Information systems are designed to help companies use enterprise resources more efficiently. But what if companies used information systems more broadly — not just to measure profits but also to account for the needs of people and the environment
Consumers today are concerned with more than just quality and price. Increasingly, they also care about the social and environmental impacts of products. Indeed, many ask questions like: Does this toy contain toxic substances? Where do the materials in this garment come from? Do manufacturers take occupational safety practices in their factories seriously enough? And are the production processes environmentally friendly?
Being able to answer questions about the safety and environmental effects of products we use is critical. However, without the right information, even seemingly easy questions are difficult to answer. We send spacecrafts to Mars, but we know embarrassingly little about everyday products we use. Although we produce huge quantities of data every second, we frequently lack the relevant and actionable data points to respond to simple questions people have about what products are made of and how they are made.
Recent surveys (including those published by MIT Sloan Management Review) find that most executives believe that sustainability has a permanent place on the corporate agenda. However, today’s IT systems don’t sufficiently support companies that are seeking to understand and manage the full impact of their activities throughout the extended value chain. This helps to explain why sustainability has not yet become fully integrated into core business strategies.
Classical IT systems for enterprise resource planning (ERP) have significantly improved business processes and the management of enterprise resources. ERP today provides an integrated view of core business processes across various departments, ranging from sourcing, manufacturing and sales to accounting and payroll. As such, it is the nerve center and system of record for many businesses.
However, nonfinancial measures (such as the amount of energy or water consumed during a production step) are hardly considered in conventional ERP. After all, corporate managers are trained and incentivized to optimize financial assets, labor costs and capabilities, and materials. In our view, a more adequate approach to ERP would take into account the full range of resources, including environmental and social ones, as well as covering all phases of the value chain reaching beyond company boundaries.