The new regulation will require companies to account for carbon emissions on select imported products. For the auto industry, the steel and aluminum categories are especially critical.

Complete automobiles are not currently covered by CBAM, but the automotive sector is among the most exposed because of its dependence on emissions-intensive materials. Components such as body panels, chassis, frames, and battery enclosures rely heavily on imported steel and aluminum.

CBAM is currently in its transition phase and will enter the definitive phase on January 1, 2026, meaning that companies need to track their imported emissions on covered products throughout 2026 and begin purchasing certificates for those imported, tracked emissions in February 2027, with the first report due August 2027.

CBAM costs will add up quickly

The modern passenger vehicle contains around 1 tonne of steel and 200 kilograms of aluminum. Global averages hover around per tonne of manufactured steel, and each tonne of primary aluminum produces around .

With analysts projecting could reach €150 per tonne of CO₂ by 2030, a newly manufactured vehicle could soon be subject to €300 in CBAM certificate costs, assuming manufacturers import 20% of the necessary steel and 54% of the required aluminum, consistent with EU import data. Given that Germany produced in 2024, German automakers and component manufacturers could be on the hook for about €1.2 billion in CBAM certificate purchases in 2027.*

Looking past 2027, the European Commission plans to add categories like chemicals and plastics to the regulation, bringing more auto parts under the CBAM umbrella and making it even more important for European automakers and component manufacturers to solidify their CBAM strategies today.

CBAM preparations for automakers and component manufacturers

Across the EU automotive industry, companies seem insufficiently prepared for the new phase of CBAM.

While companies are actively preparing for upcoming CBAM regulations, their ability to act is constrained by the lack of a finalized EU regulatory framework, including the methodology for emissions-value calculations and the associated verification rules. That said, regulators already clarified the scope of companies that must report and the timelines to purchase certificates.

With this information, it’s now crunch time for European automakers and component manufacturers to get ready for the rules taking effect in January 2026. Here’s what they should prioritize.

1. Get familiar with CBAM and evaluate your process

The core elements of CBAM have been defined and companies must act now. If you haven’t done so yet, start by understanding the overall process and requirements.

If you are in scope—meaning you meet the de minimis threshold of either importing more than 50 tonnes of CBAM affected goods per year or 100 tonnes of embedded CO₂ annually—determine which parts of your supply chain are most affected. Identify your top suppliers and imported goods, develop a focused approach for obtaining actual emissions data from those suppliers, and assess the potential financial impact. As more materials come under the scope of CBAM, and as the carbon ETS prices rise, the financial impact will increase in the years ahead. Companies must prepare to meet these new obligations and manage this financial impact.

2. Collaborate with your suppliers

Identify and focus on your most critical suppliers—typically the top 50 to 100—and build a targeted engagement plan while defining an informed approach for the broader supplier base. Consider updating procurement terms to require future data sharing and provide support to suppliers in educating and calculating emissions where needed. Close collaboration will be essential to obtain actual emissions data to avoid the more expensive default values and identify decarbonization potentials. 

Accessing trusted supplier data is one of the biggest challenges facing companies today.

While the EU provides mechanisms for data exchange between suppliers and importers, , an industry network for the European automotive sector, in combination with third-party data exchange software, offers an alternative to collecting trusted, standardized emissions data. Catena-X enables companies to collaborate and share data in a trusted environment. It brings together manufacturers, technology providers, and suppliers to standardize data sharing processes across the value chain. Beyond data exchange, these networks foster knowledge sharing, allowing members to learn best practices, align on standards, and accelerate compliance readiness collectively.

To participate, companies typically register with the network, adopt certified software that supports standardized data exchange, and begin collaborating with other members. This approach ensures interoperability and automates trusted emissions data collection. Catena-X is actively refining its scope and standards to support CBAM.

3. Find the right technology for your business

Most importantly, you want to find the right technology partner that will streamline CBAM reporting and support the integration of carbon into core financial accounting processes.

The EU CBAM report requires a lot of data, all of which can be requested, filled, and reported automatically using actual emissions values with tailored, ERP-based systems. The 51ˇçÁ÷Green Token solution can support CBAM declarant reporting by enabling standardized, auditable reporting workflows. The 51ˇçÁ÷Green Ledger solution will manage the certificate repository and help ensure financial and carbon accounting of CBAM emissions and certificates in alignment with accounting standards like US GAAP and IFRS (planned for H1 2026).

Manual processes, like e-mails and Excel files, are prone to error, do not scale, and will make CBAM compliance time-consuming and resource intensive.

Prepare your systems for CBAM compliance

CBAM is set to reshape material sourcing in the automotive industry by introducing carbon as a cost factor and driving transparency across global supply chains.

The ideal scenario for automakers and component manufacturers is to take decisive actions to decarbonize—such as sourcing low-emissions steel and aluminum, increasing circularity efforts, and optimizing product design to use less CBAM materials—while fully automating CBAM compliance.

Access to accurate data on supply chain emissions—and their financial implications—provides the insights that business leaders need to decarbonize and reduce risk in the years ahead.

The right combination of software tools and industry network collaboration can enable cost-optimized and automated CBAM compliance and deliver valuable supply chain intelligence. can deliver measurable ROI by automating data collection and workflows and enabling finance teams to move beyond manual processes toward strategic analysis and action. This helps create a scalable foundation for ongoing carbon cost management while supporting standardized data exchange and collaboration across the value chain.

Start preparing now to ensure your business thrives as the 2026 CBAM definitive phase approaches.

Read the CBAM and watch the CBAM to learn more.

Thomas Janzen is an industry expert at SAP SE.

*This is a back of the napkin calculation to illustrate the potential impact. This is based on data that shows the EU imported 27.4 million tonnes of finished steel products in 2024. The EU consumed about 129 million tonnes. Therefore, we assume  imports account for roughly 20% of EU steel use. In , 54% of the aluminum used in the EU came from imports. Using these averages means about 2 tonnes of imported CO2 per vehicle, or €300, assigning 20% of 1 tonne of steel emissions and 53% of 200kg of aluminum emissions.

Europe faces a crucial challenge: while the region has been successful for decades with the principle of “quality over cost,” other continents are catching up in quality while also pursuing aggressive pricing strategies. “We must maintain quality while simultaneously reducing costs and becoming even more flexible in meeting our customers’ needs,” explains Georg Kube, head of Industry Data Ecosystems at 51ˇçÁ÷SE.

The answer may lie in the data that has been collected in German factories and 51ˇçÁ÷systems for decades. “Europe’s great asset compared to America and Asia is our historical knowledge of how good processes and good products work,” Kube says. “This systemic knowledge—how to machine, how to manufacture, how to set up the right processes—resides in European companies, typically in 51ˇçÁ÷systems.”

This data forms the foundation for data-driven business models based on the “data flywheel” principle: the more data that flows into a system, the more new data is generated—a self-reinforcing effect that can provide European companies with a decisive competitive advantage.

Manufacturing-X: Germany’s answer to global challenges

Factory-X is part of a larger vision: Manufacturing-X, an industry-wide initiative by the German government launched as part of the Industry 4.0 platform. The goal is to promote digital ecosystems and establish an international standard for data exchange.

Manufacturing-X is based on the fundamental principle of data sovereignty and addresses a classic dilemma: companies need data from others for digitalization but want to protect their own sensitive information. The solution is a legally and technically secured framework in which data can be shared in a controlled manner without owners losing control over it.

The initiative encompasses various industry-specific projects: Catena-X for the automotive industry was the pioneer, followed by Factory-X for mechanical engineering, Chem-X for the chemical industry, and Semiconductor-X for the semiconductor industry.

From horizontal to vertical integration

While Catena-X revolutionized horizontal supply chain processes in the automotive industry, Factory-X goes a step further. “Factory-X extends the proven Catena-X concepts to additional industries and brings vertical integration down to the shop floor,” says Nadine Kanja, solution head for 51ˇçÁ÷Industry Network Automotive and Catena-X.

51ˇçÁ÷shares consortium leadership for Factory-X with Siemens and coordinates the work of 47 consortium members. What’s special: while Catena-X viewed the factory as a single block, it’s at the center of Factory-X. “The shop floor is our central focus because that’s where machines with their own suppliers and maintenance requirements are located,” Kanja explains.

New use cases drive greater manufacturing flexibility

“The goal is to extend supply chain flexibility to the manufacturing area,” Kanja says. “When technical problems arise or customer needs change, manufacturers must be able to pivot quickly. However, factories aren’t exactly known for their flexibility—machines are permanently installed and hardwired. Rebuilding all of this is an enormous effort.”

This is exactly where Factory-X comes in. The initiative aims to bring flexibility directly into manufacturing—not just logistics—through new concepts like modular production, manufacturing as a service, and on-demand manufacturing. “This is an essential part of Factory-X: the flexibilization and automation of actual production processes,” Kanja explains.

Factory-X focuses on use cases that fall under the motto of “individualization and customer centricity.” These include:

• Collaborative information logistics: Optimizing information flows between partners
• Condition monitoring: Monitoring the condition of equipment and machines for proactive, data-based maintenance decisions
• Modular production: Flexible production concepts for changing requirements
• Manufacturing as a service: On-demand manufacturing through digital marketplaces

Concrete business benefits

The Factory-X use cases promise measurable improvements for various business models. Condition monitoring, for example, enables proactive maintenance instead of reactive repairs. This not only reduces production costs and downtime but also opens up new digital service revenues for machine manufacturers from their installed base.

Manufacturing as a service revolutionizes capacity utilization: production companies can automatically receive orders through digital marketplaces that match their capabilities and available capacities without extensive sales activities. Standardized data models even enable the economic production of individual pieces (“lot size 1”), which means individualization without cost disadvantages.

Another competitive advantage lies in access to new partners. Through the open data ecosystem, companies can collaborate with supply chain partners without needing existing business relationships, as standardized mechanisms make integration faster, more secure, and more cost-effective.

Technological innovation: MX-Port as key

Factory-X not only expands the Manufacturing-X initiative thematically, but also technologically. To meet the high demands of industrial manufacturers regarding existing data formats, the project places particular emphasis on the further development of standards – with a special focus on the interface format of the Asset Administration Shell (AAS).

