How Can ERP Platforms Help Businesses Manage Their “Green Lines” Toward Sustainable Development?

SAP gears up toward sustainability data management, and while most organizations are defining meaningful targets, many are yet to report on progress.

The first SAP Sustainability Summit announced the SAP Product Footprint Management product for release in Q3 2021. (Image credit: SAP.)

SAP ran its first Sustainability Summit with a range of industrial keynotes—from automotive manufacturers to energy providers—and featured keynote speakers and panel discussions involving the existing SAP customer base (hence, the forum was, of course, very SAP friendly). The summit covered key considerations about the climate change agenda for 2030 and the transition to net-zero emissions by 2050, discussing environmental impact considerations across scopes 1, 2 and 3.

During the conference, SAP Product Footprint Management was announced for Q3 2021 and was presented as a platform to assess product footprint across the entire product life cycle. This is refreshing news since most discussions about sustainability tend to focus on commitment pledging and self-encouragement about the need to do more to reach net-zero carbon goals.

In this article, I discuss the recent SAP Product Footprint Management announcement and its positioning toward helping organizations manage their “green line” across the digital thread.

Carbon targets include greenhouse gas (GHG) reduction, carbon offsets, increases in low-carbon and renewable power, coupled with operational and supply chain emissions efficiency, including material engineering to manufacturing, logistics, product usage, maintenance and recycling.

Despite global awareness about the need for sustainable innovation to support climate change targets for 2030, the net-zero 2050 agenda and many related initiatives only appear to be scratching the surface of such a complex and holistic challenge.

The 2030 goals are often referred as “ambitions” as organizations struggle to translate those goals and commit to meaningful long-term actionable sustainability transformation road maps. Over the short-term, it is important to understand what needs to be measured and how progress can be tracked so that organizations can continuously adjust their business decisions. For this, organizations must consider how product lifecycle management (PLM), enterprise resource planning (ERP) and other platforms can help to mature and manage operational performance toward such targets.

In a recent LinkedIn post, Christian Klein, SAP CEO, highlighted that “sustainability is no longer optional but has become key to the long-term success of any business. It’s about defining new competitive advantages, lowering risks, building resilience to pricing regulations, gaining ground with investors, and being ahead of emerging consumer demands. As a result, we see sustainability becoming a central dimension of corporate decision making, just like cost or growth.”

Klein also pointed out that “no company can take this journey alone,” certainly due to the complexity of the problem as well as the complexity of the solution(s)—from new technologies and innovations that haven’t emerged yet, to new business models, new investments, new data management requirements across the product lifecycle—in the true PLM sense. This raises several key perspectives on data management and associated questions about digitalization:

• How can digitalization contribute to tracking GHG emissions and other carbon footprint-related data?
• As the countdown to addressing climate change challenges draws near, how much time do enterprise platform editors have (across PLM, ERP and other solutions) to develop new holistic software capabilities that will provide the required product footprint data transparency?
• How and when must this specialized data be recorded and shared?
• How accurate must the data be, and where does it come from?
• How does that data link to national and international policies and standards?
• What data and measurement standards already exist or must be developed and must then be integrated into enterprise platforms for holistic management?
• Is sustainability a CFO-driven initiative? If so, who in the C-suite is responsible for sustainability?
• What new business models might be required to support the shift to sustainable innovation?

In mid-2020, SAP launched a strategic program called Climate 21 to promote dialogue and collaboration across the SAP ecosystem, customers and partners. The goal was to brainstorm and exchange ideas on how to achieve sustainable low-carbon future requirements. There is a lot to read about this on the SAP Climate Action blog, which covers topics such as:

• Understanding the CO2 footprint of a business
• Understanding how businesses need to plan, set targets, define standardized metrics around processes, analysis and reposing against these targets
• Understanding how software (including SAP) can support efforts to slow down climate change

An understanding of the challenge is becoming clearer, though not so much the tools and processes needed to address the challenge. As Priyadarshini Prabhoo, vice president, head of Product Management, SAP Climate 21 Initiative, put it in one of her blog posts: “SAP is addressing the challenge of sustainability including climate action through our solutions. We enable organizations to go beyond measuring top and bottom-line results to include a third measure of success—a green line.”

