Sustainability is a significant focal point for SAP in 2022. The software company not only recently announced a few sustainability solutions that are now available to its clients, but also, it has gone on the record to discuss how it will limit its own carbon footprint.
ASUG sat down with Japen Hollist, Head of Sustainability Go-to-Market in North America for SAP. We discussed the importance of sustainability in SAP strategy and how the company’s portfolio can help organizations become more sustainable enterprises and meet regulatory standards.
This is an edited version of our conversation.
ASUG: Japen, could you start by telling us about your role at SAP and how you help customers?
Japen: Absolutely. Thanks for the opportunity to share. My role is to lead the go-to-market activities for the SAP sustainability solutions in North America. As part of the North America Customer Innovation Office, my team collaborates with our field force and our teams of expert advisors and architects to help our clients make their sustainability goals and objectives a reality. We help bring SAP sustainability solutions to life to ensure that our customers can unlock their full potential.
ASUG: What is the importance of sustainability and how does it fit into the SAP mission and strategy?
Japen: Sustainability is critical beyond it being the right thing to do for people and our planet.
It’s helpful to also think of sustainability in a few other contexts:
- Sustainability is a global challenge. It is a calling for businesses to shift from doing “less bad” to doing “no harm” to either the environment or society—to shift to leaving the world better than we found it.
- Sustainability is a global megatrend, much like social media or e-commerce. Megatrends dramatically affect the world and the way we operate as humans.
- This megatrend is shifting markets. This is a lot like how Tesla’s success with electric vehicles has caused all the major automakers to shift away from the internal combustion engine to building more electric vehicles to compete.
- Sustainability is expanding our understanding of accounting. Today, we track financial metrics in general ledgers as we close the books monthly, quarterly, and annually to show stockholders a company’s financial health. But the general ledger does not account for the externalities of a business: emissions, waste, and inequality. Sustainability invites us to account for all these externalities and more as the non-financial metrics that are material to the operation and performance of the business. We will do this via sustainability ledgers monthly, quarterly, and annually to show all stakeholders the total business health.
- Sustainability is data-centric. To become a sustainable enterprise, you have to become an intelligent one first. An intelligent enterprise captures and manages data in systems across all business processes. That data is needed to have visibility into all of the sustainability metrics, and it has to be available for the decision-making points within business processes. You can’t become a sustainable enterprise without the insights needed to elevate your business processes. Sustainability is engrained in the SAP mission statement: to make the world run better and improve people’s lives. The plan is to help every SAP customer become an intelligent, sustainable, networked enterprise.
ASUG: When we last spoke, you mentioned that data management is key to success for SAP customers interested in leveraging SAP sustainability solutions. Why is that? What types of data should SAP customers be collecting and how should they manage it so they can effectively leverage these solutions?
Japen: Corporate sustainability is about being transparent and accountable to stakeholders. This engenders trust, and trust maintains a company’s social license to operate. It enhances its brand and improves its reputation. Whether it’s for a shareholder, an employee, or an environmental activist, managing data—collecting it, sharing it, and/or comparing it to standards of excellence—is how a company can be transparent and accountable. In the future, reporting such data will be mandatory. This is what we see in the new rules proposed by the U.S. Securities and Exchange Commission (SEC).
ASUG: How is SAP supporting organizations as they create environmental, social, and governance (ESG) initiatives?
Japen: Sustainability is a journey for our clients, and we meet them where they are in their own journeys. Some are beginning, and some are more advanced. Yet, all have work to do. We encourage companies as they create ESG initiatives to do more than just a series of “random acts of sustainability.”
Instead, we support organizations by inviting them to do the following:
- Establish a sustainable business strategy. This starts with ensuring sustainability is central to the overall business strategy, with all corporate functions contributing. It also means measuring progress and reporting annual sustainability outcomes with the same level of importance as the company financials. We have partnered with BCG, McKinsey, and Bain to aid our clients in this regard.
- Embed sustainable business data into your processes and networks. Use sustainability data within your business processes to make sustainable and profitable decisions and to measure performance. Then, share the sustainability performance data: items such as calculated carbon emissions, water use, recyclability, and labor information with your suppliers, industry associations, regulators, and NGOs. Embed this data into decision-making steps within your business processes, so that when you buy or when you build, it is done sustainably.
- Manage carbon and climate exposure throughout the business. Reduce your financial and reputational risks by accounting for and managing climate-related emissions across all parts of your value chain down to the individual product and service level.
- Embrace circularity and become regenerative. Use operating principles to avoid waste. Reduce, reuse, recycle, and reclaim materials to eliminate waste and accelerate your adoption of circular economy processes. This is where going beyond doing “less bad” to adopt approaches to do “more good” comes in.
