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As a customer advisor in the area of financial services at SAP, I am interested in bringing our portfolio closer to all interested parties. In my previous blog post, the current regulatory requirements in the area of sustainability for financial institutions in the EU were examined in more detail. But how can SAP help its customers with its portfolio? The SAP Sustainability Platform is an essential part of the overall SAP portfolio. That’s why in this blogpost I’d like to go into more detail of the holistic sustainability strategy at SAP and explain the portfolio for the financial industry.
But why does the topic of Sustainability matter to SAP in the first place?
On the one hand, all SAP customers worldwide contribute 87% of the global trade. This includes a large number of banks and insurance companies. For this reason, SAP is responsible for embedding sustainability with all its customers in order to make a lasting impact on the global economy. On the other hand, sustainability is a team sport! It is driven by regulators, investors and employees and therefore needs to be considered not only from a financial perspective. Implementing all aspects of sustainability requires a holistic approach within the company and an anchoring in all business processes and products. In a digitally driven world, systems, applications and programs support this integration of the sustainability strategy into all areas of the company.
To manage sustainability, business process technologies are needed to identify, quantify, analyze, and act on relevant data. To make this possible, the SAP Cloud for Sustainable Enterprises brings together a comprehensive solution portfolio that enables companies to manage sustainability performance holistically.
Figure 1: SAP Cloud for Sustainable Enterprises
The SAP portfolio is targeted at various industries and includes cross-industry solutions. To get an overview of the existing solutions for different use cases in the industries, you can use the SAP Sustainability Navigator.
As described in previous blog posts, the EU Taxonomy and CSRD address specific requirements for the financial industry. The requirements of the EU Taxonomy and CSRD are primarily targeted at the entity as such, including its business activities. However, financial institutions play a special role here. Firstly, financial institutions must look at internal activities related to for example buildings, waste, energy consumptions and workforce impacting environment, society or internal governance (Corporate Sustainability). On the other hand, financial institutions must focus on the impact on the environment and society caused by their products and services, such as loans or insurances (“Financed / Insured Emissions”). Specifically for the latter requirement, for example, the EU Taxonomy requires separate measures (Green Asset Ratio) and the CSRD again refer to other standards (PCAF), which in turn require specific key figures. However, to calculate these key figures, information is also required that arises in the value chain and is not publicly available, such as greenhouse gas (GHG) emissions from the investors or customers. This leads to challenges ranging from data retrieval to the management of the financial and insurance portfolio. With solutions in the area of “Holistic Steering & Reporting”, SAP provides answers to these questions.
Figure 2: SAP Sustainability Navigator - Example Banking
The “Sustainability Navigator” depicts two key solutions for the financial industry: “SAP Sustainability Control Tower” (SCT) and “SAP Profitability and Performance Management” (PaPM). However, as already described, “Holistic Steering” covers all business processes. Therefore, a selection of potentially relevant solutions from data retrieval to reporting for the financial industry is described below. The evaluation of the appropriate solution will however take place on a customer-specific basis. As shown in figure 3, the five following SAP solutions are in particular the focus for financial institutions.
- SAP Business Technology Platform (BTP)
- SAP Datasphere
- SAP Sustainability Control Tower (SCT)
- SAP Profitability & Performance Management (PaPM)
- SAP Analytics Cloud (SAC)
SAP Business Technology Platform (BTP)
SAP BTP is an innovation platform in the cloud optimized for a variety of SAP applications. Within the BTP different functionalities are combined in a central environment. The functions can be divided into the following five pillars:
- Application development with low-code no-code functions
- Automation
- Integration
- Data & Analytics
- Artificial intelligence (AI)
Figure 4: Overview of SAP BTP
The BTP therefore offers a platform for various products and services that enables users to extend existing applications, create new innovations, or use database functions. For development teams to the business and sales, the BTP offers a wide range of possibilities.
The topic of sustainability is also firmly integrated into the BTP. In particular, to determine Scope 3 emissions, financial institutions need to gather information from capital- or policyholders to include them in the calculations of regulatory KPIs. This information, such as for example emissions caused by a funded project, is often not publicly available. With SAP Build functions on the BTP, the financial institution can, for example, design a template that must be filled by the customer or partner when the contract is signed. This external data is then stored directly in the database and can be processed in reporting subsequently.
The AI capabilities of the BTP also play a major role in the context of sustainability. In particular, AI functions on the BTP will be able to be used in the future for the creation of various reports and for mapping relevant emission factors.
Considered in the overall architecture, the BTP plays a key role here in the development of new innovations and the creation of customer-specific applications that can take on a supporting function and facilitates the subscription of additional Sustainability tools described in the following.
