Central to this is adverse media screening, which involves searching for negative news about entities, be they companies or individuals, to determine their reputability.
Traditionally, organisations have relied on ESG rating agencies and self-certification for supplier due diligence. While these approaches have their merits, they do not necessarily deliver the ‘ground truth.’ This has prompted a shift towards leveraging Natural Language Processing (NLP) to enhance adverse media screening for supplier due diligence.
Where rating agencies and self-certification fall short
ESG rating agencies and self-certification play a crucial role in fostering responsibility and sustainability within supply chains. However, they come with significant limitations.
ESG rating agencies often lack transparency and standardisation in their methodologies, leading to significant discrepancies in ratings. On the other hand, self-certification can be prone to bias, misinformation, and even fraudulent practices given the inherent incentives for suppliers to portray themselves in the best light.
In contrast, adverse media screening offers a more objective way to identify potential red flags. It enables organisations to gain insights into a supplier’s ethical conduct, compliance with regulations, and overall reputability.
Still, traditional methods of adverse media screening, such as manual searches, are time-consuming, prone to human error, and can be unable to cope with the sheer volume and linguistic nuances of global news media.
Boost ESG assessment with NLP for adverse media screening
This is where Natural Language Processing (NLP) technology steps in, as it is well-equipped to handle the volume and complexity of global media. NLP is an AI-powered technology that enables machines to understand, analyse, generate, and respond to human language.
NLP brings speed, accuracy, and scalability to adverse media screening processes, all of which are invaluable in the modern, fast-paced business environment.
Benefits of NLP for supplier due diligence processes
- Fast, accurate and scalable.
- Can be programmed to pick up specific red flags.
- Identifies tone, subtleties of language and negative sentiment.
- Provides ongoing monitoring capabilities thanks to real time analysis.
- Limits false results by accurately identifying and categorising entities in a text.
NLP can sift through vast amounts of data from multiple sources and in different languages, searching for negative or adverse mentions linked to potential or current suppliers. It can be programmed to look for specific red flags, such as legal issues, financial instability, operational disruptions, environmental harm, and poor labour practices.
Further, advanced NLP techniques can pick up on subtleties of language, identifying negative sentiments even when explicit red flags are not present. For instance, sentiment analysis, a popular NLP technique, can assess the tone of a text and give insights into the public opinion of a supplier.
Another technique, named entity recognition, can accurately identify and categorise entities in a text, ensuring that the adverse media relates specifically to the supplier in question and not another entity with a similar name.
Moreover, NLP’s ability to perform real-time analysis can provide companies with ongoing monitoring capabilities. This feature is crucial, considering that a supplier’s ESG performance is not static and can change due to various factors such as operational shifts, market changes, or regulatory updates.
Therefore, NLP-enhanced adverse media screening represents a significant advancement in supplier due diligence processes. It complements existing mechanisms such as ESG rating agencies and self-certification, providing a more holistic, accurate, and timely understanding of a supplier’s ESG performance.
A multifaceted approach to supplier due diligence
It is worth noting that while NLP provides a powerful tool for adverse media screening, it is not a standalone solution. Companies should combine the strengths of NLP, ESG ratings, self-certification, and other methods to capture a comprehensive picture of a supplier’s ESG performance.
As businesses strive to build more sustainable, resilient, and ethical supply chains, the adoption of innovative technologies like NLP for adverse media screening will likely become an industry norm.
By augmenting traditional due diligence methods with NLP, companies can obtain the ‘ground truth’ about suppliers, enabling them to make informed decisions that align with their ESG goals.
smartEYE watches your third-party relationships, 24/7, to identify emerging ESG or adverse media risks throughout the relationship. It augments your third-party due diligence with 24/7 risk vigilance, delivering the ongoing ‘ground truth’ of third-party risk to ensure initial onboarding assessments, independent risk ratings or self-declarations remain valid and no new relationship risks are emerging.
To learn more about how smartEYE can protect your organisation from third-party risk by association and preserve your brand integrity, please book a demo.