Core organizational data, encompassing financial, HR, and supplier information stored within ERP systems, plays a pivotal role in accomplishing ESG objectives. ERP data has the potential to reduce carbon emissions, facilitate sustainable supply chains, introduce circular economy practices, and more. Enterprises that embrace the digital transformation of their ERP systems position themselves to effectively monitor and analyze ESG metrics, enabling data-driven decision-making.
Nevertheless, conventional ERP systems may fall short in terms of flexibility and scalability required to drive ESG objectives. Extracting and amalgamating data across various functions can pose significant challenges. On-premises ERP deployments can also hinder the scaling of new capabilities and obtaining a comprehensive overview of an organization's sustainability performance.
Utilizing the Appropriate Data:Companies leverage data stored in their ERP systems, such as purchase orders, invoices, and energy consumption, to gauge their environmental impacts. Diverse data types are indispensable for addressing various ESG factors, such as HR data for assessing diversity and supply chain data for evaluating emissions. Customer profiles stored within CRM systems can also furnish valuable insights. Managing this data necessitates sophisticated systems and analysis to categorize it into relevant scopes and categories. Effective ERP systems can support the collection, analysis, and reporting of ESG impacts, but this journey is marked by substantial data management challenges.
Journey to ESG Data Maturity:Advancing towards ESG data maturity is a journey that Microsoft initiated early and continues to undertake. The subsequent section delineates this journey into three distinct phases:
3 Phases of ESG Data Maturity:
This section provides practical guidance regarding the typical phases of ESG data maturity, drawing from Microsoft's experience. This progression is not always linear and can diverge based on an organization's commitment to specific ESG goals, incentives, and leadership.
Phase 1: Emerging
The emerging stage of ESG maturity encompasses ad hoc initiatives using existing data housed in different systems. Reports in this phase may lack granularity, and calculating intricate ESG realities can prove challenging. Significant manual effort is required to collate and manage data, rendering analysis and reporting reactive. This phase serves as a learning phase where organizations discern what they need, possess, and lack. However, prolonging this phase by merely reacting without reflecting on avenues for improvement is discouraged. To attain ESG data maturity, emerging organizations should prioritize standardizing and unifying their data, invest in technology and tools to streamline data management, and institute clear and consistent data collection protocols. Continuous improvement is imperative for a sustainable and manageable approach to ESG data management.
Phase 2: Hybrid
In this stage, the organization has integrated ESG data into its enterprise-wide data strategy, but legacy systems impose limitations. ESG reporting and decision-making remain labor-intensive, and a shift towards cloud-based ERP systems may be on the horizon. Embracing flexible, enterprise-grade tools for visualizing sustainability data and employing AI and machine learning capabilities can help surmount data-related challenges. Data-agnostic storage solutions, like data lakes, can also be beneficial. Transitioning data to a cloud-based data lake empowers organizations with enhanced security, scalability, and flexibility in managing ESG data. The incorporation of third-party, cloud-based data fosters a more comprehensive understanding of ESG risks, compliance matters, and performance in comparison to peers and industry standards. Establishing robust data governance and security protocols is essential to the responsible and proficient management of sensitive ESG data.
Phase 3: Advanced
At this phase, actionable ESG insights are readily accessible to decision-makers and stakeholders. The organization has digitally revolutionized its data strategy and governance by centralizing ERP data in the cloud through an agile, composable platform. Emphasis is placed on staging, filtering, and cleansing data lakes to enable in-depth business intelligence reporting across the enterprise data estate. AI and machine learning models aid in identifying and prioritizing ESG risks and opportunities, while Natural Language Processing (NLP) delves into unstructured ESG data to deepen comprehension of public sentiment regarding ESG performance. These capabilities empower organizations to craft a comprehensive ESG strategy, exhibit authentic leadership, and surpass stakeholder expectations.
4 Tips for Commencing the ESG Data Journey:
This section shares pragmatic recommendations gleaned from Microsoft's and others' experiences in successfully launching ESG data initiatives:
Focus Your Efforts
To advance ESG data initiatives, organizations should concentrate on the most significant endeavors, gradually expanding their capabilities. The specific focus depends on stakeholder expectations, regulatory commitments, and industry requisites. For example, manufacturers might prioritize sustainable packaging and supply chain emissions, while financial services firms may emphasize ESG risk mitigation.
