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Non-Financial Notes: Environmental Performance

A Detailed View of Our Emissions

We look at our energy usage and emissions throughout our entire value chain, gaining insights to help us manage our environmental performance and, in turn, help our customers do the same. The activities and trends behind our results for 2016 are detailed below. This includes information about the areas in which we consume the most purchased electricity, as well as the impact caused by the use of our products.

Our gross carbon footprint for 2016 was 682 kilotons CO2e (704 kilotons CO2e in 2015). Our gross carbon footprint includes all GHG emission categories in Scope 1, 2, as well as selected categories of 3 as outlined in figure 1. Our net carbon footprint is calculated by reducing purchased renewable energy certificates and carbon offsets from our gross carbon footprint in the respective reporting period.

Direct Emissions (Scope 1)

Consumption of fuel for our company cars remains the single greatest contributor to our Scope 1 emissions. In 2016, we continued to enhance our car policy by linking emissions caps to efficiency improvements of the automotive industry. In addition, we focused on greater shifts in commuting habits. We continued the global rollout of TwoGo by SAP, our car-sharing solution, which is now available in 110 SAP locations worldwide. To increase the scale and attractiveness of TwoGo, we make the solution available to the public free of charge. As part of our initiative to increase the proportion of electric vehicles in our car fleet to 20% by 2020, we continue to offer incentives to our employees to purchase electrical cars. As an example of additional transportation alternatives for our employees, we established a company bike program in Germany, where employees have the opportunity to select between using a bicycle or a company car to commute to work. A further commuting alternative to a company car in Germany is participation in a national reduced train fare program called “BahnCard 100.”

Indirect Emissions (Scope 2)

Our purchased electricity powers everything from our data centers to our buildings throughout the world. Whenever we refer to our green cloud, we mean our cloud is carbon neutral due to purchasing 100% renewable electricity certificates and compensation by offsets, at SAP. We continued a wide range of efficiency projects to reduce our energy usage, including facility upgrades and new LEED certifications. We also expanded the management of our environmental performance through ISO 14001.

We are one of the global corporations that have signed on to the RE100 initiative. Led by The Climate Group in partnership with CDP (formerly Carbon Disclosure Project), the goal of the RE100 campaign is to have 100 of the world’s most influential businesses committed to 100% renewable electricity.

Upstream Emissions (Scope 3)

Only selected upstream emissions such as business flights, paper consumption, and co-locations of data centers are directly measured and hence included in our corporate target. The additional upstream emissions products and services or grey energy of our buildings are based on an estimate. Together, our upstream emissions including these estimates are responsible for about 15% of SAP’s total carbon footprint.

As it is expected that the emissions from external data centers (co-locations) will continue to grow in the future, SAP committed to a green cloud strategy, to compensate the emissions with renewable electricity certificates.

Downstream Emissions (Scope 3)

The vast majority of our overall emissions stem from the use of our software. When SAP software runs on our customers’ hardware and on their premises, the resulting carbon footprint is about 20 times the size of our own net carbon footprint. Given that we cannot control our customers’ IT landscapes because they usually contain many elements not related to SAP software, we share this responsibility with others.

Offsets

Our investment in Livelihoods Funds has provided us with 21 kilotons of high-quality carbon credits, which we used to compensate Scope 3 emissions in 2016.

We continued offsetting carbon emissions for business flights in 2016. In addition to avoiding overall business flights, we began to offset selected business flights in the second half of 2015. This offset effort resulted in a compensation of 90 kilotons of CO2e in 2016.

General Information About Environmental Non-Financial Indicators

Boundaries

Our boundaries take two different perspectives: SAP as a company, which includes all our legal entities and operations and supply chain, and SAP as a solution provider enabling our customers. These boundaries are listed in detail in the GRI G4 Content Index.

Environmental Indicators

Data for our environmental indicators is collected and reported on a quarterly basis and is subject to external assurance for annual reporting.

Reporting on total energy consumed, data center energy, and renewable energy is based on the data collected for the calculation of our greenhouse gas (GHG) footprint. Therefore, the same reporting principles apply as for the GHG footprint.

All numbers are based on the metric system. Whenever we state “tons,” we mean metric tons.

The indicators greenhouse gas emissions per employee and total energy consumed per employee are calculated on the basis of an average number of employees. This average is calculated by adding the FTEs at the end of each quarter and then dividing the result by four.

