Transforming your ERP into an ESG powerhouse:
Driving sustainability from the digital core

‘As a standalone initiative, ESG reporting yields sub-optimal outcomes. But when it is integrated into the core business strategy and enterprise risk framework, organizations can alter internal functions and help external stakeholders gain a competitive advantage. ESG reporting can stimulate a rethink of decision-making up and down the value chain, which in turn can drive innovation, resource efficiency, and operational resilience.

An integrated reporting practice empowers organizations to reinvent their operating model, improve market strategy agility, and foster a culture of transparency that appeals to stakeholder conscience.’

• Unlock value with ESG reporting, Capgemini Invent

In today’s business environment, sustainability has moved from a ‘nice to have’ to a core driver of corporate strategy. Integrating environmental, social, and governance (ESG) factors into your operations not only aligns with regulatory demands but also strengthens your competitive edge and market position. The obvious – but often overlooked – place to ingrain this is right at your organisation’s digital core, as part of any ERP transformation.

And yet, organisations often view their ERP transformations and ESG initiatives as two distinct endeavours, missing the chance to harness their full potential together. But by embedding sustainability into an ERP transformation from the outset, organisations can maximise impact across financial, environmental, and operational domains. This integrated approach turns an ERP from a finance-only solution into a holistic digital core that drives compliance, innovation, and long-term, sustainable value creation.

Australia’s watershed moment for corporate sustainability is (nearly) here…

“The shift to mandatory climate-related disclosure presents the biggest change to corporate reporting in a generation… Getting started early is critical, as is a recognition that the quality and depth of reporting will mature over time.”

Joe Longo, ASIC

As ASIC’s Chair Joe Longo observes, Australia’s incoming climate-related financial disclosure regulations represent the biggest change to corporate reporting in a generation. For CFOs and their teams, this is more than a compliance exercise – it’s a chance to lead. With sustainability becoming a core business function, ownership is shifting to the C-suite.

While the challenge at hand is complex and the stakes are high, with ever-growing consumer and regulatory expectation for organisations to demonstrably quantify their sustainability efforts, this regulatory shift is a tremendous opportunity for those who take an integrated approach – combining ESG and ERP transformation into a single, cohesive strategy.

Why the time to turn sustainability obligations into a catalyst for innovation and value-creation is now

• Awareness is heightened and the sustainability imperative is clear. Despite this, intentions are yet to fully translate to action.
  Capgemini’s A World in Balance 2023: Heightened sustainability awareness yet lagging actions finds that from 2022 to 2023, executive agreement globally on the importance of sustainability has tripled, increasing from 21% to 63%. Yet, it also finds that: ‘Despite the improved sentiment on sustainability and clarity around the business case, investment in sustainability has not increased in 2023. Our research reveals that organisations continue to fall short in terms on reporting on environmental sustainability initiatives, especially in measuring and collecting Scope 3 emissions.’
• Australian regulations are imminent.
  The January 2025 deadline for mandatory climate-related financial disclosures will reshape corporate reporting. New Zealand has already implemented similar regulations, giving Australia a clear path forward.
• Consistent progress has been made in Australia, but there is significant progress yet to be made.
  The annual World in Balance research series shows that Australia has made steady year-on-year progress towards environmental and social sustainability. To put this progress in context, despite an increase of 5 points on its 2023 Climate Change Performance Index ranking, in 2024 Australia ranks 50^th out of the 67 countries included in the index, placing it in the ‘low performer’ category (up from ‘very low’ in 2023).
• Reporting is complex – and isn’t getting any simpler.
  The leading roadblock to progress cited globally by organisations is their inability to measure accurately and exhaustively. As leaders’ understanding of what is needed evolves, they now increasingly realise how interconnected and complex achieving sustainability is. This is reflected in a 9% decline in organisations’ confidence in their ability to effectively measure and report on their Scope 3 data.

• The Eco-Digital economic opportunity is vast, yet to date its full potential has been largely unrealised.
  Driven by digital sustainability, the ‘eco-digital’ economy, is expected to double by 2028 to almost $33 trillion globally. Nearly eight in ten organisations say they are experiencing a dual transition towards a more digital and sustainable world, yet today these organisations have only harnessed around 25% of the overarching potential of mainstream technologies – such as ERP – to help them enable this. 
• Globally, organisations’ digital investments as a share of revenue are expected to nearly double by 2028. Digital investments in Australia are on the rise, with Australia positioning itself as a competitive player in the global digital market, with a focus on innovation and technology adoption.
• As a share of revenue, the Australian enterprises surveyed in The Eco-Digital Era^TM: The dual transition to a sustainable and digital economy, conducted by the Capgemini Research Institute and Harvard’s Digital Value Lab, currently spend on average 3.6% of total revenue on digital investments (compared to a 2.9% global average), with its digital spending projected to increase to 6.1% of revenue by 2028.

The a-ha moment for Australian organisations:

Much like the concept of circularity, which urges us to reimagine existing resources before reinventing the wheel, many Australian organisations are having a lightbulb moment. Rather than turning to bespoke solutions or bolt-on fixes, the realisation is this: We can work within our existing systems and frameworks to meet both immediate needs, like regulatory obligations, and longer-term goals aligned with purpose, people, process, and data.

