Among all of the current sobering news, this may perk up your spirits: During the first half of 2020, climate scientists calculated an 8.8% reduction in CO2e emissions globally. If you live or work in an urban area, you probably experienced the associated reduction in economic activity with your own senses — breathing easier, seeing more clearly, or hearing the birds sing again.
Although Mother Earth could take a deep breath, we still need to wean ourselves off fossil fuels. Greenhouse gas (GHG) emissions would have to be reduced by around 7% every year for the next 30 years in order to not exceed the 1.5 degree Celsius temperature limit set by the Paris Agreement. Climate scientists have not therefore stopped sounding the alarm: The largest greenhouse-gas-producing economies must hit the ground running to veer off a destructive path.
Drivers for Sustainable Business
The COVID-19 pandemic has delivered an example of how quickly countries can mobilize against a common threat. Some leaders see a green recovery to the pandemic as an opportunity to forge a better world by reducing dependency on fossil fuels and stemming global warming. A new administration in the U.S. under president-elect Joe Biden has pledged to rejoin the Paris Agreement in January, which is almost certain to spur renewed global impetus in the battle against climate change. Biden’s transition team has already launched their Climate 21 Project, which carries the same name as SAP’s Climate21 initiative to help companies become sustainable businesses.
There are number of drivers — ecological, economic, and societal — currently motivating businesses to make their operations more sustainable. Customers are demanding visibility into the carbon footprint of the products they purchase, as are shareholders and employees, who are looking for purpose and sustainability in their investments and livelihoods. Producers are taking notice, not least because national and international regulations may soon require such environmental impact information be provided on product labels and descriptions.
But does transparency have to come at the expense of profitability? No, says Toby Croucher, solution manager for Climate 21 and Sustainability at SAP.
“Sustainable businesses have the ability to measure the carbon footprint of their manufacturing processes and are able to direct investments to the right parts of their business in a timely fashion, enabling them to achieve both strong financial returns and decarbonized business models,” Croucher says. With the introduction of carbon pricing, he predicts strong demand for such solutions.
For those companies aiming to improve their carbon footprint across the supply chain, establishing GHG transparency is not something achievable overnight.
“It is about establishing long-term value in a carbon-constrained world,” Croucher explains.
Footwear Industry Takes a Step in the Right Direction
Every industry has exemplars of sustainable business practice, but few have gained as much attention as the shoe industry. The world consumes about 25 billion pairs per year, an average of three pairs per person. The result is 700 million metric tons of CO2e, contributing about 1.4% to total global greenhouse gas emissions.
A pair of running shoes has a carbon footprint between 11 and 16 kg CO2e. This includes greenhouse gas emissions generated from conception and design, until it is eventually used and discarded or recycled. Some manufacturers are making strides to reduce the footprint of their shoes significantly. Nike, Adidas, and Allbirds have already gotten off on the right foot by targeting the zero-carbon shoe made of recycled, recyclable, or natural materials.
In 2019, Nike was able to reduce the average carbon footprint of its footwear and apparel products to 7.33 kg CO2e per pair. As part of its “Move to Zero” initiatives, it plans to power its facilities with 100% renewable energy by 2025, reduce carbon emissions across its global supply chain by 30% by 2030, and divert virtually all of its footwear manufacturing waste from landfills.
It remains to be seen whether sustainability initiatives like Nike’s will gain traction with Generations Y and Z, but such strategies take time to develop and companies that get off to an early start are likely to reap the benefits sooner. Others may be forced to catch up by regulatory measures.
Carbon Emissions Accounted for Along the Entire Value Chain
In early 2020, SAP introduced a product that delivers transparency on the carbon emissions of a product across the entire value chain of a business, including production, raw materials, energy use, and transport. SAP Product Carbon Footprint Analytics makes it possible to compare each activity of a value chain to determine the amount of GHG released to make the product in each location.
“In the future there will be no difference made between cost, revenue, and GHG performance,” says Bettina Zedlitz, solution manager for Climate 21 and Sustainability at SAP. “We think that end-to-end ERP processes need to support multiple sustainability-related attributes of products and services, to gain insights for understanding and optimize the GHG footprint. We can give you the tools to analyze your business models and identify tangible actions to minimize emissions.”
SAP Product Carbon Footprint Analytics is part of SAP’s Climate 21 program. Learn more here.