Companies are confronted to the challenge of sustainability as environmental and societal issues become ever more important. Today, one is talking about environmental, social and governance (ESG) criteria to designate the commitment of companies to new practices, which all are new parameters for assessment.
On the environmental front, the company is committed to encouraging the reduction of waste and implementing effective measures to prevent the depletion of resources. At the social level,
the objective is to assess the company's relationship with its employees, suppliers, customers and third parties. Finally, corporate governance highlights the transparency of results, issues of leadership and team structure, or issues of compliance with various regulations.
If the concepts encompassing ESG seem vast and sometimes imposed, the constraints to be implemented are not only a brake on competitiveness. On the contrary, they will reshuffle the cards by offering new performances and establishing themselves as building blocks for the confidence of customers and shareholders. So how
can one best seize these opportunities for sustainable and healthy growth?
ESG for earning sustainably
While ESG management may at first seem complex, forgoing it may become very risky. Pierre-Yves Gomez, an economist, doctor in management and professor at the EM Lyon [Management School], affirms that the purpose of governance is to ensure the continuity of the company by fomenting strategic orientations. Provided that the leaders do not neglect this mission or alter it. For example, by unbalancing the relationship between project and profit.
The Orpea group, in particular, manager of private EHPADs [Assisted care residences], neglected its core business in favor of increased profitability. By reducing payroll and not investing enough in infrastructure, the company has become the subject of numerous complaints. Result: media scandal and the collapse of the group's share values.
Conversely, many examples of ESG strategy demonstrate how beneficial these actions can be for a company. Wander AG - a Swiss company in the agri-food sector, the owner of Ovomaltine, Caotina and Jemalt - has set for itself an environmental objective: 90% of its packaging must be CO2 neutral by the end of 2025. "The CO2 neutral packaging of our branded products is a good start for us. At the same
time, it allows us to achieve good results, because packaging is indeed responsible for a large part of the CO2 emissions," explains Alain Studer, packaging materials purchasing manager for the Wander AG products.
An example of good governance practice is exemplified by the Weir Group, an engineering company – one of the few tech companies in the UK with a concrete policy to help women break through the glass ceiling. Rosemary McGinness, Director of Human Resources, explains: "Although Weir operates in sectors traditionally dominated by men, we are committed to making Weir a more diverse and inclusive workplace and we will continue to provide opportunities for women to develop their career. In 2020, we have committed to ensuring that one third of the Board of Directors, group leaders and their direct reporting staff are women."
Companies that are genuinely committed to working with ESG practices will face fewer legal and social issues because they are keen to act on the basis of a set of rules that not only benefit the company, but society as a whole and its ecosystem. By putting forward an ESG strategy, the employer brand is strengthened, which makes it possible to recruit new talent in a sustainable way. According to a study by the Brazilian bank Itaú, companies that bet on ESG practices therefore increase their income, reduce their costs, minimize legal problems and increase productivity, by focusing on activities according to a well-defined objective. In North America, Europe and Asia, 22% of large investors already devote 75% or more of their total resources to activities that integrate environmental, social and governance aspects.
ERP to manage its ESG strategy
Within Diligent, Céline Dumont-Mozian, an expert in governance solutions, is alarmed by the obsolescence of work tools that are out of step with the needs of the company. "How many companies still work with paper documents? How many swear by generic solutions, such as SharePoint and Google Team Drive, which do not provide a good level of security or efficiency? How many senior executives discuss confidential matters via standard instant messaging, such as WhatsApp?" In order to achieve good environmental, social and governance practices, it is essential to invest in technologies that provide the necessary building and monitoring base. ERP (Enterprise Resource Planning) is an IT solution that provides a complete and intelligent overview of the available data. Real-time information indicates strengths and weaknesses for a continuous improvement process.
In other words, business leaders obtain a clearer picture for risk decisions and for relevant information regarding team management. With an ERP system, it is possible to prioritize reporting in order to achieve the ESG objectives set by the company.