During the Sustainability Summit, SAP reported on the results of one of its surveys with industrial businesses about the barriers to act on sustainability. In order of priority, the findings highlighted:

1. Lack of clarity on how to embed sustainability in business data, processes and IT systems
2. Lack of clarity on how potential actions toward sustainability goals can align with business strategy
3. Difficulty in proving ROI from these actions and their associated investments (linking the top-line and bottom-line to the green line).

Per Prabhoo’s post, “SAP announced Product Footprint Management—a new cloud-native application built on SAP Business Technology Platform, coming this Q3 2021. SAP Product Footprint Management takes a holistic approach to assess product footprints across the entire product life cycle, from cradle to grave, helping companies to assess the environmental impact of their products at a detailed level.”

A similar messaging was reinforced this week in a post from Gunther Rothermel and Anita Varshney, who asserted that SAP Sustainability Management solutions “will also include industry-specific insights that combine operational and financial data across value chains embedded in core business processes.” How and where should the “green line” be managed, and who should manage it? It certainly goes beyond the finance department, sales and marketing, logistics and procurement. Also, it may be more important to reach engineering and manufacturing, as well as other operational functions that do not primarily operate in ERP platforms. Nevertheless, these business functions also make essential product decisions that are likely to impact the overall product carbon footprint.

Presuming, from the announcement and initial presentation of the SAP Product Footprint Management, the following scope aims to be covered:

• Product footprint data collection—presumably from multiple data sources, not just SAP content?
• Sustainability content management, from reference content to multiple footprint categories (carbon, water, energy, land, use, etc.)
• Product footprint assessment across the product life cycle and using multiple calculation methods (top-down, bottom-up, and others)
• Product footprint analysis and analytics, per given standards, scores, requirements, and so on
• Integrating, slicing and dicing information across several business functions (from sales and marketing, finance, engineering, production, opportunity to cash, etc.)

This last point about integration appears to be critical. It will be interesting to understand how such solutions will contribute to managing the green line across the enterprise. There are indeed multiple enterprise hubs to manage product decisions across the enterprise:

• How can relevant data be gathered across the project life cycle?
• How can existing data and data models be reused to leverage sustainability data?
• What calculation standards should be used? Do these standards exist?
• Should there be holistic standards, with a management body for such standards?
• How can progress be reported with such data?
• How can the results be interpreted and inform meaningful decision-making?
• How can internal and external metrics and reporting be managed?

Connecting ERP transactional and master data from the relevant upstream authoring and downstream consuming systems is essential. While the new SAP Product Footprint Management offering sounds promising, other platforms editors, like SAP, must must also focus on managing digital continuity and tracking carbon implications at the source in authoring platforms.

The closer to the authoring user and the earlier in the product life cycle such assessments are performed, the more impact they are likely to have on the overall product life cycle (and the more cost-effective they are likely to be). This clearly requires a robust digital thread approach that connects all pieces of the puzzle and provides the required data transparency across the relevant systems—from PLM to ERP, MES, MRP, SCM, CRM and other enterprise platforms.

What are your thoughts?

References:

• G. Rothermel and A. Varshney. (2021). Sustainability Management by SAP: Enabling Tomorrow Starts Today.
• C. Klein.(2021). The Future of Energy: On a Transformation Journey towards Net Zero Emissions.
• P. Prabhoo. (2021). Climate Action with SAP’s Climate 21 Initiative.
• G. Rothermel, P. Prabhoo, and S. Feickert. (2021). SAP Sustainability Summit Presentation: Product Perspectives, Climate Action with SAP Sustainability Management.