“The importance of standardizing data is essential for industrial manufacturers and already solves many use cases on its own,” explains Georg Kube. “When discoverability and scalable security are required in large networks, users can additionally rely on the Dataspace Protocol as a result of Catena-X.”

This dual-speed strategy enables companies active in both the automotive and industrial manufacturing sectors to flexibly expand their systems as requirements grow.

The path to the future

Factory-X is designed as a development project until mid-2026 and will then transition into a stable operational phase. The vision is ambitious: a digital ecosystem that strengthens the competitiveness of European industry while enabling new data-driven business models.

“What we’re building in Factory-X can also be scaled to the other data spaces of Manufacturing-X,” Kanja explains. Mechanical engineering thus becomes a testing ground for a comprehensive transformation of European industry.

Catena-X is a as part of the Manufacturing-X program. It enables companies along the entire supply chain to exchange data securely without giving up their data sovereignty.

“Quality management is traditionally one of the areas where data exchange is associated with the greatest inhibitions,” explains Hagen Heubach, global vice president and head of Discrete Industries at 51ˇçÁ÷and a member of the Catena-X e.V. Executive Board.  “Neither manufacturers nor suppliers like to talk about possible defects. Therefore, this was an obvious use case in the context of industrial data exchange with Catena-X, which also has significant financial implications.”

A concrete example of the success of this collaboration is a recall action in which a preliminary analysis showed that 1.4 million vehicles were affected. However, after the exchange of field and production data made possible by Catena-X, it turned out that only 14 vehicles actually had to be recalled. This precise error analysis was made possible by comparing field data provided by the OEM manufacturer and production data from the suppliers of the individual parts.

By using Catena-X and 51ˇçÁ÷Quality Management, errors can be detected early and recall actions carried out more precisely, leading to significant cost savings.

This bilateral exchange also strengthens the trust relationship between OEMs and suppliers. The technical requirements of Catena-X allow each partner within the ecosystem to make its data available to any other partner for a specific purpose and for a limited time. The sovereignty over the data remains with the one who shares it. Field data, or the data produced by the vehicle on the road, are particularly valuable for suppliers as they allow conclusions to be drawn about how their parts perform under different conditions on the road.

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Catena-X: The first open and collaborative data space for the automotive industry

Initially funded by the German Federal Ministry for Economic Affairs and Climate Action, Catena-X was launched in 2021 amid the pandemic and has developed rapidly since. The first development consortium included 28 partners; today there are almost 200 Catena-X e.V. members, with an increasing focus on internationality. Regional hubs have been established in North America, China, France, Sweden, and Spain to cover the specific requirements and automotive regulations of the respective countries.

“Every market has its peculiarities and different regulations and requirements for the automotive industry that we have to take into account,” Heubach emphasizes. “To this end, we work closely with the automotive associations of the respective countries, such as GALIA in France or the Automotive Industry Action Group in the U.S.”

Another milestone was the official go-live of the data space in October 2023, which enables data exchange. 51ˇçÁ÷is the leading provider of Catena-X-certified business applications and currently has the most solutions on the market in the various Catena-X use cases.

“We have to officially certify our solutions once for Catena-X — for example, it is checked whether our 51ˇçÁ÷solutions meet the standards defined in Catena-X for interoperable data exchange,” explains Nadine Kanja, solution head of 51ˇçÁ÷Industry Network Automotive and Catena-X for the Automotive Business Unit at 51ˇçÁ÷SE.

In August 2024, a new development consortium called Catena-X Next started. Scheduled to run until September 2026, its focus topics include quality management, sustainability, and the Eclipse Dataspace Connector, the central communication component of the Catena-X architecture.

Other car manufacturers such as Volkswagen and Ford have also set Catena-X as their data standard. This shows that Catena-X and 51ˇçÁ÷are gaining importance not only in Germany, but worldwide.

“What we are building in Catena-X can also be scaled to the other data spaces of Manufacturing-X,” Kanja shares. The expert group commissioned by the German Federal Ministry for Economic Affairs and Climate Action explicitly lists Catena-X in its paper “Recommendations for Action for the Development of a Circular Economy in the Automotive Industry” as part of its recommendations for the transformation of the automotive industry.

The proactive exchange of field data from OEMs and production data from suppliers allows errors to be detected four months earlier on average. Heubach says this not only saves time and money, but also prevents unnecessary recall actions: “This allows you to pinpoint much more precisely what the problem is and which vehicles are affected. This leads to huge cost savings.”

Existing customers of 51ˇçÁ÷that already have 51ˇçÁ÷Analytics Cloud or 51ˇçÁ÷Datasphere, such as BMW and its supplier Schaeffler, can immediately leverage the use case with Catena-X and 51ˇçÁ÷Quality Management. Current developments aim to making use of and expand toward 51ˇçÁ÷Business Data Cloud to fully utilize AI components.

While it’s relatively straightforward to control and reduce a company’s direct emissions, mitigating those that arise along the whole supply chain requires a lot of time, collaboration, and data sharing. One major challenge companies face is outdated tools, such as spreadsheets or questionnaires, and disconnected processes to collaborate with their network. Furthermore, the lack of standardized carbon footprint calculations and exchange methods has led to a variety of different approaches to collect and report on data, resulting in many organizations relying only on industry averages rather than actual numbers.

Managing carbon to accelerate a net-zero future makes measurability critically important. That is where technology and innovation can make a real difference. With 51ˇçÁ÷Sustainability solutions and our ERP-centric, cloud-based, AI-enabled approach, we support our customers to use integrated sustainability data and embed it holistically into their core business processes.

What Is 51ˇçÁ÷Sustainability Data Exchange?

51ˇçÁ÷Sustainability Data Exchange helps facilitate standardized carbon data exchange between partners along the supply chain, supporting organizations to move from estimates to actuals in their upstream emission data. The application allows users to share emissions data to help implement their net-zero strategy and take climate action by identifying products or processes with high potential for CO2 reduction, avoiding double emissions counting, and optimizing footprints with actual supplier data. It helps drive scalability, standardization, and trust in carbon data exchange across the supply chain.

51ˇçÁ÷Sustainability Data Exchange is seamlessly embedded into the 51ˇçÁ÷landscape, connecting to for master data replication and integrating with to help enable accurate product carbon footprint calculations on a large scale.

To Harness the Power of Networks, Standardization Is Key

To be able to exchange carbon footprint values, standardization and interoperability with industry networks and frameworks are key, as they foster co-innovation and collaboration without a loss of data sovereignty. 51ˇçÁ÷Sustainability Data Exchange is interoperable and compliant with the new standards set by the automotive network and the Partnership for Carbon Transparency (PACT) by the World Business Council for Sustainable Development ().

PACT, for example, developed the global standard for calculating and exchanging consistent, comparable, and credible emission data that occurs along a company’s value chain and is outside its direct control, known as scope 3 emissions. Catena-X works closely with PACT to establish a joint standardization foundation on carbon accounting and sharing while adding industry-specific extensions.

Catena-X has certified 51ˇçÁ÷Sustainability Data Exchange for its sustainability use case. , a tier 1 automotive supplier, was one of the first customers to harness the application when it faced challenges in calculating its product carbon footprint in a standardized way to exchange product carbon footprint values with both customers and suppliers. With 51ˇçÁ÷Sustainability Data Exchange, WITTE Automotive can integrate the supplier footprints it receives through the Catena-X network, precisely calculate the product carbon footprint of parts and components, and publish the calculated values of its finished products within the network.

“This open and collaborative data ecosystem perfectly reflects SAP’s vision to enable every organization to become a network of intelligent, sustainable enterprises and gives the companies leveraging the Catena-X automotive network access to a broad portfolio of 51ˇçÁ÷solutions, from enabling the traceability of products across multiple parties in the supply chain to tracking and calculating the scope 3 emissions.”

– Christian Klein, CEO, 51ˇçÁ÷SE

In addition, 51ˇçÁ÷Sustainability Data Exchange embraces the power of , leveraging the depth and breadth of a global network trusted by millions of businesses, through which nearly US$6 trillion of annual commerce is executed via over 750 million transactions.

A Core Pillar of the Green Ledger

Having an accurate view of carbon emissions across the entire supply chain not only enables data exchange but can have a real impact on the bottom line. Many companies want to make carbon an integral part of the corporate balance sheet, measuring and managing it with the same precision as cash – therefore treating carbon like money. The use of 51ˇçÁ÷Sustainability Data Exchange and 51ˇçÁ÷Green Ledger, which will be generally available at the end of 2024, can provide a strong basis for making financial decisions.

Start the 51ˇçÁ÷Sustainability Data Exchange product tour to learn more.

51ˇçÁ÷Sustainability solutions can support even more than carbon management and environmental, social, and governance (ESG)-related disclosures. Check out our to learn more about support for operational compliance and material transition and subscribe to the to stay up-to-date.

Gunther Rothermel is chief product officer and co-GM for 51ˇçÁ÷Sustainability.

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The important thing about an ecosystem is that the companies don’t master the challenges of digital transformation individually.

Michael Tworek of BMW-supplier WITTE Automotive told SAP’s Winning Insights: “They master these challenges together.” See how WITTE works with BMW, SAP, and other partners within the Catena-X data ecosystem to meet those challenges – and how scaling up the ecosystem can help everyone expand use cases and improve efficiency.

The glass bottles on the high-speed filling line made quiet clinking sounds as they sped around the bend of the track. The visitors to the 51ˇçÁ÷booth at the internationally renowned industrial trade fair were waiting for the moment when an optical sensor, using AI support, spotted the bottle that was only three-quarters full and kicked it out of the line and into a defects bay. “This system has a capacity of 6,400 bottles per hour,” said a grinning Ben Hughes from SAP’s Solution & Innovation Experience team. “In comparison, the original system from our partner can fill 50,000 bottles, but that would be much too loud here at the trade fair booth.”

