The climate emergency has reached a new peak. To help accelerate the transformation toward a low-carbon, circular future, SAP is embedding sustainability end to end in its portfolio, as well as across its purpose, vision, strategy, and business operations.
Climate change is widespread, rapid, and intensifying, with some trends now irreversible, according to the recent 6th Intergovernmental Panel on Climate Change (IPCC) report.
The science is clear: unless immediate, fast, and large-scale action is taken to reduce emissions, the average global temperature is likely to reach, or cross, the 1.5° C warming threshold within 20 years. The alarming results are already with us, ranging from droughts and heat waves to wildfires and devastating flooding worldwide.
While much hope is focused on a green recovery, the window of opportunity is closing fast. The latest report from the International Energy Agency (IEA) predicts that energy-related carbon emissions are on course to surge again by 1.5 billion tons in 2021, an increase of nearly 5% year-over-year and the second-largest in history, taking us back to pre-COVID-19 peak levels.
The urgency to dramatically change course and accelerate decarbonization has never been higher. But only when businesses are moving beyond their siloed approaches, commitments, and climate pledges to fully embrace sustainability and embed these ambitions in an integrated way will we be able to drive the systemic change needed.
It is a journey toward embedding sustainability across everything we do.
Moving Away From Add-On to Core
Companies need to avoid thinking of sustainability as only an add-on to their strategies and operations. They need to integrate it across the business. Rather than defining a separate sustainability strategy, it is crucial to set a corporate business strategy that is sustainable.
A first step toward SAP realizing this was linking sustainability to our purpose of helping the world run better and improving people’s lives. The objective: create positive economic, environmental, and social impact within planetary boundaries with special focus on climate action, circular economy, social responsibility, and holistic steering and reporting.
This is reflected not only in the updated SAP vision to “reinvent how the world runs as a network of intelligent, sustainable enterprises,” but also in the executive compensation that rewards Executive Board members for customer loyalty, employee commitment, and SAP’s carbon impact, along with financial performance.
Enabling Climate Action Through Technology
The IPCC report has once again highlighted that harnessing the innovation power of enterprises has to be at the center of fighting climate change. For SAP, this means using digitalization to contribute to the United Nations Sustainable Development Goals (UN SDGs), including #13, Climate Action.
In collaboration with customers and partners, SAP is working to optimize material, financial, and energy flows throughout end-to-end business processes in order to address planetary and social challenges. For example, the company’s multi-year Climate 21 program helps build analytical and transactional capabilities into enterprise applications that can help SAP customers understand and minimize the greenhouse gas footprint of their products and operations along their value chains.
During the SAP Sustainability Summit in April, sustainability management by SAP was introduced, providing an expanded portfolio of sustainability-specific solutions, including SAP Product Footprint Management, which has been available since September 2021. There is more to come with the releases of the SAP Responsible Design and Production and SAP Sustainability Control Tower solutions in the next months, as will be shown during SAP Sustainability Day October 28
SAP.iO Foundries locations Berlin and Munich are fostering startup innovation by setting up the Sustainable Future program together with Accenture. The equity-free program is designed to propel digital transformation in four target areas: carbon tracking and trading, resource efficiency, climate risk tracking and mitigation, and circular economy.
Setting Ambitious Targets
In addition to harnessing innovation, the climate emergency calls for bold targets for decarbonization. By mid-2021, countries representing around 65% of global carbon dioxide emissions and more than 70% of the world economy have made ambitious commitments to carbon neutrality. The U.S, the European Union, Japan, the Republic of Korea, and others — in total 126 countries — have pledged carbon neutrality by 2050; China says it will do so before 2060.
The private sector also needs to step up. More than 1,900 companies, including SAP in 2017, have set emissions reduction targets grounded in climate science through the Science Based Targets initiative.
In 2019, SAP raised its commitment and adopted a 1.5° C science-based emissions reduction targets aligned with a net-zero future. However, the journey started much earlier; back in 2009, SAP set the first goal of reducing its global carbon emissions to the year-2000 level by 2020. This target was met at the end of 2017, even though SAP grew more than fourfold over the period.
The next milestone is 2023, when SAP aims to be carbon neutral in its own operations – two years earlier than previously envisaged. This includes all direct (Scope 1), indirect (Scope 2), and selected categories of value chain (Scope 3) carbon emissions, such as business flights, employee commuting, paper consumption, and external data centers (co-locations and hyperscalers).
