Sustainability is increasingly becoming an issue that businesses must pay attention to. Changing consumer attitudes, impending regulations and the desire to move away from costly and damaging fossil fuels have encouraged companies to set new sustainability strategies.
Profitability and sustainability do not need to be mutually exclusive, said SAP CEO Christian Klein in the keynote address at the SAP Sapphire 2022 conference in May. Indeed, SAP has made sustainability a top corporate priority, both by setting ambitious goals for itself and offering a slate of products aimed at helping customers set and manage their own sustainability goals.
In this Q&A, Jim Sullivan, head of product management for SAP Sustainability, discusses why sustainability has become a top priority for businesses and some steps they can take to establish an effective sustainability strategy.
Is taking action on sustainability truly becoming an issue for businesses, and if so, why?
Jim Sullivan: The view of the world is that sustainability is a nested model. As a business we operate within the bounds that society sets, and society operates within the bounds that we all live in together on this planet. When those bounds begin to be bumped against, whether via climate change, via ocean plastic crisis, via deforestation or species depletion, society reacts in predictable ways towards business. Investors move money around, regulators create friction for business in various ways, the best and brightest want to work for companies that share their values. So we're seeing a growth in sustainably marketed products at a never-before-seen scale, as the younger generation comes into more buying power.
What are the overall goals of the SAP products around sustainability strategy?
Sullivan: The three pillars they are built on are climate action, circular economy and inequality. We've come with the aspirational goals around zero emissions, zero waste, zero inequality, which are on one hand highly aspirational and very hard to get to, but on the other hand maybe they're not enough. We need to move to regenerative business and determine what's the future of business and innovation and giving to society. Within those three pillars under the umbrella of SAP Cloud for Sustainable Enterprises, we have a number of core products that we've launched and are moving along fairly rapidly.
The core SAP sustainability products are based in S/4HANA Cloud -- will legacy SAP ECC customers get left behind on sustainability?
Sullivan: Some of the early big adopters are ECC customers, so it's not precluding legacy customers from working closely on this, with the view that they're probably on an S/4HANA roadmap and journey. Their value in that is getting a front-row seat at the roadmap table of what we're developing, having some input into how they should set up master data in some of these capabilities in S/4HANA. Nobody has the right answer to that with the alphabet stew of regulations that are out there, but by partnering now, by running POCs [proofs of concept], by figuring that stuff out in legacy systems, you can help design for the future around this, and we're getting that input from a number of customers.
How is the issue of sustainability changing for businesses today?
Sullivan: We're moving from a voluntary act of sustainability reporting to a mandatory world, whether that's the SEC climate disclosure regulations, whether that's plastic taxes in the U.K. What's happening is companies are more and more going to need to disclose data for environment and social with the same quality and confidence as financial data. It's required reporting, and once the reporting goes to the CFO, they're going to want a level of data quality and assurance, and the ability to audit that data in confidence. Spreadsheets and systems that aren't secure don't work for that, so the value is in the data provenance, so you know what system it's come from and who has the ability to go in and manipulate the data, you know what the algorithms are to transform the data, and that then becomes highly valuable because you have financial quality that's auditable data.
Are there trade-offs that have to be considered as companies try to become more sustainable? For example, is moving to the cloud really more sustainable given the amount of power required for cloud computing?
Sullivan: [SAP has] done a lot of work in the area of green electricity and net-zero servers, as have many of our infrastructure partners. That component of it is important and it matters; it's the servitization of our own business in some ways. But it depends on the industry; for example, if you look at a large chemical company, and you look at [SAP's] scale of emissions versus theirs, it's 100 times-plus emissions. So if you implement one product -- SAP Transportation Management -- at one customer and get a 10% improvement in efficiency in that one company, it ends up being as effective as [SAP] going to net-zero emissions. The scale in the industries like manufacturing and energy is a lot more than the scale of server.
What should companies focus on as they consider their sustainability strategy going forward?
Sullivan: One recommendation is to plan for the future because we know this is coming, and it will come at different speeds in different countries, different regions and different topic areas, but architect for the future instead of continuing to bolt on different bits and pieces as they happen.
Prepare for financial-level data as you do a sustainability data-level strategy, and begin to implement this stuff. It's not good enough to estimate any more, and you can create your own value of how much direct data you collect to do that. You need to begin thinking about data provenance and collecting data from known systems, with known manipulations, with known records of who's touched the data, when and where, so that when the audit trail comes you're ready for that.
Jim O'Donnell is a TechTarget news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.