SAP’s Peter Graf Responds to Your Sustainability Questions

Last month we invited you to submit your own questions to Peter Graf, the chief sustainability officer of business management software company SAP, as a follow-on to his interview with Editor-in-chief Michael S. Hopkins. We sorted through your queries and Graf’s responses, and include a selection of these below.

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Why did SAP begin to address sustainability issues?

Our customers were asking for our own position, so we needed to take action. In addition, and even more significant, we had customers who required us to provide a sustainability policy, and evidence that we were not only a sustainable supplier, but had goals to improve our position. If we could not provide this information we would not be an approved supplier! We knew then that we had to take a more organized approach to sustainability.

And of course, we also realized we could help companies address their own sustainability goals. The closer we looked, the more we saw that the business processes needed were an extension of our customers’ existing investment in IT and especially their investment in SAP. As I explained earlier, many were asking for improvements to SAP products they were already using.

Given the expense of lobbying, proactive change supported by a minimal business case would seem to be more than enough impetus to support sustainable policy implementation. What do you think the fundamental barriers are to adopting sustainability or CSR?

Many people have an insufficient understanding of their baseline performance in sustainability areas. Usually once this baseline is established, a lot of low hanging fruit becomes visible. This is where activities are most profitable and this can help establish the fact that there is a business case around sustainability in the first place. Once the CEO sees sustainability as a way to reduce risk and drive opportunity, it changes the conversation.

What is SAP’s sustainability strategy?

Simply stated we have a two-part strategy: First, become a role model for how a large company can address sustainability both by policy and principles, and by using technology. Second, enable our customers to address sustainability using our technology.

What specific steps has the company taken to implement its sustainability strategy?

Given our exemplar or role model strategy, we knew we needed to capture hearts and minds, so we recruited a “champions network” to be local advocates for sustainability.

Centrally, within the team we saw the opportunity to show what reporting transparency could look like. Many reports were not clear on measureable goals, did not clearly show progress and were published as pdf.s, which offered little chance for meaningful dialogue.  We stated our goals in May 2009 with the publication of our second report (the first in November 2008 was more of a baseline). We published the report as a website, not as pdf.  Our next report, which will come out in May 2010, is designed for interaction: readers can post questions or comments, as well as state their view of priorities.  We also increased our frequency of reporting by publishing progress reports quarterly, instead of just once in our annual report.

As we started to develop our own sustainability approach, we found that software tools weren’t very well-developed to gather and collect information as part of a business process. There were no links to common master data, no organized workflow and little built-in reporting standards.  So we identified several different opportunities to create or improve existing tools. As a result we established our “enabler” strategy to help customers use software to become more sustainable, and make it much easier to track and report progress, allowing for more time to focus on improvement.

Along the way, we saw a developing market for carbon and energy tracking software, which led us to purchase Clear Standards in May 2009. We have since released two enhancements to this product, which is easy to set up and use because it’s delivered on demand, over the internet. We were able to convert and enter our own data in nine business days.

We also developed and introduced a product designed to aid a company in creating/gathering date/monitoring and reporting of their own sustainability goals – SAP Sustainability Performance Management was released in December 2009 and many customers are running this in their operations.  We use the report for own sustainability management team meetings and quarterly executive reviews.

In keeping with our goal of being a role model to customers, we’ve been able to demonstrate that you can achieve significant savings: in 2009 we realized 90 million Euros in savings and a reduction of 15% of carbon emissions. We realized that through reducing business flights 30%, cutting electricity use 7%, reducing paper use 25% and increasing use of renewable energy to 33%.

What were your key internal data sources for setting your own baseline?

We gather our information from three different types of sources: First, we directly harvest information we have in our operational SAP systems. This includes employee turnover, women in management, travel information (expensed by employees), etc. Second, we collect information from suppliers, for example utility bills or fuel purchases through gas cards. Finally, we source information via surveys and workflows across the company, through, for example, our commuting survey with employees or facility consumption information we can’t source directly from systems. We are using SAP Carbon Impact and the SAP Sustainability Performance Management software to collect, report and manage this data.

What were some of the challenges – both theoretical and practical – of engaging stakeholders in SAP’s sustainability reporting process?

We had to address the following three questions: Who do you include? How do you engage? How to make this an ongoing process versus a one time event? We run a process with three levels of engagement.

First, we’ve added an interactive, web based tool box into our sustainability report, where everybody can provide input on materiality. Second, we continuously engage with a wider group of stakeholders in focused conversations. These include NGOs, investors, employees, customers, et al. Finally, we run an advisory panel of industry experts that advises us on how to make our strategy work in light of stakeholder movements.

Can you discuss any upcoming initiatives?

In the current environment, customers want value fast, so we’ll be providing “packaged solutions” that combine products, services and content to get a customer up and running in less than 14 weeks. We’ll also enhance our overall company strategy of “on-device, on-demand and on-premise” – in particular the on-device aspect through our acquisition of Sybase. There are also several activities coming to further reduce our carbon emissions, but in light of our examplar strategy, I don’t want to discuss those until we have achieved savings. We pilot internally before we launch publicly.

In general, I believe that software development will happen across all dimensions of sustainability (energy, carbon, water, social impact, safety, toxicity, health, supply chain, etc.) in the following areas: Extension of existing on-premise systems such that more sustainability relevant data can directly be sourced from operational systems; and in new capabilities and content that come as on-demand services such that customers can leverage that data to drive transparency, analytics, reporting, and optimization.

Finally, we’ll see much of the sustainability capabilities getting directly into the hands of consumers and decision makers via mobile devices. SAP plays in all these areas and uniquely ensures that they play well together.

How much interest is SAP seeing ISO 26000 guidance on social responsibility?

We will look at this in Q4 – we don’t have a position yet.

How have stakeholders such as employees, investors, government, and SRI organizations responded to SAP’s initiatives?

Very positively.  You can read the comments by our independent advisory panel. We gave them the space to express their opinion and while there were a few areas called out for improvement, they were overwhelmingly positive in their assessment of our reporting via our online sustainability report.

In addition, for the fourth consecutive year SAP has been named the leader of the software sector of the Dow Jones Sustainability Indexes (DJSI). And we were listed in 22nd place in the G1000 Sustainable Performance Leaders ranking as measured by CRD Analytics, the sustainability analytics provider for Nasdaq.

How can providers help client organizations quantify the risks and benefits of socially responsible sourcing practices, given that companies generally only respond to hard numbers?

Socially responsible sourcing can help a company in a variety of ways: It protects the company from brand damage by ensuring that the supply is sourced in a responsible manner. It can help sell more goods and services because consumers react to more sustainable offerings if they are price competitive. It also often has the potential to reduce cost because the transparency created through sustainable practices in the supply chain reveals opportunities to drive efficiencies. Quantifying the risks and benefits associated with such questions requires a more consultative sales approach, where our team engages with the customer to compare their current practices with industry best practices. Then we quantify the benefits based on what earlier customers realized along this journey. But we also have a microsite where we explain the whole value proposition for carbon reduction, and our public website offers more information that can help make the case.