Greenhouse Gas Footprint

We define the GHG footprint or carbon footprint as the sum of all greenhouse gas emissions measured and reported for SAP, including the compensation with renewable energy or offsets. SAP’s preparation of the GHG footprint is based on the Corporate Accounting and Reporting Standard (Scope 1 and 2) and the Corporate Value Chain (Scope 3) Standard of the World Resources Institute/World Business Council for Sustainable Development. This approach conforms with the requirements of GRI G4 indicators EN3, EN4, EN15, EN16, and EN17.

Reporting Principles

SAP reports our net greenhouse gas emissions according to the GHG Protocol Scope 2 and the location-based method. The recently introduced market-based method is an amendment to the GHG Protocol Scope 2 and will be considered starting 2017. For 2016 we continue to apply the location-based emissions instead of a dual reporting (location and market based).

In 2016 we updated our emissions and extrapolation factors for the categories stationary combustion facilities, corporate cars, corporate jets, business flights, rental cars, train travel, business trips with private cars, employee commuting as well as paper consumption, leading to a 10% downward impact on SAP’s 2016 gross CO2 emissions.

Organizational Boundaries

SAP defines our organizational boundaries by applying the operational control approach as set out in the GHG Protocol.

Operational control is established when SAP has the full authority to introduce and implement its operating policies. The emissions of all operations over which the company has operational control and all owned, leased facilities, co-location data centers, and vehicles that the company occupies or operates are accounted for in the GHG footprint, being based on either measurements or, where no measured data is available, on estimations and extrapolations.

A portion of SAP’s leased facilities operates under full-service or multitenant leases, where the building owner or manager pays for the utilities directly and SAP does not have access to actual energy consumption information. SAP includes these facilities in our definition of operational control and accounts for them by estimating related energy consumption.

To support the growing demand for SAP’s cloud offerings, we subcontract computation power in local third-party data centers. Carbon emissions are approximated and included based on the consumed computation power.

In most instances, however, SAP has 100% ownership of our subsidiaries. Accordingly, the difference between applying the control versus the equity approach is about 0.6% based on SAP revenue. If additional investments in associates were included, the difference would be even smaller, about 0.5%.

Methodology

We are reporting all our GHG emissions in CO2 equivalents (CO2e), including the impact from CH4, N2O, and HFCs in our Scope 1 and 2 emissions. As SF6 and PFCs mainly occur in chemical processes, they are not relevant for us.

Below you will find the different parameters contributing to our carbon footprint:

Scope 1

  • Stationary Combustion Facilities: Inclusion of CH4 and N2O; stable values (kWh/m²) instead of actual average consumption are used for extrapolation of buildings where no measured data is available (60% measured data). In cases where no specific information is available, natural gas reported by local sites is assumed to be reported in Lower Heating Value.
  • Refrigerants Facilities: Refrigerant data is reported for completeness of our carbon footprint, but HFC emissions are fully estimated (0% measured data) based on the number of server units and office space with an A/C system; all refrigerants are assumed to be HFC134a.
  • Mobile Combustion Corporate Cars: Inclusion of CH4 and N2O; in 2016, 31 countries reported actual fuel data (90% data coverage); for other countries stable values (liters/car) are used for extrapolation based on the number of corporate cars reported. The stable values for extrapolation are based on SAP’s 2015 carbon footprint data.
  • Refrigerants Corporate Cars: Refrigerant emissions are based on a rough estimate of HFC emissions per car and are extrapolated based on the number of corporate cars reported (0% measured data).
  • Mobile Combustion Corporate Jets: Inclusion of CH4 and N2O (100% data coverage)

Scope 2

  • Electricity Office: Updated CO2 conversion factors and inclusion of CH4 and N2O based on country specific grid factors; stable values (kWh/m²) instead of actual average consumption are used for the extrapolation of buildings where no measured data is available (70% data coverage). The stable values are based on SAP’s 2015 carbon footprint data.
  • Electricity Data Centers: Updated CO2 conversion factors and inclusion of CH4 and N2O based on country specific grid factors; electricity consumption for internal data centers is extrapolated based on the number of server units (80% data coverage). The stable values are based on SAP’s 2015 carbon footprint data.
  • Purchased Chilled and Hot Water, Steam: Inclusion of CH4 and N2O based on global emission grid factors (45% data coverage).