Monitoring and Reporting
It is essential to measure and monitor progress on the path toward achieving these targets. For example, SAP has increasingly embraced holistic steering and reporting because connecting financial and pre-financial performance leads to better management decisions and business success.
SAP’s sustainability and annual reports were merged into the SAP Integrated Report in 2012. Since then, both material and immaterial value creation have been at the center of the company’s reporting and have been placed on an equal footing. Besides key financial information, environmental progress, workforce information, and social investments have been made transparent. In addition, an internal sustainability dashboard allows employees to explore the key sustainability key performance indicators (KPIs), such as women in management and carbon emissions by their country, location, and line of business, with updates every quarter.
Our reporting shows that in 2020, SAP was able to overachieve by 43% on its target for net carbon emissions in 2020, generating 135 kilotons instead of the anticipated 238 kilotons. This trend continued in the first half of 2021, during which SAP’s carbon emissions totaled 45 kilotons compared to 90 kilotons in the first half of 2020 (-37%).
The low emissions level is a consequence of the ongoing COVID-19 pandemic, as well as the introduction of Pledge to Flex, which enables a more flexible mix of remote and onsite work. SAP believes this trend will continue and has just announced in its 2021 half-year report that it has lowered its 2021 carbon emissions outlook from 145 kilotons to a range of 90-110 kilotons.
Taking Action: Measures of Implementation
To become carbon neutral in its own operations by 2023, SAP is following a three-pillar approach: avoid, reduce, compensate.
- Avoid: Whenever possible, SAP aims to avoid the creation of greenhouse gases. This is a top priority, supported by, for example, using virtual telecommunication instead of business flights.
- Reduce: If greenhouse gas emissions cannot be avoided, SAP aims to drive efficiency and reduce all types of emissions; for example, building efficiency, data center operations, carpooling and car sharing, and e-mobility.
- Compensate: SAP has extended its compensation models for travel. For business flights, it has introduced an internal carbon price to offset related carbon emissions. If greenhouse gas emissions cannot be eliminated altogether, SAP aims to reduce them through innovations in the areas of building efficiency, data center operations, carpooling, and car sharing, as well as e-mobility. For example, SAP has powered its own data centers and facilities with 100% renewable electricity since 2014, implemented an environmental management system with ISO 14001 certification in more than 30 countries and ISO 50001 at headquarters, adopting green IT initiatives in order to foster sustainable IT equipment usage and promoting tools such as Ecosia as a default search engine.
In 2020, SAP implemented additional energy and climate measures within its operations, ranging from opening a new office with energy-efficient design in Australia and implementing more efficient data center technology in Germany to introducing a bike fleet at SAP Hungary as well as a flexible mobility budget in Germany and installation of photovoltaic systems in Austria.
For emissions that cannot yet be reduced or avoided, SAP thirdly invests in high-quality carbon credits. For example, SAP has been a long-term investor of the Livelihoods Carbon Funds (LCF) since 2012. SAP has also donated funds to restore ecosystems and improve people’s lives. In support of the UN Decade on Ecosystem Restoration 2021-2030, SAP recently joined the 1t.org corporate alliance, which aims to conserve, restore, and grow trees worldwide, with a pledge to plant 21 million trees by the end of 2025.
I am proud that SAP’s efforts to combat climate change and to strengthen its transparent reporting are externally recognized. The non-profit organization CDP included SAP on its A List 2020, thereby granting us the top rating for leading in environmental transparency and action.
SAP recognizes that strong partnerships are an invaluable asset in tackling climate change. This is why we became a founding member of the European Green Digital Coalition and joined the World Economic Forum Stakeholder Capitalism Coalition and CEO Climate Leaders as well as the World Business Council for Sustainable Development (WBCSD), complementing our previous engagements with the UN Global Compact, the We Mean Business Coalition, the Value Balancing Alliance, the Ellen MacArthur Foundation, and many more.
In addition, we signed the business letter to the G20 calling for greater climate ambition and we launched Chasing Zero, a new initiative that will feature executive thought leadership, best practices, and insights into a sustainability-related transformation of SAP and its global ecosystem to achieve zero emissions, zero waste, and zero inequality. The transition to a circular economy remains central to our vision for a world of zero waste and plastic free oceans by 2030. Consequently, we support stronger circular economy policies, such as the Worldwide Fund for Nature’s OneSource Coalition and the Ellen MacArthur Foundation’s Extended Producer Responsibility endorsement.
Daniel Schmid is chief sustainability officer of SAP.