How to build a sustainability performance management stack
Sustainability pressure will continue to grow -- despite headlines that suggest otherwise -- and smart business and IT leaders understand how to use new tech to help meet demands.
The rapid evolution of sustainability regulations, investor expectations and corporate commitments is driving many organizations to adopt advanced technology systems to manage environmental, social and governance (ESG) risks and opportunities.
Many enterprises have publicly articulated climate action plans and committed to sustainability programs and net-zero pledges. As part of that effort, organizations are turning to sustainability performance management (SPM) technology. An SPM stack consists of software tools that support measuring, managing and monitoring enterprise performance on sustainability goals and activities, while helping improve operational and business efficiency. One helpful example is carbon accounting software, since reducing emissions is at the core of many organization's sustainability goals.
An organization's sustainability roadmap is heavily influenced by its industry, the regulatory and consumer environment of the countries in which it operates, and the corporate perspective on sustainability initiatives. Each industry has a distinctive environmental profile and pattern regarding energy use, resource consumption and supplier networks. So, the path to sustainability will differ for a manufacturer, an agriculture company and a services company.
The regulatory and disclosure requirements also vary from country to country. And there are several different ESG reporting standards and frameworks. Additionally, sustainability goals typically cover not just the enterprise's own operations, offices and facilities but extend upstream and downstream of the value chain -- the Scope 1, Scope 2 and Scope 3 emissions. These can span multiple countries. All in all, each enterprise must chart a tailored roadmap that best suits its context.
Here is where taking a sustainability technology stack view comes in handy. While the stack of technologies will have flavors of the industries, the key components include the following:
- Supply chain sustainability and analytics.
- Product and material traceability.
- ESG data management.
- Carbon accounting.
- Integrated workplace management.
- Environmental, health and safety management.
Each of these categories offers many established and emerging products from which to choose.
Challenges of SPM implementation
The sustainability performance management stack relies on data from the enterprise's operating, financial, business process, data and analytics, performance and reporting systems. In setting up the SPM stack, IT and sustainability leaders will face a few challenges, such as the following:
- For many organizations, integrating siloed systems and rolling up data from disparate sources is largely manual. Generally, the more mature governance and data practices are, the easier it is to implement sustainability performance management tools.
- The regulatory requirements, such as disclosure requirements and standards, are relatively new or still being fleshed out, among other issues, leading to uncertainty about the direction to follow.
- Cross-functional skills required for sustainability projects are likely in short supply.
Sustainability software project tips
To overcome the sustainability performance management software stack implementation challenges, it helps to follow some best practices. These include the following:
- Include the right stakeholders. From the earliest stages, include business, sustainability, operating, and different country teams in the case of global organizations.
- Upskill on sustainability. Provide the teams with training on the mandatory obligations and voluntary commitments that the organization must meet.
- Lead with business goals. Prioritize sustainability initiatives that also improve financial ROI or other business operating metrics, which will help tide over any regulatory uncertainty.
- Be selective. Since not all enterprises need all software components, identify the components most relevant to the organization. Based on that, create a phased implementation plan.
SPM tips for the buying team
Technology selection plays a critical role and helps avoid delays and other headaches later on. There are several things to consider in selecting the best-fit tools for the organization:
- How well do the products integrate with the rest of the enterprise tech stack?
- Does targeted software or a suite with broad functionality across different stack layers better meet organizational needs?
- How well do different software options support organizational and industry-specific functionality and standards?
- What does each option offer regarding the depth of reporting, analytics and AI functionality?
- If products use generative AI, do they include adequate guardrails and controls to reduce AI errors?
The sustainability performance management tech stack enables organizations to meet regulatory, investor and operational demands. The SPM stack allows an integrated approach to ESG data, traceability, supply chain analytics, carbon accounting, and workplace and safety management.
As sustainability requirements and stakeholder expectations continue to rise, organizations that invest in the right technology mix can stay ahead of the curve.
Kashyap Kompella is an industry analyst, author, educator and AI adviser to leading companies and startups across the U.S., Europe and the Asia-Pacific regions. Currently, he is CEO of RPA2AI Research, a global technology industry analyst firm.
