This sum­mer, tem­per­a­tures soared across the globe, with NASA report­ing the hottest sum­mer record­ed since sci­en­tists began reg­u­lar­ly doc­u­ment­ing glob­al tem­per­a­tures in 1880. Col­lec­tive­ly, June, July, and August were 0.41 degrees Fahren­heit hot­ter world­wide than in any oth­er sum­mer. This swel­ter­ing heat had severe, rip­pling con­se­quences. Oceans warmed, threat­en­ing vital ecosys­tems. Lakes con­tin­ued shrinking at alarm­ing rates. And wild­fires in Canada cast a mas­sive plume of smoke across North America. 

There is no doubt: the dire pre­dic­tions of cli­mate sci­en­tists are becom­ing our real­i­ty. How­ev­er, these trou­bling events have spurred action from busi­ness lead­ers and gov­ern­ment offi­cials. While 2023 was an unnerv­ing pre­cur­sor of unmit­i­gat­ed cli­mate change, the year also con­tin­ued a trend of orga­ni­za­tions pri­or­i­tiz­ing sus­tain­abil­i­ty initiatives. 

Look­ing back at 2023, there is cer­tain­ly work to be done as busi­ness­es begin — or con­tin­ue — their jour­ney toward sus­tain­able, net-zero oper­a­tions. And while we’re wit­ness­ing the effects of cli­mate change, this year did offer some pos­i­tive, hope­ful developments. 

Here are some of the key envi­ron­men­tal, social, and gov­er­nance (ESG) trends in 2023 that impact­ed the SAP ecosystem. 

Infla­tion Impact­ing ESG Pri­or­i­ties

One of the biggest glob­al finan­cial devel­op­ments com­ing out of the pan­dem­ic was ram­pant infla­tion, which peaked in the Unit­ed States at 9.1% last June. While infla­tion steadi­ly decreased in 2023, it still has not sub­sided to pre-pan­dem­ic rates. Last month, the infla­tion rate was 3.1%, a far cry from the peak last sum­mer. How­ev­er, in times of sus­tained infla­tion, inter­est rates and the cost of goods remain ele­vat­ed. To com­bat these unfa­vor­able shifts, busi­ness­es have cho­sen to lim­it inno­v­a­tive prac­tices and delay incor­po­rat­ing new work­flows — includ­ing those relat­ed to ESG pri­or­i­ties — as they focus on weath­er­ing the cur­rent eco­nom­ic climate. 

Sus­tain­abil­i­ty efforts cost enter­pris­es mon­ey. The Unit­ed Nations Con­fer­ence on Trade and Devel­op­ment esti­mat­ed costs to meet sus­tain­able devel­op­ment goals will fall between $5.4 tril­lion and $6.4 tril­lion on an annu­al basis. These inno­v­a­tive prac­tices require new work­flows, soft­ware, resources, and employ­ees to ensure suc­cess. It is no small ask for orga­ni­za­tions to acquire and imple­ment such com­po­nents in times of eco­nom­ic hard­ship. While ESG prac­tices and work­flows are vital, they are often side­lined as enter­pris­es close ranks and focus on main­tain­ing prof­itable oper­a­tions dur­ing times of high inflation. 

We saw this dynam­ic play out to a degree in 2023. While infla­tion is decreas­ing, paving the way for orga­ni­za­tions to pri­or­i­tize ESG prac­tices, many enter­pris­es still spent the year focused on main­tain­ing lega­cy oper­a­tions and mit­i­gat­ing the effects of infla­tion. As the econ­o­my improves, ASUG expects many orga­ni­za­tions to turn their atten­tion to sus­tain­abil­i­ty prac­tices in 2024, espe­cial­ly as SAP con­tin­ues enabling the track­ing of vital ESG data with soft­ware solutions. 

Ingrained ESG Prac­tices

The ulti­mate endgame of any sus­tain­abil­i­ty pro­gram is ensur­ing that sus­tain­abil­i­ty will play a cru­cial and cen­tral part of an organization’s oper­a­tions and work­flows. That process begins at the report­ing stage. The only way a com­pa­ny can under­stand how it is per­form­ing — from any lev­el, finan­cial to sus­tain­abil­i­ty — is by track­ing data. 

In recent years, SAP has pri­or­i­tized the ESG report­ing capa­bil­i­ties of its soft­ware. Dur­ing the SAP Sap­phire & ASUG Annu­al Con­fer­ence in May, the com­pa­ny dou­bled down on this focus, unveil­ing new solu­tions aimed at help­ing its cus­tomers man­age, track, and report met­rics vital to sus­tain­able oper­a­tions. This was sim­i­lar to the mes­sage SAP brought to Sap­phire in 2022, when the com­pa­ny first unveiled its suite of sus­tain­abil­i­ty report­ing solu­tions, includ­ing SAP Sus­tain­abil­i­ty Con­trol Tower. 