Scope 3

The following scope 3 GHG emissions are included in our corporate GHG target:

  • Business Flights: Average emission factors for business flights are calculated based on short, medium, and long-haul flights; extrapolation of CO2 is based on the actual distance travelled and the net (excluding tax) costs (55% data coverage), emission factors for business flights do not consider the radiative forcing factors.
  • Rental Cars: Average emission factors from rental cars are calculated based on actual distance traveled and these factors are used for extrapolation based on the costs (90% data coverage).
  • Train Travel: Average emission factors from train travel are calculated based on an actual distance traveled and these factors are used for extrapolation based on the costs (30% data coverage).
  • Business Trips with Private Cars: Carbon calculation is based on distance traveled with a private car, extrapolation is based on FTE. Train and company car trips are excluded from this activity type (60% data coverage).
  • Employee Commuting: A system-integrated commuting survey about the distance to work and the mode of transport is conducted annually for SAP globally. The survey responses are the basis for carbon calculation of employee commuting in the following year. More than 30,000 employees responded to the survey in 2016. Commuting for non-responding employees and quarterly updates are extrapolated based on the number of FTEs excluding those employees who own a company car.
  • Electricity External Data Centers: Updated CO2 conversion factors and inclusion of CH4 and N2O based on country specific grid factors; electricity consumption for external data centers is extrapolated based on the data center capacity, a utilization and power usage effectiveness (PUE) factor. As the utilization and PUE factor is not available for all external data centers, the average of all provided factors is used as estimate for external data centers with missing information.
  • Logistics: Calculation is based on the actual number of parcels and mail sent from our logistics center in Germany and is extrapolated globally.
  • Data Download: Carbon calculation is based on the data volume downloaded by our customers globally (100% data coverage).
  • Paper Consumption: Calculation for emissions caused by the consumption of printing paper is based on printer tracker data (100% data coverage).

An external data center is a local computing center with server units running SAP software that is operated by an external partner. Those emissions are classified as Scope 3. SAP-owned and SAP-managed data centers, coming from acquisitions are classified as Scope 2 GHG emissions.

Additionally, we annually measure and publish the following Scope 3 GHG emissions based on the GHG Protocol’s Corporate Value Chain (Scope 3) Accounting and Reporting Standard. These GHG emissions are not included in our corporate target and are meant to be for indicative purpose only.

Upstream

Due to the link of our upstream emissions to operating expenses, for 2016, we extrapolated our upstream figures by multiplying our four key contributors to our upstream emissions from 2015 with the year-over-year increase of operating expenses between 2015 and 2016.

Downstream

  • Use of Sold Products: Resource need per year is determined using a landscape simulation. It is extrapolated globally based on the number of productive installations and power usage effectiveness (PUE). We use a PUE factor of 1.9, representing a commonly used global average. Emissions are calculated using a global electricity emission factor. Due to the special characteristics of software products, an assessment of resource need per year was chosen. This deviates from the minimum boundaries as defined by the GHG Protocol’s Corporate Value Chain (Scope 3) Accounting and Reporting Standard, which requires assessment and disclosure of “direct use-phase emissions of sold products over their expected lifetime.” The calculation covers all of our major solutions, including on-premise software. Cloud solutions are not included, as they are part of our Scope 2 emissions. Mobile solutions (e.g. SAP apps running on customer IT equipment) are also not included. Calculation parameters will be adapted when significant technology changes occur.

Not included: Upstream Transportation and Distribution (due to data complexity and de minimis); Upstream Leased Assets (not applicable); Processing of Sold Products (not applicable); End-of-Life Treatment of Sold Products (not applicable); Downstream Leased Assets (not applicable); Franchises (not applicable); and Investments (not applicable).

External Reduction

  • Renewable Electricity: Purchased renewable electricity is already deducted from our Scope 2 emissions in the net carbon footprint; CO2, CH4, and N2O conversions are based on grid specific factors from the origin of renewable electricity; data is only valid with an official certificate or written confirmation of the electricity supplier (100% data coverage).
  • Offsets: Purchased offsets are reported separately based on the carbon reduction amount purchased. SAP ensures that the GHG emission reductions from offsets are credible and that they meet four key accounting principles:
    • Real: The quantified GHG reductions will represent actual emission reductions that have already occurred.
    • Additional: The GHG reductions will be surplus to regulation and beyond what would have happened in the absence of the project or in a business-as-usual scenario based on a performance standard methodology.
    • Permanent: The GHG reductions will be permanent or have guarantees to ensure that any losses are replaced in the future.
    • Verifiable: The GHG reductions will result from projects whose performance can be readily and accurately quantified, monitored, and verified.

