Every business wants to talk about “sustainability”. Mentions of the S-word in corporate reports have increased by 44% since 2018, according to research on top business trends for 2021 undertaken by the software firm SAP and market researchers at AlphaSense.
But, as consumers and businesses alike have come to realise, sustainability can be a slippery concept. Definitions vary, benchmarks differ and data is patchy. All too often, that results in a gap between what companies say and what they do.
Meanwhile, today’s ethically minded consumers have become more exacting. Many want to know more than simply where their goods come from: they also want to know a product’s carbon emissions across its entire production chain, whether it can be recycled, and whether the workplaces where it was made embrace fair labour practices. Customers have also grown savvier at spotting false claims, while activists and regulators are getting ever more adept at calling out companies for failing to back up their sustainability claims and targets with actions.
Against this backdrop, it is increasingly critical for businesses to be able to demonstrate the veracity of their sustainability claims. Likewise, it’s crucial that they can accurately measure and monitor their performance against their own targets. But this can be a difficult undertaking. Most companies’ total carbon emissions come from their products’ supply chains rather than from the companies’ directly-owned operations, which makes them difficult to track. For instance, these could include emissions associated with raw materials, and delivery and logistics. Accounting for these value chain emissions – otherwise known as Scope 3 emissions – is essential for any meaningful sustainability claims.
“Calculating environmental and social impacts across a company’s products and services, and across the entirety of their life cycles is simply – complicated,” explains Thomas Saueressig, a SAP executive responsible for product engineering, in a blog post. “Yet supply chain emissions are on average 11.4 times higher than operational emissions. So merely focusing on individual operational emissions is no longer enough. Actually, it was always just a first step.”
After all, efforts to tackle complex global problems such as the climate emergency and other social injustices are necessarily collective efforts, so it stands to reason that joint initiatives and policies will be more impactful.
A report from SAP and the consultancy Oxford Economics found that more than half of 2,000 executives surveyed had enforceable joint sustainability policies in place with a vendor or supplier. Nearly a third said the success of their own company’s sustainability initiatives relied on those relationships.
However, the report found much room for improvement when it came to the quality of those relationships: “Too often the connection between outside practices and internal goals is not strong enough. Just 16% have well-established policies for working sustainably with vendors and suppliers.”
One of the key ways to make joint efforts more effective is to gather better data, for instance on each business’s carbon emissions and recycling practices. As the old business adage goes, what gets measured gets managed.
However, gathering robust and comparable data can be challenging in the context of complex supply chains. The research found that more than half of respondents reported that insufficient data management and analysis skills in their organisation made it difficult to achieve sustainability. Also, 55% found it difficult to manage separate processes for in-house and external software; and 55% had difficulty sharing data between different kinds of software.
Given the complexity and the need for transparency, traceability, real-time monitoring and verification, perhaps it’s no surprise that businesses are turning to cutting-edge technology to help.
SAP produces several digital tools and solutions to help companies gather, consolidate and analyse data. These tools include sustainability and ESG reporting solutions, which help companies incorporate environmental, social and corporate governance (ESG) metrics alongside their usual financial reporting data. SAP’s Digital Product Passport tool lists an item’s individual parts to allow for better recycling, while the SAP Responsible Design and Production tool allows companies to work out how to best source materials in the shift to a circular economy and comply with new laws. There is also a SAP Rural Sourcing Management solution, designed to help agribusiness companies with traceability – it connects smallholder farmers to agriculture supply chains, giving transparency when sourcing raw materials.
These tools help companies track their progress at a more granular level. Better data can reveal if they’ve gone beyond compliance obligations and are meeting the standards expected by consumers, partners and investors. Knowing that everything is auditable and measurable can give a business the confidence to make sustainability claims with certainty.
As well as helping companies improve their sustainability, better data and traceability systems allow companies to think more strategically when it comes to broader business decision making. After all, having a fuller view of your business can help you spot opportunities as well as risks.
SAP has put together a sustainability action plan to help companies make decisions with the bigger picture in mind. These include collecting and analysing sustainability data throughout the entire business, from every process and network. This visibility and end-to-end analysis allows managers to make more informed calls – weighing up a material’s carbon cost versus recyclability for instance, or differentiating between the impact of rubber or polyester.
Finally, better data and traceability is invaluable when it comes to complying with increasingly stringent environmental reporting regulations, as well as regulations on labour practices throughout a business’s supply chain.
Moreover, if companies can share their own sustainability data with regulators, industry bodies and NGOs, there can be additional network effects as businesses and regulators learn more about the best ways to be truly sustainable.
Find out more at sap.com/sustainability