The showcase demonstrated how the cloud-based 51ˇçÁ÷Digital Manufacturing solution could serve as the process order management system for 51ˇçÁ÷customers, whether they typically work with a lot size of one or with continuous manufacturing at higher speeds. The purchase order could have come from an 51ˇçÁ÷S/4HANA system, for instance, and ended here with execution in production. “We can see the hardware integration with our own eyes,” said Hughes.

AI was also involved: a camera captured the fill level of each bottle. If it was outside the defined tolerance, the bottle was rejected and this information was sent to the 51ˇçÁ÷system. A manufacturer could use this data to calculate the production costs for the system and the profitability of every work center, all with AI support. The data from all systems would give experts and management insights into how well the production process was working. This, in turn, would help improve planning.

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Complete Portfolio from the Industry’s Point of View

Hannover Messe 2024 took place from April 22-26. Muhammad Alam paid a visit for the first time in his role as leader of the 51ˇçÁ÷Product Engineering Board area. At the 51ˇçÁ÷booth, which featured the motto “Bring out new manufacturing excellence,” he emphasized the importance of AI as an integral part of 51ˇçÁ÷solutions: “AI has the opportunity to fundamentally create significant value for our customers, particularly in the industrial space, with an ability to create resiliency from a supply chain perspective that just wouldn’t be possible without the application of AI.”

51ˇçÁ÷demonstrated nearly its entire portfolio in an industrial context in Hannover. “51ˇçÁ÷uses what we call ‘end-to-end scenarios’ to do this,” said Georg Kube, head of Industry Data Ecosystems. To reflect this, the booth was set up in line with this logic. The “design to operate” graphical element, which maps all steps of the manufacturing process, showed the corresponding step in the value chain at each station of the booth. “We integrate our solutions with the specific process that manufacturers have,” Kube said. “They design a product, then it’s manufactured, then it’s bought by a customer, and in the end it is being used and maintained. We offer integrated solutions for every step in this process.”

Working Together for Success

Darcy MacClaren, global CRO for Digital Supply Chain, acknowledged the challenges faced by SAP, its customers, and its partners: “We are facing environmental and geopolitical disruptions and we want to be sustainable.” She said collaboration is the key to achieving these daunting goals, a message that was echoed in many presentations and podium discussions at the booth.

For example, experts from , , and 51ˇçÁ÷discussed how the automotive industry network is creating a standard that enables collaboration, data interchange, and transparency to support decarbonization along the value chain. Catena-X serves as a blueprint for other industrial networks under the umbrella, such as Factory-X for factory equipment suppliers and operators.

The showcases at the trade fair booth wouldn’t be possible without partners, which also play a decisive role in SAP’s competitiveness and future viability. “The partner ecosystem is a key success factor for SAP,” said Andreas Markus Thon, head of Digital Supply Chain MEE. “They are enriching our suite with their applications and solutions and are critical for high quality and successful adoption and use of our solutions.”

A Fleet of Robots Delivers Materials

SAP’s “Modular Manufacturing” showcase let visitors witness examples of successful partner collaboration for themselves. It demonstrated a fleet of autonomous transport robots that delivered a variety of parts for a valve from storage to assembly stations. Thanks to the fleet control software with embedded AI from 51ˇçÁ÷partner , the robots from different manufacturers worked together seamlessly, making autonomous, situational decisions as to which station should assemble or disassemble the parts. The scenario demonstrated that 51ˇçÁ÷systems can also implement modular production, which is typically used in manufacturing scenarios involving many variants and low to medium product volumes. 51ˇçÁ÷S/4HANA, 51ˇçÁ÷Extended Warehouse Management, and 51ˇçÁ÷Digital Manufacturing were deployed here.

The “Industrial Metaverse” showcase was another big draw. It let visitors to the 51ˇçÁ÷booth put themselves in the shoes of a systems operator, using VR (virtual reality) glasses to inspect a system virtually, even if the manufacturing was taking place on the opposite side of the globe. The “Injection Molding Machine” scenario vividly demonstrated how planning and manufacturing dovetail in integrated, agile, made-to-order production, as the machine produced colorful recycled plastic cups for guests at the end of the process.

Other topics at the trade fair included potential uses of digital twin solutions, such as virtual models and real-time simulations, as well as collaboration between people and machines. A summary description of all the presented scenarios is available .

The World’s Largest Industrial Trade Fair

The guiding theme of Hannover Messe 2024 was “Energizing a sustainable industry.” Nearly 4,000 exhibitors from 60 countries presented solutions for a high-performance, sustainable industry. As part of an industrial ecosystem, they showed how carbon neutrality can be achieved through electrification, digitalization, and automation.

Companies from Germany, China, Turkey, the U.S., Italy, and France booked the largest exhibition spaces. Around 1,600 speakers appeared on the venue’s 11 conference stages. This year’s partner country was Norway.

Under its motto “Bring out new manufacturing excellence,” 51ˇçÁ÷demonstrated how it is using AI to advance manufacturing processes, among other solutions, at its more than 1,000-square-meter booth in Hall 15. Visitors to SAP’s booth had the opportunity to see 27 product demonstrations and nine interactive showcases. More than 25 51ˇçÁ÷partners showed the collaboration and variety of potential uses of their solutions, and 35 presentations by experts and customers were featured at the booth.

Photo Šnottebrock.

Business leaders might assume that more regulation in such a volatile environment would hinder the innovation they require most at this time. However, we will argue smart and balanced regulation can serve as a catalyst for transformation.

Recent regulatory initiatives like the German Supply Chain Due Diligence Act (LkSG), which mandates human rights and environmental impact due diligence, have positioned Germany at the forefront of ethical standards in supply chains. The draft EU Corporate Sustainability Due Diligence Directive (CSDDD) extends corporate responsibilities in sustainability, while the U.S. Uyghur Forced Labor Prevention Act (UFLPA) places the onus on companies to prove that their products are free of forced labor, shifting the burden of proof to importing entities.

Increased Transparency: Understanding Suppliers’ Suppliers

These and many other emerging regulations play a crucial role in enhancing supply chain resilience. Firstly, they help to increase transparency. Compliance necessitates extensive data collection, providing companies with a clear view of their supply chains, including supplier practices and potential risks. This has been practiced by the pharmaceutical industry for many years due to the potential for damage to human health and economic risk to the company from counterfeits or product quality issues.

Now, more industries are recognizing that transparency across the tiers of a supply chain creates this critical backbone of data and visibility.

Secondly, companies must reassess their sourcing strategies, encouraging diversification and regionalization. This in turn reduces dependency on single suppliers or regions, making supply chains more resilient against unexpected disruptions.

Although companies may have been operating in an interconnected web of global supply chains for decades, those that still do not have full visibility into their own suppliers — and those of their suppliers’ suppliers — are putting themselves at undue risk by not innovating. We call this tier-n visibility. This is an incredibly powerful tool for eventually reducing uncertainty across supply chains.

Enhanced Collaboration: Gaining a Competitive Advantage

Compliance, when well-executed, can lead to stronger relationships with suppliers. The engagement required fosters trust and accountability in the supply chain, resulting in more collaboration to overcome challenges. With diversified sourcing, companies can swiftly adapt their supply chains to ensure business continuity. That’s simply better preparedness.

Researchers at Cambridge University recently emphasized the need to form alliances to , advocating for more collaboration to improve resilience and sustainability. Collaborative approaches, supported by digital technologies, can lead to significant benefits, including reduced tax evasion and enhanced information sharing in the global supply network.

But let’s face it: This is an industry problem, not a technology issue. Industries need to change how they use supplier data. Instead of using it to push for better procurement terms through negotiation, they should focus on more collaborative processes.

Many industries are beginning to realize the benefits of such a collaborative approach. For instance, a car company using the open network can pinpoint faulty engine parts and trace issues back to the supplier’s supplier. Such a targeted approach minimizes recalls. Catena-X ensures interoperability through common standards, allowing data providers to maintain sovereignty over their data. With 170 international members, including major German car manufacturers, Catena-X is poised to become an industry standard.

In this dynamic environment, supply chain resilience becomes a competitive advantage. Companies that proactively embrace regulatory requirements gain the trust and loyalty of consumers, investors, and stakeholders.

Reduced Risk: Embedding Artificial Intelligence

Growing regulatory demands also require a paradigm shift in how businesses approach risk management within their supply chains. Here is where artificial intelligence (AI) plays a central role.

can provide proactive insights into the highly complex impacts of potential risks, allowing companies to anticipate and mitigate challenges before they escalate. This transforms the traditional risk assessment process, offering a more dynamic and real-time understanding. And that’s exactly what businesses need now to de-risk.

For example, understanding the impact of new trade sanctions (such as U.S. export controls on advanced computer chips), a container port blockade, or a steep increase on transportation cost for a given shipping lane offers a competitive advantage. Sensing disruptions, simulating them, understanding the impact, and then recommending and executing actions are core use cases that are optimized by AI and machine learning.

However, with powerful technology like AI also comes great responsibility. Ensuring ethical AI development and deployment requires transparency, accountability, and collaboration among businesses, governmental bodies, civil society, and the broader public. The draft EU AI Act would regulate AI systems based on risk levels, emphasizing the importance of adhering to ethical principles to ensure responsible AI use. Trust in AI solutions hinges on the responsible handling of AI technologies and adherence to human rights.

51ˇçÁ÷recognized even before any AI regulation was available, that the speed of AI adoption increased . 51ˇçÁ÷was the first European technology company to establish AI guiding principles in 2018 and then created an AI Ethics Policy. The company established an AI Ethics Steering Committee and AI Ethics Advisory Panel, which helps operationalize guiding principles, provides guidance for high-risk use cases. and will align with the upcoming EU AI Act.

Advanced Technologies: Turning Regulatory Burdens into the Foundation for Resilience

Necessity often drives innovation, leading companies to invest in advanced technologies such as supply chain control centers, n-tier visibility, digital twins, cloud solutions, and AI or machine learning. 51ˇçÁ÷solutions, such as and , not only facilitate compliance but also enhance overall supply chain visibility and management.

