In his first Sustainability Solutions Overview webcast for 2023, titled “State of the Union,” Japen Hollist, Head of Sustainability, GTM – North America at SAP, provided key insights into the current status of progress around sustainability at SAP, speaking virtually to an audience of ASUG members and nonmembers.
Hollist reflected that sustainability is at the core of the SAP mission “to make the world run better and improve people’s lives,” referring to “sustainable development” as defined in the World Commission on Environment and Development’s 1987 Brundtland report ‘Our Common Future,’ which described it as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”’
Conduct Business with a Higher Purpose
This United Nations definition, Hollist explained, is far from new. The Seventh Generation philosophy, for example, has espoused a concept of environmental stewardship in Native American communities for centuries. “When you sit in council for the welfare of the people, you must not think of yourself or of your family, not even of your generation,” Hollist said, quoting a Faithkeeper from the Onondaga Nation. “Make your decisions on behalf of the seven generations coming so that they may enjoy what you have today.”
What if corporations adopted this perspective? Despite the high quality of living enjoyed by those in North America today, the idea of responsibly managing natural resources and the world around us has not been sufficiently ingrained within business practices, Hollist argued. “Our public companies certainly focus on short-term quarterly profits, and we all, like them, to do that because we have our retirement investments there with them, but this tends to be in conflict with the Seventh Generation mindset,” Hollist said, leading with some sobering statistics.
“Corporate externalities like pollution are not readily accounted for in income statements and balance sheets, as one garbage truck of plastic is dumped into the ocean every minute, and we only recycle less than 9% of what we could,” Hollist said. “And inequality is growing for 70% of the population, with 1 in 5 children being victims of child labor in poorly developed countries. Corporations around the globe, while anxiously trying to fight that, still have it embedded in their supply chains.”
Part of the SAP vision for sustainability, Hollist said, is to “remind corporations to live with purpose, to conduct business with a higher purpose, and to expand their vision to care for people and the planet.” For SAP, in particular, returning to its mission statement is a necessary reminder of why its business exists, to begin with.
While acknowledging the assorted challenges of embedding sustainability within all business processes of an organization or industry, Hollist encouraged ASUG members to consider sustainability “a first goal, not an end goal,” particularly as it pertains to “chasing zero,” in terms of carbon emissions, waste, and inequality, by 2050.
Noted Hollist, “The best companies are those not just shooting to do the bare minimum of moving to net zero, instead moving toward a net positive, so that any employee, customer, stakeholder, or resource on the planet that a corporation touches is left better than they found it. This takes stewardship to a whole new level. The end goal becomes a beautiful, flourishing, vibrant company and not just a sustainable one.”
Not all customers buy into the vision of sustainability or necessarily believe in climate change, Hollist acknowledged. However, even those still uneducated about its realities agree that sustainability has emerged as a global “megatrend,” changing their markets, industries, customer expectations and buying behaviors, and how products are built and packaged. “They will have to adapt their business vision of sustainability to accommodate this change,” he said. “And SAP is here to help them.”
A Comprehensive Vision
Given shifting regulatory and reporting requirements, “CFOs are now expected to track carbon like they track cash, in automated systems with data assurance, data linearity, data integrity and to be fully audited, so that the CFO can attest to their veracity without the threat of being criminally wrong,” Hollist said. “That’s going to require technology, to help sustainability teams accomplish that. Corporate sustainability has become extremely data-centric, with CFOs, accountants, and auditors becoming the new stewards of sustainability data. That's a pretty big change, and they are used to the rigor of SAP financial and operation systems to give them comfort in that metric accuracy.”
The approach from SAP, Hollist explained, involves three major customer imperatives: business transformation, supply chain resiliency, and sustainable outcomes. Tracking progress to what he called “the company green line” instead of its top and bottom lines, Hollist stressed that SAP technology focuses on tracking sustainability outcomes both within a company’s four walls and its operations as well as up and down its supply chain.
SAP is the only software company in its industry that’s on the Dow Jones Sustainability Index. Its average social, environmental, and governance (ESG) rating from standard reporters is 79/100, the best ESG score at present in the software industry, and its Carbon Disclosure Project rating is an A, whereas the rest of the industry averages a C. While most of its emissions contain scope 3 emissions downstream in its data centers, SAP is on target to be carbon-neutral for scope 1 and scope 2 emissions by the end of 2023, with a net-zero carbon target of 20 years earlier than the U.N. recommendation of 2050.
This focus on leading by example aligns with the SAP vision of corporate sustainability. “Both SAP and our competitors both pull data elements to run metrics and calculations out of business processes, and they push them up into analytics dashboards,” said Hollist. “But since SAP owns many of the systems that run our company's business processes, like order-to-cash or source-to-pay or hire-to-retire or record-to-report, we can uniquely push that data back into those business processes for sustainable decision making.”
For example, when a company’s planner or scheduler is determining their forecast and commit process, they might consider variables like supply availability, price, and quality. In the future, they can have emissions data as another set of criteria they can take into their decision-making process. “No company becomes sustainable until their business processes become sustainable,” said Hollist. “And I think that’s why our vision is a more comprehensive one for what it means to be an intelligent, sustainable enterprise.”
Driving Business and Sustainability Together
Hollist identified five essential actions for a sustainable business to take, regardless of size, industry, geography, or sustainability maturity. “First, companies need to establish integrated sustainability management enterprise-wide, which will require data and systems,” he said. “Secondly, they need to embed sustainability into business processes—not just dashboards, but pushing it back where decisions are being made, which can increase or decrease your carbon, inequality, and waste levels.”
Added Hollist, “Companies should focus on carbon and climate exposure because there’s such thing as a carbon liability, and that’s important for people to understand.” He also said, “Companies need to embrace circularity and become regenerative,” noting the importance of mimicking natural processes and doing away with a linear take-make-waste economy. Finally, “You have to prioritize people always. Take care of them.”
For more of Hollist’s insights, including the results of recent executive surveys around barriers to sustainability as well as a discussion of the SAP Sustainability solutions suite, watch the full webcast here.