- Prioritize people across your value chain. Enhance your social sustainability by cultivating workforce diversity, safety, and human rights, as well as developing learning and growth opportunities, and leveraging the power of your corporate purchasing to move the needle.
ASUG: I’m fascinated by the notion of the circular economy. Could you explain what that is for readers who may be unfamiliar and discuss what SAP solutions are available to customers to support the circular economy?
Japen: We touched on circularity briefly in the previous question, but let’s expand it further.
It’s the idea of replacing linear business models of take-make-waste with business models that mimic nature, where the waste of one process is the resource input to another. It also includes the idea that corporations have an extended producer responsibility, meaning that their responsibility for their products extends across the lifetime of a product, not just until the point of sale. Currently, our circularity solution, called SAP Responsible Design and Production (RDP), focuses on the worldwide plastics problem.
RDP helps our clients determine the recycled content of the plastic that they use in their packaging. This allows them to calculate and report according to new plastic tax regulations.
ASUG: Reviewing the other sustainability solutions, let’s continue with SAP Sustainability Control Tower (SCT). How can this solution help customers as they begin their sustainability (and sustainability tracking) journeys?
Japen: Just like our clients rely upon SAP to track and report financials in adherence to U.S. GAAP and IFRS standards of accounting, all with audit and assurance capability, they also need to track and report non-financial data to recognized sustainability standards with audit and assurance. The problem is that there are still many sustainability standards, and while most are voluntary, some mandatory ones are emerging, such as the E.U. Taxonomy and the proposed SEC rules. As these mandatory standards emerge and the voluntary standards consolidate, SAP SCT is the go-to solution to help our clients track these standards and any other sustainability metric that a company sees fit to collect data and report on.
ASUG: Let’s move on to SAP Product Footprint Management (PFM). Could you give us an overview of the solution and how it helps customers?
Japen: We see climate-conscious consumers and discerning B2B buyers tracking carbon on products like we track calories on nutrition labels. Several products are being labeled with the carbon emissions that are expected to occur as a result of their manufacture and life span. SAP PFM helps our clients determine the emissions of each of their products so they can be transparent and accountable in reducing those emissions.
ASUG: Are there other SAP solutions that can be used to help a company become more sustainable?
Japen: Yes, there are many. The solutions we have discussed thus far are the new SAP sustainability solutions, but we have many other solutions that the ASUG community knows well that can also be used for sustainability. Solutions such as SAP Environment, Health & Safety, SAP Product Compliance, SAP SuccessFactors, SAP Fieldglass, SAP Ariba Guided Sourcing, SAP Ariba Guided Buying, and SAP Ariba Supplier Risk with its connection to EcoVadis.
ASUG: What is SAP Cloud for Sustainable Enterprises?
Japen: Because there are so many different products within the SAP portfolio that can be used to help enterprises become sustainable, we refer to them all as part of SAP Cloud for Sustainable Enterprises. It is also a commercial way to bundle various products together for our clients, depending upon their needs and where they are in their sustainability journey.
ASUG: What are some examples of SAP customers leveraging any of these solutions in effective, interesting ways?
Japen: The three new products,—SCT, PFM, and RDP—are in the early stages of being implemented and adopted by clients, so, specific examples are still forthcoming. However, the reason customers are buying or considering these solutions is to track their sustainability progress, calculate product carbon emissions, and manage their plastic tax and extended producer responsibility.
ASUG: How do you keep track of international regulations and incorporate them into these solutions? I’m curious about how that process works since you have to be up to date with so many governments and regulatory entities.
Japen: Well, that is the job of our esteemed SAP product engineering team, so it’s a bit out of my scope, but I know that they don’t do it alone. We use our internal government affairs team and many partners: strategic management consultants, implementation partners, technology partners, NGOs, other companies, and organizations to keep us apprised of existing and proposed global regulations and legislation that will affect our customers.
ASUG: What does the future hold for SAP in this area over the next one to three years?
Japen: The next years for SAP and sustainability will be all about the maturation, adoption, and expansion of our new and existing sustainability solutions portfolio. The consolidation of voluntary reporting standards and the emergence of governmental regulations and legislation will be a catalyst for change.
Markets will shift with new technologies. Carbon and waste-intensive industries will transform. Being sustainable will continue proving to be a competitive advantage. It will attract better talent and more loyal customers. Consumers and investors will be more discerning with whom they do business.
I see SAP, working closely with our many customers and partners, fully adapting to the numerous changes that will come as we empower our clients to become intelligent and sustainable enterprises.