New Business Models for a More Sustainable Future – Davos 2022: SAP’s Intelligent Enterprise Institute Executive Panel
Although the planet faces great challenges, we must not forget that this is a time of immense opportunities for sustainable development and business. Our greatest challenges – that include global warming, environmental degradation, increasing competition for resources, rising inequalities, escalating geopolitical conflicts, health, and financial crises – make it more evident than ever that business as usual is facing serious challenges and that companies must innovate and pursue sustainable models if they want to prosper.
There is an urgent need for market players to take a holistic approach, embrace responsibility and a long-term vision, to redesign and experiment with new sustainable business models. Increasingly, leaders are recognising that we have reached a moment in history when corporate value cannot be seen as something separate from the well-being, improvement and preservation of societies and the environment. Businesses are called to innovate to meet the needs of the present without compromising intergenerational equity as well as future business potential. This cause is extremely important because the future survival of our species on the planet depends on it.
The SAP Intelligent Enterprise Institute explored this topic in a panel discussion at Davos 2022 World Economic Forum. Stefan Shoepfel, co-head of the Intelligent Enterprise Institute, moderated the panel, drawing on the diverse perspectives of professional speakers; Bettina Petzold, Lufthansa Cargo, global head of marketing, Judith Wallenstein, BCG, managing director and senior partner, Claudia Malley, The Economist, president and managing director of partnerships of Economist Impact, and Claudio Muruzabal, SAP, president of Cloud Success Services.
Following, are some thoughts and resources based on the panel.
Words from a frontrunner experimenting new business models
As established by the 2015 Paris Agreement on Climate Change and the 2030 Agenda for Sustainable Development, reducing carbon dioxide (CO2) emissions is one of the main global goals to curb the greenhouse effect and global warming.
Governments and businesses must cooperate and work creatively and innovatively to find ways to fulfil targets and commitments, such as those presented at COP21 or the WEF. Building the net-zero economy is a great challenge, especially for carbon-intensive sectors such as manufacturing, electricity, agriculture, and transportation, but it is possible.
In April 2022, a McKinsey survey found emissions to be the top concern of air travellers’ respondents in 11 of 13 countries polled. The aviation industry is a great example of an industry that must innovate and implement more sustainable business models in response to the planet and societal needs. As stated on the company website, “Lufthansa Cargo is pursuing the goal of becoming the world’s most sustainable cargo airline.” (https://lufthansa-cargo.com/meta/meta/company/about-us) Their efforts include state-of-the-art technologies (e.g. ‘Sharkskin’ technology) and continuous investment into its Sustainable Aviation Fuel program to further reduce CO2 emissions (Lufthansa Cargo, 2022). In 2021, Lufthansa Cargo and DB Schenker have started operating a weekly carbon-neutral cargo flight from Frankfurt to Shanghai. Fuelled by Sustainable Aviation Fuel (SAF), this flight has been the first regular carbon neutral cargo flight connection in history.
“Since the last two years, our customers have been increasingly requesting sustainable transport services across the entire supply chain,” says Bettina Petzold, Global Head of Marketing of the aviation giant Lufthansa Cargo, “offering worldwide sustainable solutions required the right mindset, linking our strategy to reflect the SDGs, especially climate change, to focus on reducing our CO2 footprint. I am very happy that we have moved from experimentation to building reliable standard products based on sustainability. We have built our current model to provide 100% carbon-neutral flights and have invested in optimising aircraft efficiency. At the same time, another key component of the adopted model is the spirit of cooperation with our customers, who are willing to pay extra for biofuel – which is currently about three to six times more expensive than traditional kerosene-based fuel – to fly 100% carbon-neutral, which is what we are doing and what we focus on.”
Bettina explains that biofuel is mostly produced from 20 to 40 percent of the waste oil used for French fries, which is where the future slogan ‘Fry to Fly’ originated from.
Reducing the Green Premium will help technologies, like SAF, scale sooner. The hope for the future is that the price of biofuel will become cheaper as demand for it increases. Today, all Lufthansa Cargo routes to China are CO2-neutral, a promising way forward. This step in the right direction, together with the ongoing development of further technologies – which could, for example, extract CO2 from the air and convert it into fluid energy – makes Bettina optimistic that the goal of zeroing Lufthansa Cargo’s carbon footprint by 2050 is within reach.
Strategy: critical success factors to implement sustainable business models
To make the sustainable future we envision a reality, companies, especially large and transnational ones, need to adopt sustainable practices, including more sustainable consumption and production patterns, as well as integrate sustainability information into their reporting cycle.
“I would also like to point out that the first mover advantage is there,” explains Judith Wallenstein, Managing Director, and Senior Partner at BCG; “Being first mover versus saying let’s wait for regulation and when it comes, I will have a safe playing field and adjust my model. That’s one way of looking at it, but think of Tesla, typical example of a market pioneer, the first electric vehicle disrupting the entire OEM landscape and the supply ecosystem behind it. Their first EV hit the market in 2008. The road less travelled may not be easy, but I think there is a lot of evidence of the reward that sustainably manufactured products are finding in the marketplace, especially in light of often-scarce sustainable resources.”
With her extensive strategic knowledge, Judith discusses the critical success factors for companies and organisations to implement new sustainable business models. In a 2021 article, Judith and other BCG colleagues outlined six steps to successfully transform and make sustainability a durable competitive advantage:
1. Develop a sustainability strategy anchored in purpose
2. Capture business value
3. Build new sustainable businesses
4. Make the core sustainable
5. Build capabilities and address enablers (data, talent, …)
6. Own the narrative, and engage investors and stakeholders
Successful companies go far beyond compliance and reporting these days. They integrate aspects of their environmental, social and governance (ESG) strategy into every component of their business, to create new winning business models and to capture the value that their transformation creates (BCG, 2021).
