If you multi-million dollar Tier 1 ERP system is already showing its age, it may not be easily adaptable to environmental footprint management, especially if it had its origins before the current trend towards service oriented architecture (SOA). It probably will be more of a hindrance than a help when it comes to measuring an environmental footprint. Many very robust and popular enterprise software suites were not initially designed to track and manage environmental impacts, and are designed in such a way that it is difficult for the vendor to simply add a new layer of functionality that would accomplish this.
How Manufacturing ERP Can Shrink Your Environmental Footprint. (Part 4)
This is one reason that some enterprise software vendors have gone so far as to purchase companies that offer carbon footprint solutions. They are unable to simply add broad, environmental management capabilities to their existing ERP products, and are therefore opting to sell additional software packages that would require an expensive integration project to interact with the rest of their product portfolio. And even then, the resulting capability would be limited to carbon footprint measurement to the exclusion of other environmental impacts. As deeply entrenched Tier 1 vendors, one can forgive them this defensive, if not entirely efficacious strategy.
On the other hand, a truly modern ERP system, built from the ground up on SOA, is comprised not of a single block of code, but rather on thousands and thousands of small bits of functionality that interact with each other in a uniform, established fashion. This allows the system to mutate in new directions more quickly, and also allows companies using this software to reconfigure and change the way they are using the system more easily. In these modern enterprise suites, it is easy enough to simply add new software components that interact with the existing functionality in order to track environmental impact data, using in essence the same conduits or pipes for data that are typically used to track values like cost and revenue.
This SOA-enabled approach not only drastically reduces cost and complexity by an order of magnitude, but it allows for a more flexible, agile solution that can be configured to meet specific environmental measurement and management needs.
An integrated environmental footprint management tool ought to be configurable to track not just carbon emissions, but all environmental impacts a manufacturer may want to report on or manage. It also delivers a more usable solution because users are not forced to learn two separate software programs with separate and divergent interfaces and navigation conventions.
Flexible ERP software packages with embedded environmental management functionality will be particularly important for middle market companies, but as they increase in popularity, will become the preference of the largest enterprises as well. Why is this? Very large enterprises with several billion dollars in annual revenue or more often already have a myriad of enterprise systems running within their business, and they have become accustomed to building and maintaining numerous integrations. These large industries may even have a substantial IT department or a standing budget for a consultancy firm that integrates various software products for them and maintains those integrations.
Continued in Part 5
It is certainly true that in most companies, not much can happen without a mandate from the top. But even with that executive mandate and support, many companies are finding that their ERP system is not fully equipped to efficiently measure their current environmental footprint or make business decisions based on environmental impact.
How Manufacturing ERP Can Shrink Your Environmental Footprint. (Part 3)
Most manufacturing executives will agree that they understand the importance in measuring and managing their environmental footprint. Yet many will also admit that they could not measure their environmental impact at all within their current ERP system. It seems logical that these same executives would look to their ERP vendor to offer environmental footprint management embedded directly into the solution as a standard component. With the continued onslaught of regulation, there is a real and immediate need for ERP products with built-in environmental footprint management capabilities to help manufacturers meet the current demand for reliable environmental impact data.
As is often the case in areas of the business an ERP system does not address or addresses poorly, many companies are using ad hoc systems like Microsoft Excel spreadsheets or other tools that are obviously limited in their capability, require extensive manual intervention and keep data segregated from the rest of the enterprise. But this is on its face a very poor approach given that every activity in business has both a cost impact and an environmental impact. If you move something, if you buy something, if you manufacture something, if you are consuming something, if you turn a light bulb on, if you turn on a computer, it all has an environmental impact—so you really need to keep track of pretty much anything that you do inside the company in order to measure an environmental footprint. So if you want to do it in a credible way, you need to actually keep track of activities across the enterprise, and that is extremely hard to do when your environmental management system stands alone, apart from the rest of your enterprise system.
Adequately tracking environmental footprint data is virtually impossible while using ad hoc systems like spreadsheets because outside of an enterprise application, no combination of spreadsheets is comprehensive enough to do the job. Mastering the environmental footprint, after all, requires that we actually look across the entire product lifecycle from the raw material sourced from mines, forests, etc. to the end user or customer. You must actually see what affect your product has when it is used, and what will happen when it is eventually disposed of or decommissioned. True environmental footprint management can involve a complex and huge body of data —and the natural place for that data and where most of it is already to be found is within the enterprise system, the ERP system. After all, environmental accounting and financial accounting are very much alike in the sense that everything that you do has a financial impact and needs to be tracked in ERP and similarly, everything you do has an environmental impact that can also be managed in a centralized way wit h in ERP.
Continued in Part 4
Data on environmental impact originates from literally every part of a company, and can take many forms. This means that technologically, environmental footprint management can be a major challenge. But the nontechnical barriers to launching an effective environmental management program are not to be underestimated, either.