Everyone understands the need for systems and data to meet sustainability targets and make strategic decisions. However, in the race to meet new requirements, the connection between leveraging existing systems and achieving these outcomes can sometimes be overlooked. This shift in mindset is key.

The Australian Institute of Company Directors (AICD) highlighted this at their recent Climate Governance Forum (which fittingly took place the week that  Senate passed the new legislation). The WWF’s Judy Slatyer emphasised that boards and executives must consider the systemic impacts of climate change, incorporating nature and climate considerations into their decision-making frameworks. In a similar vein, ASIC’s Kate O’Rourke stressed the importance of using familiar governance frameworks and approaches to align financial and non-financial issues. O’Rourke’s message was clear: We have the tools – now we must use them.

By taking a ‘Trojan horse’ approach and embedding sustainability goals, metrics, and principles into existing everyday processes, systems and frameworks, businesses can drive sustainability outcomes within overarching processes and role responsibilities. This method integrates – or ‘hides’ – sustainability in core business operations, making sustainability ubiquitous and transforming compliance into a strategic opportunity.

Another advantage of this approach is that it helps to minimise increased employee workloads and the need to context-switch between tasks and systems to fulfil new requirements – thus helping eliminate known barriers to change adoption.

ERP transformation, reimagined

“In today’s rapidly evolving business landscape, sustainability has transitioned from a peripheral concern to a strategic imperative. In this context, the role of ERP systems has evolved beyond their traditional function as operational tools.”

Paul Esherwood, Editor in Chief, ERP Today

As businesses are compelled to move to new fully cloud-based ERPs, many understand the technical necessity of the migration but are missing a critical element: the business rationale. Beyond the impressive new functionality these suites offer, the real value lies in the enhanced intrinsic reporting capabilities that modern ERP systems deliver. This new generation of ERP solutions offers real-time, self-service reporting – something that was previously only possible with complex workarounds and third-party tools.

The true power of modern ERP systems is their ability to provide a single source of truth, directly within the platform. Gone are the days of data latency, manual interventions, and mixing reports from multiple sources. Now, finance teams can shift from number-crunching to high-value activities like data analytics and strategic decision-making.

If we look at this from a sustainability perspective, the need for a holistic view becomes even more pressing. Ignoring sustainability data misses the opportunity to build a solution that is future-ready, leaving sustainability data scattered across departments, requiring manual tracking and multiple downloads from various systems. Imagine a brand new ERP with real-time, self-service reporting – but you still manually collate sustainability data. This is a missed opportunity that often cannot be rectified until the next ERP transformation program.

To truly unlock the value of ERP transformation, organisations must adopt a holistic mindset. It’s no longer just about financial data; it’s about capturing sustainability metrics and other critical business intelligence in one seamless, integrated platform. This shift ensures that ERP systems become the backbone of both financial and non-financial reporting, driving real-time availability of information and enabling smarter decisions across the entire organisation.

When two lenses become one: The ERP-ESG transformation nexus

When designed with sustainability at the core, your ERP will become the central nervous system of your organisation – integrating financial and non-financial data into a single source of truth. This synergy between business and sustainability goals drives strategic, efficient decision-making and fosters eco-friendly innovation. By embedding sustainability into your ERP from the start, you not only streamline operations but also amplify the shared benefits across both areas, enabling a three-fold transformation:

1. Understanding the full scope of your organisation’s sustainability impact.
2. Redesigning your IT and business ESG operating models.
3. Achieving your ERP transformation objectives.

Common sustainability challenges – and ERP solutions

1. Data fragmentation: Sustainability data is often scattered across systems – and your wider ecosystem – making it difficult to consolidate and analyse, particularly for scope 3 emissions outside an organisation.
ERP solution: Centralised data management ensures sustainability data is accessible, accurate, and ready for reporting. This streamlined reporting approach simplifies compliance and shifts from annual to real-time, data-driven decisions.

2. Complexity of reporting requirements: Sustainability regulations are intricate, demanding detailed and accurate data that’s often hard to integrate.
ERP solution: Automated reporting reduces manual effort, ensuring timely, accurate disclosures. Customisable ERP modules can be tailored to unique sustainability metrics, making compliance easier and more efficient.

3. Resistance to change: Employees may resist new sustainability measures, especially if they feel burdened by additional tasks or system changes.
ERP solution: Comprehensive change management support smooths the transition to sustainability-focused practices. With training and strategic support, employees are more likely to embrace the new system and foster a culture of sustainability.

Market opportunities and innovation

Innovation and market differentiation: Embedding sustainability into ERP drives eco-friendly product development, creates new revenue streams and helps enhance market position.

Risk management and resilience: A sustainability-focused ERP helps mitigate environmental and social risks, ensuring long-term stability and preparing businesses for future challenges.

Impact: 53% of organisations report faster progress toward net-zero goals when embedding emissions data into decision-making, with an average 4.6% reduction in emissions through emissions measurement and analytics.

