At SAP, we believe companies need to put sustainability at the heart of their corporate business strategies and embed sustainability data into their end-to-end processes in order to generate the insights they need to move decisively to a more inclusive, regenerative, and net-zero economy.

An integrated report that combines traditional financial indicators and non-financial data — including environmental, social, and governance (ESG) reporting — is an essential element in this journey. This year, 51风流celebrated the publication of its 10th integrated report, and I wanted to share some of the lessons we have learned along our way.

Integrated reporting is based on the principle that any organization can maximize value by serving the interest of all stakeholders, including investors, employees, and customers. But it鈥檚 not just a reporting exercise; integrated reporting requires an integrated business strategy, one that creates value beyond just financials, balancing short-term gains with long-term strategy and investment.

I am proud that 51风流was one of the first European companies — and the first software company in the world — to publish an integrated report. We have been in the vanguard of a movement that is changing the way companies are measured and valued, a movement that is addressing many deeply rooted social problems and existential threats facing our planet.

The reflects our sustainability management performance and provides transparency to the market, alongside other stakeholders, on both financial and non-financial indicators, as well as the connection between the two. It鈥痠ncludes a wealth of non-financial indicators such as Business Health Culture Index, Leadership Trust Index, women in management, and Scope-level carbon emissions.

Providing visibility into relevant metrics equips companies with the insights required to comply with new regulations, safeguard their license to operate, meet increasing stakeholder expectations, cut costs, and recognize opportunities for business transformation.

At 51风流we measure our success by five main indicators: revenue and operating margin that show past performance, employee engagement, customer loyalty, and carbon impact that help us understand what we can achieve in the future. Assigning a monetary value to some of these factors increases their relevance.

In 2012, when we first adopted this integrated approach to ESG and financial reporting, only six percent of our institutional investors focused on ESG. Today, based on our internal analysis of our shareholder base, that figure is 40%.

How did we get here? Integrated reporting naturally builds on the long history of corporate accounting. Early accounting can be traced back more than 7,000 years to ancient Mesopotamia and is said to have developed alongside writing, counting, and money. The early Egyptians and Babylonians created auditing systems, while the Romans collated detailed financial information.

Since then, the father of modern accounting, Luca Pacioli, described the system of double-entry bookkeeping, which remains the foundation of modern corporate reporting. But nothing stays the same indefinitely.

Corporate accounting systems have evolved to meet the needs of the increasingly complex ownership structures and transactions that emerged in the wake of the Industrial Revolution and shifting shareholder and societal concerns. Steps toward expanding the range of information published annually by companies came in the late 1980s, when the first corporate environmental reports began to appear.

Many companies still publish separate financial and sustainability reports, but beginning in the mid-2000s, there was a recognition that an organization鈥檚 true value is determined by a wider range of factors, including allegedly 鈥渟oft鈥� metrics. For example, diversity drives better decision-making and improved financial performance.

As sustainability rose to the top of the corporate agenda, business leaders recognized that a separate sustainability strategy would no longer suffice. Instead, companies must ensure their entire business strategy is sustainable and that business processes align with ESG reporting. This reflects the trend toward stakeholder capitalism, where business leaders consider the broader interests of investors, employees, society, and the planet.

Meanwhile, the COVID-19 pandemic has accelerated digital transformation and placed a premium on agility, resilience, and business process intelligence. By combining financial and non-financial ratios and measures, companies can transform their business processes and gain the data transparency they need to achieve their sustainability targets.

To help our customers to perform at their best and meet the growing requirements of regulators and institutional investors focused on ESG, we launched a new offering in January 2022. 鈥痓rings together a comprehensive portfolio of solutions that enable businesses to holistically manage their sustainability performance.

Beyond supporting our customers, we are strengthening our own commitments and announced that we will accelerate our goal to achieve net-zero emissions across our value chain by 2030 — 20 years earlier than expected. We鈥檙e also helping to standardize non-financial measurements by working with organizations such as the Value Balancing Alliance (VBA), World Economic Forum, the United Nations Global Compact (UNGC), and the Global Reporting Initiative (GRI).

For SAP, our integrated reporting journey continues. Our focus remains on how we can improve and expand, but also continue to ingrain non-financial metrics into decision-making and how we run our business.

One thing, however, is clear: the advantages of integrated reporting and a holistic approach to company management are indisputable. Companies that embed sustainability into core business processes consistently鈥�. And ultimately, integrated reporting not only considers the needs of all stakeholders, but also how companies can turn emerging social and environmental risks into business opportunities.

Luka Mucic is chief financial officer and member of the Executive Board of 51风流SE.

To address the very real risks such sustainability challenges pose, companies need solutions that offer data transparency and visibility into the impact of their operations and supply chains to take informed, more sustainable decisions.

