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How SAP sustainability software helps manage ESG programs

By David Essex

ORLANDO, Fla. -- Geopolitical shocks, economic uncertainty and generative AI have pushed sustainability out of the headlines, but that doesn't mean organizations have stopped efforts to reduce their carbon footprints and report progress to stakeholders and governments.

And while environmental, social and governance programs have fallen out of favor in some quarters, ESG is still a priority at many companies. Regulatory requirements -- especially the stringent reporting mandated by governments around the world -- remain a major challenge.

In 2021, SAP began releasing a series of cloud-based applications to help manage sustainability initiatives and reporting, including the Sustainability Control Tower and green ledger.

The effort was led by Gunther Rothermel, a 25-year SAP employee who heads software development as chief product officer for sustainability. Previously, Rothermel oversaw work on part of SAP's integration suite, Business Technology Platform, before the executive board asked him to form a sustainability software engineering team in 2020.

Informa TechTarget sat down with Rothermel at the 2025 SAP Sapphire conference to delve into how the software can improve sustainability and reporting -- and what's coming next.

Editor's note: This interview was edited for length and clarity.

What are your current offerings, and if possible, can you name the most important one?

Gunther Rothermel: We have seven dedicated products. Two are part of S/4HANA and have been around for many years. EHS [Environment, Health and Safety] and Product Compliance are S/4 modules also under my leadership. We overhauled the EHS one and infused AI to change the user experience.

We added five on the Business Technology Platform. Probably the most prominent one is the Sustainability Control Tower because that is the place where we bring all the data together for reporting. Think of SCT as the aggregator where we combine everything for reporting.

The other modules solve particular domains of sustainability. One, for example, calculates carbon footprint on a product and corporate level. One handles packaging waste, and one traces the chain of custody along the supply chain.

How has the popularity of AI, especially generative AI, changed these products? Are there new features where AI made a difference compared to, say, five years ago?

Rothermel: We do embedded AI cases to boost productivity. For example, for some regulations you have to create huge reports with hundreds of pages. In SCT, with the help of generative AI, you can generate drafts of those reports by bringing in prompt engineering to add the context. Of course, nobody's handing over these reports directly, but it's a starting point for editing, saves a lot of time and boosts productivity.

The second important case involves getting data into our sustainability models. A lot of data sits in files or documents -- legal documents, permits, even energy bills -- the kinds of things where customers don't have structured APIs. We use the document extraction capabilities of our AI platform to process these documents and feed the data into our systems.

The third one is our Joule copilot, and over time, agents, to change the user interaction. We have not shipped any agents yet for sustainability, but we are working on it.

When do you think they'll be available?

Rothermel: Probably the beginning of next year. There are conversational [use] cases in Joule we have already delivered.

Does SAP provide tools to take action to improve sustainability? For example, is there anything for using IoT to control the heat in buildings?

Rothermel: We already have parts in place where customers can start to manage initiatives. In our journey to sustainability, we initially spent a lot of time just building the necessary capabilities and getting data. Now we are at the edge of really driving optimization behavior, and this is where AI agents will play a big role.

A massive use case is decarbonization across the supply chain. The cool thing is now we have the foundation for that.

One additional component that matters is the green ledger, which is actually part of our finance portfolio. It's a ledger like you know them. There's nothing specific about it except that it's for carbon and other environmental data. It's where we bring together sustainability data and finance data, where you can really drive optimization.

Most customers ask us, 'I have 10 potential initiatives I could do, but which ones are best in terms of financial impact? We can come up with many ideas, but can we afford them? What does it do to my margin?' We now have the foundation to drive this kind of optimization both in carbon as well as the waste and packaging side. We are on the verge of also driving optimization with the help of agents and other functionality.

It's becoming widely understood that the most in-demand emerging technologies -- especially generative AI, but also blockchain -- place enormous demands on the environment, particularly energy and water use. The demand for cloud computing in general has been growing. Does SAP offer tools to help customers keep their demand for IT services under control?