SAP Datasphere
SAP Datasphere, as the next generation of SAP Data Warehouse Cloud, is a comprehensive data services solution built on the BTP. SAP Datasphere enables a business data fabric architecture that can harmonize mission-critical data across the enterprise. The solution combines a wide range of capabilities such as data integration, cataloging, semantic modeling, and data warehousing for SAP and non-SAP data.
Figure 5: SAP Datasphere as part of SAP BTP
For most companies, the biggest challenge is the procurement and management of relevant sustainability data. Required information from customer and business partners (for example emissions), which were previously not covered by the respective contract, make it increasingly difficult for financial companies to obtain and manage sustainability data. For this reason, companies in the financial industry need reliable solutions that enable the identification, structuring, and traceability of data from different sources. In the area of sustainability, SAP Datasphere is therefore used as a central data warehouse solution to collect all relevant sustainability data and connect it from external systems. On the one hand, SAP Datasphere offers the option of creating a central data warehouse for all sustainability information, according to the customer’s wishes and architectural challenges. On the other hand, SAP Datasphere can already deliver predefined data models for specific sustainability information, which are then handed over directly to and consumed by SAP Sustainability Control Tower.
In addition to data retrieval and modeling from SAP and non-SAP systems, SAP Datasphere also supports the connection of external data from the “Data Marketplace”. The following image shows a selection of available emissions data to be obtained from the Data Marketplace. This includes, for example, emission factors, statistics, and emissions per capita, or for specific product groups.
Figure 6: SAP Datasphere - Data Marketplace - Examples for the Search Term 'Emission'
As part of the holistic steering, SAP Datasphere offers a wide range of options for collecting and preparing sustainability information. In the following, the tools for calculating and analyzing the quantitative sustainability information are explained.
SAP Sustainability Control Tower (SCT) and SAP Profitability & Performance Management (PaPM)
SAP Sustainability Control Tower is SAP’s central solution to address the regulatory requirements of the EU Taxonomy, CSRD, and ESRS and is, like SAP Datasphere, based on SAP BTP. SCT, as a central part of the SAP Cloud for Sustainable Enterprises, is a cloud-based solution that enables companies to monitor their operational performance in terms of sustainability and manage their business based on financial and sustainability-related metrics. In principle, the SCT follows the principle of holistic steering of a company in terms of sustainability. This means that all sustainability aspects (environment, society, governance) are consolidated from various sources in the SCT in order to calculate and display the key figures required by the regulatory standards and to steer the enterprise to a more sustainable company.
The SAP SCT is delivered with prefabricated and maintained content (“SAP Standard Content”). This includes, but is not limited to, calculation logics and reports for EU Taxonomy, as well as future CSRD reporting including ESRS. In principle, users can freely choose which of the metrics contained in the standard are to be used and which additional metrics are to be created. In addition, users can develop and build additional metrics and reports in the “Calculation and Process Engine” (CPE), for example, additional calculations or conversions.
Figure 7: SAP SCT Components
The metrics of the EU Taxonomy, CSRD, and ESRS are of particular importance to businesses in Europe. For this reason, the SCT already includes metrics and reports to calculate the quantitative requirements of the EU Taxonomy and the ESRS. Further metrics for the implementation of the quantitative requirements of CSRD / ESRS are currently under development and are expected to follow. A roadmap of the planned content in SCT can be found here.
As described in the beginning, there are special requirements for financial institutions with regards to key figures and data points to be disclosed. However, the financial-industry-specific key figures have not yet been delivered in the standard content of the SCT, but can be created on a customer-specific basis using the CPE. The CPE is compatible with SAP Profitability and Performance Management (SAP PaPM), which itself is also a key component of the SAP Sustainability Platform and plays a central role in the creation of financial-services-specific key figures for various sustainability standards.
SAP PaPM, based on the SAP HANA in-memory platform, was originally developed for detailed allocations at financial institutions, but for a long time, SAP PaPM has been an integrated performance management application for all industries and lines of business, including Sustainability. SAP PaPM Cloud is a next-generation performance management application that does not require its own data model but can reuse existing data and information models from other SAP and non-SAP applications. Building on the principles of the SAP Fiori user experience, the software is designed to run easily and comfortably by users.
