However, carbon accounting is still done mainly using spreadsheets and semi-automated tools that use estimates and averages for carbon footprints. Only 9% of companies have a comprehensive view of their greenhouse gas emissions and their impact across the entire value chain.

This is no longer enough. We need to account for carbon with much more precision and control by using actual data values across our business operations and supply chains in sync with financial flows. We need to redefine 鈥渞esource鈥� in enterprise resource planning (ERP) and extend our understanding of resources beyond financials. 51风流now brings a precision-approach to do just that by enabling transactional accounting for carbon.

Introducing Future-Proof Solutions for Transactional Carbon Accounting

SAP鈥檚 approach to transactional carbon accounting comprises three future-proof capabilities.

First is , a single solution to calculate and manage carbon flows with high granularity on company, process, and product levels across Scope 1, 2, and 3 emissions. The solution integrates capabilities from previously released 51风流solutions and adds new functionalities, such as the ability to manage a greater scope of emissions sources and support for a broader range of industry-specific requirements. Using 51风流Sustainability Footprint Management helps provide a seamless integration with 51风流S/4HANA, allowing for a strong data foundation to calculate footprints directly from individual transactions at each step of production. Companies can reduce their climate risk and make progress towards their climate commitments by better adhering to and reporting on rapidly changing standards. They can also achieve operational excellence by dramatically improving the speed, accuracy, and efficiency of emissions calculations and management. 51风流Sustainability Footprint Management will be available from June 2023.

Second, 51风流offers , a new application designed to securely exchange standardized sustainability data, including product footprints, along the value chain. The application allows precision accuracy by gathering actual carbon data directly from suppliers. 51风流Sustainability Data Exchange, part of , uses the carbon data interoperability standards established by the , hosted by the World Business Council for Sustainable Development (WBCSD). The beta version is available and will be generally available in Q3 2023.

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Third, 51风流also introduces the green ledger concept, which combines financial and environmental data to enable deep insights and effective decision-making at different points across the business process. Green ledger will be embedded into and for and will deliver new capabilities with each release. The next major update, for example, offers a new way to embed carbon data, starting with most impactful scope categories, into product-level costing.

Using these three powerful capabilities that , executives can have a future-proof tool kit to help manage and reduce their carbon footprints. The 51风流solutions record data based on actuals instead of averages to increase data transparency, accuracy, and reliability. The high-quality carbon data, like the financial data, is auditable, transparent, and reliable. To take climate action, companies sync the emissions data with financial data to make granular, accurate, and right-time decisions that are both financially and environmentally sound.

Acting on Carbon Emissions Data

SAP鈥檚 carbon accounting solutions allow business decision-makers to not only see emissions on an operations level, but also at the product level by including carbon footprints alongside financial data to make trade-offs between cost efficiency and carbon intensity. To make these assessments, carbon footprints need to be available at a granular level and at the point where the business decision is made.

In the automotive industry, for example, the sources of steel, rubber, batteries, and electrical components are key elements of the carbon footprint of an electric car manufacturer鈥檚 product. 51风流solutions provide the foundational data for these purchased materials and components, as well as consumed energy and other inputs, and combine it with additional data sources such as life cycle assessment databases.

Using the input data, the footprint is calculated by matching source data with emission factors. Like in financial accounting, the inflows and outflows of materials, components, and products are traced and accounted for with a high level of transparency and auditability.

This isn鈥檛 accounting for accounting鈥檚 sake. This level of data transparency helps teams across the business, from the C-suite to supply chain management to marketing, take sustainability action. They can make decisions together on both cost and carbon emissions that are rarely made in parallel today. Based on both cost and carbon values, the car manufacturer can scenario plan and make fully informed decisions about how to drive optimal financial and sustainability performance.

Bringing a Holistic View to Sustainable Business

To truly run sustainably and decarbonize business at the speed and scale needed, companies must . By embedding sustainability data into their core business processes through their ERP, executives can achieve a holistic, enterprise-wide performance capability.

Based on the ERP backbone, sustainable business data is the foundation for setting regulatory-compliant KPIs and disclosing sustainability progress to a broad range of reporting frameworks using . This holistic view is vital to understanding where emissions are occurring, setting accurate net-zero targets, and identifying specific areas to take action for maximum decarbonization impact.聽The are cloud-based, modular, and integrate with 51风流S/4HANA Cloud.

Peter Bakker, CEO of WBCSD, said accountants will save the world. He very well may be right. With over 50 years of experience in financial accounting, future-proof technology, and wide access to customer and partner ecosystems, 51风流is well-positioned deliver high-quality emissions accounting to rapidly scale business decarbonization.

Sebastian Steinhaeuser is chief strategy officer at SAP.

