Over the past several years, we have talked at SAP about how we cannot limit ourselves by merely trying to create a sustainability strategy. Instead, we have been working to make our corporate strategy more sustainable. This month, we hit an important milestone on this journey with the publication of our first integrated report, which combines content from our annual report and sustainability report into one online experience.
The SAP Integrated Report is about much more than how we deliver information about our performance. It speaks to our vision of what it means to create value in the 21st century. No longer do financial results alone capture our ability to respond to the world’s challenges or serve customers. Instead, we are looking holistically at the interrelationship between our financial and non-financial performance. These linkages are not just important – they are the foundation of our future success.
We believe that the leading companies will be those that best navigate the major issues of our time, a global mix of environmental, social, and economic challenges. An integrated report signals that the business landscape has changed, and it is no longer possible to separate sustainability from the core of how we operate and what we deliver to customers. It is also a significant step towards truly integrated thinking, the precursor to developing a strategy and actions that ensure our future success, relevance and viability.
We also recognize that a single report does not capture the full complexity (and messiness) of change. What will it really take to achieve the vision of an integrated report? We don’t pretend to have all the answers, but we have picked up some lessons that are helping to guide our path:
1. Make it Material: Position sustainability at the center of how your company creates value.
Sustainability needs to reach far beyond your carbon footprint or energy savings to your strategy and services. As a leader in enterprise software, we are in the business of helping companies manage resources with IT. Today, they must manage resources that have historically been ignored, such as water, energy and intellectual capital. Our business success hinges on our ability to help our customers contend with everything from the explosion of mobile technology to the pressures of population growth and the strain on natural systems. Working to create a more sustainable world goes hand-in-hand with seizing new business opportunity by delivering software solutions that help customers manage the challenges that arise in their industries, be it resource shortage, urbanization, or environmental health and safety risks.
2. Engage employees: People need to understand how what they do creates a sustainable future.
I recently challenged our developers with the following “scary” question: Why do you go to work? Facing this question was a prime reason I became Chief Sustainability Officer of SAP. I encourage our employees to see a deeper purpose in writing code. They can have such enormous impact by developing software that lives up to our vision to help the world run better and improve people’s lives. For example, our technology is helping people consume banking services through their phones, gaining access for the first time to their own bank account or loan; we are creating new ways to manage transportation and run supply chains that are safer for consumers, workers and the environment. This uplifting impact is often forgotten as people are facing the stresses of their day-to-day jobs. We are therefore always aiming at uniting people around a shared vision and purpose.
3. Approach innovation differently: Shift from efficiency to transformation.
While greater efficiency brings tangible, bottom-line benefits, it will only take you so far: What comes after changing your light bulbs, or making your supply chain the most efficient it can be? We see leading companies go beyond efficiency. They embrace innovation and transformational strategies that not only serve as a source of differentiation, but may disrupt entire industries. For example, the automotive industry is embracing the new trend of the “sharing economy” and revolutionizing our ideas of car ownership, mobility and transportation. One example of how we have embraced such innovation ourselves is a new ride-sharing application that is helping us create social, environmental and economic benefits for SAP. TwoGo by SAP not only enables us to save money and reduce our emissions, but helps our employees connect with each other, enhancing our work culture. At the same time, we are supporting the core business of SAP, as we gain new insights into designing mobile, cloud-based technology. TwoGo is now poised to be a revenue-driver, as we offer it to other companies seeking to go beyond efficiency to change how we live and work.
4. Make it a strategic target: Embed non-financial measurements into how you steer the company.
When we report our employee engagement scores, we don’t say simply that our employees are important. We say that engagement is one of our four companywide objectives because it drives our financial performance and innovation. In fact, this linkage – between financial and non-financial measures – is at the heart of an integrated report. Companies with highly engaged employees achieve 12% more profitability and 18% more productivity than their peers, according to Gallop Consulting. Employee engagement also drives greater retention, which brings significant financial benefit. We have calculated that for every percentage point our retention rate goes up or down, the impact on our operating profit is approximately $80 million. Perhaps most important, engaged employees help us create more innovative solutions for our customers, as they assume a sense of ownership about the purpose and products of SAP. This recognition of how non-financial indicators enable us to create value means that our sustainability targets start to become indistinguishable from our business targets.
5. Create incentives for change: Understand why it matters.
Sustainability leaders must tailor their message to every line of business and how it creates value. With HR, sustainability attracts millenials, increases engagement and drives productivity. With the CFO, it contributes to margin. R&D cares about innovation, sales cares about new products and growth, and the CEO cares about long-term strategy. Speaking to each requires a deep understanding of the business and its players. I could not do my job if I didn’t know both the software industry and the culture of SAP. For change to happen, people must be convinced that sustainability serves both their own goals and the organization. An integrated report explains how, which is one of the reasons that it is such a valuable tool as we work to create a more sustainable future.
To learn more about our strategy, performance in 2012, and where we’re heading, please see our 2012 SAP Integrated Report at http://www.sapintegratedreport.com.