How to get started with strategic ESG reporting

A new EU directive has come into force – the Corporate Sustainability Reporting Directive (CSRD). This means that it will be necessary for larger companies to make their sustainability efforts visible through an ESG report.

For small and medium-sized enterprises, it is still a voluntary affair, but at the same time, it is also a unique opportunity to shortcut both strategic development and commercial advantages. An ESG report filled with figures about the company’s climate footprint, social responsibility, and management situation is more than just fulfilling a requirement.

It is an effective compass pointing towards concrete improvement opportunities. Therefore, a solid ESG report can be used as a powerful tool for the company’s strategic planning and marketing. Here are some tips on how you can make ESG reporting a part of your commercial game plan.

Make ESG reporting a strategic advantage for your business development

It is easy to drown in buzzwords like “green transition,” “climate crisis,” and “equality.” But remember, your ESG report is a light in the dark. It provides you with tangible data that can guide you through the necessary changes.

Let the report’s data be your foundation when setting future goals:

How much should your climate footprint be reduced in five years?
What percentage of your team should be employed under social conditions?
Is it time to hire more apprentices?

Make a plan for the necessary investments to achieve your goals. But remember, you don’t have to handle everything at once. If your climate footprint is minimal, consider focusing your investments on social aspects such as diversity, wage differences, and social employment requirements.

Great marketing potential

An ESG report offers much more than benchmarks for internal planning.

You can also use it to boost your marketing initiatives – including Employer Branding.
Use the report to strengthen your brand and stories about the company’s values. Taking care of an ESG report, even when it is not a legal requirement, signals that you care about the company’s responsibility.
You can use the report as part of your sales material for both new and potential customers and markets. As companies set higher standards for their supply chains, those who have already collected and published ESG-relevant data will stand stronger.
The report can also be broken down into smaller pieces that serve as small insights into your sustainability work. They can be used on social media, in newsletters, and other communication platforms.
Last but not least, you can use the good results in the report to attract new employees. The report can show your work in contributing to, for example, reducing emissions and improving the work environment, which can be significant when attracting potential new employees to your company.

How do you report?

Producing the report can be complex and time-consuming, but it doesn’t have to be. Data for a large part of the climate accounts can be extracted from your ERP solution. If your ERP system is cloud-based like Business Central Online, you can use the BeWo app to scan your ERP for emission data.

BeWo uses an AI engine to scan all invoices in the system and can, based on these, perform a calculation and generate a report that can be used in your overall ESG reporting. BeWo finds and calculates data on the 3 emission scopes described in the Greenhouse Gas Protocol (GhG).

Other environmental data can be stored with product data in your PIM system. When you store data about your products’ measurements, dimensions, sizes, and qualities, you will also be able to store data about, for example, packaging use and handling of recyclable waste, as well as more precise Scope 3 data (indirect Supply Chain data).

Regarding social data, you should consider a data warehouse that can collect and consolidate data from, for example, HR systems, payroll systems, and time registration for reporting in, for example, Power BI. You can collect all ESG data in your data warehouse and build the final report in Power BI.

There you can show your goals and ongoing development with ESG work. It is no longer good enough just to say that you work “sustainably” or with ESG initiatives – it will actually be illegal and fall under the term “greenwashing.” Your report must be able to document the initiatives and have an audit endorsement.

For small and medium-sized enterprises, ESG reporting is still a voluntary affair, but at the same time, it is also a unique opportunity to shortcut both strategic development and commercial advantages.

A five-star rating

The pace of today’s business world means that effective ERP solutions are becoming increasingly crucial, as they are often the key to more efficient operations and increased productivity. However, with many different ERP systems on the market, it is not always easy to choose the best solution. Therefore, the Forbes Advisor Business team conducted an objective evaluation of 7 leading cloud-based ERP providers, based on five key categories and 25 different parameters.