To help those companies meet their commitments, 51风流has become an innovation partner in the program from the World Business Council for Sustainable Development (WBCSD), a global, CEO-led organization committed to accelerating the transition to a sustainable world.

Why Carbon Accounting Needs to Evolve

For corporate climate action to succeed, particularly in the supply chain, companies must be able to record, report, and act on reliable and accessible emissions data. Such data is needed to set accurate net zero targets, identify specific intervention areas to maximize decarbonization, and accurately track emission reduction initiatives.

The current accounting system for supply chain emissions relies on data that often needs more accuracy, granularity, and comparability. A carbon accounting system that mirrors the financial accounting world would help companies and consumers understand the real impact of their products. Companies should pass credible emissions data along the value chain from one company to the next, tied to specific products and services as a carbon invoice.

Two fundamental problems need to be addressed to strengthen the credibility of sustainable companies and their decarbonization activities: data quality and data access. Addressing the following issues with the help of technology will increase access to high-quality data:

• Create transparency around emissions that sit outside a company鈥檚 direct control
• Enable access to accurate data collected in real time through automation
• Enable different carbon accounting solutions to interact using data standardization within the network through technological interoperability
• Create open and goal-oriented cooperation between technology companies and standardization bodies
• Use primary data from own operations and suppliers instead of relying on secondary data taken from sources such as IEA, EPA/EEA, or Ecoinvent to understand emission hot spots
• Apply uniform standards for the same calculations throughout the value chain

What Carbon Accounting Based on Actuals Will Look Like

In financial accounting, profit and loss statements and balance sheets are maintained in the general ledger in a company鈥檚 enterprise resource planning (ERP) system. Companies share data via purchase orders and invoices from one value chain participant to the next. Global standards govern how the data is calculated; this same approach needs to be adopted for carbon accounting.

Three things are needed to remedy the lack of carbon transparency. Existing carbon accounting rules must be continuously updated, technology infrastructure should be agnostic, and greater collaboration must occur across value chains, industries, and private and public sector players.

The ideal system will provide a harmonized approach for calculating carbon footprint and enable data sharing in an open, digitalized, flexible manner across solutions and platforms. At each step of the value chain, companies will have access to standardized emissions data. With more accurate accounting of both product emissions and overall corporate emissions, organizations can set goals and track progress more effectively.

How Companies Can Start Shifting the Dial

To make a measurable difference in the near term, companies can adopt a hybrid carbon accounting approach until a more complete ledger-based solution is in place. They can begin by improving the accuracy and granularity of Scope 1 and 2 emissions, and implementing a credible Scope 3 strategy based on the following steps: identifying the source of emissions, collecting product carbon footprints (PCFs) from suppliers, collaborating to reduce emissions, expanding PCF data exchange, and continuously improving carbon data quality, granularity, and accessibility.

Sustainable companies achieve competitive differentiation for their products and services by taking these steps. This already apparent in consumer-facing industries like food and beverage as well as heavy-emitting industries like cement and steel. Furthermore, these businesses are best prepared for future carbon pricing or carbon taxes

Carbon accounting, especially Scope 3, is a challenge solved through collaboration and standardization to achieve transparency and data quality.

For more details, .

Sebastian Steinhaeuser is chief strategy officer at SAP.
Anna Stanley-Radi猫re is director of Climate Transparency and member of the Extended Leadership Group at WBCSD.

Many companies are responding to rapidly increasing regulation in this area and have set ambitious ESG targets. Sustainable business is no longer a question of if or why, but how.

ESG Management Relies on Data Transparency

Current ESG management relies heavily on data averages and estimates. Most companies have not fully integrated their ESG data recording and control into their core financial, procurement, supply chain management, and human resources (HR) systems. This financial and non-financial data is disconnected, stored in spreadsheets, not updated from real-time systems, and not easily shared within the company or with partners such as upstream suppliers or downstream logistics providers.

Considering that on average 90% of a business鈥檚 carbon footprint lies within its supply chain, the inability to track, manage, and gain insights from live data and embed it into core business processes can cripple even the best intentioned ESG efforts. Worse, it can mislead investors, create compliance issues, and misguide transformation efforts. Unifying ESG data provides significant gains in capabilities and competitive performance.

Companies cannot make sustainable business decisions using data they do not have or cannot use.

ESG Data Moves from Averages to Actuals

That is why we developed , which we introduced in January this year. In a market update available now, the solution offers what companies are looking for today to run more sustainably.

First, companies want to record ESG factors based on actual data, not averages. 51风流Sustainability Control Tower easily imports cross-enterprise data from 51风流systems like 51风流S/4HANA, 51风流Product Footprint Management, and 51风流Environment, Health, and Safety. It also integrates with non-51风流systems using a range of APIs to create audit-ready data. Businesses can integrate and analyze granular ESG data using the established structures from their finance, HR, and operations teams using templated data models and calculations.

