To have greater sustainability impacts, companies need to look beyond achieving efficiencies to developing transformative services.
Integrated reporting is a means to drive alignment and catalyze thinking about sustainability within a company.
Successful product innovation requires the engagement of diverse employees.
“If you can only focus on efficiency, it’s not going to get you where you want to go [for sustainability].” —Peter Graf, SAP
“The integration of sustainability [in companies] is not going as fast as we would like it to be.” —Aron Cramer, BSR
“We need to be as diverse as we can to innovate.” —Peter Graf, SAP
Cramer introduced Graf and noted that SAP is an interesting company in that it sees itself as both an exemplar and an enabler of sustainability. The latter is through providing services that allow other companies to improve their sustainability performance.
Graf explained that SAP provides software services to around 250,000 customers globally from across a range of industries, 80 percent of which comprise SMEs and 400 of which are Fortune 500 companies. The company’s vision—Better isn’t enough—encompasses its approach to sustainability, which seeks to go beyond creating efficiencies to transforming industries. Graf underlined the need to look beyond efficiency, giving the example of innovation in the automobile industry. Although cars have become 60 percent more fuel-efficient over the last four decades, car-related carbon emissions have grown by more than 300 percent in the same time period due to increased car ownership and consumption. Therefore, efficiency does not always lead to positive sustainability outcomes.
Next, Graf recounted SAP’s measures to adopt more sustainable practices, stating that the company has saved more than €200 million in the last decade as a result of its efforts. Central to these efforts has been transparency. SAP uses an internal sustainability dashboard to track its carbon emissions and related costs, as well as to collect data on other sustainability areas such as the proportion of women in the company’s management. In addition, SAP publishes an integrated report that clearly sets out how its sustainability activities impact financial performance.
Turning to SAP product development, Graf pointed out three key drivers of change: regulatory compliance, efficiency through insight, and transformation of industries. Regulatory compliance or supply chain requirements have generated the greatest demand for SAP products, with software platforms such as the SAP Product Stewardship Network helping various companies source more sustainable products.
Secondly, there has been increased interest on the part of SAP customers for data analytics software that allows them to spot potentials for efficiencies and inter-relationships between areas for improved efficiency. For instance, sensor networks that collect real-time data on energy or water consumption, in both commercial and industrial buildings, have helped SAP customers reduce the energy consumption of their operations and optimize manufacturing processes.
Finally, SAP has begun developing innovative services that completely transform industries. For example, the TwoGo carpooling application, which started off as an internal car-sharing tool for SAP’s German employees, has turned into a commercial product generating environmental, social, and economic benefits worth more than US$10 million. SAP is also partnering with major car manufacturers to connect cars to internet networks, allowing their users to track fuel consumption in realtime as well as share vehicles, thus enabling a shift from individual car ownership to sustainable mobility.
Responding to questions posed by Cramer, Graf highlighted the need to have a clear business case for transformative solutions in order for them to be successfully scaled. He gave the example of SAP’s Connected Car service, which was developed primarily to satisfy customers’ desire to reduce the costs associated with fuel consumption. Unfortunately, very few industries are being transformative enough, requiring a push from the outside in order to go further than just incremental improvements. At present, most of SAP’s revenues come from services responding to efficiency or regulatory compliance drivers. The key to increasing demand for transformative services is to have longer-term, strategic relationships with customers.
The Q&A with the audience provided an opportunity to discuss, among other issues, some of the challenges faced by companies in building internal alignment on sustainability. Cramer noted that, according to a recent BSR and GlobeScan report on sustainability priorities for global companies, integrating sustainability into business operations and throughout the value chain is not as advanced as it could be. Graf mentioned that SAP recently organized a seminar with the IIRC on integrated reporting, inviting chief financial officers from major German companies to attend. This particular event, as well as the publication of SAP’s own integrated report, helped catalyze more integrated thinking within the company on the relationship between sustainability and financial performance beyond the short term.
Graf also emphasized that SAP is seeking to be as diverse as possible as part of driving innovation in product development. For example, the company has worked with people with disabilities such as autism to test new software products, and also sets targets for the proportion of women in its workforce.