ERP in the eco-conscious organization

The IBM Institute for Business Value and SAP explore how organizations use ERP to attain sustainability goals

Sustainability has soared to the top of the corporate agenda. Running a sustainable business is no longer optional—it’s essential. In 2022, CEOs cited sustainability as their highest priority 37% more frequently than just one year prior.

C-suites overall have come under tremendous pressure from boards, investors, customers, employees, and regulators to reduce the negative impact of their carbon emissions and waste and deliver profitable, sustainable, low carbon outcomes.

And consider this: regulations that demand environmental improvements and require both financial and nonfinancial disclosures are rapidly expanding around the world. Managing a business to comply with existing and emerging regulations is tremendously complex. Even so, running a sustainable business can create a competitive advantage. So how do C-suite executives both measure their sustainable business impacts and manage a sustainable business?
 

The “backbone” of your organization: The enterprise resource planning system

C-suite executives need to see around corners, relying on information, often managed in their enterprise resource planning (ERP) system, to make business decisions every day. Yet, when it comes to running sustainably, most organizations today operate with disconnected disparate sources of the critical business information they need to make meaningful progress.

Sustainability performance needs to be managed with the same rigor as financial performance. Most businesses simply do not have the business data transparency they need to truly run sustainably. The optimal strategy is to use the data “backbone” of any organization—the ERP system.

To find out how organizations use an ERP implementation to attain sustainability goals, the IBM Institute for Business Value (IBV) and SAP, in collaboration with Oxford Economics, surveyed more than 2,125 senior executives involved in their organizations’ environmental sustainability strategies —around the world and across industries. The surprising result: those who outperform their competition in both environmental and financial outcomes also boast the most deeply engaged ERP implementation.

ERP, the technology of record touching virtually every organizational business process, can connect financial and environmental goals, keeping metrics reliable and accessible. 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.

In short, actions must align with commitments, as the World Business Council for Sustainable Development (WBCSD) emphasized in its recent paper on carbon accounting. By giving businesses the capability to record, report, and act on enterprise-wide data, ERPs help resolve many of the complex challenges and demands of sustainability.
 

High achievers that prioritize sustainability

A group of high achievers emerged from our study. Of the more than 2,125 business leaders surveyed, 15% actively prioritize environmental sustainability, implementing concrete, well-publicized plans to achieve goals at a far higher rate than their peers. We call this cohort the Environmental Sustainability Enabled (the Enabled), because in addition to prioritizing environmental improvement, they all also rely on ERP data structures to address sustainability goals. Our research revealed impressive accomplishments from the Enableds—overall, they:
 

• Produce stronger financial results, including reporting profitability 46% more than underperforming peers
• Deliver better environmental outcomes, with almost 60% of high achievers reporting better environmental sustainability results than their competitors
• Create more resilient businesses, with 84% saying environmental sustainability drives innovation.
   

A second group comprising 36% of businesses surveyed are environmental naysayers. We call them the Environmental Sustainability Reluctant (the Reluctant). This group does not view environmental sustainability as important to their success and their commitment is somewhere between low to nonexistent.

The Enabled, with their emphasis on ERP, experience profitability overperformance 46% more than the Reluctant. We have identified four essential elements of Enabled organizations’ environmental and financial success (see figure):
 

• Environmental strategy encompasses an all-in organizational commitment to specific targeted outcomes.
• A spirit of innovation and transformation is applied to environmental goals.
• Organizational culture inspires and rewards actions that drive measurable improvements.
• Technology is deployed to accelerate environmental progress by setting strategic priorities, applying data-generated insights, and innovation.

Greener together: A holistic cross-organizational approach

Source: IBM Institute for Business Value and SAP survey of 2,125 sustainability-focused executives, in collaboration with Oxford Economics.

A successful sustainability initiative that turns strategy into action requires organizations to embrace an end-to-end holistic approach. Targets are achieved by building sustainability and environmental impact considerations into operations, processes, data, and regulatory compliance, both internally and across ecosystems. This is where ERP can be a game changer. ERP is the technological foundation for executing operations, processes, and data.

Read this report to learn more important lessons from the Enableds, as well as specific steps that you can take to advance sustainability with your ERP system.