How ERP Is Breaking Down Silos and Driving Sustainable Change
Feature by Jonathan Wright, Daniel Schmid
Sustainability continues to be a business imperative and pressure to change business processes is increasing. Recent data reveals that executives rank environmental sustainability as their top priority, up from fourth place in 2021.
While many organizations have established environmental, social, and governance (ESG) goals and made ESG commitments, driven by purpose and emerging regulatory requirements, they face a number of challenges when making the transition from ambition to action. In fact, 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, 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.
A 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. This trust can accelerate the culture 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 recent IBM and SAP study 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:
- The 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 the Enabled believe ERPs are helping manage manufacturing sustainability goals. And 31% more believe the same as relates to labor management.
- The 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 the 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 SAP 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.
Learn more about the recent IBM Institute for Business Value study and how we are helping clients leverage ERP to operationalize sustainability here.
Daniel Schmid is chief sustainability officer of SAP.
Jonathan Wright is global managing partner, Sustainability Services and Business Transformation Lines, IBM Consulting.