In order to meet the financial-industry-specific requirements, the SCT and PaPM also offer so-called “Sample Contents” which cover various Sustainability use cases, such as quantitative ESRS requirements, as well as EU Taxonomy and TCFD requirements. The Sample Contents, shown in figure 8, can be used as a starting point for implementing further logics and metrics or as an example for a new implementation. New regulatory requirements or technical renewals are continuously rolled out by new versions of the Sample Content. However, if a new model is created with a Sample Content as a basis, this model is not affected by renewals of the content and can be adjusted by users or consulting services in the event of regulatory changes. SAP PaPM further has the flexibility to be used for use cases other than Sustainability and can for example combine Sustainability calculations with profitability models. For a complete list of the available sample contents in SAP PaPM Cloud, you may check the official SAP product page here.
The ESRS Disclosure Management Sample Content, for example, can be used as the basis for calculating the quantitative information required by ESRS. This contains calculation logics for the quantitative requirements of ESRS E, S, and G, as well as reporting templates for individual KPIs and data points. Figure 9 shows an extract of the ESRS Disclosure Management Sample Content.
Figure 9: ESRS Reporting in SAP PaPM Cloud
The flexible modeling environment also offers the option of creating and linking any number of models for other sustainability aspects, as well as other use cases. Especially for the financial industry, it is possible to create quantitative information and scoring models, for example, as required by the PCAF. The flexible modeling environment in SAP PaPM Cloud enables, for example, the derivation of a specific data quality score, depending on the availability and accuracy of the data to be used.
Figure 10: Example - PCAF Scoring in SAP PaPM Cloud
SAP Analytics Cloud
With SAP SCT and SAP PaPM, SAP provides tools for calculating regulatory KPIs and voluntary quantitative information, as well as for ad-hoc reporting and simulation. However, an essential part of the holistic steering and reporting of sustainability lies in the integration of sustainability information into the planning and reporting of the entire company. As part of the Cloud for Sustainable Enterprises and part of SAP BTP, SAP Analytics Cloud (SAC) is a solution to those sustainability reporting challenges.
With a user-friendly interface, SAC addresses primarily business areas and management functions that want to manage and use various sustainability information in a structured way, for example, to represent regulatory key figures or deviations in targets. In the spirit of collaboration and as a prerequisite for sustainable action, self-service analyses can be used to identify and share actionable insights across the company. For example, the results of KPI calculations from SAP SCT or SAP PaPM can be presented in consolidated form.
Sustainable business requires not only the identification of the status quo and the disclosure of regulatory information, but should serve as the basis for overall corporate governance and planning. For example, the Paris Climate Target of 1.5° can only be achieved through forward-looking action. In this context, the SAC provides planning functions that enable sustainability information to be integrated into the entire enterprise planning.
Figure 11: SAP Analytics Cloud – Overview
Benefits of SAP Sustainability Platform
Sustainability is a team sport! To successfully implement a sustainability strategy, the collaboration of all lines of business of the financial company is required. For this reason, the SAP Sustainability Platform is aimed at all areas and stakeholders of the company. The platform enables the implementation of a variety of quantitative requirements, as well as the connection of different models with each other.
Furthermore, the SAP Sustainability Platform can be built on the existing IT architecture. Existing SAP and non-SAP data sources can be connected using predefined interfaces so that existing data can be used without replication at best.
Replication of data objects can be largely avoided as well on the SAP Sustainability Platform by reusing existing data objects from the SAP source systems. The existing data models and objects can be used, for example, directly for the calculations of different KPIs.
Finally, the SAP Sustainability Platform can grow incrementally. Individual modules that have been described can be introduced independently. Thus, for example, a partial use case of the CSRD can first be implemented (e.g. emissions from travel) to test the platform. This significantly minimizes the risk for the company.
This blog post outlined the existing tools of the SAP Sustainability Platform that can support the technical implementation of the sustainability strategy of financial companies. However, Sustainability is a cycle and will always bring new challenges and opportunities in the future. For example, SAP is already working on the treatment of Sustainability information exactly like financial data. The development of ‘ SAP Green Ledger’ and ‘Carbon Accounting’ has developed from this initiative. In further blog posts I will discuss other topics in the area of Sustainability in the context of SAP. Stay tuned!
Sources:
https://www.sap.com/sustainability/solutions.html
https://sustainability-navigator.cfapps.sap.hana.ondemand.com/
https://news.sap.com/2023/03/sap-datasphere-power-of-business-data/
https://www.sap.com/products/technology-platform/datasphere/features.html
SAP Datasphere – Data Marketplace – Example accessible via ‘Guided Experience’ https://guided-experience-datasphere.cfapps.eu10.hana.ondemand.com/dwaas-core/index.html#/marketplac...
https://help.sap.com/docs/SAP_PROFITABILITY_PERFORMANCE_MANAGEMENT_CLOUD
https://discovery-center.cloud.sap/serviceCatalog/sap-analytics-cloud/?region=all
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