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Decarbonising at scale: SAP's sustainability strategy

Sustainability chiefs at SAP speak about the circular economy and helping customers to track supply chain emissions, and how ESG begins at home

Speaking at the SAP Sapphire event in Barcelona a couple of weeks ago, Peter Bakker, president and CEO of business consortium the World Business Council for Sustainable Development (WBCSD), reminded the audience that the world needs to halve its emissions of greenhouse gases by 2030. "That means we have to transform everything," he said.

A prerequisite for transforming everything - energy, transport, agriculture - is that organisations measure and report their environmental performance, just as they do with their finances, including auditing emissions embedded in their products.

In most sectors, at least 80% of emissions are scope 3, meaning they are bound up in the supply chain. Companies are increasingly having to account for these emissions as regulations tighten, but it's something that many find hard to do. "I'm not saying it's simple, but the standards are there. It can be a done and it will be done," Bakker said.

Last year, WBCSD launched Partnership for Carbon Transparency (PACT), a protocol for exchanging supply chain emissions data across company boundaries. The technology companies involved include Siemens, CircularTree, IBM and SAP.

Cracking scope 3 emissions

The Sapphire agenda was notable for the prominence that SAP chose to devote to sustainability. The company, which, like IBM, has an outsize footprint in big business and supply chain in particular, clearly sees a significant role for itself in facilitating the decarbonisation process.

SAP chief strategy officer Sebastian Steinhaeuser told Computing he sees PACT as "the basis for really cracking scope 3".

70% of the data required to track emissions sits in ERP systems, according to Steinhaeuser, but not just those made by SAP. PACT provides a way of securely sharing data across different systems. "We take an open ecosystem approach, we believe sustainability is a team sport," he said.

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Sebastian Steinhaeuser

Steinhaeuser believes ESG is becoming a differentiator for SAP's customers. "They don't just think of sustainability as a reporting challenge, or like a tax on their business, but as a potential source of competitive advantage."

The same goes for SAP, he added. "Of course, we want to prove the value of our solutions in avoiding emissions, avoiding waste, avoiding inequality."

Responding to Computing's findings that data pertaining to SAP's own emissions was not always easy to surface, Steinhaeuser insisted transparency is important to the company, that it will publish failures as well as successes on its journey to become carbon-neutral across the value chain by 2030, that it is following science-based targets, that it is independently audited, and that executive compensation will be tied to the achieving these goals.

"There's no room for wriggling around. And we don't want to because I fundamentally believe the only way to really decarbonise at scale is to solve the scope three value chain transparency challenge."

He continued: "I think this is where more and more companies will go. And that's always important to me, because I don't only lead sustainability as a business, I also lead our internal sustainability efforts. I want to make sure that we are a thought leader and also eating our own dog food."

Circular economy: what goes around comes around

Globally, there are some 450 regulations around extended producer responsibility, according to Stephen Jamieson, global head of circular economy solutions at SAP, and it's a number that's growing significantly.

Recent additions to the regulatory pile include the Spanish plastics tax, which came into force in January, imposing duties on one-time-use plastic products and packaging. In March, Hungary passed a law that goes further, with producer obligations on packaging, single-use plastic products, electronics, batteries, tyres and promotional materials, and France adopted a comprehensive anti-waste Law in 2020. Similar measures are on the way too in the UK, several US states and South Africa, and a first draft of the UN plastics treaty is due in the next few weeks.

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Stephen Jamieson

"We're seeing a mushrooming of those regulations," said Jamieson.

Companies with complex supply chains need to keep a close eye on the changing regulatory environment around producer responsibility to ensure they have time to react. As with emissions, this necessitates being able to track raw materials and interim products at every step in the value chain.

According to SAP, its systems "touch 77% of everything that's bought and sold globally," which again is why the German software giant sees an opportunity to get involved, taking a lead from the Ellen MacArthur Foundation's three principles for the circular economy: eliminate waste and pollution; circulate products and materials keeping them in use; and regenerate nature.

Jamieson has been developing products and services to "catalyse the intersection between regulation and business execution" for five years now, seeing it as something of a personal mission: "It's my belief that a circular economy is inevitable," he said. "It's a question of will it take us 10 years, or will it take us 100 years as a species to get there?"

A recent initiative is GreenToken, a blockchain-based system for tracking provenance, developed with Unilever, initially to track the source of palm oil used in many of the products on supermarket shelves, an ingredient that is frequently linked to the felling of rainforests and is hard to trace.

Other customers that have stepped up include Spanish brewer Hijos de Rivera and Henkel, the German chemical and consumer goods firm, which had to get to grips urgently with the Spanish plastics tax.

So are they using their circular economy activities to their marketing materials as a differentiator?

Not yet, Jamieson said. "They've got the commitment [to the circular economy] and they're running the project to satisfy their operational obligations. So now it's joining the two together."

So early days. In the meantime, it's about providing coverage to more markets, so others can climb on board, he said.

"We've been building a capability that allows customers to monitor those regulations, allows them to measure the materials that they are running through their organisation, and then allows them to act on upon their findings, whether that's swapping to more sustainable alternatives, whether that's pivoting to new business models, really enabling that change."

Some organisations get it now, but for others will take more convincing that this can be a win-win, he said.

"Right now, it's like we are building the road at the moment the car has been invented."

Steinhaeuser and Jamieson seem sincere in their pursuit of environmental and social goals, and, as Jamieson pointed out, SAP has led the Dow Jones Sustainability Index for software vendors for more than a decade, so the green tint is nothing new. But SAP is a 50-year-old global IT powerhouse, Europe's largest software company. There are balances to be struck with business as usual. Would it, for example, be prepared to turn away new customers with a particularly troubling ESG record? Maybe not. A spokesperson responded to that question thus.

" SAP works with the largest companies around the world to contribute digital solutions that enable the decarbonisation, circularity and social sustainability of entire value chains. SAP works with companies in all major industries, and we support them with digital technologies to accelerate their transformations to run sustainably. Company and industry transformations need a collective effort and systemic approach.

"We aim to rapidly reduce society's reliance on fossil fuels and generate less extractive, circular and regenerative economies, but we cannot overlook the immediate social and economic need for reliable energy sources to power and heat our homes, move about in our daily lives, and sustain the production of vital materials like cement, plastics and steel."

Decarbonising at scale: SAP's sustainability strategy

Sustainability chiefs at SAP speak about the circular economy and helping customers to track supply chain emissions, and how ESG begins at home

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