The Business of Calculating Sustainability Footprints

This decade is becoming about choices for businesses.

In the context of increasingly dire social and environmental challenges, businesses are increasingly being tasked by consumers, investors, analysts, and regulatory bodies with acknowledging what’s wrong and doing what’s right. Research shows that many businesses are already reacting. Around 60% of companies worldwide have a sustainability strategy in place. It’s a good start, but the bigger picture is more complicated.

Even with a strategy in place, most businesses struggle to measure their greenhouse gas emissions comprehensively. Without knowing what to measure, or how to measure, the decision to do better can quickly fall short. This is where the newest sustainability offering from SAP, SAP Sustainability Footprint Management, comes into play. Based on intensive user research, the solution was designed to provide businesses with the right tools to assess the climate impact of their operations, and improve their performance across the value chain, from cradle to gate.

Identifying the right measurements for decision-making

A recent study from BCG shows that 87% of consumers believe that businesses should integrate environmental concerns into their products, services, and operations to a greater extent than they have in the past. 76% of consumers indicated that they would discontinue relations with companies that treat employees, communities, and the environment poorly. These are real pressures that businesses are facing, and not just from consumers, but increasingly from investors and regulatory bodies as well.

As pressures mount, businesses have begun to extend the climate commitments for the emission scopes (as defined by the GHG protocol (PDF)) tied to their value chains. Emissions along the value chain often represent a company’s biggest greenhouse gas impact, and is where 80% or more of emissions can be found. But with this expanded scope come new challenges. Only about 9% of businesses measure their total emissions comprehensively. Most omit some of their Scope 1 and 2 emissions, and more than half do not report any of their Scope 3 emissions. What’s more, businesses estimate an average error rate of 30-40% in the measurements they do make. Without understanding the full extent and composition of their total emissions, companies won’t know where to prioritize their reduction efforts—or how to measure their progress accurately.

To address these needs, SAP recently released SAP Sustainability Footprint Management. The solution helps companies to assess their climate impact and improve their environmental performance across the value chain by leveraging ERP data and logic. Businesses can easily access the calculation of their product, value chain, and corporate footprints, incorporating Greenhouse Gas Protocol Scopes 1, 2 & 3 (PDF) to improve on their performance and make better decisions towards climate action and decarbonization.

The challenge of capturing footprints

Even when businesses have the right intention, there are various factors that can interfere with how businesses measure their impact. Data discrepancies and inconsistencies can pose a significant challenge. What do we mean by this? Take the example of a business sourcing a ton of aluminum. On average, we can expect this would account for about 12 tons of CO2. However, the real value might actually range from 2-20 tons depending on the energy input, the plant type, or the quality of input materials. These large discrepancies have a real business impact when it comes to communicating sustainability, and conveying trust to customers, and must be solved for.

Businesses need transparent and easily explainable means of estimating their environmental impact.

Another challenge businesses face is competitive differentiation. We predict that companies will increasingly compete based on the carbon intensity of their products and services. We’re already seeing this in consumer-facing industries like food and beverage, or heavy-emitting industries like cement and steel, where companies race to provide the lowest carbon materials. To differentiate based on carbon intensity, businesses need to be able to reliably measure not only their company footprints, but also their product, value chain, and processes carbon footprints. To do this, businesses must be able to capture their impact in a transparent way.

Designing for transparency and explainability in footprint management

User research played a key role in the design of SAP Sustainability Footprint Management. Based on insights gathered from a series of collaborative and interactive workshops with 19 co-innovation customers from across different industries around the globe, the design team was able to gain an in-depth understanding of how businesses are currently calculating and managing footprints. The workshops focused on the "as-is and to-be” business processes, exposing customers’ needs and pain points, and how to move forward to allow businesses to capture footprints more accurately.

A key learning that the design team took away from these customer engagements is that most businesses are using time-consuming and highly manual processes to estimate their environmental footprints. Some businesses do this themselves, tasking each department with providing information on their CO2 emissions and then painstakingly piecing this information together into an Excel sheet. Other businesses outsource these measurements, only to end up with a final data point with little justification for how it was derived. For most businesses, especially large enterprises, these strategies are neither scalable nor effective.

Two main themes emerged from the user research insights: Businesses strive for explainability and transparency when estimating their environmental impact.

With SAP Sustainability Footprint Management, businesses are able to easily grasp the footprint calculation in a visual way. Each calculation displays the transactional inputs and outputs and their corresponding footprints. Users can also deep dive to understand the valuation formula used for the calculation.

1. Explainability is defined as the ability to comprehend the underlying model for calculating a footprint and the justification for subsequent computation statuses. There are many ways to calculate footprints, such as life cycle analysis (LCA), but it’s not always evident for businesses how the footprint is being calculated on a screen, or how the system arrived at the number. For businesses primarily using Excel sheets, aggregating and calculating this data can be cumbersome and ineffective. To solve for this, SAP Sustainability Footprint Management provides an automated, scalable calculation for every data point by leveraging ERP data. For instance, for a particular calculation, users are able to see the transactional inputs and outputs and their corresponding footprints. Users can also deep dive to understand the valuation formula used for the calculation.

1. Transparency goes hand in hand with explainability, as it enables businesses to have complete access into the entire value chain. We know that businesses want to visualize their sustainability KPIs along the entire supply chains and end-to-end business operations in a more transparent way. Transparency is critical in gaining user and consumer trust. With the new solution from SAP, businesses can now gain transparency into, for example, the calculated footprints for purchase requisition items, or the energy sources used throughout the production process of semi-finished and finished goods.

More informed business decisions lead to a better future

To allow businesses to make more informed decisions that positively shape our future, we need to take the guesswork out of tracking product and corporate footprints. We can do this by providing a solution that makes businesses aware of the effect of their actions, while helping them understand how the system arrived at this conclusion. With this information at hand, businesses can focus on creating more sustainability strategies and transform our world for the better.

SAP Sustainability Footprint Management is a cloud solution built on SAP Business Technology Platform and is available for large and small enterprises. This solution was developed as part of a co-innovation initiative with customers to develop technology that can track, analyze, and report the carbon footprint of customers’ products along the entire value chain.