As ESG (Environment, Social, & Governance) matters continue to become more central to organisations it makes increasing sense to review a business holistically for ways to facilitate and encourage best practices and conformance to standards. A possible area of this is within the realm of ERP. While traditionally ERP has been able to deliver focused improvements in operational efficiency and optimisation, many of the corollary benefits of this activity (which would contribute to ESG goals) may have been overlooked.
Simple business processes, such as electronically signed Purchase Order processing, can contribute to governance and audibility; while waste management processes traditionally focused on cost reduction, can be turned to evaluate the external impacts of production on a local environment (both socially and environmentally).
Businesses are now starting to specifically leverage Enterprise Resource Planning (ERP) systems such as Sage X3, as key line-of-business systems of record, for their potential to contribute to environmental sustainability goals. Below we will explore some of the examples of benefits that a business can derive from an ERP system in terms of environmental sustainability:
With an increased focus on decarbonisation of the supply chain, businesses can employ ERP systems to help track and monitor energy consumption, identify areas for improvement, and implement more energy-efficient practices. This can reduce a company’s carbon footprint and minimise energy costs, just one of the many ways using an ERP system can help increase sustainability with your business. Specific examples may include the optimisation of production runs (warm-up time for machines, the energy input for clean downs/line changes, etc.) and the consolidation of business activity across sites to ensure that both economic and energy-optimised activity takes place. This may even extend to the reduction of the number of production sites, to consolidate activity, or the outsourcing of elements of the production process (e.g. blast-freezing in frozen food production) to reap the maximum efficiency outcome.
As part of production and stock handling ERP systems can facilitate businesses in tracking and managing their waste production and disposal. This is becoming increasingly prominent a topic, with local legislation appearing internationally such as the Plastic Packaging Tax in the UK. By measuring and controlling the amount of waste generated businesses are able to make informed decisions about supplier selection and waste reduction, as the adage suggests: “you can only manage what you measure”. There are clear business and environmental benefits to undertaking a waste reduction programme, it not only helps to conserve natural resources but also helps to minimise disposal costs.
Supply Chain Management:
An integrated business system, such as an ERP, can provide businesses with a comprehensive view of their wider supply chain; enabling them to identify and address sustainability issues throughout the entire process. Global sourcing and operations can be optimised for not only lead times but also carbon impact; using a sophisticated business management solution will allow you to “score” your suppliers and rank them for automation purposes (such as in MRP supplier selection). Through a very simple configuration of supplier records, a score can be produced based on ESG metrics – we can call this “green procurement”.
In summary, an ERP system can provide businesses with an overarching view of activity and encourage numerous benefits in terms of environmental sustainability, including energy efficiency, waste reduction, supply chain management and green procurement. By adopting a suitable ERP system and business best-practice organisations can take a step towards a more sustainable future while improving operational efficiency and driving cost reduction.