Why Enterprise Software Must Embrace ESG
Excerpt from "Why Enterprise Software Must Embrace ESG."
First published on Forbes by Forbes Technology Council Member and Chief Product Officer for IFS, Christian Pederson. August 16, 2021
ERP For ESG
Executive teams will find commercial software is rapidly evolving to satisfy ESG-related demands. They should look for specific types of capabilities to ensure they're prepared to measure and manage not just by financial value, but environmental and social impacts. Important considerations include:
Circularity. Management of a circular product lifecycle that minimizes waste must encompass not just data required to manufacture a product, but also a hierarchical plan for decisions and costs associated with reuse, recycling, remanufacturing, lifecycle extension or disposal.
Artificial intelligence. Managing cost, revenue and the environmental impacts of product, services or operations quickly becomes too dynamic a situation for the human mind to manage. Artificial intelligence (AI) can help, for instance, by optimizing the scheduling and routes of field service technicians to reduce miles driven or fuel consumption.
Complete implementation. Too often, a company will just implement the financial module of an ERP system, but sustainability requirements mean they should also consider the human resources and supply chain modules to document labor and sourcing practices in an auditable environment. This helps handle the S and G in ESG by capturing a company's operations or suppliers' labor practices, exposure to corruption, community development or human rights. It enables a management team to comply with modern slavery legislation and global frameworks like ISO 26000.
Reaching ESG goals is an ongoing learning process, and, as noted by Workiva, there are typically two key challenges in ensuring high-quality data governance for ESG data:
1. Navigating the plethora of ESG measurement methods, frameworks, guidance, protocols, rankings, indices and standards that are disconnected from the reporting process. This can be a steep learning curve, but regulatory authoritative reporting frameworks are fortunately available to help businesses report with greater confidence and accuracy.
2. The fragmented ESG reporting data ecosystem. Workiva also notes the challenge involved in trying to generate a single source of truth that can be linked to multiple disclosures and views in the ESG data ecosystem. Adopting composable software that comprises highly integrated and interconnected modules is key in bringing together disparate data sources.
In order to meet ESG goals, ERP software should be accompanied by sound organizational structure and processes. By communicating information clearly and across the entire organization, employees are more likely to acquire the new skills and knowledge needed and have a single version of the truth to work from.
Furthermore, it's always worth considering which other technologies your business might adopt to supplement the ERP implementation and bring you closer to meeting ESG goals. Think about how you might link your ERP with other solutions or external data sources as part of a composable architecture. Enterprise software should share data and orchestrate processes seamlessly with operating equipment through the internet of things (IoT), third party emissions calculators and trading partners' systems.
Read the full article on Forbes.com.