RISE with Innovation and Sustainability

[joaquincarballo]

Dear reader,

How many times have you heard that when discussing a move to the cloud, the main points are about infrastructure? Whether you are an enterprise architect, an account executive, an SAP Partner, or an IT manager, you will find this post relevant.

If you haven’t read my previous article titled Cloud Transition for Sustainability and ESG Enhancement, I recommend you do so, as it sets the ESG pillars when moving to the cloud.

But what lies beyond that, and what user experience do you get when acquiring the latest on S/4HANA? To begin with, one of the most remarkable highlights is the Green Ledger.

By integrating sustainability data with financial insights, Green Ledger enables detailed analysis of revenue, costs, and margins concerning emissions across organizational structures and value chains. This integration includes setting carbon budgets at the cost center level and embedding carbon considerations into business decision-making processes.

A study by Harvard Business Review states that "Carbon Might Be Your Company’s Biggest Financial Liability." Economic models and the experience of the EU Emissions Trading System suggest that the price of carbon could likely be between $50 and $100 per ton of CO₂ in the near term and rise from there. At $100 per ton, that would represent five percent of the global economy. Taking this context into account, it seems reasonable to include the Green Ledger in your Enterprise IT Transformation.

Image 1: Finance and GHG Emission Overview tab

Now, which process capabilities do you need to enable this? Needless to say, S/4HANA is natively integrated with SAP Sustainability applications that cover some of the following features:

• Streamlining your environmental, social, and governance reporting: Here you will enable comprehensive data collection, analytics, and external benchmarking for informed decision-making.
• Calculating and managing your carbon footprints across scopes 1, 2, and 3: You will gain insight into your carbon footprint by calculating product and corporate carbon emissions.

These features play a big role when executing them through ERP transactions within core processes such as Lead to Cash, Source to Pay, and Plan to Fulfill, among others.

When it comes to core processes, I particularly like the use case for Sustainable Source to Pay. The idea here is to procure low-carbon products and/or services at a transactional level. This is especially useful given that many Chief Procurement Officers (CPOs) have this initiative as one of their main strategic goals. The challenge CPOs face is that they rank suppliers at a company level, not at a part level. This is where the magic of using transactional ERP processes comes into play, facilitating all the manual work. It's key to understand that using Sustainability Data Exchange, you can save Scope 3 to Material Master (MM) in S/4HANA, and with Sustainability Footprint Management, you can calculate the product footprint and save it to MM in S/4HANA. This allows CPOs to procure low-emission products/services at a transactional level.

This transaction use case looks like this:

 

Image 2: Automate Sustainable Procurement Execution

Today, Scope 3 (Upstream and Downstream) accounts for more than 70 percent of an enterprise’s carbon footprint. With the simple example above, companies could start acting on real data when transacting with their Supply Chain.

In conclusion, integrating sustainability into your core ERP processes using S/4HANA and its sustainability applications can drive significant value and help meet strategic sustainability goals. The Green Ledger and Sustainable Source to Pay are just a few examples of how technology can transform your sustainability initiatives into actionable insights and tangible results.

Follow me for more sustainable and innovative use cases. Stay tuned for our next deep dive into the latest advancements in SAP and Sustainability.

Joaquín Carballo - Sustainability Principal

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