SAP recently announced its sustainability strategy, including aggressive carbon reduction targets, a new cross-functional sustainability organization, and sustainability solutions for customers. More information is available on SAP’s sustainability pages.
What is Sustainability, Anyway?
Sustainability means different things to different people — the UN Commission on Sustainable Development lists over 40 issues that it can cover, including such topics as “sustainable tourism”, “poverty”, and “mountains”. Given this distinct lack of consensus over what sustainability means, it’s perhaps unsurprising that most organizations are still figuring out what sustainability means for their business and how to implement it.
Research published last year by the Economist Intelligence Unit provides a thorough review of organizations’ sustainability initiatives today – and the extent companies are having difficulty devising useful targets and aligning social and environmental objectives with financial ones. (Additional summaries of the Economist data for North America and Western Europe are available).
There’s a broad consensus that sustainability covers a “triple bottom line” that encompasses social, environmental, and economic dimensions. SAP defines it as “holistically managing economic, social and environmental risks and opportunities for increased profitability”:
- Promoting safety, health, and well-being of people
- Positively impacting the planet via environmental improvements
- Providing benefits for customers, communities and other stakeholders
Sustainability is rapidly become a business necessity: expected by consumers, enforced by new regulations, and encouraged by economic incentives.
According to the Economist survey, most executives (57%) believe that the benefits of pursuing sustainable practices outweigh the costs, and expect better environmental practices to attract new customers, improve products, and increase profitability.
Sustainability is More Important Than Ever
A more recent Economist Intelligence Unit survey also showed that far from slowing movement towards more sustainability, the current economic turbulence is accelerating the trend, with 47% of respondents planning to reduce carbon emissions and energy use, and 27% planning to create lower-carbon-footprint products.
SAP’s Carbon Footprint
SAP announced it will reduce its greenhouse gas emissions down to 2000 levels by the year 2020 – a total reduction of 51% compared to 2007. SAP published its first Sustainability Report last year, which was rated a “C” by the Global Reporting Initiative. It already leads the software sector in the Dow Jones Sustainability Index, and appears in the FTSE4Good index. SAP also appears in the Global Challenges Index, which recognizes transparency and anti-corruption efforts, and the Global 100 list of the most sustainable large companies in the world.
SAP’s sustainability initiatives include:
- Eco-efficient buildings: intelligent lighting, solar power, passive cooling systems, waste-water recycling, and rainwater collection. For example, the SAP building in Palo Alto, California has a Silver-level LEED (Leadership in Energy and Environmental Design) certification.
- Subsidized public transportation tickets, new policies to reduce car fleet greenhouse gas emissions, and reduced travel through more extensive use of video conferencing facilities and “virtual events”.
- More efficient air conditioning in a major SAP data center in Germany.
- Recyclable paper and packaging, and internal recycling programs.
SAP’s Sustainability Organization and Framework
To drive and coordinate all aspects of its sustainability efforts, SAP is forming a new cross-functional sustainability organization, which will be led by Peter Graf, SAP’s first chief sustainability officer and EVP Sustainability Solutions.
The global team will oversee all sustainability-related initiatives, from the creation of solutions that enable sustainable business processes for customers to SAP’s own sustainability operations, including key social, economic and environmental programs.
SAP’s sustainability framework is based on the strategic use of IT as a catalyst for change, and includes:
- SAP solutions to enable sustainable best-run businesses
- Customer-centricity and co-innovation
- SAP as a model for corporate accountability and stewardship
SAP wants to help its customers holistically manage sustainability, in areas such as people health and safety, product safety and stewardship, environmental performance, resource efficiency, sustainability performance management, and “green IT”.
Environment, Health, and Safety Management. This new product combines SAP Environment, Health & Safety, SAP Environmental Compliance, SAP REACH Compliance and Technidata Compliance for Products, to help companies with:
- People Health & Safety: Supports the management of Health & Safety, industrial hygiene and occupational health processes, as well as compliance for product safety, hazardous substances, dangerous goods and waste management.
- Emissions Management: Helps to ensure compliance with environmental laws and policies as well as reduce associated costs, efforts and risks on plant and corporate levels.