The best examples of the dynamic application of supply chain technology are often found in the food and beverage sectors, where strict quality controls as well as traceability and safety regulations have long necessitated agile, transparent, and sustainable supply chains. Unilever’s commitment to traceability and transparency in its global palm oil supply chain demonstrates how compliance acts as a transformative force. NestlĂŠ’s embrace of technology illustrates how businesses can e with evolving standards. And Grupo Nutresa’s procurement transformation shows how it’s possible to while doubling down on sustainability with trading partners.

These examples show that compliance and innovation are not mutually exclusive and should be integrated, with sustainability serving as the bedrock of resilient supply chains.

Thomas Saueressig is a member of the Executive Board of 51ˇçÁ÷SE.
Anahita Thoms is partner and global lead sustainability partner for Industrials, Manufacturing, and Transportation at Baker McKenzie.

While Wave 1 served to benchmark companies on their sustainability journey, Wave 2 identified a maturing approach to embedding sustainability across business processes. Results from this latest study show truly sustainable businesses – those that have established sustainability as part of business strategy and operational decision-making – achieve a genuine competitive advantage. In addition, more respondents than ever see a stronger positive relationship between sustainability and competitiveness with 72% believing sustainability contributes towards their competitive differentiation.

“We see in the research how many companies are shifting to view sustainability no longer as a regulatory compliance tactic, but becoming more of a strategy to actually build business value,” Sarah Dziuk, 51ˇçÁ÷Insights Head of Research, said.

The study includes results from 4,750 respondents across 21 nations and 29 industries. Eighty-five percent of responses came from midmarket businesses (under US$1 billion annual turnover) and 15% from large enterprises (over US$1 billion turnover per year).

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Making More Leaders Accountable

A key finding in Wave 3 was that businesses making the connection between sustainability and competitiveness make more leadership roles accountable for sustainability. This allows for a broader span of control and more accountability. The most competitive companies tend to have more than one top action taker such as a chief sustainability officer and an environment or sustainability manager.

“Our experience suggests that success is more likely when executives empower [their] organizations to engage proactively and strategically hold them responsible for creating measurable impact. Only then will companies be able to maximize the value at stake from their sustainability initiatives.”

McKinsey

Improving Data Quality

Becoming an intelligent, sustainable enterprise requires regular, reliable, and accessible data. With the majority of emissions sitting within a company’s supply chain, shareability across business networks is also essential for meaningful decision-making. Unfortunately, many companies still rely on estimates and assumptions, many of which they gather manually.

Highly sustainable organizations have a solid focus on the quality of their sustainability data. Quality data comes from primary sources that track actual emissions, waste, and other elements. Unsurprisingly, this leads to more satisfaction with the data. The companies with the most substantial connection between sustainability and competitiveness report the highest level of satisfaction with overall data quality – 47% compared to just 10% of other organizations.

Reliable data is more useful in determining strategy. Forty-one percent of respondents indicate strong data usage to inform decision-making. They also integrate data into more business processes and operations such as procurement, product labeling, selecting M&A opportunities, and recruitment.

“The way we report on environmental data needs to quite quickly go through the same journey that accountancy went on many years ago.”

S.Oleum, a Brazilian agroforestry business that generates a third of its revenue from carbon credits, has implemented several 51ˇçÁ÷software solutions to help track and manage its environmental, social, and governance (ESG) data. Having a robust core system in place serves as a basis for all other processes and decision-making, as well as provides the accountability, transparency, and confidence it needs.

Quality data is the cornerstone of Catena-X, a program that allows the standardized exchange of carbon emissions data in the automotive industry using interoperability standards established by the WBSCD Partnership for Carbon Transparency (PACT). This lets businesses share product carbon information, promoting transparency throughout the supply chain, accelerating their journey to net zero, and making them more competitive in the process.

Sustainability as a Business Strategy

The top 25% of businesses reporting the strongest impact from sustainability reported that they treat sustainability as any other strategic pillar, on a par with IT for example. This has resulted in a much higher use of metrics for decision-making, increased investment, higher data satisfaction, and higher confidence of a return on investment in a one-to-three year period.

It has also led to positive business impacts including growth and improved profitability, increased efficiency, better quality products and services, and reduced costs, suggesting a truly sustainable business is more robust and resilient.

With clearer business imperatives, companies make investment decisions to drive business value. They invest in sustainability initiatives and can set realistic expectations of a positive financial return on investment in a shorter time frame, putting sustainability on a comparable timeline with other investments.

Linking Sustainability to Competitiveness

Companies are motivated to take action on sustainability when they see it as a genuine opportunity for differentiation and revenue growth. This leads them to make more people responsible for delivering on sustainability strategies and renders the barriers typically encountered earlier in a company’s sustainability journey, such as funding and concerns over ROI, less material.

It is interesting to note that in the UAE, where sustainability has been promoted at a country level as being as crucial for differentiation, a high proportion of companies (nearly 74%) are planning to increase their investment in environmental issues over the next three years.

The commitment to investment and lack of skepticism around sustainability in the UAE leads businesses there to report a significantly higher than average level of satisfaction with data – 36% are completely satisfied compared to 23% in the rest of the global results. More of these businesses, therefore, use reporting for decision-making, which is viewed more materially and results in decisions being taken more quickly. A positive relationship between sustainability and competitiveness is the culmination of these favorable indicators, allowing them to outshine their competitors in their sector.

Conclusion

The Wave 3 study results are clear: reacting to sustainability initiatives and demands isn’t adequate to gain a competitive advantage. Companies must invest in and treat sustainability as a key business strategy to unlock opportunities. In doing so, they will set a virtuous circle in motion where investment in accountability and better quality data drives more strategic decision-making and further investment. This benefits the company as a whole, making it more efficient, profitable, and robust in the face of the changing climate.

Heather Davies is a brand journalist.

Instead, they are recognizing the need to resolve supply chain disruptions in an integrated way, bridging the silos of various functions and going beyond dealing with supply chain disruptions as they occur. 

Taking a macro-view is also something governments have begun doing. Just think of the huge investments to “bring supply chains home”; for example, for semiconductors or for sustainable energy.  At the same time, diversifying supply chains and complying with new regulations keeps increasing their complexity.  

Companies take various approaches to these challenges, such as de-coupling their supply chains by building up costly inventories for critical components. Another option is reshoring or nearshoring, which brings manufacturing and supplier relationships closer to core markets, ideally in countries with similar political and economic systems. But all of these strategies come with downsides, including the cost of operations in globally competitive markets. 

At SAP, our vision is to embrace interconnected supply chains and optimize material flows — sustainably — with digital technologies. We believe in intelligent strategies to reduce supply chain uncertainties for the long-term by helping industries redefine their operations and by creating value chains that are more intelligent, connected, and responsive.  

Supply Chain Convergence Increases Agility 

Companies that resolve supply chain disruptions in an integrated manner bridge the silos of various functions such as procurement, logistics, or manufacturing. That’s how they can truly alleviate the impact to their organizations. Supply chain functions need to work in concert and extend into their ecosystem of suppliers. Even the most accurate supply chain plan is meaningless if material suppliers cannot commit to volumes and lead times. Through integrating supply chain planning, such as demand and supply plans with procurement collaboration, manufacturers have a much stronger strategic lever to avoid downstream shortages. 

At SAP, we call this approach design-to-operate. Our strategy is to deeply connect all relevant functions in a supply chain along end-to-end value chains and business processes. Going beyond the four walls of your own enterprise, into your ecosystem of suppliers and sub-suppliers — that’s the ultimate way to tackle supply chain challenges. In the case of supply shortages, for example, it is imperative to analyze the impact to the organization.  

With 51ˇçÁ÷Integrated Business Planning, . Impacted customer orders and revenue at risk are visible and informed actions can be taken to mitigate any shortages, for example, by changing production schedules. The 51ˇçÁ÷Digital Manufacturing system knows immediately about the changed production plan for the next shifts and adjusts labor and resources accordingly. Logistics departments in 51ˇçÁ÷Extended Warehouse Management orchestrate the new material flow, , and asset maintenance activities are re-scheduled to adhere to the new production priorities. 

As a result, supply chain leaders who follow a design-to-operate paradigm are highly agile and can take critical actions quickly to deal with supply chain disruptions. 

SAP’s Industry Business Networks: A New Paradigm &˛Ô˛ú˛őąč;

Entire industries are recognizing the benefits of going beyond the four walls of their own enterprise. Consider a car company investigating faulty engines coming from one of their production lines. Now imagine it can trace the failure not only to a particular batch of components from one supplier but then dig even deeper to identify faulty basic parts from the supplier’s supplier. Instead of having to recall thousands of vehicles, it needs to recall only a few.  

Solving problems this way requires a mindset for radical collaboration as well as technology for efficient, cross-company data exchange. is an open network that enables just that. It guarantees interoperability by defining common standards. The network is not owned by a single business and data providers keep their data sovereignty. For instance, they define for how long and for which purpose their data can be used. On the other hand, consumers can trust that data comes from a reliable source.  

51ˇçÁ÷is one of the founding members of Catena-X, together with five other companies. Since 2020, the initiative has grown to IT companies. Among them are Germany’s biggest car companies as well as many small and medium enterprises. Catena-X may soon become the industry’s standard.  

Naturally, the is ready for Catena-X. It readily connects Catena-X to SAP’s broad portfolio of automotive IT solutions to trace parts, measure carbon emissions and manage demand, capacity and quality. Recently, 51ˇçÁ÷announced business networks for more industries, including , with more to come.  

Generative AI Adds New Types of Intelligence 

A key tool in solving supply chain complexity challenges is artificial intelligence (AI). Even before the recent groundbreaking advances in large language models (LLMs) and generative AI, our supply chain solutions have been infused with both “traditional” and “advanced” AI.

