Published on the 27/04/2023 | Written by Heather Wright
Start with what you have…
Companies need to create a sustainability-infused vision for their ERP systems and leverage existing ERP capabilities to jump-start their sustainability strategy.
That’s the call from Gartner, and while ERP offers plenty of strong points in the environmental, social and governance (ESG) story there’s also a wealth of other technologies currently being touted to help companies in their sustainability and wider ESG goals.
With ERPs providing a comprehensive view of operations – including much of the data and processes related to ESG, from energy consumption and waste generation to labour practices and supply chain ethics and risk management and compliance – they’ve become central to the ESG story in recent years.
“ERP is a rich source for ESG data and insights.”
Major ERP applications usually include basic tools for the likes of carbon tracking and gauging social impacts and ERP heavyweights including SAP, have been ramping up offerings designed to help businesses on their sustainability journey.
A recent report from Gartner says within three years, 30 percent of enterprises will be relying on their ERP applications to enable environmental, social and governance reporting.
Neha Ralhan, Sydney-based Gartner senior principal analyst for ERP strategy, who spoke to iStart earlier this year about ERP’s role as a rescue technology for Australian and New Zealand businesses in the year ahead, says sustainability, and more widely ESG, is a growth area for the ERP market in Australia and New Zealand.
“We are seeing that some end users have a sustainability-infused vision. Historically, that’s been in other aspects, but it is getting filtered down into the ERP more as well.”
But she says local organisations aren’t particularly advanced when it comes to using ERP systems for sustainability, largely just using data from the ERP to report on ESG standards.
“That could be linked to supply chain or more about reporting analytics at the moment, to provide data insights” she says.
With recent reports suggesting businesses’ sustainability aspirations are facing substantial challenges from data issues Gartner says ERP can provide the full control and visibility required – if it’s done right.
In Predicts 2023: In a Period of Global Upheaval, will ERP Come to the Rescue, Ralhan and her co-authors recommend companies create a sustainability-infused vision for their ERP to support direct and indirect sustainability impact goals.
“ERP leaders need to ensure that their strategy targets current top-line and bottom-line priorities, as well as allows them to work through business requirements that are not yet fully designed. These include sustainability and ESG compliance, which will succeed only when it is fully aligned with the organisation’s expectations.”
It says ERP-enabled ESG processes and reporting strengthens the sustainability performance of an organisation, as well as supporting peer comparisons, predictive analysis, audit and target versus actuals tracking across the enterprise.
“ERP is a rich source for ESG data and insights,” Gartner says. But, it warns, current ESG applications and dashboards in ERP systems need simplifying or revamping to enable greater deployment and ease of use.
“In addition, system integrators and service providers are expected to play a large role in advancing the role of ESG via the ERP through pace-layered integration to automate access to data and insights,” the report says.
Many ESG solutions already exist in ERP platforms, reducing barriers to entry for organisations across various industries.
To draft that sustainability infused vision, Gartner, which has been talking up composable architecture and applications, including composable ERP, for several years now as a way of enabling greater agility, suggests application leaders provide data on stakeholder pressure as well as direct and indirect sustainability impact, and write a one sentence sustainability vision, then link it back to the ERP strategy.
The analyst firm says companies should also assess ERP vendors own ESG credentials.
Crucially, companies should also put their ERP systems to work today for ESG measures.
“To allow for quick gains, uncover ways the enterprise’s current ERP can create a positive impact on ESG issues, without large configuration changes and additional applications.
“Predictive analysis, audit and target versus actuals tracking, and greater oversight of supply chain are examples.”
Using ERP data for your sustainability initiatives can also help organisations avoid the greenwashing trap, where claims are made without the data to back them up.
And the role of data is highlighted in the findings of the United Nations Global Compact- Accenture CEO Study on Sustainability, which found 73 percent of CEOs are enhancing sustainability data collection capabilities across their value chains.
That data is also being harnessed for innovations such as digital twins, enabling companies to model new systems and move them to production more quickly, without spending materials, and time, on prototypes. They’re also being used to optimise supply and transportation networks, better utilise resources and respond to disruptions.
A Capgemini Research Institute report found 60 percent of organisations across major sectors were leaning on digital twins as a catalyst to not only improve operational performance, but also to fulfil their sustainability agenda.
Beyond ERP
Cloud has long been hailed as the great saviour when it comes to tech sustainability, moving workloads from old, inefficient data centres and offices into facilities with superior hardware setups, designed at scale and built for efficient energy use, and with higher utilisation rates – and lower carbon emissions.
A PwC survey of Fortune 1000 companies reported that 60 percent of companies were either using or planning to use cloud to augment ESG reporting, with 59 percent saying they used or plan to use, it to refine ESG strategies.
AI, automation and analytics tools are also being held up as technologies which can ease the sustainability recording, reporting and reduction, path. An Accenture report last year noted that nearly three-quarters of companies surveyed were using AI emissions tools.
Then there’s the ‘green software’ movement, pushing for software to be designed, developed and implemented to limit energy consumption and have minimal environmental impact.
There’s also been some moves toward so called ‘green software’ development – software designed, developed and run in a way that maximises energy efficiency and environmental impact.
It includes ‘sustainable coding’ – something being championed by the Green Software Foundation, a group of companies Microsoft and Accenture who joined forces in 2021 with the likes of the Linux Foundation and the Joint Development Foundation Projects, to build an ecosystem around green software.
In theory, the advantages include simpler architecture, faster computing speed and less resource usage.