This year, SAP debuted three new solu­tions that were pitched as tools to help cus­tomers mon­i­tor sus­tain­able oper­a­tions and meet reg­u­la­to­ry and com­pli­ance demands. SAP Sus­tain­abil­i­ty Foot­print Man­ag­er enables cus­tomers to man­age Scope 1, 2, and 3 emis­sions across their prod­uct and sup­ply chain oper­a­tions. SAP Sus­tain­abil­i­ty Data Exchange enables com­pa­nies to decar­bonize sup­ply chains, empow­er­ing them to share stan­dard­ized sus­tain­abil­i­ty data. Final­ly, the new SAP ​“green ledger” sys­tem for car­bon account­ing is now includ­ed in RISE and GROW offer­ings. New capa­bil­i­ties, such as gen­er­a­tive AI, will peri­od­i­cal­ly enhance the impact of the green ledger’s com­bined finan­cial and envi­ron­men­tal data, which will inte­grate with SAP’s cloud ERP to pro­vide native­ly inte­grat­ed finan­cial and envi­ron­men­tal decision-making.

SAP appears com­mit­ted to this focus. In Octo­ber, SAP announced that its RISE with SAP ​“pre­mi­um plus” pack­ages will include SAP Sus­tain­abil­i­ty Foot­print Man­age­ment and SAP Sus­tain­abil­i­ty Con­trol Tow­er, allow­ing cus­tomers to har­ness these sus­tain­abil­i­ty solu­tions with­in their cloud trans­for­ma­tion jour­neys. Look­ing ahead to next year, ensur­ing ease of adop­tion for sus­tain­abil­i­ty-focused tech­nol­o­gy will be a key test for SAP, as the com­pa­ny seeks to enable all cus­tomers to inde­pen­dent­ly man­age ESG report­ing and improve the sus­tain­abil­i­ty of their busi­ness operations. 

As John Ker­ry, U.S. Spe­cial Pres­i­den­tial Envoy for Cli­mate, not­ed dur­ing an address at this year’s SAP Sap­phire & ASUG Annu­al Con­fer­ence, ​“You can’t man­age what you don’t measure.”

In oth­er words, trans­ac­tion­al car­bon account­ing will play a key role in ensur­ing the suc­cess of busi­ness­es’ sus­tain­abil­i­ty ini­tia­tives. ​“Rig­or­ous account­ing and trans­paren­cy are absolute­ly essen­tial,” Ker­ry said. ​“We need trust in the sys­tem. And we need to ensure that all of our actions have the high­est envi­ron­men­tal integri­ty. Rig­or­ous account­ing and strong envi­ron­men­tal integri­ty will be the key to the suc­cess of the ener­gy tran­si­tion accel­er­a­tor that we’re cre­at­ing with our partners.”

Shift­ing Reg­u­la­to­ry and Com­pli­ance Expec­ta­tions

In 2023, Amer­i­can reg­u­la­tors moved for­ward with new, sus­tain­abil­i­ty-focused ini­tia­tives, as new reg­u­la­tions focused on busi­ness data dis­clo­sures and frame­works for com­bat­ing cli­mate change.

The U.S. Secu­ri­ty and Exchange Com­mis­sion (SEC) is mov­ing for­ward with cli­mate-relat­ed dis­clo­sures, requir­ing pub­lic com­pa­nies to report cli­mate risks to investors in reg­is­tra­tion state­ments and peri­od­ic reports. Accord­ing to the SEC, these dis­clo­sures will include ​“mate­r­i­al impact on their busi­ness, results of oper­a­tions, or finan­cial con­di­tion, and cer­tain cli­mate-relat­ed finan­cial state­ment metrics.” 

Specif­i­cal­ly, the rule change requires com­pa­nies to mea­sure and report on Scope 1 and 2 emis­sions. Scope 3 emis­sions report­ing is like­ly not far behind. How­ev­er, it is impor­tant to remem­ber that 2024 is an elec­tion year in Amer­i­ca. While the Biden admin­is­tra­tion cam­paigned on sus­tain­abil­i­ty and cli­mate change — and has tak­en steps to move for­ward with these ini­tia­tives — oth­er pres­i­den­tial can­di­dates will take dif­fer­ent approach­es to the issue. 

2024 and Beyond

Despite these shifts, it’s safe to say that ESG oper­a­tions will con­tin­ue to play a vital role in mov­ing orga­ni­za­tions for­ward. Pub­lic per­cep­tion of cli­mate change is slow­ly mov­ing in favor of sus­tain­able oper­a­tions. For exam­ple, Pew Research Group found that 48% of Amer­i­cans ages 18 to 29 sup­port­ed phas­ing out the use of oil, coal, and nat­ur­al gas. 

SAP is obvi­ous­ly com­mit­ted to ensur­ing ESG data mon­i­tor­ing is a cru­cial part of its cus­tomers’ oper­a­tions as they imple­ment sus­tain­able prac­tices and move to meet reg­u­la­to­ry demands. As we look to 2024, ASUG expects sus­tain­abil­i­ty solu­tions to grow, change, and become ingrained with­in SAP’s efforts to help its cus­tomers’ busi­ness­es run better.