For instance, creates demand forecasts based on historical demand patterns, but it also leverages advanced machine learning capabilities to improve forecast demand with point-of-sales data and improve planning quality using self-healing master data and lead time predictions. In the future, generative AI will enable completely new types of intelligent capabilities like these:

• Facilitating human-machine interaction: Users will soon be able to interact with their system much more naturally via our new embedded generative assistant Joule. For example, they will be able to ask which of customer X’s demands for product Y are still unfilled in Central America. Joule will give the answer, intelligently combining data from various systems and domains because it will be embedded throughout the 51ˇçÁ÷cloud enterprise portfolio.
• Supporting creativity: Much like a sparring partner, generative AI can help designers, engineers, and product managers create new product ideas in an innovation cycle and iterate them with 51ˇçÁ÷Enterprise Product Development.
• Transforming unstructured data: Consider a truck arriving at a warehouse with inbound cargo. The clerk knows what cargo to expect and this is saved in an 51ˇçÁ÷system. However, what is really on the truck is written on a loading list, often in paper form. Making this data available digitally has been possible for quite a while and is known as optical character recognition (OCR). What’s new is that generative AI tools can now match the unstructured loading list to the structured data already in the system — in a split second.

Leveraging AI for companies to scale and sustain business operations will no longer be optional. Consider the increasing labor shortage facing manufacturing companies, among others. They will have a shortfall of up to 85 million employees by 2030 — roughly the population of Germany!

By automating mundane tasks with advanced AI capabilities, we will bridge the human resources gap and enable experts to focus on what really matters: making data-backed business decisions.

Human and artificial intelligence work hand in hand — it’s a duet, not a duel.

We already help our customers build risk-resilient supply chains and deeply connect enterprises to run productive, agile and automated operations. Now, by also leveraging the power of generative AI, we will ensure that supply chain resilience doesn’t have to be something that keeps CEOs up at night.

Thomas Saueressig is a member of the Executive Board of 51ˇçÁ÷SE, 51ˇçÁ÷Product Engineering.

It is simultaneously the third highest contributor to carbon emissions in the industrial sector and the best placed industry to decarbonize products across a multitude of industries.

As a result of its position high upstream in the supply chain, the chemicals industry can often seem invisible. Its products sit in the value chain of key industries including agriculture, pharmaceuticals, and consumer goods, making up a significant proportion of their Scope 3 emissions. But change is coming that will make companies more accountable for these previously hidden emissions. New legislation such as the European Corporate Sustainability Reporting Directive (CSRD) will reveal the carbon footprint of the chemicals industry as companies with more than 250 employees will be required to report their GHG emissions, including those that lie in Scope 3.

A Vision for the Chemicals Industry

In order to meet new legal requirements and identify opportunities for emissions reduction, the chemicals industry needs to look beyond its current tools and collaborations to upgrade the quality of data — based on primary information rather than averages and estimates — and share access to it. Aligning data structures and using the same semantics will encourage competition among suppliers, galvanizing them to manufacture chemical products with ever lower carbon footprints, benefiting all downstream customers as well as the climate. To realize this vision, the solution will receive actual data from suppliers upstream, using a standardized methodology, allowing companies to calculate their own product carbon footprint so it can then be shared with downstream customers. For broad adoption, this carbon data exchange tool needs to be relatively simple while allowing for secure data exchange.

The automotive industry already has a blueprint that the chemicals industry can adopt. It tracks material flows digitally throughout the entire supply chain. Catena-X allows companies to share standardized emissions data from their supply chain with confidence based on technology that provides an auditable chain of custody. This offers car manufacturers the information they need to make strategic decisions to reduce the carbon footprint of their products, embrace circularity, and increase the adoption of circular business models such as battery recycling. Some of the chemical companies that supply the automotive industry are already involved, such as BASF.

“As an energy-intensive industry at the beginning of nearly all value chains, the chemical sector plays a key role in reducing global carbon footprint in manufacturing and beyond. Carbon footprint transparency at product level is a fundamental step to achieve this,” said Alessandro Pistillo, director of Digital Strategic Projects at BASF. “BASF is a founding member and very active contributor in global initiatives focused on Scope 3 transparency and product carbon footprint standardization such as Together for Sustainability in the chemical sector, as well as Catena-X and the Global Battery Alliance in the automotive and battery value chain respectively. At the same time, BASF is also a leading member of WBCSD-PACT, whose framework is geared toward ensuring cross-sectoral interoperability.”

Improved Accuracy

Historically, industry averages and secondary data have been used to estimate carbon footprints. The cornerstone of the vision for the chemicals industry involves a significant improvement in GHG emissions data, a step that will provide much greater emissions transparency for the industry itself and for its customers. 51ˇçÁ÷has been working with the World Business Council for Sustainable Development (WBCSD) since 2021 as an innovation partner and has been involved in the Partnership for Carbon Transparency (PACT) initiative, helping to develop the global standards, methodology, and technological infrastructure needed for product-level emission accounting and exchange.

Collaborative Data Exchange

The desire and the frameworks for the chemicals industry to collaborate already exist. They date back to 1985, with the establishment of the Responsible Care program and the 2011 formation of industry body Together for Sustainability, a worldwide initiative to raise sustainability standards in the chemicals industry’s supply chain. Its members include some of the world’s largest chemical groups, represented by their chief procurement officers. Despite the industry’s ability and willingness to cooperate, and its current pilot IT system for sharing upstream product carbon footprint information, it is still on the cusp of data exchange.

“Footprint data is there,” said Michael Sambeth, global enterprise architect at SAP. “It can be calculated using out-of-the-box solutions from SAP; now it needs to flow across the supply chain.”

Catena-X led to the launch of the 51ˇçÁ÷Sustainability Data Exchange application, which was designed specifically with security in mind, to exchange standardized carbon footprint data along the value chain. 51ˇçÁ÷Sustainability Data Exchange uses the carbon data standards established by WBCSD PACT. With a high proportion of Together for Sustainability members already using 51ˇçÁ÷ERP systems, they are well placed to be able to leverage 51ˇçÁ÷Sustainability Data Exchange to exchange this data with their suppliers and customers while adhering to global standards.

Moving to a Green Ledger Approach

The chemicals industry is a product of its established supply chains, high-volume activities, cost efficiencies, and scalability. It is highly organized and well versed in creating and following methodologies, but it needs to see the value in primary standardized data — and data sharing — for decarbonization.

A green ledger approach will allow businesses to treat their emissions in the same way as their financials. Carbon accounting makes emission “bookings” part of every business transaction in the same way as financial information. This means that a level of detail and confidence is achieved, allowing companies to look at emissions from any angle — by product, organization, profit center, site, factory, equipment, etc. This granularity is the foundation for planning and steering, which cannot be done using averages or highly aggregated figures.

The decarbonization of a multitude of industries hinges on the ability of the chemicals industry to successfully standardize and exchange carbon footprint data. Only those chemical companies with sustainability at the core of their strategy and the right tools for high-quality emissions accounting will be able to future-proof their business to remain competitive in the face of the ever-evolving legislative changes created to combat the effects of global warming.

For more information on how 51ˇçÁ÷helps companies record, report, and act on their sustainability goals, visit .

Carbon accounting is still undertaken manually or using semi-automated tools that rely on estimates or averages. Additionally, many more organizations still need to set targets. To move forward, they must first ascertain current emissions levels. But with supply chain emissions representing a much higher proportion than direct emissions, this is proving challenging for four key reasons: a lack of data, poor or unreliable data, a skills gap preventing effective data analysis, and issues exchanging data.

Organizations must account for carbon, not only for climate and compliance reasons but to aid decision-making, reveal opportunities for efficiencies and growth, and differentiate their business. As a result, organizations across industries are racing to slash the carbon footprint of their products and services. As businesses at every level of the value chain ramp up their own decarbonization efforts, business leaders know the lowest carbon offerings are likely to become the most desirable and hence the best opportunity for growth and profit.

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A Lack of Emissions Data

Emissions data is used in three areas of a company’s net-zero strategy: to measure and identify hotspots for emissions reduction; to make improvements such as selecting suppliers and redesigning products and processes; and to continuously anticipate business outcomes and identify new opportunities for greenhouse gas reduction.

For successful decarbonization, emissions data must be embedded in an organization’s decision-making process. Incomplete and unreliable data hinders the creation of an effective net-zero strategy. This issue is particularly prevalent across the value chain in scope 3 emissions, which regularly account for 75% of a company’s emissions across all sectors. Due to a lack of influence and control and an absence of disclosure rules, supply chain emissions go vastly underreported, weakening net-zero strategies.

It is essential for companies to close the gap and gather data on all scope 3 emissions. Not doing so leaves them open to allegations of greenwashing and non-compliance penalties as policymakers worldwide move increasingly towards making scope 3 emissions reporting mandatory.

Poor Quality Data

Data that is accurate, granular, and comparable is indispensable for a comprehensive understanding of an organization’s carbon footprint. However, much of the data being relied upon is spend-based, estimated, or reliant on regional or sector-based averages as opposed to primary data directly from a business’s operations and suppliers.

By its nature, secondary data cannot provide an accurate indication of a company’s greenhouse gas emission hotspots, nor can it be used for comparison purposes. It also lacks granularity, impairing decision-making. Relying on inconsistent data carries potentially significant risks, which can lead to a decline in trust and credibility.

Sustainability Skills Gap

The number of green jobs grew by 8% between 2015 and 2021 and is expected to continue to increase. But there is a significant skills shortage, and candidates don’t yet have the competencies to be able to fulfill the roles. Short courses and micro-credentials run by universities, professional bodies, and NGOs are helping to fill the gap, but on-the-job training and upskilling are also necessary to equip employees and business leaders with the necessary skills to be able to interpret the data and turn pledges into progress.

Data Exchange Issues

Carbon accounting challenges within a single organization are an issue, but the problem is multiplied when it comes to achieving carbon transparency between companies in a given value chain. Incompatibility of data, inconsistencies in carbon accounting rules, software platforms that don’t easily interact, and a lack of collaboration across supply chains leave business leaders fumbling in the dark for information.

The automobile industry is an obvious example. With 98% of emissions falling into scope 3, exchanging carbon footprint data can seem like an impossible task due to its complex supply chain, a lack of trust between suppliers and customers, a scarcity of quality data, inconsistent carbon accounting methodologies, and incompatible data management platforms.