After a thorough review, Forbes named Microsoft Dynamics 365 Business Central as the “overall best ERP solution” for medium and large businesses. With a five-star rating, Dynamics 365 Business Central outperformed competitors like SAP Business One, Acumatica, and Oracle NetSuite in key areas such as pricing transparency, employee self-service capabilities, and customer support.

Dynamics 365 Business Central is a cloud-based ERP solution specifically designed to help medium and large businesses manage finance, operations, sales, and customer service. The solution’s comprehensive features include financial management, inventory management, production planning and control, project management, and sales management.

So, what makes Dynamics 365 Business Central the best choice according to Forbes? Let’s take a closer look at the main reasons for their selection:

1. A Complete ERP System for SMEs

Dynamics 365 Business Central offers a comprehensive suite of features tailored to meet the needs of small, medium, and large businesses (excluding enterprise).

2. Affordable Pricing

The solution offers flexible pricing models, making it relevant for companies with different IT budgets.

3. Efficient Financial Management

With access to automated bank reconciliations, cash flow forecasts, and financial reporting, Business Central significantly streamlines financial management.

4. Increased Productivity

By streamlining workflows, automating routine tasks, and ensuring a unified overview, companies can increase both productivity and efficiency.

5. Improved Inventory Management

With Business Central, companies can track all parts of inventory in real-time and set up automatic replenishment and optimization of inventory levels. This reduces costs and improves customer satisfaction.

6. More Sales and Better Service

The solution includes sales and service modules that can efficiently manage the sales process, track customer interactions, and ensure strong customer service.

7. Better Decision-Making

Business Central provides companies with comprehensive real-time insights, offering a completely different decision-making basis and much better opportunities to make the decisions needed to drive growth and stay ahead of competitors.

8. Scalability

Business Central is designed for growth and allows for scaling the number of users and functionality as needed.

9. Integration with Other Microsoft Tools

Business Central integrates seamlessly with other Microsoft tools, such as Power BI, Office 365, and PowerApps, thus realizing the full power of Microsoft’s ecosystem.

Bonus info:

Approved by the Danish Business Authority In February 2023, the Danish Business Authority set requirements for companies’ standard accounting systems (Danish Bookkeeping Act). This includes requirements for document storage, IT security, and automation. Microsoft’s Business Central Online meets the requirements under the Danish Bookkeeping Act.

The right fit for SMEs

According to Forbes’ analysis, “Microsoft Dynamics 365 Business Central is one of the few cloud-based ERP solutions robust enough to be an effective solution for a growing company while still being accessible enough to suit small businesses.”

All in all, choosing the right ERP system is crucial for any company’s success. With its scalability, user-friendliness, and ability to customize and integrate, Dynamics 365 Business Central is a great solution for medium and large businesses.

Forbes has evaluated 7 leading cloud-based ERP solutions, and the conclusion is clear: Business Central is the best solution. Read here to find out why.

Why Two-Tier ERP?

With a Two-Tier ERP strategy, they can meet both the needs at the corporate level and the often very different needs of local subunits and subsidiaries. A Two-Tier ERP strategy leverages the strengths of having two different ERP systems, so companies do not have to complicate their technology environments or give up standardization. This way, they get a much more efficient solution overall and a better return on their ERP investments.

There are many good arguments for why a single ERP solution from one provider is generally the best solution. And it makes a lot of sense for companies to keep technical complexity to a minimum and only deal with one technology provider. But one system from one provider is not necessarily the right way to go for everyone.

Many larger companies operate under very complex conditions in practice. For example, growth and acquisitions can result in user groups or business units with special needs, or specialized systems with significant functionality that are not part of the ERP, even though they may be integrated with it. In these situations, a Two-Tier ERP strategy may be preferable. There is no single ERP system that can do everything. Today’s leading ERP systems cover more functionality than ever, and modern cloud-based solutions are much more efficient and quicker to implement than the often challenging and lengthy implementations that were common in the past.

