In 1898, Swedish scientist Svante Arrherius advanced his theory that fossil fuels would warm the Earth’s atmosphere. Now, nearly 120 years later, there is near-universal agreement in the scientific community that increased CO2 levels caused by humans are heating up the planet.
The question is no longer if but how fast and how large the consequences for people and the environment will be.
While experts, activists, and politicians debate the correct response, it is clear that CO2 reporting, carbon taxes, and voluntary offset schemes will not be nearly enough to bend the global warming curve.
The current COVID-19 pandemic could mark a turning point in progress on climate change; the estimated 8 percent decline in greenhouse gas emissions in 2020 has been advanced as a silver lining of the crisis. Estimates by the United Nations (UN) show that emissions must fall by 7.6 percent every year until 2030 to keep temperature increases to less than 1.5°C.
As companies emerge from the crisis, they have to expect that they will be faced with legislation that stipulates a sustainable recovery through tighter CO2 regulation. This would significantly impact operating costs. The largest carbon producers will feel the push for climate action beginning in highly developed markets, followed successfully by others.
A challenge to corporate reputation is another risk not to be underestimated, as companies are increasingly being asked by investors and the public whether their businesses and products are contributing to the solution or to the problem.
Make the World Run Greener
A few months ago, Thomas Saueressig, member of the Executive Board of SAP SE leading Product Engineering, launched an initiative to understand how SAP S/4HANA and other SAP applications could help customers manage their carbon footprints.
The initiative resulted in Climate 21, a program that reaches well beyond the corporate practices of emissions reporting to data about product-related greenhouse gases and other sustainability issues that help businesses and consumers make more responsible buying decisions.
In January, top management made the company’s first statement to the market on Climate 21 at the World Economic Forum.
Manage the “Green Line”
Saueressig’s vision for the company’s enterprise resource planning (ERP) products is to add sustainability as the third dimension to driving business success: the “green line,” as he calls it.
“SAP helps customers manage the top line and bottom line of their business, and we run the supply chains and value chains of the largest companies in the world,” Saueressig said. “So we are in the best position to now help companies manage their green line by minimizing the carbon footprint and negative environmental impact of their product. I believe this will help make us the leader of the next-generation ERP market.”
Not Just About CO2
Since 1972, SAP has helped businesses to manage their enterprise resources to drive revenue, reduce cost, optimize asset utilization, streamline supply chains, and improve customer service. From this point of view, minimizing CO2 and other greenhouse gases is just an additional factor in an enterprise’s target function.
“On the way to a more sustainable future, SAP has a critical role to play in helping companies understand, monitor, and optimize their CO2 transactions — up and down their supply chains as well as in their asset base,” said Toby Croucher, head of Solution Management for Climate 21 and Sustainability at SAP.
Green Line Benefits for Companies and Consumers
The Climate 21 program team is planning a phased approach to crafting the solutions that companies can use to manage their green line. This starts with understanding the composition of the CO2 footprint that products accumulate over the entire value chain and looking at product design, operations, and supply chains.
The idea is to share the CO2 product footprint with business customers and consumers to enable them to make climate-friendly buying decisions. Customers that know the CO2 rating of each product they buy and each service they use are empowered to choose products with the smallest climate impact.
But can citizens really make a difference? Studies say yes. In the U.S., about 80 percent of direct and indirect CO2 emissions are attributed to households; reducing this footprint by only five percent would make a substantial difference. Such buying decisions would influence supply chains and reward businesses that make products and services with a smaller CO2 footprint.
SAP is busy preparing to introduce the first analytical solution. Co-innovation with leading customers across all industries in well underway and has set the company on a path to a sustainability-enabled ERP that helps companies balance top line, bottom line, and green line for the 21st century.