How Manufacturing ERP Can Shrink Your Environmental Footprint. (Part 2)
Many of the problems companies experience as they try implement an environmental program of this type stem from the lack of clear ownership. Who within the company owns the issue—is it the production manager, is it a district or regional manager, the marketing department or someone else Within many companies, this is not decided with sufficient clarity, and therefore questions and tasks with regard to environmental management can tend to fall between chairs. ? While the IT department may own the ERP system, clearly IT is not where environmental footprint management should reside.
In more and more companies, there is an assigned environmental manager. This person may also hold the position of quality manager or production manager. This is a positive development, but typically, these people still don’t have the power to get things done outside of a very narrow band of responsibility. They can order some reports from others in the organization, and perhaps induce people to fill out some forms to gather data, but they have very limited hard power. In other companies, environmental management programs are driven by the marketing or sales department. Sales-led initiatives can actually lead to a slight increase in power as the promise of increased revenue and sales results can motivate a number of people throughout the enterprise due to either direct fiscal incentives or a general desire to grow the company.
Indeed, some companies have been able to market and brand themselves as “green” or environmentally responsible, and have by virtue of this been able to carve a competitive niche for themselves. But as more and more companies position themselves in this way, marketing on the basis of environmental responsibility will depend on having better documentation and proof points than competitors who are making the same claims.
But as successful as sales-led environmental initiatives may be, the mandate to launch a broader and more effective environmental management program is possible once it becomes an issue at the board of directors’ level. Once the importance of measuring and managing an environmental footprint becomes a part of the corporate strategy and a means of managing board-level risk, a company is in a position to put much harder policies into place and can in effect force the different departments and cross functional teams to collaborate around the issue. When the mandate for an environmental management program comes from the president or CEO, and when that chief executive is actively involved in advocating for and tracking deliverables, it is more likely that the required resources will be made available to assure success.
One other alternative situation involves an environmental program being driven by the CFO. With increased pressure from the investor community, the CFO could in fact be the high-ranking executive with an intimate understanding of the implications and importance of environmental footprint management when it comes to securing investment capital. The CFO also tends to have substantial hard and soft power within an organization, and can command significant organizational resources directly and through influence with other C-level and line managers.
Continued in Part 3
Politicians love to talk about restoring America’s manufacturing base. So why do they keeping making it tougher for manufacturers to operate? Not just in the United States, but also around the world, government regulators are placing, or preparing to place, new and more stringent environmental monitoring demands on manufacturers.
How Manufacturing ERP Can Shrink Your Environmental Footprint. (Part 1)
European directives on Registration, Evaluation, Authorization of Chemicals (REACH), Waste of Electronic and Electrical Equipment (WEEE) and Restriction of Hazardous Substances (RoHS) affect any company doing business in Europe. State governments in the US, including California, are also emulating these regulations.
Investors, with the encouragement of the US Securities and Exchange Commission and similar bodies elsewhere in the world, are paying more attention to the environmental liabilities of the companies they fund. Several statements of position (SOP) from the American Institute of Certified Public Accountants (CPA) also deal specifically with the need for accounting of environmental liabilities in financial statements of audited companies.
Consumers are looking for proof of claims of environmental responsibility on the part of companies whose products and services they buy. And manufacturers are facing green supply chain mandates from their customers, who are intent on making purchasing decisions not only on the basis of price and quality, but also on the basis of environmental impact and the contribution to global warming.
Manufacturers are under pressure from all fronts to document their environmental impact. This documentation may be intended primarily to prove compliance with government mandates, compete for business in request for information processes, or to deliver decision support for sound environmental management practices. Regardless of how environmental impact is used, within the vast majority of manufacturing companies, data on how operations impact air, water and landfills is difficult if not impossible to get. While adequate information technology (IT) systems are not yet in place, manufacturing ERP systems are ideally suited to collect the data, data that originates from virtually every activity and department of the company, making environmental management initiatives eminently achievable.
This series of articles examines not only the ERP technologies but also the organizational dynamics necessary to successfully implement an environmental footprint management program that can encompass not just carbon emissions, but also all organizational impacts on the environment. We will also suggest specific questions that should be asked of ERP software vendors that claim they can deliver environmental footprint measurement and management capabilities. A thorough and flexible environmental program, enabled by enterprise software, can prepare a manufacturer for virtually any environmental mandate from the private or public sector. But this degree of flexibility and agility really requires both a firm commitment from management and a very tight and intimate integration between environmental functionality and the system where most environmental impact data is already housed, ERP databases.
That’s the good news. If you have a robust ERP system, much of the information required for compliance with environmental regulations already exists, and simply needs to be pulled from the system through the creation of automatically generated reports. Because your ERP system is involved in every transactional step of your organization’s processes, environmental data that is not yet captured by the ERP system can be through some simple adjustments to the system rules.
Continued in Part 2