Tomorrow is Earth Overshoot Day, which marks the date when humanity’s demand for ecological resources and services in a given year exceeds what Earth can regenerate in that year. It is a reminder that we are living beyond our means.
Consider this: We are using resources 1.75 times faster than the planet can regenerate. And with another billion people projected by 2030, we will need two Earths to sustain our needs. There is a unique window of opportunity for us to manage the turnaround, but it is closing, and we need to act fast.
Since 1970, the Global Footprint Network, an international research organization, has hosted and calculated Earth Overshoot Day. For the first time in years, this critical milestone occurs later in the year. This disrupts the devastating trend since 1970 where we continue to reach our planet’s natural limits earlier and earlier — for example, we reached that point November 4, 1980, and August 7, 2010.
Sadly, we owe this reversal to the COVID-19 pandemic, at tremendous human and economic loss. At the same time, we will need to work hard to keep these environmental gains. Time is of the essence. Without a healthy planet, there can be no basis for a return to healthy societies, resilient and restorative economies, and shared prosperity. Although COVID-19 is set to reduce global emissions in 2020 by almost eight percent, we clearly remain on an unsustainable path and pressure is mounting. We must act now to shape a sustainable recovery.
Sustainability: A Business Imperative
Putting aside moral obligations or ethical responsibility, it makes good business sense. It does not take an accounting expert to understand that it is not good to overspend. What business leader would dare report that they spent the company’s entire annual budget on August 22 and will run on a deficit for the rest of the year?
So why aren’t we applying this logic to stay within our common budget, the Earth’s limits? One reason: We need better data quality and a worldwide reporting and steering committee that spans across countries, governments, and other relevant organizations.
This isn’t the only reason. Breaking it down to the level of a single company, this is also rooted in partially outdated assumptions of how a company creates value. As discussed with key stakeholders on the 10th anniversary of SAP’s sustainability journey last year, much of today’s accounting system is still derived from Luca Pacioli’s thinking back in the 15th century, when he popularized the system of double accounting and the world was not yet facing today’s challenges, including climate change and resource depletion.
Luckily, the mindset is shifting. We are moving beyond Milton Friedman’s idea that the purpose of business is merely to generate profits. In my conversations with peers, customers, and investors, I observe that, increasingly, business executives share our belief at SAP that steering a company holistically — considering the financial but also social and green bottom lines — leads to better management decisions and better performing and more resilient companies.
For several years we have been investigating the interconnectedness of all sustainability dimensions as they relate to the performance of our business. Each year, we share those findings, which are publicly accessible in the SAP Integrated Report. Identifying the connections within our own operations is only the first step. As part of our engagement in the Value Balancing Alliance, we are working with like-minded businesses to transform how to measure and value a business’ overall societal impacts and dependencies. While this effort is still at the beginning, all dimensions are interwoven in today’s world.
Company leaders will need to do much more than manage their top and bottom lines to keep investors and other stakeholders happy. They will also need to manage their “green line.” This requires openly disclosing, through aggregated reports, how their company is improving the environmental as well as social footprint across its value chains.
We Need a Low-Carbon, Circular Economy
Businesses can make a massive impact because they drive global production and consumption and can contribute to United Nations Sustainable Development Goal 12. While businesses are often cast as culprits in the environmental crisis, they also play a key role in the solutions — for example, by driving the transition to a low-carbon, circular economy.
Earth Overshoot Day painfully visualizes that our current economy is largely based on a “take-make-waste” model, where materials are extracted, manufactured into goods, used, and then disposed of; it is a linear economy. We must jointly work toward a circular economy that supports the continual use of resources and creates a closed-loop system that minimizes the use of resource inputs while reducing waste, pollution, and carbon emissions.
Gartner expects that in the next 10 years, circular economies will replace linear economies. With the link between resource reuse and CO2 becoming clearer, showing that 45 percent of CO2 emissions can be tackled by transforming the way goods are made and used, we need to accelerate our support for this transformation. Digital technologies can help scale circular economies. That is why SAP focuses on providing solutions and services that enable customers to become intelligent, sustainable enterprises that can pave the way for a better tomorrow.
Tech Innovation Enables Circular Economy and Climate Action
Key focus areas for SAP include circular economy and climate action. We want to help companies understand, minimize, and disclose the full carbon footprints of their products and service, and to better manage material flows through their supply chains.
As part of the Climate 21 program, SAP launched SAP Product Carbon Footprint Analytics to help analyze the accumulated amount of greenhouse gases and other environmental impacts created by the procurement, production, and logistics of services and finished goods. We also build capabilities into our analytical and transactional systems that help customers transform to circular businesses with a focus on five key areas: responsible design, responsible sourcing and marketplace, responsible production, responsible consumption, and resource recovery and reuse. One example is the Plastics Cloud enabled by Ariba Network, which makes it easier for companies to procure recycled plastics.
We all have a role to play in this. Here at SAP, our purpose is to help the world run better and improve people’s lives, and our objective is to create positive economic, social, and environmental impact within the planetary boundaries.
Both the pandemic and Earth Overshoot Day show how critical it is to manage the planet’s limited resources carefully while ensuring fair distribution. Solving the global challenges that we are facing takes systems thinking and multi-stakeholder collaboration. No single person or entity can master this alone. I invite everyone to be part as we build back together to be more inclusive and restorative, allowing all of us and future generations to thrive.
Daniel Schmid is the chief sustainability officer at SAP.