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ESG & Sustainability
From confusion to clarity
A common understanding of sustainability is to meet the needs of the present without compromising the ability of future generations to meet their needs. It is an all-inclusive concept, considering all stakeholders and environmental dimensions. Environmental, social and governance (ESG) refers to a collection of corporate performance evaluation criteria that assess the robustness of a company’s governance mechanisms and its ability to effectively manage its environmental and social impacts. We acknowledge the need for ESG and sustainability standards, but it is a bit confusing.
“Manufacturers accelerate ESG strategies as customer and supplier requirements increase” (The Manufacturer, Feb. 2024, Website).
Stakeholder and legislative pressure are the main drivers for the current developments in this space. It affects all companies. There is a consensus around this trend, as 97% of companies in the State of Design&Make survey 2024 by AutoDesk have taken actions to improve sustainability. Stakeholders such as authorities, investors, customers, employees and the society at large expect efforts to operate sustainable. Over 83% of companies are influenced by their customers to act, while 78% are proud of their company’s efforts. However, 87% of the surveyed companies report their sustainability aspirations as good long-term decisions that are good for business.
Business and sustainability performance corelate, and the high performance create more value. According to the 2021 McKinsey & Company report “How companies capture the value of sustainability" the value creators do more than just meet the customers’ requirements on sustainability. They also excel in other areas, like:
- Align with their goals, mission, and values
- Make tangible positive impact on an issue
- Meet industry norms and standards on sustainability
- Build, maintain or improve corporate reputation
- Conform with regulatory requirements
They conclude:
“Companies creating value with sustainability are more likely than others to address the issue for reasons related to their organizational purpose.”
It is not a software tool alone that will secure additional value creation form your sustainability efforts. The determining factor is how sustainability it is integrated into your culture and how you collaborate across your value chain. In simple terms, success requires strong leadership.
Confused by regulatory requirement?
Reporting on sustainability compliance can be experienced as a complex and confusing discipline. Standards are developed continuously, but there are several commonalities across the different regulatory initiatives, programs, standards and protocols. For practical purposes we will use the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standard (ESRS) for this brief introduction.
Large parts of the ESRS metrics, reporting content and procedures are based on existing standards and frameworks. CSRD does not directly apply to small and medium enterprises (SME) unless they are public, however all SMEs will be indirectly affected. As the implementation of the directive progress, more organizations will be subject to sustainability reporting. Our objective is not to provide detailed guidance in all things ESG and sustainability related. We will present an outline and reflect over the relevance for ERP systems.
The CSRD and ESRS will dominate the ESG reporting. ESRS have 2 general cross-cutting standards, and 12 topical standards. The topics relate to the ESG dimensions Environmental, Social and Governance. Industry-specific and SME’s proportionate standards will come soon.
The expectation is that the SME standards will be less extensive than the full ESRS. Although the datapoints to be reported within each topic appears to be continuously evolving, the illustration indicates how many mandatory and optional datapoints are defined for each topic (Source: EFRAG). The number in parentheses represents the number of mandatory datapoints irrespective of materiality assessment. In the datapoint indication on ESRS 2 includes Minimum Disclosure Requirements (MDR). These relate to Policies, Actions, Targets and Metrics (PAT&M) for all disclosure requirements. The standard also specifies if the format of the datapoint within the categories numerical, narrative and semi-narrative.
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Mazeppa er en av våre norske partnere som har solgt og supportert RamBase lengst i Norge.
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We trust that you now possess a thorough understanding of the various manufacturing strategies.
Most importantly, we want to hear from you!
We encourage you to bring any questions or feedback to our workshop discussions. Your inputs will influence the direction of our development.