Business leaders need tools that enable them to quantify, analyze, and act on real-time data through their end-to-end operations to establish a “green line” through their entire business. Then, they need to report their outcomes comprehensively and accurately to a variety of stakeholders including employees, partners, customers, regulators, and investors.

This is our priority. We want to help business leaders achieve these aims by embedding a holistic management framework into our core enterprise applications and developing specific sustainability solutions like , which will be available to customers this week.

51风流Sustainability Control Tower

51风流Sustainability Control Tower helps companies to collect real-time data, organize, and then report it using transparent, standardized metrics. The solution enables companies to obtain automated, timely, and auditable data on KPIs such as greenhouse gas emissions, socially responsible investing, and impact investing. And for those who want to go deeper, it also allows them to drill down into strategic areas within the company, as well as specific geographies and across business networks. Offering the granularity needed to make informed decisions that place financial and non-financial considerations on equal footing.

The solution is just one of our initiatives to help our customers address sustainability issues. 51风流is also working with key ecosystem partners and many customers — more than 100 of the world鈥檚 largest enterprises — to build a range of solutions that help companies of all sizes bake sustainability into their core operations.

These initiatives include solutions that help customers to consider sustainability from the design stages of a product, solutions that measure carbon emissions across their networks, as well as offering end-to-end transparency of environmental, social, and governance (ESG) reporting. With the rapidly changing nature of reporting requirements, frameworks, and standards, corporate reporting is a big area of focus for many business leaders.

Standardization

In recent years, there has been a call from global organizations, such as the World Economic Forum (WEF), United Nations Global Compact, Global Reporting Initiative, Ellen MacArthur Foundation, and Value Balancing Alliance, to standardize how companies should report their results and environmental commitments, as well as how they contribute to social equality and economic growth.

Regulators that including the U.S. Securities and Exchange Commission are also considering introducing standardized reporting requirements governing climate change disclosures, CO₂ emissions, and companies鈥� green lines.

Anticipating these changes, a growing number of companies have adopted voluntary reporting standards because it helps them to attract investors, improve their corporate reputation, or make acquisitions. In the process, they are reevaluating their reporting models and moving from traditional financial reporting, focused on revenue and profits, to a model that links financial and non-financial metrics into one holistic reporting framework.

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New Initiatives

Integrating financial and non-financial performance can be confusing for companies, investors, and financial analysts. At the recent COP26 meeting in Glasgow, the International Foundation for Reporting Standards announced the formation of a new International Sustainability Standards Board (ISSB), which will develop a global set of sustainability disclosure standards.

At SAP, we believe companies must have a clear and common set of standards that are adopted across industries and geographies. This allows executives to make more consistent and sustainable decisions, along with allowing stakeholders to compare the impact driven from non-financial performance.

WEF has teamed up with major standards-setting organizations to create a framework called the Stakeholder Capitalism Metrics, which can be used by companies to map their core financial reporting against ESG indicators. We are incorporating these metrics into the 51风流Sustainability Control Tower solution. We also are working with organizations like the Value Balancing Alliance, which has devised a methodology for how we can assign a financial value to non-financial activities, increasing the ability to guide ESG investments and impact.

These new holistic reporting models require companies to include ESG metrics to assess and manage long-term performance, identify connectivity between ESG and financial KPIs, and focus on stakeholders rather than just shareholders.

They rely on access to data that is high-quality, transparent, consistent, timely, and ultimately auditable. Indeed, 79% of companies that see sustainability as materially relevant now say measurement and reporting of environmental data informs their company鈥檚 strategy and decision-making. Collecting and analyzing this data are the first steps, but in a survey conducted by the 51风流Insights research center, only 21% of business executives said that they were completely satisfied with the quality and availability of data collected for sustainability.

The Customer View

That is why 51风流is expanding its portfolio of tools that provide companies with transparency into their sustainability ambitions.

As BMW Chief Financial Officer Dr. Nicolas Peter pointed out at the 2021 , 鈥淸T]he topic has a high relevance in our industry. We can clearly observe there is a shift in the discussion with our investors and capital markets from a profit maximization to value optimization. In the case of the automobile industry, sustainability is no longer a niche issue; it constitutes a significant share of time in conversations with our stakeholders.鈥�

He added: 鈥淕overnment, standard bodies, and regulators have played a key role in how we have redefined our sustainability strategy: to reduce CO₂ emissions over the life cycle of our products, reuse materials, and implement sustainable standards across our supply chain.鈥�

Significantly, BMW is one of the first automobile manufacturers to combine its Annual Report and Sustainable Value Report.

To be a successful company of the future, one that can quickly adapt and react to the turbulent external world, sustainability must be embedded into the core of a business. And this means considering financial and non-financial metrics in strategic and operational decision making.