- Product Safety & Stewardship: Helps to conform with product and material compliance regulations for all industries and secure the right to market products. For 2009, the REACH (Registration, Evaluation, and Authorization of Chemicals) compliance functionality is available separately to help organizations comply with this new European directive.
Sustainability Performance Management. SAP BusinessObjects Xcelsius, Strategy Management, and Risk Management software allows customers to set up sustainability dashboards, define and cascade goals and initiatives, and tie them to sustainability key performance indicators.
Energy Data Management application. Provides utilities the means to manage energy profiles, offer real-time pricing and complex billing, and optimize energy settlements with the goal to improve energy efficiencies. This product enables a “Smart Metering” capability between a utility and its customers.
Recycling Administration application. Helps ensure compliance with worldwide recycling legislation for packaging, batteries and WEEE (waste electrical and electronic equipment), across SAP and non-SAP software, across the enterprise and beyond, giving businesses the real-time visibility they need to ensure effective business operations and corporate accountability.
Supply Chain Management application. Helps companies plan and design their supply chains, consolidate orders and optimize shipments, thus reducing CO2 emissions and overall energy consumption.
- SAP Environmental Compliance
- SAP REACH Compliance
- SAP Recycling Administration
- SAP BusinessObjects solutions for governance, risk, and compliance
- SAP Product Lifecycle Management
- Environment, health, and safety compliance management applications
Sustainability 2.0: Collaboration and Co-Innovation
Corporate sustainability pioneers were typically defending themselves against reputational or regulatory risk rather than looking for financial gains. But now leading companies are moving to “sustainability 2.0” – exploiting the new opportunities that have arisen, and working closely with customers and partners on co-innovation.
Successful sustainability requires coordination across the organization, and according to the Economist survey data, relatively few organizations have been able to implement clear standards in all areas of sustainability.
In particular, organizations struggle to apply sustainability policy to the extended supply chain. Over 40% of companies rated their performance in controlling the environmental and human rights standards of their suppliers as below par – worse than any other area – and only one-fifth have implemented supplier controls in the last five years. In addition, organizations are less likely to report on supply chain human rights standards than any other area, and change is unlikely anytime soon: only 35% consider action here an important priority.
This is even more surprising given that there are many public examples of disastrous consequences from socially or environmentally damaging supply chains. Indeed, social auditing arose largely because of the embarrassing behavior of suppliers to developed-world organizations.
The root problem is that today’s global supply chains are very complex, with multiple levels of subcontracting, and there’s little transparency. This makes the chains very hard to “police”. To combat the issue of global supply chain transparency, SAP has been a keen proponent of Business Network Transformation, where companies work more closely with their increasingly interdependent ecosystem of customers, partners, and suppliers to drive transparency, growth and profitability. The drive to sustainability reinforces this trend.
Collaborative Sustainability with SAP
SAP is already working with partners with deep sustainability-related expertise to provide implementations and support co-innovation with customers, and working with technology partners on SAP relevant Green IT benchmarks, projects and standards.
SAP intends to continue collaborating with customers about their current and anticipated needs and seeking co-innovative customers to work with on sustainability. To achieve this, SAP teams will leverage existing communities such as customer communities, Industry Value Networks, Business Process Expert community, SAP EcoHub and Enterprise Services Community, to drive co-innovation activities and channels for sustainability solutions.
In particular, SAP customers and employees are invited to join in the sustainability dialog on the SAP Collaboration Workspace, where you can start discussions, take part in a SAP sustainability survey or view the survey results.
Here are the results of the survey — using SAP BusinessObjects Xcelsius, of course:
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Looking Forward to the Future
Many organizations are only just beginning to move beyond defensiveness and consider sustainability as a competitive advantage – but it will become much more common.
In the next five years, organizations expect to spend more time on sustainability, communicating their performance to investors and stakeholders, improving the environmental footprint of their current products and services and developing new ones, and improving their own energy efficiency.
For SAP, 2009 will see the release of two further products: Cap & Trade, an extension of the Emissions Management solution set, and a Sustainability Performance Management solution using the BusinessObjects portfolio of business intelligence, risk, and strategy management products in conjunction with EHS.
A more detailed roadmap and additional products are intended to follow, and the next SAP sustainability report will be released in May 2009.