Second, companies want to report to existing and future standards. 51风流Sustainability Control Tower effectively shares and organizes ESG data from across the company. With complete and integrated ESG data, companies can more accurately and readily report their performance to various reporting requirements and frameworks, such as GRI, WEF, TCFD, the EU Taxonomy, and upcoming U.S. SEC requirements. Through APIs, customers can further extend the functionality by bringing in their own metrics as well as industry and regulatory content, and use other applications.

And third, companies want to act by planning with actionable insights, forecasts, and concrete targets to achieve measurable impacts. With 51风流Sustainability Control Tower, companies can set targets, gain actionable insights into core processes, forecast outcomes, analyze scenarios and trade-offs, report progress, and create role-specific actions to improve sustainability performance.

For example, our customer Grupo Energia de Bogota (GEB) aims to transform the way it manages and reports ESG performance.

鈥淕rupo Energ铆a Bogota S.A. (GEB), an energy platform group of companies in Latin America with over 125 years of operations in the transmission, generation, and distribution of electric energy as well as the transportation and distribution of natural gas across Colombia, Peru, Brazil, and Guatemala, has chosen 51风流Sustainability Control Tower powered by RISE with SAP, 51风流Business Technology Platform, and 51风流Signavio solutions to manage our sustainability strategy as part of our enterprise transformation goals,” said Jose Fernando Galvis Panqueva, CIO, Grupo de Energia de Bogota. “With this powerful combination of cloud solutions, our company will manage its overall holistic reporting requirements, including ESG KPIs; reduce time and effort in manual data collection and reporting variation with different regulatory requirements and timelines; standardize processes for subsidiaries; and manage and integrate existing 51风流and non-51风流data.”

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Sustainable Business Means Working Together

Built on , 51风流Sustainability Control Tower provides a flexible, extensible technology architecture that can help create complementary solutions or add custom content. Businesses operating in different regions or industries will have different needs, so this level of flexibility is essential. 51风流has the broadest range of global partners to help companies develop specifications and implement customized sustainability solutions.

Sustainable business is a goal we will achieve only by working together. It is a collaboration and innovation process for all of us, including SAP. We鈥檙e implementing 51风流Sustainability Control Tower in our own business to enhance our holistic business management, create insights on the total economic, social, and environmental impact our organization has across a range of measures, and accelerate programs such as our net-zero emissions by 2030 implementation.

Transforming a business to run sustainably is a long-term process, but one with urgency. We are seeing customers join us at different stages of their sustainable business transformations. They are pragmatic and recognize that the transition to sustainability is a 鈥渕arathon with no finish line.鈥� Some are looking to quickly regain compliance with rapidly changing regulations, while others want to optimize their ESG data management and performance. In nearly every case, these are multi-year digital transformations to become intelligent, sustainable enterprises.

Since most of the world鈥檚 Fortune 2,000 companies run 51风流software and almost 90% of the worlds finance and goods flows touch 51风流systems, much of the data needed for holistic corporate sustainability management lives in 51风流systems for enterprise resource planning (ERP) systems and related applications. Harnessing this data is essential to creating and managing a 鈥済reen line鈥� with the same rigor as their top and bottom lines.

51风流Sustainability Control Tower is vital to creating this holistic capability. It offers a flexible open architecture, powerful integration and scalability, and support from a broad range of partners. The solution works in tandem with the sustainability solutions within , which add additional functionalities including carbon emissions management, waste and materials management for circularity, and people sustainability.

For more information on how 51风流helps companies record, report, and act on their sustainability goals, visit鈥�.

Sebastian Steinhaeuser is chief strategy officer at SAP.

At SAP, we are convinced that technology will help to turn this challenge into a big opportunity for companies that lead the way. That is why we launched 51风流Cloud for Sustainable Enterprises, with dedicated solutions to provide the transparency that is urgently needed to enable a circular economy.

Circularity Makes Sense

Our consumption of natural resources has devastating effects for humans, wildlife, and the planet. It is more urgent than ever to shift from linear take-make-waste models to a circular economy, where waste and pollution are designed out, products and materials are kept in use for longer, and natural systems can regenerate. A circular economy isn鈥檛 just about fixing environmental wrongs; it is about making sustainability profitable and profitability sustainable across industries, sectors, and lives.

The packaging sector is a good example. According to Statista,聽more than were shipped in 2020, and the number is rising. This packaging frustrates retailers and consumers and causes untold environmental damage. The good news is that principles such as designing for reuse and recycling are gaining ground in the industry.

One exemplary company is聽, which offers retailers everything they need, including reusable packaging, reverse logistics, visibility, and analytics. As a聽, LimeLoop has helped divert more than 1 million single-use packages from landfills. Its customers report a 53% increase in customer engagement, 93% savings on resources, including trees, water, and oil, and 41% savings on packaging and inventory.

