There is no easy road to meeting corporate sustainability goals. But many companies are inadvertently making that work harder on themselves by looking at the challenge in silos.
Companies often rely on so-called "best-of-breed" technologies when managing their operations and value chains. Best-of-breed refers to individual technical solutions that are very good in their specific area, based on customer reviews and technical ratings.
The problem with these applications, when it comes to corporate sustainability management, is that best-of-breed solutions often cannot easily share data with one another, so they are not fully optimizing that data across operations and supply chains. Further, sustainability data is often not integrated with critical business functions, such as procurement, finance, and human resources departments.
Because of this incomplete and disconnected sustainability data, executives are unable to achieve a truly sustainable operating model . In fact, a recent SAP Insights Study indicates that about 70 percent of CEOs find it challenging to measure environmental, social and governance (ESG) data across their company’s value chains.
“The financial and non-financial data is disconnected, stored in spreadsheets, not updated from real-time systems, and not easily shared within the company, with other applications, or with partners such as upstream suppliers or downstream logistics providers,” Sebastian Steinhaeuser, chief strategy officer at the software company SAP, told TriplePundit.
Further, when it comes to things like carbon emissions tracking, best-of-breed solutions “often don’t connect with other sustainability data and applications” and need to use estimates from industry templates or other company functions. This “limits the ability to effectively manage and strategically steer a company’s overall, holistic sustainability transformation,” Steinhaeuser said.
“What [companies] need is real, actual data from their operations and supply chains,” he continued. “To get reliable Scope 3 emissions data, for example, we need more than averages. We need actuals.”
Emissions from supply chains, known as Scope 3, can represent up to 90 percent of a company’s overall footprint, and these emissions are notoriously tricky to tackle because they often fall outside of a company’s direct control. Having real data rather than estimates can help facilitate reducing those emissions, as they become easier to pinpoint.
“With the lack of data transparency and enterprise-wide capabilities, it's no surprise that companies are struggling to scale and accelerate sustainability across their operations and supply chains,” Steinhaeuser told TriplePundit.
In order to adequately address their emissions and reach their climate goals, companies need to manage their sustainability key performance indicators like they manage their financial ones. That means taking a more holistic view of the sustainability challenges a company faces. “I hear consistently that increasing regulation combined with greater pressure from trading partners and consumers is driving a heightened focus on running a sustainable business,” Steinhaeuser said. “We’re seeing a greater integration of business strategy, digital transformation strategy and sustainability strategy. Companies are now realizing they need a holistic, enterprise-wide approach.”
Still, Steinhaeuser is concerned that many business leaders are aiming for regulatory compliance without taking the extra steps needed for the deeper sustainable business transformation that new technology solutions could afford. “Businesses say inadequate technologies explain their lack of progress in their ESG strategies,” he said. “What they need today is increased data transparency and collaboration to scale positive impact."
In order for companies to act on their climate targets —and meet them — they need to have accurate data. “We believe companies are falling behind because they are unable to gain detailed visibility into the data they need,” Steinhaeuser explained. “And we know you cannot manage what you cannot measure.”
Companies are under increasing pressure from the public, investors, regulators, and their own boards to act aggressively on improving the sustainability of their operations and supply chains. The accuracy and transparency of sustainability data should match that of financial data, but for most companies, relying on separate, best-of-breed solutions means that is not happening.
SAP is one company that is trying to help businesses make better technology decisions when it comes to their sustainability data. “Businesses need applications that can integrate enterprise-wide data including the sustainability data in core processes, and also bring in external data from other applications, industry organizations and regulators, and run analysis on it to manage the business more sustainability and report progress more accurately,” Steinhaeuser told 3p. One example of this is the SAP Sustainability Control Tower, a platform that takes a holistic look at sustainability across a company’s value chain.
The SAP Sustainability Control Tower manages accurate, live data — which allows companies to move from averages to actuals, report their performance regularly, and comply with reporting frameworks and standards. “With accurate, transparent and advanced analytics reporting, companies can identify areas for action, simulate scenarios, and hit their sustainability goals to minimize waste, reduce carbon emissions and improve sustainable supply chain performance,” Steinhaeuser said.
The SAP Sustainability Control Tower also integrates with other sustainability tools the company offers, like the SAP Cloud for Sustainable Enterprises portfolio, which adds additional functionalities including carbon emissions management, waste and materials management for circularity, social responsibility, and so-called “people sustainability.”
Most Fortune 2,000 companies use SAP software, and nearly 90 percent of the world’s finance and goods flows interact with SAP systems. So, creating sustainability software tools for their client base fits squarely into SAP’s wheelhouse. But the company also utilizes the tools for its own house.
SAP is implementing the SAP Sustainability Control Tower throughout its own business to “create insights on the total economic, social, and environmental impact our organization has across a range of measures, and accelerate programs such as our net-zero emissions by 2030 implementation,” Steinhaeuser said. He said the tool will help the company improve their ESG data management and enable them to set more accurate metrics and use analytics and automation to improve their own sustainable operations and reporting.
Looking ahead, good data is key to accomplishing sustainability goals
The bottom line is that in order to meet increasingly ambitious sustainability goals, companies need to have accurate, transparent and holistic data, Steinhaeuser concluded.
“Unifying ESG data provides significant gains in capabilities and competitive performance,” he told us. “Companies can’t make sustainable business decisions using data they don’t have or can’t use.” Tools like the SAP Sustainability Control Tower can put that decision-making control in the hands of company executives, giving reassurance to customers, investors and regulators.
This article series is sponsored by SAP and produced by the TriplePundit editorial team.
Image credit: John Schnobrich/Unsplash
Kate is a writer and policy wonk, with a focus on water, clean energy, climate change and environmental security. She spent over a decade running energy-water nexus and energy efficiency programs at Environmental Defense Fund as well as time at the U.S. Departments of Energy and Defense, U.S. Government Accountability Office, and state and federal legislatures. She serves as an Advisory Board member of CleanTX, which aims to accelerate the growth of the clean tech industry in Texas.