Magazine Fall 2014

A New Perspective on Enterprise Resource Management

Information systems are designed to help companies use enterprise resources more efficiently. But what if companies used information systems more broadly — not just to measure profits but also to account for the needs of people and the environment

Thomas Odenwald and Christian Berg Reading Time: 10 min 

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Danone Stoneyfield Yogurt

Danone, a multinational food company based in Paris, uses its enterprise systems to analyze and measure the sustainability impact of products.

Image courtesy of Flickr user Whitneyinchicago.

Consumers today are concerned with more than just quality and price. Increasingly, they also care about the social and environmental impacts of products. Indeed, many ask questions like: Does this toy contain toxic substances? Where do the materials in this garment come from? Do manufacturers take occupational safety practices in their factories seriously enough? And are the production processes environmentally friendly?

Being able to answer questions about the safety and environmental effects of products we use is critical. However, without the right information, even seemingly easy questions are difficult to answer. We send spacecrafts to Mars, but we know embarrassingly little about everyday products we use. Although we produce huge quantities of data every second, we frequently lack the relevant and actionable data points to respond to simple questions people have about what products are made of and how they are made.

Recent surveys (including those published by MIT Sloan Management Review) find that most executives believe that sustainability has a permanent place on the corporate agenda. However, today’s IT systems don’t sufficiently support companies that are seeking to understand and manage the full impact of their activities throughout the extended value chain. This helps to explain why sustainability has not yet become fully integrated into core business strategies.

Classical IT systems for enterprise resource planning (ERP) have significantly improved business processes and the management of enterprise resources. ERP today provides an integrated view of core business processes across various departments, ranging from sourcing, manufacturing and sales to accounting and payroll. As such, it is the nerve center and system of record for many businesses.

However, nonfinancial measures (such as the amount of energy or water consumed during a production step) are hardly considered in conventional ERP. After all, corporate managers are trained and incentivized to optimize financial assets, labor costs and capabilities, and materials. In our view, a more adequate approach to ERP would take into account the full range of resources, including environmental and social ones, as well as covering all phases of the value chain reaching beyond company boundaries.

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About the Authors

Thomas Odenwald is a senior vice president of sustainability at the software company SAP SE and is based in SAP’s offices in Palo Alto, California. Christian Berg is chief sustainability architect at SAP Services in Walldorf, Germany. Authors’ note: This article reflects the personal views of the authors and does not represent the views of SAP.

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Comments (4)
soheyla ayazi
thank you for publishing this article because it focus and expresses the need for a systems of systems approach with which to govern sustainable development requirements and analyse environment
Syed Ali Faraz Kazmi
superb! this article really put light to care for environmental sustainability in particular because to overlook this fact, really threatens the efficient acquisition and utilization of resources. in addition to keep track how much the business is accounted for the damage to the society and the environment two of the most important concerns for an economy.
klgpost
A good read and a hard one to disagree with or to implement. Coming from the viewpoint of resource management and agency theory, I would like to see CEOs and shareholders take action on your recommendation of the triple count (financial, social and environmental)  and the outcome. That would be another even more interesting report article!
v hailey
Thank you for publishing this article because it highlights and expresses the need for a systems of systems approach with which to govern sustainable development requirements.  If we are ever to make real progress in reversing the cascade of anthropogenic damage, we need to engage those who are capable of the most damage and also of the best remedies:  organizations.   Whether or not we are prepared as a species to admit to the accelerating damage we are *still* causing, a comprehensive approach to SD is essential:  if we focus just on climate change, by the time we have it managed, it will likely be too late to reverse the onslaught of converging tipping points.  

In fact, there are ISO standards already in design (and 1 SD systems engineering model nearing completion), which will be submitted to ISO countries to address the very issues you identify.  You are so correct that IT is the perfect paradigm:  the outcomes of systems engineering, like SD, are only visible at the very end of the process (just like unintended consequences), requiring controls over the processes and their attributes during development and throughout change management;  it requires the ability to extrapolate and create abstractions of logic that ultimately must satisfy vital, even life-critical, functional and non-functional requirements and still be traceable, accessible, usable, understandable, etc.  Like IT, the only way to ensure  the achievement of the sustainable outcomes we're hoping for is to control the very life cycle processes that govern outcomes, from concept to requirements, design, build, test, V&V, implement, monitor, learn, and improve...

ISO/IEC JTC1/SC7 has already laid out most of the critical processes that enable systems such as ERP to exist.  Keep your eyes open for an ISO standard that will measure corporate performance based on a comprehensive triple-bottom line set of measurable processes and attributes (e.g. resilience, transparency, etc.) that will enable an organization to identify harm, plan to eliminate it, and then track progress against it.  Then, once you see it, keep your fingers crossed and hope the world is forward-thinking enough to vote it through!

Victoria (Vicky) Hailey, CMC,   VHG Corporation
Canadian Chair, SMC/ISO/PC280 Sustainable Procurement