How ERP Support ESG Strategy
Why we need ERP to support our ESG strategy, now!
Business is revolutionising, and sustainability must now sit at the heart of everything we do. Investors, employees, customers, governments, and regulatory bodies have made the robust incorporation of an Environmental, Social, and Governance (ESG) strategy imperative for long-term operational success.
But how can we do this when our sustainability data is being held in different areas of the business and, as a result, decisions are being made in silos?
Many organisations are still making finance-first decisions, and with a lack of transparent and robust data reporting in the environment and social space, who can blame them? Experts say that inadequate data is the biggest obstacle to ESG progress. We know that in order to sustain a profitable business we need to weigh up the impact on our people and planet, but the cross-business governance and metrics required to proactively steer a sustainable strategy can require heavy resource and time investment…unless you have an ERP system!
An Enterprise Resource Planning (ERP) system integrates and automates data and process management across core teams, such as Finance, Manufacturing, Supply Chain, Customer relations, HR… Due to the cross-functional reach, an ERP system can ensure that the right data is available to steer decision making to enable the business to meet environmental, social and governance goals.
What can ERP do to help us meet our ESG strategy?
Data, data, data!
An ERP system can become a core enabler of our ESG strategy as it centralises data, standardises processes, and makes business performance measurable and auditable. So how can we apply this in practice?
Use ERP system data to help us deliver our ESG strategy
ERP can support businesses to turn sustainability goals into operational controls, measurable KPIs, and auditable evidence, helping to integrate ESG objectives into business-as-usual operations.
The cross-functional nature of the ERP system helps to standardise ESG governance and processes across the business. This leads to leadership trusting the data being reported and therefore utilising the metrics to steer future strategic priorities, make good decisions, and celebrate successes. Ensuring commonality between business KPI’s and ESG strategic metrics here is fundamental to success of the ESG strategy and the value of ERP system reporting.
Provide us with reliable and consistent management reporting
An ERP system breaks down reporting silos, allowing businesses to understand synergies across ESG initiatives to maximise impact and value of change, ensuring wider impact of all decisions are considered. This will help businesses to make high impact, low investment decisions, supporting long term sustainable growth.
The enhanced reporting abilities also helps to keep businesses accountable for ESG progress, building trust and supporting brand reputation, employee recruitment and satisfaction, customer retention and business stability/growth. This can be achieved through regular internal and external reporting including commonly used Annual Impact Reports.
Make application and assessment of sustainability certifications worth while
A majority of the recognised sustainability labels and certifications, such as Fairtrade and B Corp, require data to evidence business compliance to their required performance and progress within environmental and social initiatives, alongside financial performance. Regular audits from accrediting bodies mean data needs to be up to date, gathered and reported on consistently, and often maintaining or improving impact from a given benchmark.
The rigor and transparency of data processing here is essential, and an ERP system will provide a single source of the truth, standardised processes, and built in governance to make the ability to gain and maintain certifications efficient and worth-while. These labels hold businesses accountable for long-term ESG monitoring and improvement, and become an invaluable tool for improving brand reputation, maintaining customer and employee satisfaction, and consequently contributing to business stability and strength.
What does an ESG Strategy look like?
An example workflow of strategic business direction driving actionable sustainable progress by utilising ERP:
Workflow in detail:
1. The business sets a strategic goal of “net-zero emission by 2050”, aligned with the UK government’s emission targets.
2. Due to the long-term nature of the goal, the business calculates that to keep on target, they need to reduce emission by 10% year on year for the next 5 years, and this is embedded as an objective in their 5 year strategy
3. The data required to calculate Scope 1 to 3 emissions is gathered into various functional modules of the ERP system, which sit in different departments across the business:
a. HR – employee emissions e.g. laptops, screens and phones, travel
b. Facilities – office building energy management
c. Manufacturing/Engineering – process emissions, fuel usage
d. Logistics – transport
e. Procurement – supply chain emissions
f. Finance – invoices, energy purchase, budget
4. The ERP system allows this data to be visible to required teams to have ongoing visibility of the progress against strategy of the emissions reductions across the business, allowing robust future target setting, challenge to existing processes, and any need for escalation to be confirmed.
5. Leadership teams will have transparency of the data through regular management reporting established by the ERP system, allowing them to make informed business decisions, for example if financial investment in offsetting is required.
What next?
An ERP system can be utilised as an invaluable tool to ensure all the benefits of sustainability work are realised by business. ESG strategies typically contain long term goals and initiatives, due to the complex nature of Environmental and Social change impact, therefore efficient, robust and transparent collection of data allows businesses to see the difference a focus on ESG can have, allowing leadership to consistently steer the business in the right direction.
If an ERP system is already in place within your business, take a look at opportunities to enhance data management and reporting to support your ESG strategy. If ERP is not in place, consider this to be another insight into the value these systems can provide to businesses. Want to get your ESG Strategy started today? Get in touch.