Commence with Simple Methods
When adopting new analytics and reporting tools, beginning with straightforward methods is advisable. Microsoft suggests a spend-based approach for estimating emissions, involving the collection of spending data from sources such as invoices and procurement records and the use of conversion factors for emission estimations. Although it may not offer the most precise estimate, this method is relatively uncomplicated and cost-effective, making it an excellent starting point for many organizations. Complexity and sophistication can be progressively integrated over time.
If an organization has not initiated the adoption of a modern and flexible ERP solution, ESG requirements can serve as a compelling motivator to commence the transformation. Microsoft recommends the use of a composable, Microsoft Dynamic cloud-based ERP system that unifies data across business lines, supports modern analytics, facilitates the rapid addition of new functionality, and scales to accommodate evolving requirements without necessitating complex infrastructure planning.
Harness Cloud Solutions
Solutions such as Microsoft Sustainability Manager empower organizations to record, report, and reduce their environmental impact more seamlessly through automated data connections that deliver actionable insights.
4 Approaches through which Microsoft Drives ESG Performance:
Microsoft's longstanding commitment to ESG leadership offers valuable insights to organizations at various stages of their own ESG journeys:
Scale Strategy to Accomplish Ambitions via Holistic Engagement
Microsoft adopts a comprehensive approach to ESG by evaluating its impact as a customer, supplier, investor, employer, policy advocate, and partner. It assesses its influence on carbon footprint, water consumption, waste management, and ecosystems. Microsoft also provides technology to aid customers and partners in their sustainability efforts, invests in research and collaborations, and advocates for policies that drive positive change.
Set the Tone from the Top
Prioritize sustainability as a fundamental aspect of the brand's commitment and garner support from all leaders. Microsoft deems the well-being of people and the planet as a core priority for achieving overall success. This belief is shared by the CEO, CFO, President, and the entire company. Microsoft's Climate Council, consisting of senior business leaders from every business group, provides sustainability counsel, fosters collaboration, aligns priorities and resources, and evaluates progress. Moreover, carbon reduction objectives influence a portion of its executive incentive plan.
Integrate ESG into the Business while Tailoring It to Business Group Levels
Corporate commitments at the strategic level come to life at the business-group level. Microsoft acknowledges this and has established roadmaps for each focus area (carbon, water, waste, and ecosystems) with specific commitments for each business group. To ensure sustainability across its supply chain, it offers capacity-building tools, resources, and sustainable supply chain financing to its suppliers. The company holds its business groups accountable for their carbon emissions through an internal carbon fee that extends to Scope 3 emissions. Microsoft defines measurements and scorecards for each business group's sustainability commitments and conducts biannual progress assessments. By adhering to these practices, organizations can facilitate meaningful change and contribute to a more sustainable future.
Report on All Aspects, Not Just Progress
Environmental sustainability necessitates a dedication to transparency, and Microsoft specifically commits to it. The company shares its sustainability insights through various channels, including white papers and speaking engagements. It also shares its methodologies for achieving results when it succeeds in its sustainability efforts, aiming to assist others in achieving similar outcomes. Beyond delivering innovative technology and services, Microsoft heavily invests in policy advocacy, partnerships, and research to advance environmental sustainability. It openly communicates its challenges to foster collective learning and improvement.
The Collaborative ESG Data Journey:
Embracing sustainability as a strategic imperative and digitally transforming ERP systems can contribute to a better world for future generations. As Microsoft Dynamics 365 ERP migration experts, we can partner with your organization to integrate ESG performance into core systems and processes, enabling your business to make a positive impact. As ESG regulations evolve, we collaborate with your organization to ensure that your ERP systems drive ESG impacts and advance sustainability, paving the way for a more sustainable future.
If you are interested in learning more about how Microsoft Dynamic 365 ERP systems can benefit your business, please reach out to us today for a complimentary consultation. We can assist you in evaluating your needs and identifying the right ERP solution for your organization. Contact us now.
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