5 key points to integrating ESG in your ERP
1 – Start at the beginning: the first step in implementing an ESG strategy consists in assessing the various issues that can be an obstacle to the sustainability of the company's activities. If the right problems are not targeted from the start, it is unlikely the right solution will be obtained in the end.
2 – Do not go it alone: in order to have a complete overview of all the facets of the organization, it is necessary to succeed in involving all the actors of the company and its ecosystem, so that they really use the ERP. It must therefore be taken into account that each stakeholder will have their own specific requirements and agendas which will require particular attention.
3 – Aim for the long term: for a CFO, having a new system that measures, monitors and manages sustainability in an optimized way is obviously the panacea. But preparing a thorough business case can be tricky, especially if it extends to considering non-financial elements. Helping the CFO see the long-term big picture is critical to their business.
4 – Do not be distracted by details: the latest technological features offered on the market, as attractive as they may be, are not necessarily useful, on the contrary, they can quickly prove to be inoperative.
5 – Don't forget that this is a long-distance race: the process of integrating ESG criteria should be seen as a long-term endeavor with a focus on continuous improvement and investment to keep it relevant. The key to success is governance, especially around data. Thanks to ERP, quality, reliable and consistent data ensures that your system will continue to function.
ERP and ESG: very good relationships!
By intelligently integrating one’s ESG strategy into the ERP, informed decisions based on data analysis can be made to measure and reduce waste and carbon emissions, optimize the use of assets and improve resource efficiency. The carbon footprint can be calculated using the data available on the company's activities and energy consumption. This data will provide information to management to streamline sustainability operations. At the governance level, an ERP provides an overview of the activities of each employee. It is then possible to provide the necessary resources according to the role in the company by ensuring secure access. As for the production of compliance reports, the ERP as the sole source of data makes it possible to efficiently establish relevant ESG reports that can even be automated.
Finally, it appears that ESG strategies are not just a fad without concrete effect. A true underlying trend, they enable sustainable management of activities. Companies that adopt them quickly by integrating its principles as a whole respond better to the expectations of the various stakeholders. Whether shareholders, managers, employees, suppliers, customers and regulatory authorities. At the same time, the activities of financial directors are evolving with the management of the company's impact, based on all the extra-financial data available. Greenwashing then recedes to let a reasoned and sustainable management of the company's resources take precedence. A new major challenge, ESG criteria appear as the new performance indicators, plainly and simply essential.
Sources :
Boas práticas ESG aliadas à tecnologia do ERP | (Best ESG practices allied with ERP technology) | Photon
Why ESG matters even more in a post COVID-19 world - Asset & Wealth Management Series | PwC Switzerland (YouTube video)
2022 Outlook: Global ESG | Bloomberg
Hot right now? Six key points to build ESG into your ERP | ERP Today
Unlocking the power of people | Weir
Chapitre VII. Les défaillances de la gouvernance, Pierre-Yves Gomez in La gouvernance d'entreprise (2018), pages 106 à 124 | (Chapter VII. The failings of governance, Pierre-Yves Gomez in The Company Governance (2018), pages 106 to 124) | Cairn.info
5 erreurs qui conduisent à une mauvaise gouvernance et comment les éviter | (5 mistakes leading to bad governance and how to avoid them) | Diligent
RSE, ISR, ESG, ODD, comment s’y retrouver ? | (RSE, ISR, ESG, ODD, which is which?) | MACSF
Pourquoi l’ESG est-elle devenue un enjeu majeur pour les employeurs ? | (Why ESG has become a major challenge for employers?) | LEXplicite
Les critères ESG vont-ils bouleverser le métier du DAF ? | (Will ESG criteria upend the functions of the Finance Director?) | Daf-mag.fr
Wander – Des produits de marque dans des emballages carbone compensés | (Wander: brand-name products in compensated carbon packaging) | CilmatPartner
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