From Sustainability to Scalability And The Central Role of ERPs
Sustainability is a priority for business leaders who want their organizations to successfully operate on the global stage. Corporations are being challenged with a higher level of accountability for their environmental impact and the efforts they are making to reduce their negative impact and move towards net zero.
While this is an ethical issue, it also affects a business' bottom line because of the financial implications of not adhering to and providing evidence for sustainability practices. Investment in sustainability will have a significant ROI, especially if managed correctly with an ERP.
How sustainability impacts profitability
While sustainable practices have previously been viewed as a bonus to profitable business operations, embedding environmental consciousness into business processes is now becoming standard practice and even a growth opportunity for various reasons.
The demand of the global stage
To be able to claim sustainability compliance, organizations are expected to look beyond their own operations to the practices of their supply chain partners such as suppliers and transporters. This has led to the adoption of the Corporate Value Chain (Scope 3)
Standard, an internationally accepted methodology for the tracking and reporting of emissions throughout a supply chain. If a member of a supply chain fails to meet sustainability KPIs, it can be replaced in favor of an organization with high sustainability standards.
For example, Coca-Cola demands a Science Based Targets initiative
(SBTi) rating of its sugar suppliers to minimize the impact of what can be a high carbon footprint process. Members of the SBTi have committed to science-based sustainability targets. A lack of proven sustainability processes can cause businesses to lose profitable opportunities and consequently stunt business growth. So to be able to collaborate with big global players who are part of the global supply chain, organizations need to be actively reducing their carbon footprint.
The cost of greenhouse gas emissions
Legislators and regulators are beginning to align with the sustainability requirements of the big players in the global supply chain and voluntary initiatives such as the Corporate Value Chain Standard and SBTi. Therefore, continuing to sell products with a large carbon emissions output will lead to increasingly significant fines. Having proof of the environmental impact of a product will be necessary to stay in business and avoid costly fines.
Additionally, efforts to reduce greenhouse gas emissions will improve cost-effectiveness as more efficient processes that minimize environmentally damaging outputs and waste are explored. A focus on sustainability allows businesses to stay ahead of regulatory demands enforceable via fines and ensure their operations are as cost-effective as possible.
Futureproof operations
A combination of consumer, supply chain and regulatory demands makes the implementation of sustainability practices inevitable for all organizations. The sooner companies implement sustainable operations, the sooner they will be able to leverage the opportunities environmentally-conscious businesses are allowed.
Investment in sustainability technology, assets and operational restructuring will pay off in the near future as it positions the business as a valuable partner in the long term. Companies that delay sustainable transformation are at risk of being left behind by customers, partners and regulatory bodies as they play a costly catch-up.
With industry trends, expectations and requirements around sustainability tightening, businesses need the right systems in place to track, optimize and report sustainability KPIs. Businesses could be doing all the right things but lack the evidence to prove it, therefore they cannot leverage sustainability as an advantage.
How ERPs support sustainability efforts
ERPs are used to manage core business processes. Sustainability is becoming a core business process that needs to be supported by data. As a statement of sustainability is no longer adequate due to the consciousness of greenwashing, companies have to do their due diligence to provide evidence of their environmental impact. ERPs can support the implementation of and evidence supporting sustainability practices.
Evidence of sustainability
Data is essential to monitoring environmental impact and providing data visualizations as evidence of sustainability status. An issue a lot of sustainability-conscious organizations face is that while they are collecting a lot of data, they struggle to process it in order to understand and report their environmental impact. An ERP can be configured to automatically collect, analyze and produce insights from environment-related data for internal use and external evidence.
Optimization of processes
As well as evidencing where organizations are successfully implementing sustainability practices, an ERP can also highlight areas for improvement. Transitioning from traditional operations to sustainability-conscious operations can be a lengthy process. An ERP can be a guide through the optimization processes as its data informs the calculation and refinement of a roadmap to a net-zero future.
Sustainability-focused data processing systems
SAP ERPs, in particular, make sustainability optimization, monitoring and reporting more efficient and more effective by providing pre-configured systems for data processing. SAP Sustainability Footprint Management and SAP Sustainability Control Tower, for example, support the structuring of data on sustainability within the ERP and supply chain. The ROI on these applications will only increase as new legislation is introduced and sustainability becomes a requirement of doing business.
The key takeaway is that the sooner businesses have a single point of truth around their sustainability data, the sooner data can be structured to show progress aligned with the sustainability demands of the global supply chain – partners, regulators and consumers. Adherence to sustainability practices avoids fines, reduces operational costs and provides business opportunities.
SAP ERPs and applications help you to become more cost-effective and build a greener business so you are ahead of the game when sustainability becomes a hard KPI. You can rely on NTT DATA Business Solutions for expert insights and hands-on support in implementing or adapting your SAP ERP to support your sustainability practices.
Are you curious if your ERP is up to the task to provide you with the valuable sustainability data and insights you need to become more sustainable and to become compliant to legislation? Our expert Marc van den Berk is happy to tell you more about it. Contact him at: [email protected].
Senior project and change manager