Media’s impact in amplifying and accelerating sustainable transformation
As stated in the UN Declaration on the 2030 Agenda for Sustainable Development, hundreds of millions of people have moved out of extreme poverty in the last generation. Access to education has increased significantly for all children. The spread of information and communication technologies and global interconnectedness have great potential to accelerate human progress, bridge the digital divide and develop knowledge societies.
“Media has revolutionised through digital transformation and is now in everyone’s hands. If the media can get the right stories to the right people, at the right time and in the right format, there is enormous potential to help broaden perspectives and open minds to new ways of thinking.” – says Claudia Malley, Economist Impact President and Partnerships Executive at The Economist Group. Claudia ponders the influential role the media plays in educating individuals, influencing communities through social consciousness, promoting, and accelerating sustainable business models – “What is interesting are some of the complexities of media information for decision-making, which can determine whether progress is enabled or hindered. These complexities concern trust, misinformation and the ethical responsibility of stories shared and how they are shared.”
Claudia leads a new activity at the Economist, called Economist Impact, which relies on research and insights to enable the ability to drive progress, combining the power of a think tank with the creativity of a media brand to be able to bring reliable information, new insights, and perspectives to enable real change in the world.
Regarding her work at the Economist Impact, Claudia mentions sustainability is one of the three main areas where the Economist Impact aims to drive change. She says that to drive change around sustainability as a media company, her team recognised the importance of cooperation, creating space to work on solutions that bring together the necessary stakeholders, who should be diverse and perhaps even contentious to discuss and open the door to future solutions.
The creation of forums for the exchange of ideas and cooperation is crucial both for the media at large and for companies that want to innovate and look for new business models around the world. As Claudia concludes, ‘Time is not in our favour. So let us ask ourselves: what can we do, together, that can be different, more inspiring and more multiplying to get us where we need to be?”
About technology’s contribution in enabling more sustainable business models
Arguably, the word that best sums up our societal experience of disruption and learning over the past two years is resilience. As we adapt, we transform, very quickly to be able to build sustainable business models that can adapt to the ever-changing environment we live in. Technology plays a key role in businesses transformation, as the choice of the right platform not only allows reporting and transparency but also provides flexibility to drive new sustainable business models in a scalable and profitable way.
With 50 years of history and more than 425,000 customers, SAP has a special place at the forefront of what is happening in the world in terms of transactions, whether it is travel, supply chain, operations or business management, SAP very quickly has an input on what is happening. The core of SAP’s business is still based on engineering skills, skills that united its founders. When thinking about how to build sustainable models, SAP goes back to engineering to build technologies that enable those models. When exploring new business models, companies should consider how technology can help improve their business processes. How can emerging technologies contribute to business sustainability? SAP is committed to answering this question for customers.
Claudio Muruzabal, president of SAP’s Cloud Success Services, shines a light on the fundamental importance of technology in bridging the capability gap to help run companies more sustainably. At the end of the day, this is SAP’s mission – to help the world run better and improve people’s lives with a promise to innovate, helping customers to run at their best. This includes providing technology solutions and services that allow businesses of all sizes and industries to innovate and realise their sustainability goals.
“We at SAP, see the role of technology as a catalyst to adapt to the changing environment” – says Claudio – “Not only for our 425,000 customers globally but more so due to our role in touching more than 80% of the world transaction revenue through an SAP system. What we all learned in the last two years and more recently, is the need to be resilient. And this is where emerging technologies can help improve business processes for flexible, agile, adaptation”.
Technologies based on The Cloud are increasingly enabling the resilience described by Claudio. The Cloud transformation has unlocked tremendous value and unparalleled visibility across business operations. Moreover, Cloud technologies are enabling integrated digital business networks and data-driven insights that allow for immediate actionable access to stakeholder sentiment and typically result on reducing costs associated with core business processes.
Bridging the gap between business and IT is therefore a key success factor for sustainability strategies. This means sustainability needs to be on CEOs agendas, who, in turn, need to work hand-in-hand with IT to enable the necessary capabilities and bring strategy to life.
For Claudio, the next step in building a new sustainable business model is to listen to the voice of customers. Bringing the views of key stakeholders, including not only the customer but also the customer’s customers and their employees, into the business model.
Additionally, Claudio reflects on the importance of ESG governance as a critical component in bringing sustainable business models to life. Technology can make it possible to measure footprint and sustainability indices in the same way that companies measure financial returns.
Finally, Claudio focuses on the importance of linking companies’ ESG strategies to the SDG goals. For SAP in particular, the 17th goal ‘Partnership for goals’ is of paramount importance. Individual companies, organisations or governments cannot do everything on their own. Cooperation, as emphasised by other speakers, is essential.
Bringing together all the components raised during the panel, the right technology, information, stakeholders, and sustainability strategy, goes a long way towards building an intelligent, more resilient enterprise.
To help customers better align their business strategies with IT investment, SAP has recently launched its Intelligent Enterprise Institute globally. As part of SAP’s global Cloud Success Services, the Intelligent Enterprise Institute will inspire business leaders and help organisations in their ongoing transformation to become more sustainable, profitable, and resilient.
How can we build more resilient and sustainable business models?
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