Corporate sustainability as an element of strategy and planning for corporations has been gaining ground significantly over the past decade. Buoyed by environmentally focused laws led by the EU, sustainability programs have also taken on economic elements such as access to capital and liquidity, as well as operational components from traditional quality programs. Most sustainability programs have three major components:

1. Economic and financial: These include the ability to reduce the consumption of raw materials into the products or services delivered to customers, the ability to access capital markets, and the long-term viability of a company vision and mission
2. Environmental: These include Restriction of Hazardous Substances (RoHS) along with regulations and environmental welfare, the effect the carbon footprint of an organization may have on its operations, and the effect of “cap and trade”
3. Social responsibility: These include the welfare of worker rights, adherence to local labor laws, fair wages in developing countries, and workplace health and safety

For a global organization, this goes beyond its identity as a good corporate citizen. In 2006, the Global Reporting Initiative (GRI) was created to provide guidelines and audit recommendations for organizations participating in corporate sustainability reporting (CSR) activities. These guidelines ensure a level of consistency and governance in the practice of corporate sustainability.

Despite several years into the GRI guidelines, what defines sustainability strategically to most companies depends on the company’s point of view. Figure 1 illustrates how several Fortune 500 companies running SAP ERP position their corporate sustainability programs. Although each company considers the three primary areas the GRI supports, each has a different orientation and set of actions associated with its respective program.

Figure 1

Target focus of sample Fortune 500 CSR programs, SAP clients

Driving Value through Corporate Sustainability

Given today’s compliance and reporting requirements, why do large and small organizations alike develop corporate sustainability programs? Earlier this year, management consulting firm McKinsey surveyed more than 150 CFOs, investment managers, and other professionals responsible for the development, implementation, or consumers of information from corporate sustainability programs as to the way these programs drive financial performance. On average over 75% of these stakeholders believe value will be driven from the increase in transparency and compliance from CSR programs. Over 50% of these stakeholders believe a successful CSR program will attract and attain talented employees, while 30% believe that market value will be driven by opening new market opportunities. Other areas in which you can realize value include access to capital and introduction, and attraction and retention of employee talent. For more, see “Valuing Corporate Social Responsibility” in the February 2009 issue of the McKinsey Quarterly, or go to www.mckinseyquarterly.com.

If you review the survey results, you can see that these questions yield a short list of direct and indirect key performance indicators (KPIs) that, if realized, could produce a financial and valued return. Of particular note is the response indicating “improving access to capital.” For the past few years, several stock indices in the US and EU markets have created opportunities for publicly traded companies to share in a sustainability index should their CSR activities meet the GRI and additional reporting guidelines. 

SAP BusinessObjects Sustainability Performance Management

SAP BusinessObjects Sustainability Performance Management allows you to combine the real-time operational performance of classic SAP ERP solutions with real-time decision analysis using the SAP BusinessObjects enterprise performance management (SAP BusinessObjects EPM) solutions and SAP BusinessObjects GRC applications. In addition, since SAP BusinessObjects Sustainability Performance Management is driven from a service-oriented architecture-based product architecture such as SAP BusinessObjects, SAP users do not need to keep all operations data content in the classic SAP environment. Sources can come from a variety of application areas such as other ERP environments, operational systems, spreadsheets, and cloud-based sources.

SAP BusinessObjects Sustainability Performance Management resembles SAP BusinessObjects Strategy Management, with a library of KPI categories pre-loaded. You can easily designate KPI content sources mapping back to SAP BusinessObjects Strategy Management as well. Figure 2 illustrates a conventional KPI window list to the left (including pre-populated entries in a drop-down list), additional links to other KPIs, and performance settings for limits and alerts according to the organization’s bandwidth and tolerances to these indicators. These performance settings shown on the right of the screen also provide summary index values based on icons denoting in-tolerance or out-of-tolerance behavior of the KPI.

Figure 2

SAP BusinessObjects Sustainability Performance Management maintains lists of pre-populated KPIs with links and performance settings

Many sustainability targets address building-more-with-less environmental considerations. For example, a coffee maker would like to sell more coffee while reducing the amount of paper products it uses to deliver its product to the consumer. One of the strong leverage points with SAP BusinessObjects Sustainability Performance Management is the ability to trace back to material consumption levels in the classic SAP ERP environment. The user can map material based on KPIs involved and discover real-time performance to these targets by selecting the KPI Material Consumption tab in SAP BusinessObjects Sustainability Performance Management (Figure 3). For example, the coffee cup assembly includes parts defined in a bill of materials. The paper, sleeve, and lid are made of materials that you can manage in the materials management (MM) component of SAP ERP. In this case as well, the user can configure performance settings based on the target KPI settings and tolerances desired by the organization. SAP BusinessObjects Sustainability Performance Management provides example sustainability categories and key indicators that are pre-configured in many cases based on customer best practices. 

Figure 3

SAP BusinessObjects Sustainability Performance Management provides an option to track material consumption levels based on KPIs

Governance regarding corporate sustainability relies on the use of visual dashboards both for reporting and management presentations. You can develop this via the Dashboard tab (Figure 4). The user can quickly align to the areas of the corporate sustainability program as defined for their organization, and check the top-level status of each element based on settings. With modifications, SAP BusinessObjects Sustainability Performance Management can allow deeper flow-downs into particular initiatives, which can also allow for SAP Project and Portfolio Management (SAP PPM) integration on actions and projects aligned with particular groups of initiatives. SAP PPM, similar to other classic SAP ERP modules (such as materials management [MM] and project scheduling), is purchased separately from SAP BusinessObjects Sustainability Performance Management. Returning to the coffee maker example, tolerances on the consumption of paper cups could be tied to MM, where you could see real-time information on the use of a particular product, corresponding inventory levels, and other operational information. The redesign of the cup itself could be a strategic initiative, articulated as a program in SAP PPM with a target realization date that would then potentially allow risk tolerances to be set more conservatively once implemented.

Figure 4

SAP BusinessObjects Sustainability Performance Management dashboards show alignment and performance to corporate sustainability areas

You can use these dashboards either in their native format or in the briefing book format to illustrate the same view as part of a corporate briefing book environment (i.e., the spiral binders of slides that executives use to brief analysts and shareholders). These views are also supported with Xcelsius, Crystal Reports, and SAP BusinessObjects Explorer dashboarding, reporting, and analytic tools, respectively, as part of the integrated SAP BusinessObjects environment. These products are purchased separately; however, some bundling scenarios may exist after SAP BusinessObjects Sustainability Performance Management reaches GA status.

As with any new product, early adopters will find particular features and nuances may not be completely to their customized liking. However, compared to other products at similar stages, SAP BusinessObjects Sustainability Performance Management is robust and intuitive to use.

William Newman

William Newman, MBA, CMC is managing principal of Newport Consulting Group, LLC, an SAP partner focused on EPM and GRC solutions. He has over 25 years of experience in the development and management of strategy, process, and technology solutions spanning Fortune 1000, public-sector, midsized and not-for-profit organizations. He is a Certified Management Consultant (CMC) since 1995, qualified trainer by the American Society of Quality (ASQ) since 2000, and a trained Social Fingerprint consultant in social accountability since 2012. William is a recognized ASUG BusinessObjects influencer and a member of SAP’s Influencer Relations program. He holds a BS degree in aerospace engineering from the Henry Samueli School of Engineering and Applied Science at UCLA and an MBA in management and international business from the Conrad L. Hilton School of Management at Loyola Marymount University. He is a member of the adjunct faculty at both Northwood University and the University of Oregon with a focus on management studies and sustainability, respectively.

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You may contact the author at wnewman@newportconsgroup.com.

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