Instrumental, encyclopaedic, priority, priceless – ask any business leader to describe an enterprise resource planning (ERP) system and they’d probably use these four adjectives.
Many would say that they simply can't imagine working without one. After all, an ERP allows businesses to manage a myriad of processes, make data-driven decisions, and report on their progress – all on a singular, easy-to-use software platform.
ERPs are particularly important within an organisation’s finance function. Through ultra-accurate plans, budgets and forecasts, companies can effortlessly produce standardised financial metrics required by stakeholders and reporting regulations using their ERP. In the past (and maybe still today for many companies), this financial performance data was often all that was needed to measure a business’s health, value and longevity. However, wider world developments have led to the rise of an equally crucial criterion – and a new use case for data availability.
The growing importance of ESG
Environmental, social and governance (ESG) issues have long been rising towards the top of corporate agendas. But in just six months, 2022 has transformed ESG into perhaps the single biggest priority for business leaders, investors and consumers alike.
In April 2022, the Intergovernmental Panel on Climate Change revealed that worldwide greenhouse gas emissions must peak by 2025 if we’re to avoid irrevocable climate disaster. Meanwhile, research from international charity Oxfam showed that the Covid-19 pandemic oversaw unjust global wealth transfer and intensified gender inequality. And with social injustices, supply chain fragilities, and the ‘great resignation’ rumbling on, it’s no wonder that 60 per cent of global consumers now say sustainability is an important criterion when choosing what to purchase, according to findings from consultancy firm Simon-Kucher & Partners.
As a result, the ESG efforts of a business have become integral to its operations and economic value, and a fundamental metric of success. And while I’m extremely passionate about diversity, equity and inclusion and I’m convinced it’s the solution for many issues, for now I want to consider the critical significance of data in our transition towards net-zero emissions.
Decarbonisation is about data availability
It’s clear that the world needs to decarbonise fast. Organisations and their leaders must first take responsibility for their environmental impact. A CDP report shows that just 100 companies have produced over 70 per cent of the world’s emissions since 1988, while thousands more continue to pursue short-term profits over long-term sustainability.
As of early 2020, only 23 per cent of the Fortune 500 had set meaningful commitments to carbon neutrality, climate action, or both, according to research from Natural Capital Partners. Progress in European-headquartered Fortune Global 500 companies has been slightly more promising, with 42 per cent already taking action or making public commitments. But for many organisations, difficulties arise when they are asked to implement decarbonisation strategies at scale. It’s one thing to aspire to carbon neutrality or net-zero emissions, but it’s something else entirely to get there. So, what’s the solution?
We’ve all experienced in our personal lives how access to live data can help us to spot areas for improvement, and then make incremental lifestyle changes for the better. Think wearable technologies, such as smart watches and fitness trackers. These devices not only track our daily activities, heart rate, and sleep hours, but they also send us up-to-the-minute reminders to inspire instant, healthy action.
For organisations to truly realise their carbon impact, they need similar real-time access to their carbon dioxide emissions data. After all, how else will they know how and where to make changes? It’s easy to talk about a climate transition, but without data tracking and systemic analysis, decarbonisation is simply not possible. No feasible, scientific-based goals can be set, no success can be tracked, and sustainability will remain just a buzzword.
Overcoming data complexity
With time running out before temperatures increase by 1.5C, organisations across the globe must urgently leverage data to accelerate their decarbonisation strategies. However, this isn’t easy. Common major data challenges include the development of a company-wide collection strategy, a consistent approach to data units, confidence in the data’s accuracy, and building a team with the competence to grasp the data’s insights and make them actionable.
Mitigating these challenges and building a successful strategy usually involves three steps: measure, monitor and act. At Schneider Electric, we call this ‘Strategise, Digitise, Decarbonise’. Most people are familiar with steps one and three but overlook, or even undermine, the importance of step two. ‘Digitise’ is perhaps the foundation of an effective policy: it involves tracking all of an organisation’s carbon data and storing it in a singular, easy-to-use location, allowing leaders to record baseline levels of carbon dioxide, set improvement targets, monitor live progress, and report and disclose results to stakeholders.
This is particularly important as ESG data around decarbonisation is not yet standardised. Multiple disparate metrics can be used to assess performance, from cost per kilowatt-hour to tons of carbon dioxide emissions. Meanwhile, carbon data is often also siloed in different departments and systems, with fluctuating methods of measurement and management. But how should this information be handled?
From ambition to action
Smarter technology means corporations are now able to capture and monitor granular energy and resource consumption in real time. Yet many still struggle to turn this data into action. Data is readily available but companies find it tough to ensure quality and use the information to foster sharing and collaboration.