Creating your blueprint for sustainable ERP transformation – where to start

Questions to ask as you embark on your sustainability-centric ERP transformation

For any major digital core transformation, to embed a sustainability focus by design, it’s critical to ensure that all your sustainability stakeholders are included – right from the point where you’re preparing your RFP.  

To ensure your ERP transformation is set up to deliver on its sustainability ambitions, firstly consider these key questions.

• Is sustainability an integral part of our data architecture and approach to governance from the outset?
• Is our approach to our ERP transformation holistic?
• Are we viewing our ERP transformation as an opportunity to rethink our entire business model through the lens of sustainability?
• Are we involving all departments and ensuring that sustainability metrics are part of every decision-making process?

Regulation:

• Have we identified which regulations our business needs to comply with, and by when, now and in the coming years?
• Have we analysed how regulations are impacting, or will impact, our business?
• Have we set, and are we following, science-based targets?

Strategy

• What major business transitions and changes are we planning to implement over the next five years?
• How is our organisation’s ESG data strategy defined, communicated and sponsored?
• What is important for us to track? What decisions do we want to make?
• Who needs access to our sustainability insights and reports internally and externally?
• Are we gearing up for continuous improvement?
• What potential cost savings and efficiency gains can we realise by embedding sustainability into our ERP systems?
• How can our ERP transformation drive innovation and create new business opportunities through sustainability?

Next steps:

• Conduct a sustainability audit of your current ERP system/s:
  Evaluate your current systems to identify gaps in sustainability integration.
• Define clear sustainability KPIs for ERP integration:
  Establish key performance indicators that align with your sustainability goals.
• Engage cross-functional teams in ERP design:
  Involve stakeholders from all relevant departments to ensure a holistic approach.
• Map out compliance and reporting requirements:
  Plan for how your ERP system will meet both current and future regulations.
• Pilot sustainable ERP initiatives:
  Start with a pilot project to refine your approach and build momentum for broader implementation.

The shift to mandatory climate-related reporting in Australia represents both a challenge and an opportunity for business leaders. By using your ERP transformation as a sustainability ‘Trojan horse’, you can embed sustainability into the heart of your organisation, ensuring compliance, driving innovation, and creating long-term value. Failure to embed this approach at the outset of any ERP transformation is a missed opportunity for immense value creation. The time to act is now – not simply to meet minimum regulatory requirements, but turn this moment into a strategic advantage that positions your organisation for its sustainable and prosperous Eco-Digital future.

Lynette Ryan

Vice President

‘Transformation isn’t simply about changing systems; it’s about evolving mindsets. The true measure of transformation isn’t just in what we change, but in why we change, and the true power of transformation lies in its ability to connect our actions today with our responsibilities tomorrow.

If ERP and our digital core is our engine – the mechanism through which we embed and pave our path – ESG is our mission – the compass that gives this path the direction we need to chart the best course for our future.

ERP sets unified processes in motion, creating momentum and shared responsibility; ESG brings purpose and meaning. ERP lays the foundations for operational excellence; ESG elevates these foundations to a legacy of lasting impact.’

Dan Ong

Vice President 

‘ERP transformation isn’t just a technical upgrade; it’s a strategic shift. The true value lies not in a modern ERP’s impressive suite of functionality, but in the power to unify data and unlock real-time insights that drive smarter, faster decisions.

Gone are the days of fragmented data and manual interventions. Modern ERP systems act as the single source of truth, where financial and sustainability metrics converge. This is more than an upgrade; it’s a transformation that shifts organisations from reactive reporting to proactive, data-driven decision-making.

If financial data is the fuel, sustainability is the roadmap, guiding businesses toward a future where growth and responsibility coexist. Together, they transform ERP into the central nervous system of your organisation, ensuring every decision is aligned with both profit and purpose.’

Further Capgemini resources and recommended reading:

Unlock value with ESG reporting: Realising a sustainable future beyond regulatory compliance

A World in Balance 2024: Accelerating sustainability amidst geopolitical challenges

The Eco-Digital Era^TM: Research from Capgemini Research Institute and the Digital Value Lab at Harvard’s Data and Design Institute

Sustainable technology: A competitive advantage for businesses

From talk to action: Practical steps for your ESG journey

Green data: The sustainable foundation of enterprise

Three data-foundation strategies for Scope 3

Data for Net Zero

Data for Net Zero: Why data is key to bridging the gap between net zero ambition and action

Data-powered enterprises 2024

https://www.capgemini.com/solutions/sustainable-futures-performance/

https://www.capgemini.com/insights/leading-sustainability/

Other references:

2024 Climate Change Performance Index (AU rank improved overall, now in ‘low performer’ category)

https://www.aicd.com.au/risk-management/framework/climate/climate-reporting-legislation-passes-senate-reporting-to-commence-from-1-january-2025.html

https://www.aicd.com.au/risk-management/framework/climate/principles-for-setting-climate-targets-a-guide-for-australian-boards.html

https://www.aicd.com.au/content/dam/aicd/pdf/tools-resources/director-resources/directors-guide-to-mandatory-climate-reporting-web.pdf