The Impact of Carbon Accounting Challenges

The aforementioned challenges result in wasted time and resources, compromised decision-making, an inability to affect meaningful emissions reduction, missed opportunities, a lack of transparency, and higher exposure to business risks, not to mention the global risks of deadly heat waves, devastating floods, rising sea levels, and a decline in biodiversity.

Moving Towards a Green Ledger

What if sustainability performance could be managed with the same rigor as financial performance? Where it becomes as effortless as financial transactions in your enterprise resource planning (ERP) systems, where a carbon network makes data exchange easy, and where end-to-end carbon accounting tracks product emissions across the entire value chain?

Ledger-based transactional carbon accounting provides all of this and more – and it’s not new. It is an amalgamation of a suite of solutions, an ecosystem of platforms. Working together, they have the power and interactivity to collect and assimilate emissions data using a hybrid approach to help businesses transition from estimated or average emissions values to actual and verified data. A double entry approach allows companies to balance emission in- and outflows.

A sustainability ledger provides auditable carbon reports and attaches emissions to financial costs and revenue. This provides companies with the capability to analyze carbon emission hotspots through a financial lens across cost centers, profit centers, and market segments.

Finding the Key to Collaboration in the Automotive Industry

Perhaps most importantly, the sustainability ledger approach provides a platform for collaboration and integration of data throughout an entire value chain. The is the first open and collaborative data ecosystem capable of allowing companies to work together to establish transparent processes and common data standards from material acquisition to manufacturing and distribution to meet sustainability and regulatory requirements.

By partnering with the World Business Council for Sustainable Development (WBCSD), Catena-X was able to achieve a standardized carbon footprint value that could be used throughout the supply chain.

Thanks to the , companies can manage this standardized product carbon footprint data and share it easily, on a material level, between business partners in an efficient and secure way.

Other Industries Incorporating the Green Ledger

The automotive industry isn’t alone in identifying a need for a more scientific and collaborative approach. Other industries, including manufacturing and healthcare, are moving towards a more holistic green ledger solution.

Multinational chemical and consumer goods company Henkel has recently implemented while simultaneously transitioning to the cloud. will benefit along its entire value chain from increased data-driven, real-time decision-making and leaner and more sustainable processes.

The Next Steps

Plugging the gaps and improving the quality of emissions data is a clear priority to turn an organization’s carbon reduction targets into actionable plans, but collaboration must not be underestimated if a real reduction is to be achieved across industries. Companies now need to identify the best software solution for their business that will not only collate emissions data on a transactional basis but also report it holistically and provide the possibility to share it throughout the supply chain.

Find out more about .

Heather Davies is a sustainability communications brand journalist at SAP.

This includes artificial intelligence (AI) embedded into the 51ˇçÁ÷Digital Manufacturing solution, 3D product and operations viewer capabilities in manufacturing, service and maintenance processes, and adherence to sustainable packaging guidelines in the 51ˇçÁ÷Responsible Design and Production solution.

• Advancements to Supply Chain Software from 51ˇçÁ÷Enable Risk-Resilient and Sustainable Supply Chain Operations

In today’s world, constant disruption has become the new normal. Resilience is essential for businesses to withstand the forces of change. To achieve it, companies are looking to redesign their supply chain and manufacturing processes to consider cost, speed, profit, customer service and risk. According to a global , manufacturing executives are more likely than those in other functions to deploy intelligent technologies at scale to improve predictive analytics capabilities. However, only 36% of the 1,000 survey respondents said they have deployed predictive analytics in any part of their enterprise. To become more resilient, 51ˇçÁ÷customers can employ AI embedded into 51ˇçÁ÷Digital Manufacturing for AI-driven insights and AI-powered visual inspection processes. Customers can ensure that defective parts are discovered early and are addressed quickly, producing higher yield, ready-to-deliver quality materials. The lower product defect rates result in fewer service claims and improved asset health and maintenance.

“In recent years, it has become apparent that our global supply chains are vulnerable to disruption,” said Thomas Saueressig, member of the Executive Board of 51ˇçÁ÷SE responsible for 51ˇçÁ÷Product Engineering. “This has far-reaching consequences for the manufacturing industry as well. 51ˇçÁ÷is a driving force in many industry-relevant initiatives, such as Catena-X and Manufacturing-X. Open data ecosystems, especially, have their place in the manufacturing industry. What is more, in many of the conversations I’ve had with business leaders, and according to our latest Oxford Economics study, it becomes clear: They see the need of investing in Industry 4.0 principles and AI to increase supply chain resiliency, but many are still in the piloting stage. 51ˇçÁ÷is in a unique position to accelerate the journey to resilient manufacturing because we can embed intelligent capabilities in enterprise software across all end-to-end-processes.”

Smart Press Shop, a joint venture of and , reached a new milestone in automotive production by using AI embedded in 51ˇçÁ÷Digital Manufacturing. Adapting a cloud-first development strategy, Smart Press Shop enables fully paperless production and a completely automated process for configuring production-line machinery for pressing automotive body parts. With the help of 51ˇçÁ÷software and embedded AI, Smart Press Shop can assess the quality of materials in real time and adjust machine performance to improve downstream processes in logistics and operations.

“With the help of 51ˇçÁ÷solutions, we were very quickly able to build a system landscape at the Smart Press Shop based on the principles of Industry 4.0 and covering our requirements, such as self-optimizing production, end-to-end traceability and resource-saving production,” said Hendrik Rothe, CEO, Smart Press Shop GmbH & Co. KG. “Within a few months, our core solutions 51ˇçÁ÷S/4HANA Cloud, public edition as well as 51ˇçÁ÷Digital Manufacturing were ready for use. Above all, the solutions enable us to process data in real time, to handle our entire production without paper, and ultimately to make all our processes transparent. Thus, we are very flexible and positioned for the future.”

3D Capabilities to Strengthen Resiliency

To further help manufacturing become more resilient, the 3D product viewer capabilities of the 51ˇçÁ÷Enterprise Product Development solution are now integrated into manufacturing, service and maintenance processes. In 51ˇçÁ÷Digital Manufacturing, production operators now can view 3D product models in their dashboard and work environment to streamline complex assembly. In the 51ˇçÁ÷Service and Asset Manager mobile app, field engineers can use 3D augmented reality views to accelerate asset maintenance, increase first time fix rates and reduce downtime.

Sustainability Initiatives Are Still at the Top of Business Agendas

According to the Oxford Economics study, 28% of supply chain executives include improving sustainability metrics as one of their top three strategic goals. To enable not only risk-resilient but also sustainable supply chain operations, 51ˇçÁ÷Responsible Design and Production now supports company-specific sustainable package guidelines. Customers can monitor, measure and act to eliminate waste during packaging design.

51ˇçÁ÷had extended its integration with business sustainability ratings provider EcoVadis SAS within the Trading Partner Profile (TPP). The integration enables suppliers to promote their sustainability performance and showcase their EcoVadis sustainability rating status across 51ˇçÁ÷Business Network. This helps buyers identify opportunities to comply with emerging ESG due diligence and reporting legislation, as well as enabling them to select new suppliers who can help them reach ambitious corporate and value chain sustainability commitments.

These innovations are helping customers achieve better visibility across their supply chain operations and to ultimately increase resiliency.

Visit the to learn more about how 51ˇçÁ÷software helps:

You will also find out how .

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HANNOVER MESSE is the world’s leading trade fair for industry. About 4,000 companies from the mechanical engineering, electrical and digital industries as well as the energy sector will showcase technologies and solutions for a connected and climate-neutral industry. Visit the 51ˇçÁ÷booth in Hall 15, E17 from April 17–21, 2023.

About the Oxford Economics Study: On behalf of SAP, Oxford Economics conducted a global supply chain survey of 1,000 supply chain executives and professionals in 15 industries across the United States, Canada, Brazil, Germany, France, Spain, UK, Italy, China and Japan. One third of the sample was made up of companies with US$500M to $999M in annual revenue, with one third having between $1B and $10B and one third generating over $10B in revenue. Survey respondents participated in the research using a computer-assisted telephonic interviewing methodology (CATI). Interviews were carried out in January and February of 2023.

About SAP

SAP’s strategy is to help every business run as an intelligent, sustainable enterprise. As a market leader in enterprise application software, we help companies of all sizes and in all industries run at their best: 51ˇçÁ÷customers generate 87% of total global commerce. Our machine learning, Internet of Things (IoT), and advanced analytics technologies help turn customers’ businesses into intelligent enterprises. 51ˇçÁ÷helps give people and organizations deep business insight and fosters collaboration that helps them stay ahead of their competition. We simplify technology for companies so they can consume our software the way they want – without disruption. Our end-to-end suite of applications and services enables business and public customers across 25 industries globally to operate profitably, adapt continuously, and make a difference. With a global network of customers, partners, employees, and thought leaders, 51ˇçÁ÷helps the world run better and improve people’s lives. For more information, visit .

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The new 51ˇçÁ÷Labs Dresden location is part of 51ˇçÁ÷Labs Network, which promotes close alignment with the other development locations in Germany and around the world. With this strategic move, 51ˇçÁ÷is further focusing on local talent, utilizing the growth potential of the local ecosystems. An important building block to achieve this is even stronger collaboration across the development units in SAP.

The main topics being worked on in Dresden are at the core of SAP’s strategy focusing on cloud enterprise resource planning (ERP) and 51ˇçÁ÷Business Technology Platform (51ˇçÁ÷BTP). These topics include cloud security, analysis and planning, cloud infrastructure, and industry networks in the context of the intelligent, sustainable enterprise. “We are also working here on SAP’s core competencies across all Executive Board areas. The teams make an important contribution to SAP’s focus topics and the success of our customers,” Mueller said at the opening.

Dresden Joins 51ˇçÁ÷Labs Network

The new location is now part of , a global network of research and development centers dedicated to the advancement of innovative technologies. The network consists of over 20 labs worldwide, including China, India, Germany, Brazil, and the United States. Each location focuses on different areas, such as artificial intelligence (AI), cloud computing, or process automation, amongst others. “The focus is on our developers working together and delivering our products,” said Michael Ameling, senior vice president and head of Intelligent Enterprise and 51ˇçÁ÷BTP Foundation and managing director of 51ˇçÁ÷Labs Dresden.