Similarly, data can be polluted by erroneous readings, hardware-driven faulty values, meter swap-outs or rollovers, and any number of other sources. Data streams can be diverted by misconfiguration (usually human error) or dammed by communication outages or IT security changes. Data can even dry up when a meter dies. Simply put, emission-reduction programmes require constant attention to ensure they are performing as expected.
To capture robust, digitised data, organisations should establish an integrated, cross-functional transformation team, with company-wide representation from departments like procurement, energy, sustainability, operations, supply chain, legal, investor relations and communications. This team can use its ranging skillset to audit different datasets for accuracy, align on corporate and sustainability goals, and collaborate to uncover actionable improvements.
This type of change management is hard and may require incentives to encourage participation. Financial rewards that are linked to sustainability targets for everyone can motivate employees to feel a sense of ownership over the programme and drive success.
Then, underpinning everything should be a good data management system; one which enables analysis and reporting while staying out of the way of core business priorities, operating in the background to minimise distractions and avoid eating up valuable time. Most importantly, the system must increase data confidence. With a bespoke carbon data management platform, managers can easily collate and publish this data. Then, they can move from yearly carbon estimations to ultra-accurate records of energy consumption and take impactful steps toward reducing their footprint.
Leveraging a specialist sustainability platform
We’ve already discussed the benefits of ERPs for business leaders, such as the ability to make accurate business decisions, clearly communicate results, and meet financial reporting standards. However, a Schneider Electric and Greenbiz survey of more than 300 corporate energy and sustainability professionals revealed that 52 per cent are still relying on archaic spreadsheets to manage their energy and sustainability data. So, what about using an ERP for ESG, specifically for carbon data management?
With a cloud-based software system crafted for sustainability metrics, organisations enjoy artificial intelligence-powered standardisation, collection and aggregation of carbon data across multiple locations. Over 400 streams of data, within the clear context of each organisation’s role and responsibilities, make it far easier to measure, monitor and summarise progress in real time. Then, hidden opportunities, scenarios and goals can be uncovered and weighed-up based on cost, risk and priority. Data automation also frees up staff to perform sophisticated risk management analyses and strategies, driving proactive understanding, reporting and performance improvements.
To ensure comprehensive decarbonisation management, hiring a team of expert external consultants can accelerate an organisation’s sustainability journey further. A truly successful sustainability programme requires transformation in every department, that’s why these data specialists analyse company-wide infrastructure and processes and engage with stakeholders to identify the data that’s material to a company. Then, they collate it and validate its quality. Consultants can also impartially assess an organisation’s carbon footprint, and support managers to build an ESG playbook that discloses targets, commitments and improvements against them.
Making carbon measurable against net-zero commitments
Working with numerous organisations on their sustainability strategies, Schneider Electric has found that as much as $3 million can be saved by tracking energy and sustainability performance and identifying strategic procurement opportunities, while $1 million can be saved just by identifying waste and tracking data on a single platform. As a result, 14.5 per cent of these energy savings can be reinvested in lower energy costs and similar initiatives.
A real-world example of using data to reduce spending and enact a successful carbon transition is entertainment behemoth AEG Worldwide. Through a partnership with Schneider Electric and its Resource Advisor platform, AEG began to benchmark organisational energy consumption and monitor the success of its efficiency projects.
By consolidating the visibility of 53 different types of data streams across 59 facilities into one central platform, AEG leveraged a clear overview of how to reduce its environmental footprint and energy costs across their venues. This has resulted in more than $3 million in energy cost savings and a 14 per cent reduction in greenhouse gas emissions since 2010, plus 53 per cent of worldwide waste now being diverted from landfill.
It's time for more organisations to do the same. As we’ve explored, it’s no longer enough for a successful business to be measured on profit and loss alone. The onus is now on companies to lead decarbonisation, with investors, employees and customers increasingly vigilant. If businesses are going to take their responsibility seriously and deliver on net-zero pledges, then they urgently need to put in place the right tools to manage their data.
At Schneider Electric, we began our sustainability journey 15 years ago. In the decade and a half since, we’ve been widely recognised for our ESG progress and ranked as the world’s most sustainable company by Corporate Knights. This is proof not only of our leadership in carrying out significant transformations internally, but also of our ability to accurately report on and disclose our progress with stakeholders.
Schneider helps clients define success through market intelligence and trends, benchmarking and footprint assessment, stakeholder engagement and journey mapping, and digital solutions like Resource Advisor. Through the Schneider Electric Sustainability Business, we’re also supporting thousands of clients on their own carbon data management transformations. Our products and services are built on vast experiences from our own journey and those of our customers, from widely different industries, geographies and stages.
Olivier Blum is executive vice president of energy management at Schneider Electric
This article was originally published in the Summer 2022 issue of Technology Record. To get future issues delivered directly to your inbox, sign up for a free subscription.