How ERP is breaking down silos and driving sustainable change
While many organizations have established environmental, social and governance (ESG) goals and made ESG commitments, driven by purpose and emerging regulatory requirements, they face several challenges when making the transition from ambition to action.
A recent IBM study found that global executives cite inadequate data (41%) as the biggest obstacle to their ESG progress, followed by regulatory barriers (39%), inconsistent standards (37%) and inadequate skills (36%). The impacts of data challenges are becoming visible to company stakeholders, with consumers making purchasing — and even employment — decisions based on a company’s progress toward their ESG goals.
Those who have committed to closing the green gap have embraced sustainability-focused processes and are reaping the benefits. If data is a key barrier to success, then companies should consider implementing an environmental strategy that encompasses an all-in organizational commitment to specific targeted outcomes and leverages technology to accelerate and track progress.
Another recent study from the IBM Institute for Business Value (IBV) and SAP surveyed 2,125 senior executives involved in their organizations’ environmental sustainability strategies. The study yielded a surprising result: organizations that outperform their competition in both environmental and financial outcomes also boast the most deeply engaged enterprise resource planning (ERP) system.
ERP is the technology of record, touching virtually every organizational business process. It can connect financial and environmental goals, keeping metrics accountable and accessible. When implemented in conjunction with other systems, ERP enables cost transparency and visibility—allowing environmental, regulatory and business-critical decisions to be made with improved consistency and reliability.
Uncovering hidden possibilities with ERP
An organization’s sustainability data can be difficult to attain due to siloed business processes, unreliable data and misaligned business priorities. ERP uncovers real-time material information across business functions and gets necessary data into the hands of corporate decision makers and operators for a streamlined user experience. This newfound access to data gives businesses the capability to record, report and act on enterprise wide ESG commitments and help resolve many of the complex challenges and demands of sustainability. With this visibility, people can see the impact of their decisions and trust the results being reported, which can accelerate the cultural change needed to support and accelerate overall sustainable business transformation.
While moving the needle on making progress toward ESG goals can seem nearly impossible for some, there are organizations that have managed to crack the code to greener success. The IBM and SAP study mentioned above found a group of high achieving business leaders (15%)—the Environmental Sustainability Enabled (Enabled)—that actively prioritize environmental sustainability and implement concrete, well-publicized plans to achieve goals at a far higher rate than their peers. The study found that Enabled organizations place environmental sustainability on par with financial performance because they see sustainability fueling financial results.
The recent study also found that the Enabled rely on ERP data structures to address sustainability goals, among other standout findings, including:
- Enabled report 47% of sustainability performance data is collected in their ERP, but they expect that to increase to 55% by 2025—a 17% increase.
- 94% more of Enabled believe ERPs are helping manage manufacturing sustainability goals. And 31% more believe the same as relates to labor management.
- Enabled report accumulating almost 70% of their carbon capture and energy use metrics in their ERP.
- Enabled organizations use ERP to establish standard environmental measures across ecosystems 39% more often than Reluctant (organizations that do not view environmental sustainability as important to their success).
- 43% more Enabled versus Reluctant organizations use ERP to established shared environmental targets.
All organizations should take note: in an interwoven economy, ERP can help populate and standardize shared sustainability initiatives.
The time to act is now
Sustainability and ERP are team sports acting on actuals, and no one team can achieve success on its own. As strategic partners for S/4HANA and SAP Sustainability solutions, IBM and SAP bring together technologies and services with enterprise-scale platforms to help companies break down silos and embed solutions across critical business functions and operations. Sustainability continues to be a business imperative and the pressure to change business process will only continue to increase.
Read the full study to learn how we are helping clients leverage ERP to operationalize sustainability. SAP and IBM understand how to help companies move the needle on their ESG commitments, without sacrificing their business needs or profitability.