How can SAP help make the CSR manager role more strategic

[Yannick_PTT]

How can SAP help make the CSR manager role more strategic in 2011

Now that most of the global companies have embraced sustainability, IT takes another dimension helping business achieving their ESG targets. IT in the sustainability context means creating technologies, infrastructure, and applications that promote low emissions, save money and leave a lighter footprint on the environment.  IT in the sustainability performance management context is a new chance to make sustainability a pillar of the company’s strategy.

• Sustainability Report: not only for the Fortune 500

Sustainability performance management has become the norm and is no longer a small trend that many wonder will gain widespread acceptance. From a regulatory standpoint managing your sustainability performance is still voluntary in most countries but the various business issues really do make it a must for companies to address.  And many signs let me think it will become mandatory in the next 3 to 5 years:

- Sustainability reporting information like energy efficiency is already partly mandatory in some countries like the UK and others. The “Carbon Reduction Commitment Energy Efficiency Scheme” is a mandatory carbon emissions reporting that concerns the biggest UK companies (see http://www.carbontrust.co.uk/policy-legislation/business-public-sector/pages/carbon-reduction-commit... )

- ESG reporting is becoming mandatory in some countries like India (see http://economictimes.indiatimes.com/news/economy/policy/Environmental-accounting--reporting-set-to-b....)

- The mandatory character of Sustainability reporting is one of the key recommendation of the Amsterdam Global Conference on Sustainability and Transparency (see http://www.amsterdamgriconference.org/ ), and expected in 2015.

Most of the big companies do have a pretty brochure available since a decade, showing their sustainability performance in the expected DJSI or GRI format, as well as their contribution to a better planet with nice green pictures. This is a good and important first step. But getting this done probably feels more like a pain than an asset to the business.

• Do not just report your sustainability data, manage it

With SAP Sustainability Performance Management (SuPM), customers can go fairly beyond the shiny report and truly manage the sustainability performance, identify opportunities to improve social and environmental performance. One of our customer said during his keynote at the last GRI conference that “benchmarking is to road to continuous improvement”. The process of sustainability performance management should start exactly there: get clarity on your industry’s performance and key trends and compare that with your own performance: what is the carbon footprint per capita and its evolution, what are the triggers behind the evolution, what is the ratio of women in management positions, etc.

External benchmark data from providers like SAM, Trucost or ThomsonReuters can help get the necessary market assessment. SAP SuPM allows collecting and storing all this information. The solution will help in parallel to collect the company’s quantitative and qualitative data with the right level of details (monthly to yearly), and finally bring it into relation with the industry benchmark. This will give discernment of the good and bad performances, indicator by indicator. Doing this, the solution will help answer the key question “where do we want to be as a company and by when”. A “target” performance can be set accordingly for the whole company, for each quarter, or product group, or on subsidiary level.

SAP SuPM consolidates the whole in a scorecard that gives the macro-view of the performance and score versus the target that has been set, as well as a possibility to drill down into a monthly view or a product view. With the scorecard, management can keep track of the execution of the company’s sustainability strategy and a closely monitor the sustainability projects or initiatives that are set up. The scorecard is the easiest way to bring together extra-financial indicators with financial indicators and finally reconcile the sustainability and the accounting worlds. I will address this in more details later.

• Eliminate redundant, non strategic tasks

One of the main activities CSR manager have to cope with for their sustainability report is probably one of the most boring ever: collect the data from all over the place. Here is a possible data collection process for most of our customers: pick up the phone and call with HR, Finance, Controlling, GRC, Legal, Facilities. Then wait forever to get an answer per email, call them back, get an email first without the attachment, and with the attachment but in an Excel version you cannot. Does that sound a bit familiar to you?

With its embedded data collection capabilities, SuPM helps automated up to 85% of the GRI core indicators from SAP and non SAP systems. Most of GRI social, environmental or economic KPI are indeed in an SAP HCM, SAP EHS, SAP EC application or somewhere else in the SAP business suite. I recall the Head of Environmental Technology of a global high-tech company telling me at a BITKOM meeting in Berlin: “While searching for the sustainability information in my company, I have the feeling it is all there in SAP”. I could not agree more.

Let me give you 3 concrete examples based on the GRI G3 disclosure available here:http://www.globalreporting.org/ReportingFramework/G3Online/PerformanceIndicators/

• The HR information necessary for the GRI indicator LA10 “Average hours of training per year per employee by employee category” can be extracted from SAP Human Capital Management’s Training Module using a simple SAP Script as connector. The script can be built on the application side and registered in SAP SuPM.
• KPI around carbon and energy management like EN3 “Direct energy consumption by primary energy source” can be collected  from SAP Carbon Impact using the web service connector
• Last example, the financial indicator EC1 “Direct economic value generated and distributed” can be potentially extracted from an SAP NetWeaver BW query using the appropriate SAP script. Many SAP customers do have financial data already available in a bigger data warehouse and this is more than enough for the quarterly or sustainability report.

The automation of the data collection (and possibly other tasks) allows all the persons involved in that process give a different contribution to the company’s sustainability success investing their time in more value-added activities.

• Report confidently and transparently

Most of our customers are still doing their sustainability reporting with MS Excel. This has probably one or two good short term advantages. But what about the upcoming audit and very valid questions like: where is the donation budget coming from, who changed it last quarter and approved it lately? According to experts, current verification of sustainability reporting results from existing and growing market demand. An important driver of this demand is the growing legal requirement to report on environmental issues in several countries as I mentioned earlier.

In addition to that, there is right now a clear global trend or better said global recommendation towards integrated reporting. Sustainability data do represent the “natural” extension of the Financial Report of a company. The ambition of the International Integrated Committee (IIRC) is to provide one unique reporting framework for financial and extra-financial indicators. (more at http://www.integratedreporting.org/. South Africa preceded the IIRC movement with the King III Code of Compliance making integrated reporting mandatory for all companies listed at the Johannesburg SE (see here for more details: http://www.business-rescue.co.za/pdf/KING-III-Cape-Town-programme.pdf)

 How is this supported in the application? First of all, SuPM is fully auditable and help answers the when/where/who/what questions from the auditors. SuPM allows to audit all movements around sustainability indicators, the questionnaires sent to the business guys, and other stuff like the conversion factors (how to translate KW/h into liter of water consumed per SKU), the application includes audit capabilities for the comments (reason for a rejection of a KPI for example), data Source Information including source system details (from which system/query is the information coming from), and more.

Last but not least, I think SuPM is the first solution that provides out of the box XBRL reporting capabilities for sustainability data. Why is this relevant? You as an investor or as “simple” consumer will get a much easier way to work with a more consistent information. You will be able to search and filter the information that is relevant to you. XBRL reporting will provide more transparency and easier comparability when checking the sustainability performance of different organizations. XBRL reporting is being used by the financial community since the late 90’s and will support the technical integration of financial and non-financial data. Here is an example of an interesting SEC prototype with information published on a voluntary basis: http://www.viewerprototype1.com/viewer

Integrated reporting is a huge business opportunity for SAP that has been selling the best integrated system since decades, and has a best-in-class reporting portfolio. This is probably a good topic for my next blog and a nice project for the CSR.

For more information on SAP Sustainability Performance Management please visit:

https://help.sap.com/grc -> Sustainability Performance Management

For a technical overview please check out:

http://www.sdn.sap.com/irj/scn/index?rid=/library/uuid/e0ccbbc0-7696-2d10-4293-e385642b1f6e