Incorporating data into sustainability objectives
The world population would currently need 1,75x Earths to support its lifestyle. We need to align human activity with our planet’s ecological capacities. To do that, we need to start managing sustainability like we handle everything else: by collecting high quality data and taking informed decisions.
Across the world, people, businesses, and nations recognize the need for immediate action. The disclosure of sustainability data and information is a key aspect in understanding corporate impact so regulators are mandating greater transparency with specific legislative initiatives such as the Corporate Sustainability Reporting Directive in the EU. Also, stakeholders are requesting regular reports on companies’ sustainability impacts and initiatives.
The 2030 Agenda and its ambitious Sustainable Development Goals (SDGs) has forced companies to ensure robust and credible sustainability disclosure. For many companies it is not a question of compliance, but about a fundamental change that starts with taking a more holistic view of the company’s performance. Nowadays, success is no longer measured and reported solely based on conventional economic indicators, but also based on environmental and social indicators.
Adjusting reporting practices is not enough because reports typically look towards the past and provide a snapshot of the status quo, at best. They help organizations track performance and turn the results into action points but the biggest impact comes from the actions that companies take in between reports.
To effect change, we must go beyond reporting and integrate sustainability with the overall enterprise performance management processes. This way we can manage the triple bottom line end-to-end from strategy and planning, to reporting results to stakeholders, to performance analysis, which informs corporate adaptation and improvement on the ground, with an Enterprise Performance Management framework.
Leveraging Enterprise Performance Management systems to achieve sustainability objectives
The concept of Enterprise Performance Management (EPM) has been established for decades but incorporating a sustainability agenda can be challenging. There are three main reasons for that.
- Sustainability metrics and reporting standards are nowhere near as established as financial indicators. Many are still subject to evolving regulations.
- Data is not readily available, data sources are scattered and of variable quality.
- Many companies do not yet have consistent ways and systems for collecting and storing sustainability data. In consequence, they must resort to laborious manual workarounds, which reduces reliability and produces a lot of latency and frustration.
We believe that existing EPM competences, tools and processes can be leveraged to support sustainability.
At NTT DATA, we guide our clients on their journey towards a holistic EPM along the triple bottom line and help them address the above-mentioned challenges with a systematic approach:
1. Review the EPM process
The first step is to review the current EPM processes of the company to assess where and how we can include the triple bottom line. As EPM systems currently focus on financial data and objectives we need to have a clear view on what adaptation needs to be done on the different part of the processes:
- Strategy: Objectives need to be clear, measurable, and aligned with the organization’s strategy. If the goal is to achieve net zero by 2030, the carbon footprint objective needs to be set accordingly.
- Planning: Information and metrics of the triple bottom line need to be included in the planning processes. Normally, social and environmental plans need to be planned top down as they are key for the company.
- Close and consolidation: During the closing and consolidation processes companies need to consider the triple bottom line and define their rules to consolidate the data.
- Reporting: All the report needs to be updated to include this holistic vision.
- Performance: The Social and Environmental perspective will be included in the performance review. For example, in the forecast Processes Company will compare their plan vs the current data to assess how they are doing and be able to take action to correct any deviation.
The triple bottom line in the EPM systems entails a series of adaptations in the processes and tools. Depending on the maturity of the company and the processes, EPMs can generate a profound change, so a comprehensive redesign of the EPM processes and the adaptations to the current systems, is vital.
To carry out forecast, reporting and performance reviews on a regular basis, companies need to obtain actual data at least monthly. And here many companies are faced with a second challenge: where does sustainability information come from?
2. Identify and pinpoint the required data
To build a consistent EPM landscape we need a data repository, which integrates all the information used in the processes. However, obtaining data is one of the main difficulties that companies face today when tackling sustainability performance management projects. Another key aspect in every EPM or analytics project is the governance and the quality of the data. This is especially true for sustainability data as a significant part of it comes from unstructured and partially manual sources.
The good news is that from a triple bottom-line perspective, not all data are equally problematic:
- Economic Prosperity: Financial information is the core of ERP systems so information needs to be available and automated. In an SAP landscape, financial data usually comes from SAP S/4HANA.
- Social Responsibility: Human resource data are key for most companies and most of the internal data is available in a data repository and reported regularly. More and more companies also have HR EPM processes, which can prove to be a very useful foundation. In an SAP landscape, human resource data can come from SAP SuccessFactors or SAP HCM.
- Environmental protection: environmental data represents the main challenge. Often, this type of data is highly fragmented, exists in a myriad of different systems or is based on third party information. Therefore, it is treated manually. SAP is working on automating data collection and harmonization for environmental data. Many sustainability tools, including SAP, further allow to address this problem with workflows that gather the data and keep track of the information.
Once data and data sources are identified, companies need to integrate them into the data repository based on their current data management, analytics strategy and processes. NTT DATA can help companies not only to identify where the triple bottom line information is, but also help them define the best strategy to obtain the information, build the data repository and govern it.
3. Define the EPM architecture
Next, we need to review the existing landscape and architecture to see if it is fitted to the new requirements or needs adjustment. The goal is not to redefine the entire landscape, but rather to enhance it with new data and/or new tools to automate the ETL processes on the environmental and social data. This approach also reflects our ambition for more sustainable development: given the current situation, we re-use, optimize and simplify as much as possible.
For example, in an SAP landscape the architecture is normally based on a data warehouse, typically SAP BW/4HANA, which provides integration to SAP or third-party systems. The EPM tool can be either SAP Analytics Cloud Planning or SAP BPC. By using existing tools and adding sustainability perspectives, companies can manage the triple bottom line as an integrated part of their EPM processes.
Although companies should aim to re-use as much as possible the current architecture, it is important to point out that SAP is currently working on new tools such as SAP Sustainability Control Tower, SAP Profitability and Performance Management and further complements to SAP S/4HANA such as SAP Product Footprint Management, which can help companies in the setup of an end-to-end solution.
4. Implement the solution and ensure value realization
The previous steps help companies define the project that should be carried out to integrate the triple bottom line into their EPM processes, both from a functional point of view and from a technology point of view. The next step is to implement the solution.
At NTT DATA, using IT to rapidly access and process a wide range of data and to apply it to produce faster and better organizational responses, is our core competency. We provide end-to-end services, from advisory and implementation to organizational change management and adoption. This is at the heart of EPM and a critical piece of any Sustainability Performance Management project.
As Global Strategic Service Partner of SAP, we rely on SAP software and technology to centralize sustainability data and integrate it into the company’s EPM systems, where the financial data is stored. The strategic alliance of SAP and NTT DATA exists to help companies that want to go beyond sustainability reporting and drive sustainability performance with good data and information.
Thibaut, Head of SAP Data Management + Ann,Head of Global Product Engineering and Innovation + Adeline, principal Manager, Global portfolio Manager