Other 51ˇçÁ÷Labs Network locations in Germany are located in Walldorf, St. Leon-Rot, Berlin, and Munich. With this change, Dresden will now become an important location for further cooperation of the different development units as a central innovation driver.

A Location with Tradition

51ˇçÁ÷has a long-lasting relationship with Dresden. The city became SAP’s second mainstay in eastern Germany after the fall of the Berlin Wall in 1989. In 2008, 51ˇçÁ÷built an office building (DRE04) opposite the Dresden Zwinger for around 500 employees. But the workforce has been growing ever since and the old location is now far too small for the now almost 1,000 employees. In recent years, Dresden and the region has become an important location for cloud development in Germany. With the new building, 51ˇçÁ÷wants to continue writing its history: “We are all super excited here in Dresden. With this new location, we are realizing our vision of the 51ˇçÁ÷Campus in Dresden,” Stephan Klein, senior vice president of Cloud Success Services and site manager of 51ˇçÁ÷Dresden, said.

The region has a strong focus on microelectronics, dating back more than 30 years, and is now driving its path into the future. In addition to university and non-university research, the region is characterized by a number of startups as well as technology and innovation centers. All these factors and advantages together were decisive for SAP’s decision to invest in the location.

At 51ˇçÁ÷Labs Dresden, the close cooperation with the local ecosystem is now also accessible to other development hubs around the world as part of 51ˇçÁ÷Labs Network. Among other things, there are projects and educational engagements with the University of Excellence TU Dresden and local partners, such as the State Chancellery and .

Collaboration and Talent Attraction

The new building also focuses on the needs of employees and therefore considers future of work concepts. With the new location, 51ˇçÁ÷wants to position itself as an attractive employer in the highly competitive market for young talent. “We want to get closer to the talents. That’s why we chose the location in the heart of the city, which is easy to reach by public transport,” Mueller said. 51ˇçÁ÷seeks contact with young talent at a very early stage, such as in schools or through projects with universities. The goal is to inspire them to join SAP, whether during or after their studies.

Mueller emphasized the need to “set super high standards in collaboration, to create moments that matter, and also to be curious.” In Dresden, it’s not just about networking within the company, but far beyond that. Above all, it is about the local ecosystem, from which all other levels will be able to benefit. “We all want to create value and that works best if we work hand in hand because what we do at 51ˇçÁ÷is a team sport,” Mueller added.

“Innovation and cooperation are only possible in an ecosystem,” said Mirko Paul, COO of 51ˇçÁ÷Labs Dresden. One example of this is the automotive industry and the European , in which 51ˇçÁ÷plays a key role by providing the digital core of the project. Catena-X is a collaborative and open data ecosystem for the automotive industry with the goal to create uniform standards for the flow of data and information in the automotive value chain. “This is only possible if you work with partners directly in manufacturing or on logistical processes. This currently also affects small and medium-sized companies,” Paul said.

Photos by Norbert Steinhauser

Stormy seas continue to buffet global commerce, with disruption unlikely to subside anytime soon. Contributing factors include the gathering pace of extreme weather events, increasingly stringent for environmental, social, and governance (ESG) reporting, escalating labor costs, ongoing geopolitical conflict, mutually reinforcing inflationary and recessionary pressures, and the trend toward regional fragmentation of trade – or what some analysts call “.”

Amid such unrelenting volatility, how can enterprises instill resilience, foster collaboration, and harness sustainability throughout their operations and those of their trading partners? Through cloud-based digital networks linking together mission-critical business processes, organizations can achieve the degree of transparency needed to ensure continuity and extend competitive advantage in these uncertain times. A comprehensive view across interconnected operations, particularly those involving logistics, supply chain management, and enterprise resource planning (ERP) systems, enables trading partners to track a product all the way from sourcing to manufacture to distribution – and everywhere in between.

With , shippers and carriers can collaborate to help optimize logistics processes, increase on-time deliveries, and mitigate supply risk. The network features three primary solutions: , , and .

Through 51ˇçÁ÷Business Network Freight Collaboration, trading partners can achieve optimal logistics collaboration, capacity utilization, operational responsiveness, and real-time market insights. The solution enables shippers and carriers to jointly manage logistics transactions, exchange documents, and obtain insights into improving process efficiencies.

51ˇçÁ÷Business Network Freight Collaboration offers three overarching capabilities: it allows shippers to digitally collaborate with trading partners on freight orders for contracting (tendering and subcontracting), execution (milestones and documents), and settlement processes. In addition, the solution facilitates the scheduling of dock appointments and gate processing, enabling businesses to orchestrate the loading and unloading of goods irrespective of who manages the yard or initiates the shipment. Meanwhile, 51ˇçÁ÷Business Network Freight Collaboration offers seamless data integration into 51ˇçÁ÷S/4HANA. All three of these digital capabilities enable organizations to extend their reach and deepen their collaboration with the trading partners on which they rely to create value, across different modes of transportation.

In a business climate highly prone to change, the ability to obtain actionable, instantaneous insights into the fulfillment of orders and transit of goods is essential. These insights can automatically be fed back into the planning system to mitigate the real-time impact of disruption and automate reactions to it. With 51ˇçÁ÷Business Network Global Track and Trace, enterprises can strengthen their situational awareness by harnessing the power of geolocation tracking, enabling the early detection of potential disruptions in time to pursue alternatives and maintain production schedules. Businesses can improve their responsiveness through the immediate mitigation of exceptions made possible by transparency across trading partners.

Customer satisfaction, meanwhile, can improve thanks to businesses’ ability to promptly update the estimated time of arrival for shipments. Through a unified, integrated platform, trading partners can benefit from a holistic and consistent end-user experience across geographies and modes of transportation, transforming reactive supply chains into predictive ones.

Cloud technologies are helping supply chains to become not only more predictive but also more accountable. Material traceability has become increasingly important in recent years as governments – from Germany and to the and – enact legislation aimed at transparency and accountability in supply chains. Verifying the absence of forced labor, the level of carbon emissions, or the attainment of other environmental objectives is essential to comply not only with local regulations but also with stakeholder values.

To this end, 51ˇçÁ÷Business Network Material Traceability enables companies to follow raw materials and finished products across all participants in the n-tier value chain. Initially developed with the food supply chain in mind but subsequently expanded to other industries, the solution draws upon the cloud-based analytics and integrated ERP data necessary to support targeted recalls or other compliance processes involving trading partners. As an example, 51ˇçÁ÷Business Network Material Traceability is a major component of the Catena-X data ecosystem for the automotive industry, through which dozens of manufacturers, suppliers, dealer associations, and application developers have set a uniform standard for the secure sharing of data throughout the value chain.

Transparency must reach beyond the traditional supply chain to include logistics partners as well, so that actionable insights are accessible throughout the core operational processes on which trading partners mutually depend. Aided by cloud-based applications, businesses can minimize the risks associated with disruption through broad visibility. But only when visibility becomes actionable can true resilience be achieved. Only through tightly integrated, highly responsive supply chains can businesses foster the agility and accountability demanded by consumers, trading partners, shareholders, and regulators. Through 51ˇçÁ÷Business Network for Logistics, trading partners can achieve the superior execution necessary to plan together accurately, innovate collaboratively, and execute successfully.

Paige Cox is senior vice president, chief product officer, and head of 51ˇçÁ÷Business Network.

Cofinity-X strives to be one of the first operating companies that aims to provide products and services for the secure exchange of data throughout the entire automotive value chain.

• BASF, BMW Group, Henkel, Mercedes-Benz, SAP, Schaeffler, Siemens, T-Systems, Volkswagen and ZF jointly founded Cofinity-X to accelerate the operation and adoption of Catena-X use cases throughout the automotive industry
• Cofinity-X aims to operate an open marketplace for applications and provide products and services to enable the efficient and secure exchange of data between all participants of the ecosystem initially focusing on the European market
• Cofinity-X will help to make important progress with the operationalization and build-up of end-to-end data-chains to trace material flows throughout the entire value chain
• Basis for the operation will be the trusted Catena-X and Gaia-X principles ensuring full data sovereignty for data sharing parties in an open, trusted, collaborative and secure environment

“Catena-X aims to provide greater resiliency and transparency to the automotive value chain, improving its quality and efficiency for all companies involved,” said Christian Klein, CEO of 51ˇçÁ÷SE. “This open and collaborative data ecosystem perfectly reflects SAP’s vision to enable every organization to become a network of intelligent, sustainable enterprises and gives the companies leveraging the Catena-X automotive network access to a broad portfolio of 51ˇçÁ÷solutions, from enabling the traceability of products across multiple parties in the supply chain to tracking and calculating the Scope 3 emissions. Cofinity-X marks another important milestone in this pioneering project, and one to which we are excited to contribute.”

Future customers will be able to access applications and services to implement use cases in the automotive value chain such as CO₂ and environmental, social and governance (ESG) monitoring, traceability, circular economy or business partner data management.

Approaches for Decarbonization: Carbon Footprint Tracking solutions enable concise, accurate calculation and reporting of CO₂ values along the value chain. This will allow Cofinity-X customers to stay ahead in Carbon Footprint transparency and derive potential sustainability improvements to play an active role in the global effort to reach net zero.

Consistent and Reliable Traceability: Tracing parts and components at any time throughout the entire supply chain starting with raw material and closing the loop with recycled parts. Traceability applications can give the possibility to display the entire value chain and help to find ways to increase supply-chain resilience.

Circular Economy for a Sustainable Value Chain: The recycling of materials is an ever-increasing topic of importance within the automotive industry. The information about the condition of components can be transparently displayed among suppliers and customers to properly re-use parts and components. By implementing circular economy, companies can improve the ratio of recyclable materials in their products and reduce waste.

Intelligent Business Partner Data Management (BPDM): Companies invest significant resources to keep customer and supplier data up to date. The BPDM services of Cofinity-X cleans and enriches business partner data across the automotive industry. Customers of Cofinity-X thus can benefit from sorted, analyzed, uncluttered and enriched partner data.

