Getting ESG Reporting and Performance Management Under Control with the SAP Sustainability Control Tower
Have you ever driven a car on a narrow, winding road during an extremely foggy night, maybe in the woods or mountains with no light from other cars or buildings around you? Perhaps, the road did not even have clearly visible road markings, making orientation even harder. Probably, it was pitch dark, you got blinded by the reflection of your own car light, and you could not really see where the road starts and where it ends. Most likely, you did not feel comfortable, had to concentrate, felt stressed, and could only drive very slowly and carefully. Without clear visibility, moving at full speed becomes difficult and dangerous.
The same is true for the business world. Organizations which have better visibility into all key factors affecting their business, can move faster than their competition. For many years, it was sufficient to keep an eye on all the financial factors. However, as the UN Climate Change Conference COP26 in Glasgow a few weeks ago clearly showed again, Environmental, Social, Governance (ESG) related KPIs have become part of the “license to operate” for businesses.
As a company, one can easily get lost in the “fog” created by the “alphabet soup” of sustainability standards, and stakeholder expectations. Many people still get confused by the numerous acronyms like GRI, WRI, GHG Protocol, TCFD, SASB, WBCSD, WEF, CDSB, CDP, IIRC, VBA, etc. The announcement of the formation of the International Sustainability Standards Board (ISSB) by the International Financial Reporting Standards (IFRS) Foundation during COP26 gives hope that sustainability-related reporting and accounting standards will converge over time. The EU has shared their support on the announcement of ISSB together with EFRAG (European Financial Reporting Advisory Group), as this closely relates to the Corporate Sustainability Reporting Directive (CSRD), which is going to be mandatory and binding for companies in the EU. Nevertheless, many organizations will continue to struggle with staying on top of all the upcoming changes and advancements.
As all the news and announcements around COP26 also clearly showed, the overall scope is widening. Obviously, greenhouse gas emissions and their effect on climate change are on everybody’s mind. World leaders also promised to end deforestation by 2030, which added another sustainability-related focus topic. Moving towards circular economy business models was yet another hot topic during COP26, as increased reuse and recycling rates help to reduce emissions and plastic waste.
In parallel, the regulatory space is evolving quickly. More and more Extended Producer Responsibility (EPR) schemes and plastic taxes are emerging, and human rights due diligence is moving center stage with upcoming regulations like the so-called “Lieferkettensorgfaltspflichtengesetz” in Germany. Thus, the number of sustainability-related dimensions is constantly growing.
In the past, doing annual ESG reporting on an ad-hoc basis using a manual process by creating spreadsheets might have been sufficient. However, with the number of stakeholders requesting and requiring sustainability data constantly increasing (investors, governments, consumers, employees, etc.), up-to-date sustainability data is required more or less on an ongoing basis. Increasingly, organizations will ask their suppliers for detailed sustainability data, which has upstream and downstream effects, reaching even to the smallest companies. Also, the breadth and depth of the information demanded is constantly growing with each sustainability dimension being added and the overall sustainability space advancing. Thus, it becomes harder to stay on top of all the moving parts.
Today, we made the SAP Sustainability Control Tower generally available to our customers. The new cloud-based solution simplifies holistic steering and reporting as well as sustainability-related performance management significantly. The SAP Sustainability Control Tower leverages the SAP Business Technology Platform to integrate various data sources in order to derive sustainability-related insights along established reporting and accounting standards.
In our product, we initially focus on the World Economic Forum (WEF) Stakeholder Capitalism Core Metrics which got developed based on the contributions by more than 120 CEOs from around the globe. These metrics leverage existing standards like GRI, TCFD, and SASB, and are focusing on the four pillars: principles of governance, planet, people and prosperity. Topics covered by the 21 Core Metrics include: anti-corruption, greenhouse gas emissions, land use, water consumption, diversity and inclusion, health and safety, economic contribution, and more. According to the WEF, numerous large organizations are already supporting these metrics.
The data required for calculating sustainability metrics often resides in business processes managed by SAP solutions, e.g. SAP SuccessFactors with respect to diversity and inclusion. In addition, recently-released sustainability solutions like SAP Product Footprint Management and SAP Responsible Design and Production represent key sources for additional sustainability data. Thus, by offering out-of-the-box support for a number of SAP solutions and by making the integration of key data sources easy, the SAP Sustainability Control Tower dramatically simplifies the ongoing calculation of sustainability metrics along established accounting and reporting standards. As a consequence, in contrast to manual processes, sustainability KPIs get updated instantaneously when new data arrives or data gets updated.
The SAP Sustainability Control Tower comes with prebuilt data models. However, as the SAP Sustainability Control Tower is powered by the SAP Business Technology Platform, the SAP Data Warehouse Cloud, and SAP Analytics Cloud, it is possible to add additional data sources and to derive additional metrics without writing code. In addition, built-in functionality like the forecasting, drill-down, scenario and what-if analysis functionality of the SAP Analytics Cloud can be used to make predictions for changes in the future. All this provides a lot of flexibility and agility not only to SAP, but also to partners and customers. The approach drastically simplifies sustainability-related performance management. At the core of the solution, auditability and compliance are taken into consideration as well.
With respect to standards support, we start with the WEF Stakeholder Capitalism Core Metrics. However, we are actively engaging with the larger standard setting community including NGOs and consulting organizations in order to influence emerging standards during their development and to quickly adopt sustainability standards once they mature. For example, we are closely collaborating with the WEF, the World Business Council for Sustainable Development (WBCSD), the Value Balancing Alliance (VBA), and the Ellen MacArthur Foundation (EMF).
As a result, as part of this evolutionary process, a central sustainability key figure ledger will evolve and grow, which fuels what we call the “green line”. As a key element of our sustainability strategy, we integrate data from numerous sources in order to derive sustainability insights which we then push back and embed into various end-to-end business processes. This way, business process owners have actionable insights at hand right where they need them. Thus, the “green line” complements the established top and bottom line for decision making.
If you want to learn more about the functional details of the SAP Sustainability Control Tower, you should sign-up for the SAP Community Call on upcoming Friday (December 17th, 3:30pm CET) which will include a solution demo. In addition, if you want to stay up to date about all the sustainability news from SAP, please join the SAP Sustainability Community as a follower by clicking on the “Follow” button. Finally, in case you missed the session, you might also want to check out the recording of the SAP TechEd session “Manage Sustainability with SAP Solutions”. Stay tuned for more sustainability news from SAP in the upcoming weeks!