Environmental, Social and Governance (ESG) & How ERP Can Help Make Earth a Better Planet

What is ESG?

ESG stands for Environmental, Social and Governance. It refers to the three main factors used to evaluate the sustainability and ethical impact of a company. Environmental factors include a company’s impacts on the environment, such as its carbon footprint, use of natural resources, and pollution. Social factors refer to a company’s impact on society, including its treatment of employees, customer satisfaction, and community involvement. Governance factors relate to a company’s internal policies and practices, such as board diversity, executive compensation, and transparency.

ESG issues are increasingly important for investors, who see them as an important way to evaluate the long-term sustainability and risk of their investments. ESG is also crucial to effectively address the impact that businesses have on the planet and society.

Why ESG Matters for Businesses?

ESG matters for businesses for several reasons. Firstly, companies that prioritise ESG factors tend to be more resilient and better positioned for long-term success. By reducing their environmental impacts, companies can minimise their exposure to regulatory risks and adapt to changing consumer preferences. By prioritising social factors, companies can build stronger relationships with customers and employees. And by prioritising governance factors, companies can reduce the risk of scandals and legal challenges, which can damage their reputation and shareholder value.

Secondly, ESG factors are increasingly being integrated into investment decisions. Many investors are now paying meticulous attention to ESG factors when making investment decisions. It is as they recognise the potential risks and opportunities associated with sustainability and ethical practices. This has led to a growing demand for ESG reporting and transparency, as investors seek to evaluate companies based on their sustainability and ethical impact.

Finally, ESG factors are becoming more important to consumers and other stakeholders. As consumers become more conscious of their impacts on the environment and society, they are demanding greater transparency and accountability from the companies they do business with. Companies that prioritise ESG factors can benefit from increased customer loyalty and a positive brand image, which can lead to increased sales and profitability.

ESG in Singapore

Singapore has a strong commitment to sustainability, and its government has implemented several policies to promote sustainable development. In recent years, the government has increased its focus on environmental, social and governance practices and has encouraged businesses to adopt sustainable practices through various initiatives and grants.

The Finance for Net Zero (FiNZ) Action Plan was recently launched by the Monetary Authority of Singapore (MAS) in April 2023. The plan is aimed at mobilising financing to support the net-zero transition and decarbonisation efforts of Asia, specifically in Singapore and the region. This new initiative builds on MAS’ existing Green Finance Action Plan introduced in 2019, encouraging financial institutions to incorporate ESG factors into their investment and risk management processes.

The Singapore Exchange (SGX) has also introduced rules requiring listed companies to provide more disclosure on their ESG practices through sustainability reports. The SGX’s focus on ESG practices reflects the growing importance of sustainability among investors and businesses worldwide. By promoting ESG practices and encouraging greater transparency and disclosure, the SGX is helping to create a more sustainable and responsible business environment in Singapore and beyond.

How ERP can Help Companies Achieve their ESG Goals

Enterprise resource planning (ERP) systems can play a significant role in helping companies improve their ESG practices. ERP systems are designed to streamline and integrate a company’s business processes, making them more efficient and effective. Here are a few ways that ERP can help companies make a positive impact on the planet:

Reduce Paper Usage

One of the simplest ways in which ERP can help to support ESG goals is by reducing paper usage. ERP software can help to digitise business processes, reducing the need for printing excessive paper, such as reports and business documents like purchase orders, invoices, etc. By reducing paper usage, businesses can reduce their environmental footprint and save costs associated with printing and paper storage.

Improve Productivity

ERP modules can help businesses to improve productivity by streamlining their business processes, which in turn reduces the need for working overtime. This can help to reduce the usage of electricity and cut down on costs, benefiting both the environment and the company’s bottom line.

Enable Remote Work

ERP software can enable staff to work from home due to digitalisation, resulting in fewer commutes and reducing carbon footprint. Remote work can also benefit employees by improving work-life balance and reducing stress.

Monitor Sustainability Metrics

ERP systems can help companies to monitor and report on sustainability metrics such as carbon emissions, energy usage, and waste generation. This can help companies to identify areas where they can reduce their environmental footprint and take steps to mitigate any negative impacts.

Ensure Compliance

Finally, ERP solutions can help businesses to ensure compliance with ESG reporting requirements by automating the collection and reporting of data. This can help companies to avoid penalties and reputational damage associated

Conclusion

As the importance of ESG continues to grow, companies are looking for ways to improve their sustainability and reduce their environmental impact. ERP software can play a critical role in this effort, by streamlining processes, reducing paper usage, increasing productivity, and enabling remote work. By embracing ERP and prioritising ESG issues, companies can make a positive impact on the planet while also achieving greater profitability and long-term sustainability.