A requirement for offsets is that the minimum standard (Voluntary Carbon Standard, or VCS) is applied. In 2016, our strategic investment in the Livelihoods Funds has provided us with 21 kilotons of offsets which are included in our overall net carbon footprint.

CO2 Emission Factors

The calculation of the above emissions is based on factors for conversion and extrapolation provided, among others, by IEA, WRI, US EPA, UK DEFRA, DEHSt, Environment Canada, GHG Protocol, and SAP’s own measurements.

Where relevant, our CO2 emission factors consider all CO2 equivalents (CO2e) for all greenhouse gases. Global Warming Potential factors are based on the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC).

Comparability

SAP uses a significance threshold of 5% for structural or organizational changes and 1% for methodology changes of total current year emissions. A structural or organizational change that increases or decreases the total inventory by 5% or more will trigger an adjustment of historic years. A structural or organizational change that increases or decreases the total inventory by less than 5% will be considered insignificant and thus no adjustment will be made.

Additionally, we annually measure the cumulative cost avoidance of our carbon emissions, compared to a business-as-usual scenario. In 2015, we introduced a cumulative cost avoidance calculation based on a triennial rolling method. This leads to additional comparability and we will continue to calculate our cumulative cost avoidance with the triennial rolling approach.

Error Correction

If a significant error is found in the base year inventory, it will be corrected. If a significant error is found which does not affect the base year but has an impact on this year’s or last year’s emissions, it will be corrected. An error is significant if it affects SAP’s gross carbon footprint by more than 1%. No restatement due to error correction of historical data was necessary in 2016.

Renewable Energy

We define renewable energy as electricity coming from renewable energy sources such as wind, solar, hydro, and geothermal. The shares of renewable energy used by SAP are calculated by adding the amount of renewable energy specifically sourced, produced onsite by our own solar cells, and covered by Renewable Energy Certificates (RECs). We have developed a quality standard that defines key criteria for the procurement of RECs to drive change in the electricity market and to avoid the risk caused by low-quality products. The key characteristics of our renewable energy purchasing guidelines are as follows:

  • Type of renewable electricity: SAP considers solar, wind, biogas, geothermal, and hydro power as renewable electricity.
  • Installation: The power plant producing the renewable energy shall not be older than 10 years. In case of a renovation of an old power plant, the 10-year rule applies only to the additional electricity output due to efficiency increase. Furthermore, SAP does not consider RECs from government supported power plants.
  • Vintage: The renewable electricity must be produced in the same year or the year before with regard to the reporting period it will be applied.
  • Accounting: To calculate the carbon reduction achieved by the RECs, SAP will use the grid-specific emissions factor. As RECs are considered independently to the electricity delivered physically to our facilities, the carbon reduction achieved through their procurement can be allocated to any location globally.

All energy outside the aforementioned categories falls within conventional energy. We define conventional energy as electricity coming from the standard electricity grid. The electricity grid provides a country-specific energy mix including all available sources, either fossil, nuclear, or renewable. Energy from renewable sources as part of the local grid is calculated as conventional energy and not displayed as part of renewable energy.

Data Center Energy

We define data center energy as the sum of electricity consumed to provide internal and external computation power in SAP data centers and contracted third party data centers. A data center is any global, regional, or local computing center (location with any number of server units) that is part of our global IT infrastructure strategy. In 2016, we continued analyzing and reporting internal and external data center energy consumption intensity against our non-IFRS revenue.

Data center energy consumption per euro is calculated by dividing the electricity consumption of all internal and external data centers measured for the calculation of our GHG footprint.

We will continuously improve data quality of energy consumption of external data centers.

Total Energy Consumed

We define total energy consumed as the sum of all energy consumed through SAP-own operations, including energy from renewable sources. It is calculated based on the consumption data obtained through our measurements for the GHG footprint and is the sum of energy consumption from stationary combustion facilities, mobile combustion corporate cars, mobile combustion corporate jets, electricity offices, electricity data centers, and purchased chilled water, purchased hot water, and purchased steam.

Water

By water, we mean total freshwater withdrawn for our facilities. Data is based on estimations from sites and is largely extrapolated. Data was provided (estimated) for 60% of the total space; remaining data is extrapolated based on square meter footage.

Waste

By waste, we mean non-recyclable waste produced in our offices and data centers. Data on municipal waste was provided (estimated) for about 50% of the total space.

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