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SAP Sustainability Control Tower looks to ease ESG reporting

SAP Sustainability Control Tower enables companies of all sizes to gather and manage ESG data. The revamped SaaS model focuses on better ease of use and quicker return of value.

SAP has revamped its Sustainability Control Tower in an attempt to make it more comprehensive and easier for organizations to deploy and use.

First released in January, SAP Sustainability Control Tower is a cloud application that gathers environmental, social and governance (ESG) data from ERP and HR systems and presents it in ways that can be more auditable for regulatory compliance.

The application has been updated to include more pre-configured content addressing new ESG regulations that are coming in the U.S. and Europe, as well as the ability to deploy the application faster via integrations with SAP S/4HANA and other SAP and non-SAP systems through APIs.

The updated SAP Sustainability Control Tower shows a "marked improvement" that highlights the rapidly changing nature of the market for ESG tools, said Amy Cravens, research manager for IDC's governance, risk and compliance technology practice.

The updates to Sustainability Control Tower enable companies to derive actual ESG data rather than estimates, and the SaaS delivery platform should lower total cost of ownership and increase speed to market, making it more competitive to a broader base of potential customers, Cravens said.

There is evidence that organizations are devoting more resources and attention to ESG-related issues. For example, a June 2022 survey report from Deloitte of 335 tax leaders from around the globe indicated that virtually all respondents (99%) were either implementing or preparing to implement strategies to deal with ESG-related changes.

The survey reported that almost three-quarters of respondents have already implemented ESG-related policies for financial metrics (73%) and employee wellness (72%). The vast majority of respondents said their company has an active chief sustainability officer (89%), and of those, all respondents reported working very closely (72%) or somewhat closely (28%) with that executive.

A survey from Enterprise Strategy Group of 400 IT professionals involved in purchasing decisions indicated that ESG compliance programs matter to IT buyers.

The survey reported that in total, 81% of respondents have a mature ESG program (30%), have partially implemented ESG initiatives (41%) or have plans to implement ESG initiatives within the next year (10%). Further, the ESG programs of IT suppliers are directly influencing IT products and services purchasing. The report indicated that an IT supplier's ESG program will have a significant (45%) or modest (48%) influence on the buying decision.

Not just for large enterprises

SAP Sustainability Control Tower has been revamped to appeal to enterprises of all sizes and was designed to have faster implementation and return on value, according to Christian Polivka, director of sustainability solution management at SAP.

"It's not just for giant enterprises that are now under pressure to disclose on ESG. It's also for midsize and even small companies," Polivka said. "Companies need to be more agile and quicker to adapt to the ongoing changes."

To help enable adaptability, Sustainability Control Tower includes pre-configured content that focuses on ESG-related regulations, including Securities and Exchange Commission reporting requirements in the U.S., as well as ESG reporting standards such as those from the Global Reporting Initiative, provider of the GRI Standards for sustainability reporting; the World Economic Forum; the Task Force on Climate-Related Financial Disclosures; and the EU taxonomy, a classification system for environmentally sustainable activities.

The SAP Sustainability Control Tower UI.
SAP Sustainability Control Tower enables companies to track a variety of ESG-related data.

"It's a huge pain for the clients to keep up with all these ongoing changes and new regulations, and the motivation of Sustainability Control Tower is to manage the data in one place," Polivka said. "The term we use is sustainability data fabric -- similar to the IT data fabric, which is about connecting everything to one data source."

Sustainability Control Tower is designed to automate the capture of ESG-related data from systems, such as ERP for supply chain-related carbon emissions, or HR and human capital management for social goals, he said. The automation improves data quality by eliminating manual data capture and means that companies don't have to rely on estimated measurements for ESG reporting.

"A lot of companies, even big ones, are still managing the ESG data gathering via email or manually with spreadsheets," Polivka said.

But because of the increasing number of ESG reporting regulations, it's critical to generate accurate and up-to-date reports, he said.

Pricing for Sustainability Control Tower has not been set yet. Licensing is consumption-based, to be defined by KPIs and data volume.

Meeting ESG reporting challenges

The main advantages of SAP Sustainability Control Tower for SAP customers are that it automates with S/4HANA and automates access to data that can provide more accurate ESG measurements, as compared with tools that rely on estimates for measurements, IDC's Cravens said.

Identifying and managing ESG data continues to be one of the chief market challenges.
Amy CravensResearch manager, IDC

"Identifying and managing ESG data continues to be one of the chief market challenges," she said. "Sustainability Control Tower enables companies to insource and manage data on the platform, and view performance in a centralized dashboard to provide better visibility on performance."

However, integrating Sustainability Control Tower with non-SAP systems could be challenging, as data might need to be entered manually, Cravens said.

Nonetheless, the updated Sustainability Control Tower can appeal to both SAP's traditional large enterprise customer base as well as more midsize organizations, she said. These organizations are increasingly finding the need to report the ESG data in their supply chains.

"Smaller companies are being tasked to track and report ESG performance by larger companies that are customers, partners or suppliers, and must report on scope 3 emissions as well as labor conditions in the supply chain," Cravens said. "There is also the increasing transformation awareness in smaller organizations as we are seeing with large companies."

Enterprise Strategy Group is a division of TechTarget.

Jim O'Donnell is a TechTarget senior news writer who covers ERP and other enterprise applications for TechTarget Editorial.

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