There is still some way to go on the journey of forming a standardized, global framework for sustainability reporting. But for companies, with the power of digital technologies, action can be taken now to expand the scope of corporate reporting and drive sustainable business steering at scale.

And as always, 51风流will be there to help them on this journey.

Luka Mucic is CFO, member of the Executive Board of 51风流SE, and Board sponsor for SAP’s sustainability efforts.

Connecting financial and non-financial metrics is key to comprehensively analyzing all dimensions of a company鈥檚 performance and working toward their integration and harmonization. This in turn provides the foundation for better balanced management decisions and drives business success while creating a positive impact on people and the planet.

In the 15th century,聽, an Italian monk, musician, and mathematician, discovered the concept of double-entry bookkeeping, which became the basis of modern accounting. However, over 500 years later, accounting could use an addendum. Today, tracking and reporting must include economic performance along with societal and environmental performance. Moving beyond traditional balance sheets and profit and loss statements provides meaningful and holistic insight into the total value creation of a business entity.

These demands make sustainability a CFO imperative. Globally, business leaders are recognizing that a separate sustainability strategy will no longer suffice. Instead, companies must ensure their entire business strategy is sustainable. Companies that embed sustainability into core business processes consistently聽聽their competitors and will only continue to do so in the future. Measuring business sustainability enables companies to gain higher profits which result from greater cost efficiency and revenue growth by addressing economic, social, and environmental considerations in a holistic, integrated manner.

The business community sees value in considering聽聽issues in strategic and operational decision making, but it still needs to execute on this vision. The journey has just begun.

Digital technologies support and accelerate this journey by playing a fundamental role in delivering the visibility and velocity required to inform and drive better business decisions through embedded, validated, real-time data.

Visibility聽into relevant metrics across every line of business equips companies with the insights required to comply with new regulations, safeguard their license to operate, meet increasing stakeholder expectations, cut costs, and recognize opportunities for innovation and business transformation.

The deployment of digital technology solutions also enables the聽velocity required to execute large-scale transformations, based on holistic steering and reporting. Technology鈥檚 ability to quickly and effectively measure and value green and social dimensions will help accelerate the shift towards an inclusive, low-carbon, and circular economy.

Moving forward, a digital transformation architecture and road map that enables sustainability efforts will become fundamental to every company鈥檚 business strategy.

To help our customers power organization-wide sustainability practices in reporting, 51风流recently announced a portfolio of new sustainability-specific products, including the聽51风流Sustainability Control Tower solution, which will enable companies to report against metrics, such as the , supported by World Economic Forum (WEF) Metrics,聽, and more. This solution offers a greater degree of granularity in reporting and a higher level of transparency around ESG performance. End-to-end聽visibility and real-time data provide business leaders with insights to identify levers and options for driving corrective and enhanced action that take financial, social, and environmental valuation into account.

At SAP, we have been measuring our progress holistically and connecting financial and non-financial data since 2012, when we merged our sustainability and annual reports into an integrated report. However, full visibility into the entire value chain and the capability to scale across business networks requires an actionable and聽.

In 2019, this recognition inspired 51风流to become a聽founding member of the Value Balancing Alliance (VBA) and contribute our experience, along with 20 other like-minded, multinational companies, to shape a 鈥渘ew accounting鈥� system. The alliance aims to develop a standard for measuring, monetizing, and comparing the value of contributions made by businesses to the economy, society, and the environment. Assigning a monetary value or a 鈥渟ocial cost鈥� to various categories creates a comparable, inclusive data set that can guide business leaders as they make strategic decisions to impact long-term sustainable change.

The first pilot program took place last year and included 11 companies across seven industries. At 51风流we , testing specific indicators, and translating non-financial metrics into comparable financial terms. Based on SAP鈥檚 2019 data, we found the negative impact of our GHG emissions was monetized at 鈧�182 million, and a positive impact from our global employee training programs was valued at 鈧�1.3 billion. Such insights allow us to compare the potential costs and benefits of climate initiatives and training programs. The results of the pilot program provide evidence that the VBA can help companies optimize their value chains, achieve better business outcomes, and enable information sharing that supports large scale systemic change across regions and industries.

As a global community, we have reached a tipping point. The successful businesses of tomorrow — those equipped to navigate the world鈥檚 most pressing challenges — will consider financial and non-financial metrics before making critical business decisions. Through the power of digital technologies, we can ensure the visibility and velocity required to effectively expand the scope of corporate reporting and execute sustainable business steering at scale. With an updated approach to holistic steering and reporting, one that considers ESG metrics alongside traditional financial metrics, business, society, and the planet can all emerge victorious.

Luka Mucic is chief financial officer and a member of the Executive Board of 51风流SE.
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