Point of View on Scope 3 Sustainability Solution
Environmental, Social and Governance is a process to assess organization’s business practices and performance on various sustainability issues. Organization’s proactively track and drive the usage of environmental and social responsibility materials in their packaging and finished goods to meet sustainability performance targets. Businesses are now focusing for a ‘Net Zero’ future where zero emissions, zero waste, and zero inequality will improve people’s lives while keeping sustainability at the forefront.
In procurement world, an organization’s GHG (greenhouse gas) emission is classified into 3 scopes.
Scope 1 emissions are direct emissions from company-owned and controlled resources. Emissions released into the atmosphere as a direct result of a set of activities at a firm level are scope 1 emissions
Scope 2 emissions are indirect emissions from the generation of purchased energy, from a utility provider. All GHG emissions released in the atmosphere, from the consumption of purchased electricity, steam, heat and cooling are scope 2 emissions
Scope 3 emissions are impacts that are not in the direct control of the company but occur in the value chain of reporting company: addressing the upstream and downstream supply chain impacts. Procurement can bring visibility and transparency to scope 3 GHG emissions
Procurement process looks out for ways to collaborate with suppliers, customers and other companies in supply chain. Utilizing spend data can be a key method in starting an emission-reduction program from procurement’s perspective
Point of view:
In view to provision a strategic value added tool for the business, Scope 3 solution should focus on integrating procurement data with the sustainability data. Through this integrated approach in ESG Scope 3 Data Management, organizations can report and monitor sustainability performance in an automated, seamless, and intelligent way and facilitate innovative insights and solutions while reducing carbon footprint.
Proposed Features of Solution
- Scope 3 Carbon footprint and spend analyses via integration with source ERP, planning and LCA systems
- Dashboard-based analytics based on materials, vendors, source regions
- Data presentation from corporate headquarters to site / division level
- Scope 3 Scenario Planning for Carbon Footprint and Spend Optimizations considered procurement related configuration parameters
- User Input (target based)-based Simulation planning (what-if analyses) to achieve balance between carbon footprint and spend figures
Proposed Solution Architecture
- Data from different data sources can be extracted and blended in SAP Datasphere
- Procurement Data from SAP S/4HANA, SAP ECC
- Data from LCA Databases for carbon footprint calculations
- Planning data
- Data can be integrated in Datasphere and modeled as per reporting requirement. Descriptive analytics can be enabled on top of modeled data in near real time fashion
- Deriving baseline value: Distributing the planned Procurement Quantity among vendors based on As-Is pattern without any optimizations applied
- System suggested Optimizations
- Carbon Footprint Optimization: Algorithm can be designed to distribute planned procurement quantities of materials on basis of Carbon optimization i.e., priority being given to vendors with least CO2e emission irrespective of cost
- Spend Optimization: Algorithm can be designed to distribute planned procurement quantities of materials on basis of Cost optimization i.e., priority being given to vendors with minimum spend irrespective of CO2e emission. Inflation indexed spend may be calculated based on configuration
- These System suggested optimization algorithms can be implemented in Datasphere and exposed to SAC. Algorithms/Stored Procedures can be written in HANA Cloud database of Datasphere and same can be triggered on demand from SAC through SAC Multi Actions API step
- User Based Simulations
- Users can opt to key in the optimized cost or carbon emission as an absolute value or as percentage against baseline.
- Users can perform different simulations and keep saving those in SAC as different versions or map to different simulation members within same version. This can be used for further analysis and to finalize the distribution of planned procurement quantity of materials among the vendors
- User based simulations can be configured in SAC leveraging what-if simulation capabilities. Data Actions can be leveraged to perform simulation calculations within SAC. Bi-directional flow between SAP Datasphere and SAC can be leveraged to pull data from Datasphere into SAC planning models using OData connection and retract back into Datasphere using Data Export service for analytics.
- Based on the simulation outcomes and analysis, due action can be taken and planned procurement quantity of materials to be purchased from respective vendors can be updated in the source. Hence this can provide an end-to-end insight to action analytics
Scope 3 analytics solution can provision lot of benefits. Some of them are listed below
- Reduced Scope 3 carbon emissions footprint
- Balance between carbon emissions and spend management
- Scope 3 vendor sustainability performance tracking, reporting & management
- Efficient scenario planning, cost/benefit analysis for optimized ESG compliant supply chains
Thanks to Sugata Biswas for the support