36.4 billion tons. That’s how much carbon dioxide the world emitted in 2021. It’s a value that’s almost impossible to grasp. To avoid the most catastrophic effects of climate change, CO2 emissions must reach net zero by 2050, scientists say.
It’s an ambitious goal that requires all companies to account for and disclose their carbon emissions. In 2022, the question is no longer if a company needs to do something; it’s how they can get started. Their role has drastically changed from observer to contributor.
Carbon accounting solutions that help companies measure how much carbon dioxide they emit are already available. But there’s another problem that currently isn’t addressed, and it’s much harder to solve: how can companies even obtain the data on their direct and indirect carbon emissions?
Referred to as Scope 1, 2, and 3 emissions, a company’s carbon footprint is complex. To measure it, companies currently turn to publicly available catalogs such as ecoinvent or the LCA Commons. These databases list certain types of materials and activities and match them against an average amount of carbon emissions being emitted.
“While these catalogs provide an initial estimate of a company’s carbon footprint, they don’t reflect the individual status quo accurately,” said Marcus Krug, head of SAP Innovation Center Potsdam. “As regulatory requirements across different regions are increasing, so is the need for companies to have accurate and verifiable numbers on their carbon footprint in their financial statements.” In addition, many companies are evaluating new business models based on accurate and trustworthy sustainability data.
With big brands like McDonald’s and Timberland going green and integrating sustainable practices in their operations, reliable and verifiable numbers to back up these claims are essential to avoid a reputational and financial crisis. Solving this issue requires a standardized approach to calculate emissions from a variety of systems from different vendors and share them through the entire supply chain – from suppliers via shippers and manufacturers to retailers. It doesn’t stop at a company’s own border.
“Collaboration and data sharing are the orders of the day for companies when it comes to measuring and managing their carbon footprint,” said Gunther Rothermel, senior vice president and head of SAP S/4HANA Sustainability at SAP.
He and his team identify opportunities to expand the SAP product portfolio to include new focus areas such as climate action, circular economy, or holistic steering and reporting.
“Achieving sustainable business practices means embedding sustainable practices across processes, end-to-end,” said Rothermel.
Solve Problems Collaboratively
Working with industry alliances like the World Business Council for Sustainable Development (WBCSD) and Catena-X as well as other software vendors, SAP Innovation Center Network is developing an interoperable carbon data network to allow customers to share their carbon emission data while preserving data sovereignty and preventing any vendor lock-in. Based on self-sovereign identity (SSI), this data foundation aims to help calculate a company’s carbon emissions so it can reduce or offset them.
“Using open standards was essential to get different vendors behind this project and excited to participate,” said Krug. “Judging from the positive customer feedback so far, this open, interoperable, and decentralized network seems to fill an important gap. No one really wants to build costly, non-standardized, point-to-point integrations across the entire supply chain.”
For companies, measuring their indirect Scope 3 emissions – the greenhouse gases emitted along their supply chains and in the use of their products – is particularly challenging.
“We know from our customers that managing Scope 3 carbon emissions and having impact at scale is a major challenge for them,” said Jesper Schleimann, chief strategy and innovation officer for the EMEA North region at SAP. “Their openness in sharing details and requirements have been crucial in designing an open solution with positive benefits for all stakeholders across the value chain and ensuring a successful adoption across the globe.”
Building on the foundation for collaboration laid by SAP Business Network, the carbon data network can provide value by tracking a product’s footprint from sourcing to the end consumer, for instance. With many different parties involved across the globe, the supply chain is usually complex and opaque.
For example, a fashion retailer sources garments from a textile manufacturer in India, which are shipped to Europe by a shipping company. The end consumer would like to know the overall carbon footprint of the garment they buy. Calculating this footprint depends on multiple factors, including the Scope 1, 2, and 3 emissions of the textile manufacturer, the shipping-by-ocean freight, the transport to the retail store, and potentially other intermediary parties.
In this difficult undertaking, the carbon data network can provide the needed transparency across all participants of the network.
Prioritize Access Over Ownership
For the past decades, proprietary solutions have shaped the enterprise software space. But as the world faces one of the biggest challenges, many companies have come to realize that certain issues can only be solved together. To be prepared for the future, a new layer of cross-company business collaboration is needed.
Decentralized approaches such as the carbon data network are open by nature and provide the technical foundation needed to share data across company borders and allow collaboration, for instance in supply chain or sustainable financing. It could also be used to improve the distribution, demand, and supply of water resources within an ecosystem.
“We are steering the market towards a more sustainable future, and we’re doing it collaboratively,” said Krug. “The decentralized network approach reflects the natural evolution of our business networks.”
Corinna Schmidt is part of NVT Marketing & Communications at SAP.
This article was originally published on Forbes.