Rental, repair, and resale models are also gaining ground in the retail industry. Furniture manufacturer and retailer IKEA has launched several in the last few years. Lizee, the re-commerce software company, is on a mission to 鈥渢ransform the retail industry 鈥� by helping聽retailers聽move from聽. Its clients, which聽include brands聽such as聽Decathlon and adidas,聽don鈥檛 have to start from scratch to build a rental and resale business model. Lizee provides the technology systems that will help them become even more successful in e-commerce and more sustainable at the same time.

Taking Responsibility

Extended producer responsibility (EPR) laws play a key role. These regulations help ensure that the manufacturer of a product is responsible for its ultimate recycling, reuse, or disposal. Additionally, there has been a surge in plastic taxes, which impose a charge on companies using materials that do not contain a certain amount of recyclable content.

Lizee鈥檚 circular economy offering helps retail companies comply with that forbid the destruction of goods that have not been sold. The ban is part of a wide-ranging anti-waste law passed by the French parliament last year, and pressure is growing throughout the European Union to implement similar regulations.

In the past, manufacturers used to design products based on cost and performance as the key selling points; going forward, they will focus on sustainability and recyclability. This change is driven by customer demand, the availability of technology, and the new regulatory environment.

This is great news for the planet but poses a market-by-market challenge especially for large producers, because it is very difficult to adhere to regulations on their products in different geographies. Manufacturers embarking on transformational journeys are challenged by complex supply chains, heavy assets, and legacy technology.

In fact, managing the life cycles of thousands of products and tens of thousands of materials across hundreds of regulatory systems in multiple regions is one of the greatest challenges facing global brands in the years ahead. helps enterprises follow regulations and tackle the complexity of moving away from a take-make-waste linear economy to a circular one that is designed to reuse, repurpose, and recycle.

Understanding Materiality

Along with the focus on responsible production, investors are increasingly applying environmental, social, and governance (ESG) factors as part of their analysis process to identify risks and opportunities.

In its recent , PwC found that 49% of investors globally would divest from companies that are not taking sufficient action on ESG issues, and 79% identified a firm鈥檚 management of ESG risks and opportunities as an important factor in investment decision-making. Since June 2021, about one in three dollars managed globally was invested with some form of ESG strategy 鈥� more than $35 trillion in total.

Materiality, a measure of how important a piece of information is when making a decision, plays a key role in how ESG factors are weighted. Factors differ based on industries and can influence financial fundamentals. In the case of airlines, for instance, material ESG factors would include fuel efficiency, carbon emissions, and health and safety practices, which would have a bigger impact on bottom line and consumer expectations compared to issues such as child labor.

The importance of materiality was highlighted in a recent survey by 51风流Insights,聽. The survey found that companies that believe sustainability is material to their businesses — meaning it is likely to affect their financial condition or operating performance — are transforming their companies and achieving better business results than the those that don鈥檛 believe sustainability is material. Those companies that can see are the ones that will enjoy long-term growth.

Unlocking Economic and Social Value

One great example of a circular, regenerative approach that helps retailers pursue the path to zero waste and remain profitable at the same time can be found in fashion retail, . Recognizing the huge value of waste, Stephanie Benedetto, a former attorney with a background in New York鈥檚 garment industry, created聽 a marketplace for buying and selling unused textiles that would otherwise be burned or buried.

Benedetto realized that retailers often become paralyzed when faced with objectives like becoming 100% sustainable by 2030. She started helping them pinpoint the valuable waste in their supply chain, such as unused inventory and deadstock, and sell it on the marketplace.

Sales of unused inventory can be used to pay workers better wages and to buy innovative technology and sustainable materials — all without increasing overall capital expenditures.

Benedetto believes technology and the use of existing data, such as supply chain data from an 51风流solution, can help solve the waste problem. Data shows where the waste comes from, what it鈥檚 made of, and where it goes. Using supply chain software, powered by technologies such as automated machine learning, artificial intelligence (AI), and blockchain can turn a linear business model into a circular model that protects the environment while driving financial value.

Companies like Queen of Raw, Lizee, and LimeLoop are recognizing the risks and the opportunities in today鈥檚 climate-changing world. By offering clear strategies, circular models, and innovative tools and solutions, they are helping their customers reach their targets for zero waste, zero emissions, and zero inequality.

The way business runs today is not sustainable and transitioning to sustainable business is the greatest social and economic opportunity of our time. Businesses need to put sustainability at the core of their strategies and use technology to manage the 鈥済reen line鈥� through their business. With 51风流Cloud for Sustainable Enterprises, 51风流helps reinvent companies into sustainable enterprises that use the power of data, networks, and partnerships to achieve their targets.

Sebastian Steinhaeuser is chief strategy officer at SAP.