digital transformation for a sustainable future

“SAP does not have a separate sustainability strategy”

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Key Takeaways

⇨ SAP has implemented a threefold ap- proach to address emissions, which includes—in this order—avoiding emissions, reducing emissions, and compensating for what is left over.

⇨ SAP started its Sustainability Journey in 2009 with a federated approach across the business, and for over two years now, sustainability has been prominently embedded as a key pillar of SAP's corporate strategy.

⇨ The most significant impact SAP is making is through its solutions and technology, which helps customers develop and execute sustainable business strategies.

In part 1 of a candid interview with SAPinsider, Daniel Schmid, Chief Sustainability Officer of SAP, talks about SAP’s journey toward Net Zero 2030, decarbonizing complex supply chains, enabling organizations to be sustainable, greenwashing risk, and future priorities.

Where is SAP in its journey toward Net Zero? What have you achieved until now?

Daniel Schmid: SAP has implemented a threefold approach to address emissions, which includes—in this order—avoiding emissions, reducing emissions, and compensating for what is left over. Avoidance, for example, involves using digital means such as virtual collaboration tools to avoid travel and the emissions it would cause. Reduction involves maximizing energy efficiency in data centers to decrease energy consumption and emissions.

Compensating what is left over pertains to offsetting the remaining emissions, which can be achieved by, for example, implementing an internal carbon price on flight tickets for business travel and using the proceeds to purchase high-quality offsets. SAP’s ambitious goals have driven innovation and creativity, resulting in significant progress toward reducing emissions. You can find detailed information about SAP’s emissions performance and journey over the years in the company’s integrated report, which includes information on Scope 1, Scope 2, and Scope 3 emissions. Since 2009, SAP has been recognized as an action leader in addressing emissions.

Is there any sustainability aspect that SAP is struggling with?

Daniel Schmid: I would not say that we are struggling, but it is important for us to identify the most significant areas of impact and material topics that require our focus. SAP’s definition specifically involves creating positive economic, social, and environmental impacts within the planetary boundaries.

However, with such a broad definition, there is a risk of losing focus and struggling to achieve meaningful improvements in sustainability performance. To prevent this, we have established four interconnected priorities—climate action, circular economy, social responsibility, and holistic steering and reporting.

Our focus areas are not only applicable internally to our operations, where SAP strives to be an exemplar and a role model for sustainable business practices. The most significant impact we are making is through our solutions and technology, which help our customers develop and execute sustainable business strategies. This is what our customers expect from us, and it is where we invest significantly, as SAP customers generate 87% of total global commerce. Regarding our journey toward Net Zero, there are three critical areas that we need to address. Firstly, the vast majority (81%) of our emissions come from the use of our products by our customers.

Our most significant lever in achieving our net-zero target is the transformation from on-premise solutions to our green cloud offerings, which have been available since 2014. Whether our customers use SAP’s data centers, co-locations, or hyperscalers, we ensure the purchase of renewable electricity.

Accounting for 16% of our value chain emissions, upstream emissions such as purchasing behaviors are the second significant area. Our top supplier program requires our suppliers to provide carbon-neutral products and services. The remainder of our emissions comes from our own operations, where we focus on improving our data center energy efficiency and introducing intelligent alternatives such as a mobility budget instead of owning company cars. We have also decided to purchase only emission-free cars during the use phase from January 2025 to achieve our 2030 Net Zero target.

Organizations want to be intelligent, sustainable enterprises. How are you enabling your customers to be sustainable?

Daniel Schmid: Let me start by emphasizing that SAP itself does not have a separate sustainability strategy. SAP’s business strategy has sustainability at its core. This is a significant distinction, and it is essential to embed sustainability within the core business strategy rather than treating it as a separate siloed approach.

We started our Sustainability Journey in 2009 with a federated approach across the business, and for over two years now, sustainability has been prom- inently embedded as a key pillar of our corporate strategy—building on our purpose of improving people’s lives and helping the world, which is a strong and powerful sustainability statement.

Our vision is to enable every organization and every industry to become a network of intelligent, sustainable enterprises. To achieve this, we developed our business strategy on three interconnected core pillars: business agility, resilient supply chains, and sustainable outcomes. Our solution portfolio starts with a busi-ness technology platform that serves as the foundation, followed by the core S/4HANA solution that manages critical business processes for companies.

We also provide industry-specific solutions and embed sustainability capabilities into our portfolio. Collaboration is crucial in this endeavor, and we need to work closely together to accelerate the transformation, which is urgently needed in most industries.

It is critical for customers to prioritize sustainability as an integral part of their implementation process rather than treating it as an afterthought. Many customers already include work streams focused on integrating sustainability data into their S/4HANA implementation. The goal is to have sustainability data visible within their business processes, allowing for informed decision-making by business users. While this journey requires a significant investment from SAP to embed sustainability data in our data models, it is a foundational component that should be included in all SAP solutions.

Consider SAP Concur, which deals with travel management. It is not just about the cost and time factors but also carbon footprint resulting from a travel decision. Similarly, SAP Ariba, which is used for managing the supply chain, ensures that social stan- dards, labor conditions, and environmental standards are met across thousands of suppliers.

It is essential to embed sustainability in SAP Ariba, but it all starts with S/4HANA’s financial module. This is critical because CFOs prioritize financial and non-financial performance, and sustainability is a key aspect of the latter. CFOs are increasingly expected to meet stakeholder expectations and comply with regulations in this area, making it essential for them to prioritize sustainability.

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