tools mostly focus on Scope 1 (direct emissions that your produces in the course of its activities) and Scope 2 emissions (direct emissions that other firms (e.g., electric utilities) incur on behalf of your firm). 

Another category of technology focuses on Scope 3 matters. Think of this as an accounting of the data that your indirect suppliers, contractors and others up and down the supply chain trigger. Scope 3 data is especially challenging to collect and many firms don’t really know much about their supply chain beyond their immediate Tier 1 suppliers. If your firm has a long, deep supply chain, the data collection challenges here could be significant and onerous.  New US regulations are not requiring the reporting of Scope 3 data just yet but given all of the other countries/states that are mandating ESG reporting, your firm may need to report some Scope 3 data anyway. 

One other background note is that ESG comprises three areas of interest (environmental, social and governance). Unfortunately, many people assume ESG only covers just the carbon emissions environmental component. There are also other greenhouse gases that warrant reporting (e.g., methane).  Companies must also track and report forever chemical (PFAS) usage, numerous social metrics beyond basic DEI data and the methods in use to ensure correct ESG decisions will be made.

ERP vendors have been somewhat slow to either develop great ESG functionality or loathe to promote it. (More on that at another time.) Infor shows more courage than some of its peers for getting out in front of this. 

Specific to Infor, their solutions will take key Scope 1 and 2 ESG data that is captured or generated within its ERP solutions (and other data sources) and place this into its Infor Data Lake in near real-time. Data can then be mapped directly from the Infor Data Lake into the specialized fields in a customer’s ESG reports.  

Breaking down Infor’s offering, there are several points to note:

1. Audit-ready metrics – New SEC requirements dictate that new non-financial data is subject to the same rigorous controls and reporting standards as financial data. In other words, companies can’t just selectively choose what to report, incorrectly tabulate the data, and, report inaccurate or misleading data. 
2. Strategy Manager – This functionality becomes important starting in year 2 of ESG reporting as companies will have an opportunity to make year-over-year (YOY) comparisons of ESG data. That will be interesting as companies will likely have lots of questions due to this new data (e.g., Why did the carbon emissions for this plant increase? Was this due to a change in production volume or product mix?). Answering these questions will likely trigger lots of research and increase demand for integrated solutions with drill-down/drill-around functionality.
3. Product Level Declarations –While some firms will only provide highly summarized, highly aggregated, old, annual data, the real end-state is getting more real-time, granular information that can better guide sales, operations and other decisions.  This will be a big information positive from ESG reporting.
4. ESG Reporting – This is more involved that the description suggests. Great ESG reporting will need a number of capabilities often found in EPM (Enterprise Performance Management) solutions. Specifically, functionality that can rollup balances, allocate certain values, deal with partial interests in certain legal entities, etc. is key to getting data ready to map into regulatory reports.

Infor’s ESG solution, as currently designed, will accommodate data from Infor, non-Infor and spreadsheet systems. That’s especially valuable for companies that have grown via inorganic means as they likely will possess a number of different ERP solutions. Spreadsheet support is important, too, as some operations will be small and/or non-automated. Some information will come from HR, EH&S, transportation and other systems. Before data can be mapped into different regulatory templates, it may require some calculations (e.g., allocations), reconciling (e.g., data elements may have different names or units of measure in other systems), or formatting changes prior to mapping. 

Infor’s initial ESG functionality is available now to customers via invitation. Some additional functionality is scheduled for release later in the year. 

Generative AI

Infor’s approach to generative AI is nuanced. They are implementing generative AI where it delivers great business value. To wit, they are prioritizing generative AI usage where it:

• Improves critical business operations
• Alters workflows to drive better value, efficiencies, controls, etc.
• Enhances industry functionality
• Provides their customers with competitive advantage

Infor’s Somasundaram noted:

We’re constantly listening to customers’ pain points and anticipating opportunities that allow customers to be successful and competitively advantaged. When it comes to building solutions that are hyper-productive, our vision is to minimize the time customers spend in applications so that they can maximize their time focusing on their specialized work and creating value.

Infor’s generative AI anchor is the industry-specific data that its customers possess is tied to LLMs (large language models). This data helps inform the gen AI tools so they can perform very relevant tasks like automatically assign attributes to products and identify exception situations in complex projects. 

These tools can work in real-time, have low-code capabilities (those are quite useful in workflow management), can generate summaries of data/content and enable ever-smarter workflows. You will see these capabilities in smart widgets, chatbots and a “concierge” capability.

Somasundaram was particularly bullish on generative AI tools that permit a user to push a button and get back summarized data/findings/insights. He indicated that this is a big focus area for now. 

To power the chatbot and other capabilities, Infor has a Document HUB. This is where all manner of customer documentation (e.g., training materials, user manuals, help scripts, etc.) are stored. The AI tools can be trained off of data in the Document HUB. 

Somasundaram also indicated that the new chat capabilities are more flexible than Infor’s prior AI tool: Coleman. There’s also language translation coming to these tools.

One generative AI capability that is not being used now but is being evaluated involves the use of generative AI to create application software code. Infor is experimenting with it currently for all-new code generation and debugging use cases. 

Like the new ESG reporting functionality, the generative AI capabilities are available in April 2024 by invitation.

Top three

At the end of our short chat, I asked Somasundaram what were the top 3 things he wanted people to note. These were:

• Infor is creating industry-specific AI use cases to best serve a variety of user personas and drive productivity gains
• Infor knows that companies have a choice in ERP solutions and is creating built-in flexibility to help companies get results fast
• Infor is building a conversational UX (user experience) that’s designed to serve a global customer base. 

My take

While every major application vendor has a generative AI strategy and products in development. What’s differentiating these vendors from one another are the following characteristics:

• How quickly can the vendor bring these capabilities to market? After more than a year of gen AI hype, some vendors are still long on promise and short on actually delivering any AI-powered applications. 
• How will vendors protect a customer’s data? A key reason that customer uptake of gen AI capabilities has been slow going is due to very real concerns of customers that their proprietary information could fail into the wrong hands.
• Is the vendor focused on the generative AI capabilities that will throw out the most competitive advantage? Vendors that develop interesting or novel gen AI capabilities that don’t necessarily impact companies in notable, profound ways won’t win. 

Infor seems to be taking a considered approach to generative AI. Given the speed its competitors are moving at, Infor will need to match the velocity and coverage of several of these firms to be market relevant. 

As to ESG, all manner of ERP, EPM and specialty vendors will have to get new products to market and/or enhance the ESG offerings they already possess. This is an imperative as the new SEC requirements are just that “requirements”.   ESG can be a differentiator for Infor especially if Infor can create a great long-term vision for ESG. If Infor can show how its solutions will offer significant insights into where and how products are made, shipped and recycled (Instead of just reporting their ESG impact), then they will deliver superior value over simple data mapping tools.  

It will be interesting to check in with Infor later this year to see what else Infor is developing on both ESG and Generative AI.