Nevertheless, it does not make economic sense for software providers to try to meet every conceivable need, as it would result in overly complicated products. This means that even the best ERP solutions essentially have gaps in their functionality, where companies must integrate them with more specialized software products or develop customizations. Therefore, a two-tier ERP architecture – where the primary ERP system forms the backbone of the organization, while the secondary supports more specific needs in certain parts of the organization – is a good idea when the business processes in a company are so different that they are best supported by two different systems, such as in large corporations with multiple locations or subsidiaries.

It’s primarily about processes

Today, the Two-Tier ERP strategy is a well-tested approach. A complex, global company can use SAP to manage the group’s cross-functional activities in a very standardized, streamlined way. But if the company acquires a subsidiary or enters a new market, it often faces new requirements or new business needs. In such a situation, it is often business processes that only matter to the new division or market.

Therefore, it does not necessarily make sense to facilitate them across the entire company. In these cases, the company can advantageously implement another smaller and more flexible ERP solution, such as Business Central, to support the operations of the specific business group. It also happens that business areas or newly acquired subsidiaries use several highly specialized or customized applications, and it is easier to consolidate and streamline them within the framework of a Business Central ERP solution than in SAP.

Another relatively common scenario occurs when a company establishes a subsidiary or acquires a company in another language environment and decides to use Business Central because it simply better matches their needs.

Business Central and SAP – A good match

A Two-Tier model can, in principle, be built on many different ERP systems, but it is our experience that some are easier to combine than others. At NORRIQ, we know that SAP and Business Central are a good example of two systems that complement each other well and have proven to be a good match and starting point for a successful Two-Tier ERP strategy.

We have particularly good experiences with Two-Tier ERP strategies based on SAP and the cloud version of Business Central – often large companies with a complex structure that run SAP on-premises and then implement a cloud-based Business Central where it makes sense. For some companies, the cloud-based version of Business Central may also be their first experience with a cloud-based ERP system. This actually encourages them to also move their SAP ERP solution to the cloud.

To explain why Business Central works so well in a Two-Tier ERP strategy, many in the industry highlight several aspects of the technology: Firstly, Dynamics 365 Business Central is a leader in its category when it comes to delivering comprehensive, powerful functionality to a wide range of businesses. Additionally, flexible configurations make it possible to adapt Business Central to industry-specific requirements – a sea of IT providers offer proven solutions that meet more specialized needs. The software has been localized to more than 40 languages and country-specific conditions, and the intuitive user interface briefly takes usability standards to a high level.

The best of both worlds

Implementing a Two-Tier ERP strategy based on Business Central and SAP is today a project with a high ROI and low risk. The strategy’s two-tier structure creates a multi-layered solution – including at the database and application level, and it enables a completely different degree of flexibility. The layers work well together but also function independently of each other. You combine the advantages of a larger, central solution with a smaller agile solution and get a very smooth setup with full access to all relevant functions.

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FAQ About Two-Tier ERP:

What is Two-Tier ERP?

A Two-Tier ERP setup is a solution where a company’s headquarters uses an ERP system to manage its own operations, while its subsidiaries or other locations use a separate, independent ERP system. This allows the headquarters to centrally manage and consolidate data while subsidiaries can still have the autonomy to manage their own operations.

What is Multisite ERP?

Here, you have a network of equal companies that “share” the market among themselves. Professional companies, such as consulting firms, are often organized this way. In a multisite architecture, all locations in a company use the same ERP system (One-Tier ERP), allowing for continuous consolidation and centralization of data across all locations. This can help improve efficiency and consistency in your business processes.

What is Hub & Spoke Architecture?

Hub-and-spoke architecture combines the stability of a monolithic platform with the agility of microservices. Here, there will be companies where there is a “parent-child” relationship, so that one company, for example, handles SCM and the others are sales units. In hub-and-spoke software architecture, the “hub” is the fundamental data layer – a single data access point that can deliver about 80% of the functionality you need.

Larger companies with a complex structure can benefit greatly from a so-called Two-Tier ERP strategy, where they combine two ERP solutions.