For modern enterprises, the imperative to measure and manage environmental impact has never been more critical. With the introduction of new regulations by entities such as European Union, the SEC, and the state of California — as well as increasing demands from stakeholders including shareholders, employees, and customers — companies are facing unprecedented pressure to enhance transparency regarding the external impacts of their operations. However, many organizations are still ill-equipped to accurately measure and report on these aspects, lacking the necessary teams, systems, and technologies to address these challenges. This is particularly challenging for multinationals with global operations and value chains, as they must navigate the additional complexity of overlapping and evolving region- and nation-specific regulations.
Software products are evolving rapidly to meet these challenges. For enterprises utilizing an SAP ERP system, SAP’s expanding suite of sustainability solutions offers a seamless match for gathering data and insights on sustainability and ESG. Organizations already using SAP S/4HANA will discover that the key performance indicators (KPIs) of these sustainability solutions are designed based on standard SAP transactional data. With every major release and enhancement pack of S/4HANA, SAP consistently delivers content to extract, collate, calculate, and report these sustainability KPIs.
ERP + SAP Sustainability Suite: How it Works
SAP's sustainability suite aims to seamlessly integrate financial and non-financial data with core business processes in an immutable way.
In a manufacturing context, for example, the objective is to record, monitor, and accurately report carbon emissions data across the value chain, from sourcing the raw materials to delivering the end product. To this end, the S/4HANA data model has been extended to hold CO2 emission data for materials provided by the supplier, the net incoming CO2 footprint of planned purchases, the CO2 equivalent presently in inventory, information on the sustainability of supplier practices, and so on. When the SAP Sustainability Footprint Manager (SFM) is integrated with SAP S/4HANA, the master and transactional data can be used to perform carbon footprint calculations in SFM. The SAP Sustainability Control Tower (SCT), meanwhile, has the capability to report audit-ready ESG metrics. The control tower also enables the organization to act upon those insights to achieve the target metrics at an organization unit level, such as a plant or at a company code level. SAP Datasphere can be used to integrate with various data sources (both SAP and non-SAP) and orchestrate a unified data exchange.
Collectively, these SAP solutions can address the majority of sustainability data challenges due to a rich suite of sustainability-aligned products across product design, sourcing and procurement, manufacturing, employee health and safety (EHS), supply chain planning and execution, sales and marketing, finance, HR, and infrastructure. For organizations already operating within the SAP ecosystem, SAP’s out-of-the-box solutions can advance sustainability objectives in an agile fashion, enabling comprehensive and traceable monitoring and reporting of relevant data.
Optimizing the SAP Sustainability Suite
From an operational perspective, achieving a robust sustainability program means seamlessly integrating data from disparate sources in the IT ecosystem, then efficiently and accurately translating that data into audit-ready metrics to meet regulatory reporting requirements. With the right data infrastructure in place, enterprises can then move beyond reporting toward actively improving high-priority sustainability metrics. The SAP Sustainability Suite unlocks exactly this sort of “record, report, and act” approach.
Exploring the “art of the possible” with the SAP Sustainability Suite begins with examining the existing reference architecture to understand how existing data will serve sustainability reporting. One key first step is to agree on the sustainability key performance indicators (KPIs) to be reported and visualize how data will be managed in both SAP and non-SAP systems. Additionally, ensuring traceability to specific transactional level data is essential for auditing purposes. The quality of existing transactional data will determine how accurately an enterprise will be able to calculate and report carbon footprints on the corporate, product, and transport levels.
Particularly in the context of new SAP S/4HANA implementations, business process modelling should reimagine best practices at a data level to ensure that the reporting capabilities of SAP Sustainability products align with the applicable regulations for the organization. When it comes to regulatory compliance, organizations will increasingly need to report on the impacts of their wider supply chain. By integrating SAP SFM with the SAP Sustainability Data Exchange, enterprise will improve their ability to exchange this “Scope 3” data on product carbon footprints with trading partners. This information will be critical in geographies like the EU; based on trusted third-party data, the SAP SCT can report on EU taxonomy-aligned KPIs as well as KPIs related to greenhouse gas emissions across scope 1, 2, and 3. SAP’s collaboration with third party content provisioning for sustainability customers is substantial, offering standard APIs and dedicated connectors for third party data.
In addition to improving recording and reporting, the SAP Sustainability Suite empowers enterprises to act. It provides tools to explore new strategies for reducing carbon emissions throughout the value chain, including identifying areas for improvement and running detailed models to evaluate proposed interventions. The SAP Sustainability Suite can also add a new layer to supplier and vendor qualification, allowing enterprises to enhance supplier reporting requirements and enforce such sustainability-related supplier mandates. While the Sustainability Suite can present the relevant data, each enterprise and its individual units will need to create new frameworks to make decisions that consider both sustainability and near-term profitability.
As with all sustainability solutions, the SAP ecosystem will evolve quickly as the regulatory and business context shifts. Enterprises will need to cultivate teams that can respond with agility. For example, SAP’s upcoming Green Ledger solution, aimed at addressing the need for more robust “impact accounting” practices, will require an expert team comprised of functional and SFM experts for implementation readiness. As they deepen their engagement with the SAP Sustainability Suite, organizations will need to simultaneously enhance functional skill levels oriented towards sustainability in areas such as financial accounting and controlling, purchasing, production planning, transportation, EHS, business processes, business technology platforms (BTPs), on-premise-to-SaaS and SaaS-to-SaaS integrations, and data and analytics (particularly complex data ingestion and visualization).
Organizations have been focusing on identifying and managing sustainability data to meet evolving regulatory requirements, but all enterprises are still in the early stages of that journey. For companies looking to build their sustainability efforts leveraging the business data in their core SAP ERP solutions, the SAP Sustainability Suite is a strong starting point, particularly when combined with a thorough data assessment, a commitment to building internal sustainability expertise, and a bias toward action.