Rothermel: The footprint of our software matters to us, and for some of our customers, it's a major part of their corporate footprint. So we do a couple of things.

First, we measure and improve and, on demand, communicate the footprint of our software. We know the carbon footprint of S/4HANA, for example, and of some sustainability software components. To do so, we work with the hyperscalers and manage and monitor all of this.

Second, we have a big internal initiative on how to write energy-efficient software. We've been doing exercises on how to program more efficiently and optimize access to AI so we aren't just wasting energy.

What's on tap for the sustainability products in the next two or three years?

Rothermel: We don't plan to announce a completely new product because we believe we already have a broad and deep suite of products. Our apps will continue to evolve. Customers demand a lot of features, and all have roadmaps, and there are a lot of sustainability regulations we need to cover.

The next important thing is the data game. We are one of the front runners on Business Data Cloud. The Sustainability Control Tower is about to become an intelligent app on BDC, which makes tons of sense because BDC is the place where data comes together in the SAP ecosystem. Data from different domains -- finance, sustainability, procurement, supply chain -- will come together in BDC, which then unlocks a new set of use cases for AI to drive optimization across those domains.

We are also building data products that will be how we organize data access for SAP applications. It's not just glorified APIs. There's more discoverability, a data catalog around it, and the data is way more harmonized.

The idea is to make accessing data easier. There was criticism from customers that we had a lot of APIs that they sometimes didn't understand or that included too much. Data products come with mechanisms to make that easier. They're the secret sauce of the BDC strategy because only if we expose data in a harmonized way can you bring it together in BDC and run agentic use cases.

Scope 3 emissions data -- the kind companies are indirectly responsible for -- is hard to collect. How does the software help?

Rothermel: This is one of the big challenges of sustainability. The Scope 3 greenhouse gas protocol has two parts: upstream and downstream. Upstream means you have to know the emissions of your suppliers. We cover Scope 3 completely in one of the modules of our sustainability stack. It took us time because it's tricky, but we cover it now.

You have numerous options. No. 1 is you can ask your supplier to give you that footprint data if they have calculated it. We have a small component called sustainability data exchange that does that pingpong. Basically, it says, 'Give me your emissions for the following bill of materials.' Then you get it back and import it.

That quickly? It's not some big report that comes out every year?

Rothermel: It depends on how frequently you want to do it and how many entities you have. Most organizations don't do this monthly. In consumer products, where you have hundreds of thousands of entities, it happens pretty often.

You have to give each supplier information about the material types you're asking for. That's one option -- you ask for the actual. But in many cases, organizations don't have that information, so we reach out to standard databases and get average factors. If you go to an emission factor database like Ecoinvent, they're open. And then you need to find the emission factors [such as energy use and industrial processes] that map to your material types and products.

If you have 10 products, you can do this manually, but some of our customers have 50,000. So we have AI-based emission factor matching that brings in emission factors and compares them with your product and material types. Then we try to match them and give a similarity score for each item. If it says 8.5, which is pretty good, it's likely the right factor, and you can import it.

Downstream Scope 3 is harder. The biggest part of it is sold products. Every organization that sells products has to report on those carbon footprints too.

For SAP, it's a major part of our footprint because we deliver software, and when companies use it, we need to report the footprint. In cloud, we actually know. But what about the on-premises software where we don't even know what kind of systems are running below it and their energy consumption? It's quite a challenge for our internal sustainability department.

It seems like you shouldn't be responsible for knowing that.

Rothermel: But that's why many organizations struggle with Scope 3 reporting for sold products and simply make assumptions. Take, for example, Mercedes-Benz. They are big sustainability customers of mine, along with BMW and others. They just make an assumption per model about the average lifespan, energy consumption and so on. And then they say, 'We assume the footprint of this car for five years is X.' That's the only thing you can do. That's the tricky part of Scope 3.

David Essex is an industry editor who covers enterprise applications, emerging technology and market trends, and creates in-depth content for several Informa TechTarget websites.