Collaboration Between Suppliers and Customers Throughout the Automotive Value Chain

“Increasing requirements to trace all materials throughout the entire value chain is one of the key factors on which Cofinity-X is built. We will be an important part of a rapidly scaling ecosystem in which all companies in the automotive value chain can participate equally. Therefore, our product offering will initiate end-to-end data chains as well as generate value for all the participants.”

– Alexander Schleicher, Managing Director Cofinity-X

Product Offering Built to Drive Acceptance and Adoption of Small- and Medium-Sized Enterprises

End-to-end data chains can only be created if all parties are willing to collaborate. Most of the companies in the automotive value chain are small- and medium-sized enterprises. Cofinity-X will offer an easy and fast onboarding for these key players. Cofinity-X will build a portfolio around four key product and service offerings. The first products and services will be available from the end of April 2023.

• Open Marketplace aspires to enable the efficient “matchmaking” of network participants by creating an optimal environment for business applications that customers can implement. All applications offered will be compliant with the Catena-X and GAIA-X data exchange principles.
• Data Exchange between parties will be based on sovereign, secure and standardized principles without forcing a lock-in effect to certain solutions. Every partner will stay in full control of their own data.
• Federated and Shared Services will power the business applications offered on the marketplace and enable data exchange in an interoperable open-source approach ensuring added value for each customer.
• Onboarding Services will foster the adoption of the Catena-X ecosystem and accelerate the digital connection of automotive partners in every step of the value chain to the ecosystem.

“Cofinity-X is pioneering the industrialization of Catena-X standards and software artifacts to offer an onboarding point for customers to the Catena-X data space. I am excited to see the first truly open and interoperable product and service portfolio come to live and derive value for all members.”

– Oliver Ganser, Chairman of the Board of Catena-X Automotive Network e.V.

Key Automotive Companies Send Out a Strong Signal and Commitment

The investment in Cofinity-X underlines the commitment of the founding partners to establish the Catena-X ecosystem. Each shareholder holds an equal share in this joint venture.

About Cofinity-X

Cofinity-X GmbH is based in Cologne and was founded in 2023. It is a joint venture of BASF, BMW Group, Henkel, Mercedes-Benz, SAP, Schaeffler, Siemens, T-Systems, Volkswagen and ZF. The vision of Cofinity-X is to run an open marketplace for the provision of own and third-party business applications and further services that enable secured and standardized data transfer along the automotive value chain in accordance with the Gaia-X and Catena-X principles with initial focus on the European market. All necessary regulatory approvals have been obtained and Cofinity-X will develop its activities accordingly. For more information, please go to: .

About SAP

SAP’s strategy is to help every business run as an intelligent, sustainable enterprise. As a market leader in enterprise application software, we help companies of all sizes and in all industries run at their best: 51ˇçÁ÷customers generate 87% of total global commerce. Our machine learning, Internet of Things (IoT), and advanced analytics technologies help turn customers’ businesses into intelligent enterprises. 51ˇçÁ÷helps give people and organizations deep business insight and fosters collaboration that helps them stay ahead of their competition. We simplify technology for companies so they can consume our software the way they want – without disruption. Our end-to-end suite of applications and services enables business and public customers across 25 industries globally to operate profitably, adapt continuously, and make a difference. With a global network of customers, partners, employees, and thought leaders, 51ˇçÁ÷helps the world run better and improve people’s lives. For more information, visit .

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Imagine streets populated with electric vehicles (EV) and gas stations replaced by EV charging stations at shopping centers and grocery stores. Mobility-as-a-service (MaaS) dominates the transportation landscape, offering users the most affordable, sustainable, and efficient way to get around. Some cars are self-driving and interconnected, talking to each other and sharing their location and next moves. What’s more, many cars are connected with the ability to send and receive all types of users’ data.

To realize this new reality, change will happen quickly, and regulations will only accelerate this transition. In Europe, a package of legislative proposals, “,” aims to reduce greenhouse gas emissions by 55% by 2030. It includes a policy that requires a 55% reduction of average emissions in new cars by 2030 and a 100% reduction by 2035. In the United States, President Biden set a bold goal that EVs make up at least 50% of all vehicles sold by 2030. Since he took office, automakers announced investments of more than in EV manufacturing and $48 billion in battery production in the U.S. alone.

Add consumer sentiment to the equation – of global car buyers are looking for an EV – and it’s no surprise that carmakers, suppliers, and dealerships recognize the need for dynamic and continuous innovation to be profitable and sustainable.

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In a world of disrupted supply chains, new market participants, digitized factories, and a growing demand from regulators and consumers for sustainable vehicles, automotive businesses are embracing the following five trends to stay competitive.

1. Shifting Gears to Electric

A massive shift to vehicle electrification will require efficient and scalable EV charging infrastructure, ideally on one platform with seamless integration into existing business systems used by automakers, suppliers, and dealerships. It will also change supply chains and the role of parts suppliers as they shift from providing components needed for internal combustion engines to those needed for EVs. To prepare for vehicle electrification, automakers and suppliers can leverage the power of technology to manage charge point infrastructure and interact along the mobility value chain in the cloud to support collaborative, end-to-end business models and processes.

51ˇçÁ÷customer provided the first intelligent, multi-socket charging solution for EVs. It allows multiple electric cars to charge simultaneously. The solution helped ChargeX lower time spent on daily charge-point operations and improve customer satisfaction with intuitive user interface and straightforward, automated processes.

2. Making Cars Smarter

Cars are the next smartphones. As consumers increasingly expect more from their vehicles, automobile manufacturers must find ways to continually enhance vehicle intelligence and connectivity.

Even in the 2020s, software reshapes how drivers interact with their cars. Automation has taken over braking, climate control, cruise control, entertainment, and more. Routine software updates bring drivers continuous improvements, adding safety features, better performance, and greater efficiency.

Fully autonomous driving, currently in its infancy, continues to learn and will soon become a common feature. Like vehicle electrification, regulatory requirements and consumer behavior inspire companies to develop innovative solutions that push the boundaries of automotive capabilities.

One company, , uses flexible and scalable manufacturing solutions from 51ˇçÁ÷to build its fully autonomous, purpose-built vehicle fleet.

3. Considering Mobility-as-a-Service

An uptick in technology-powered smart cities – spurred by our response to the effects of climate change – will force auto manufacturers and suppliers to rethink their business models. Communities will reimagine fundamental public services, including transportation, encouraging citizens to swap their vehicles for public and shared transportation services. In fact, by 2030, the shared mobility market is expected to exceed .

Mobility-as-a-service platforms offer users an integrated package of transportation options accessible through a single payment channel. These implementations will play a fundamental role in solving urban challenges, reducing congestion, greenhouse gas emissions, and accessibility constraints. Car manufacturers and suppliers can rethink and innovate their product offerings through this modality.

Take the robotaxi by . Passengers request a ride from this driverless taxicab via their smartphones. Zoox robotaxis go up to 75 miles per hour, revolutionizing ridesharing. The application provides the backbone for the robotaxi production.

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4. Prioritizing Operational Resilience 

Amid the evolving automotive landscape, automakers and suppliers must ensure resilient supply chains are in place to meet changing demand, including increasing requests for EV components, while combating battery and chip shortages. The disruption caused by COVID-19 and the war in Ukraine highlighted the threat external events can have on automotive industry operations. Technology will play an even more critical role in enabling businesses to respond to potential supply chain disruptions.

Real-time tracking and analysis can better forecast supply and demand, fostering a more agile and resilient supply chain. As a result, carmakers, suppliers, and dealerships can respond to the unexpected as soon as it happens, make better inventory management decisions, and reduce waste.

Electric motorcycle company and German multinational manufacturer of EVs and motorcycles BMW teamed up with 51ˇçÁ÷to succeed in the new world of mobility. With real-time information, detailed insights on performance, and analytics to improve decision-making across the manufacturing value chain, Zero Motorcycles and BMW can achieve operational resilience while pushing the boundaries of innovation.

5. Embracing Digital Retail

Due to consumer behavior change accelerated by the pandemic, the automobile industry recognizes the urgent need to adopt a digital-first, omnichannel sales strategy. Car buyers and sellers have started turning to contactless car buying and online dealerships. And even as the world recovers from COVID-19, vehicle retailers see automotive e-commerce searches reaching an as many customers now prefer digital retail experiences for sales, trade-ins, and services.

51ˇçÁ÷partner makes it easier for importers, dealerships, and service locations to adopt digital retail options, optimizing end-to-end sales and service processes. With innovative products for 51ˇçÁ÷S/4HANA, dealerships and service locations can continue to drive sales, deliver services, and meet shifting customer expectations.

Above All: Collaboration Is Key for Future Success

The automotive industry faces enormous challenges. Despite competition in the automotive industry, automakers and suppliers gain critical value through collaboration, particularly in such a dynamic environment for innovation. Catena-X – as front-runner for the automotive industry – aims to bring all business partners, including multi-tier suppliers, original equipment manufacturers (OEMs), or recycling service providers, into one network to help ensure an open, secure, and interoperable data exchange along the value chain. The transparency of data helps participants gain visibility into the complete material flow of a product life cycle, from “cradle to grave.” Utilizing information available in shared digital twins improves decision making for end-of-life vehicles, thus useful parts can be circulated back for refurbishment or reuse and valuable raw materials can be recycled in a more effective way. With , 51ˇçÁ÷can provide software and network services to Catena-X and the automotive industry at large.

Learn how you can ĚýˇÉłóžąąôąđ that are ready to meet the road ahead with industry cloud solutions from SAP.

Hagen Heubach is global vice president of Automotive Industry Business Unit at SAP.
Kelly Cannon is head of Industry Thought Leadership at SAP.

packages help enterprises gain insights into their product carbon footprint data and identify further potentials in reducing greenhouse gas (GHG) emissions.

Scope 3 Emissions: The Biggest Challenge to Achieve Net Zero

Despite the massive disruptions that businesses are currently facing, climate change remains the most critical challenge that industries must jointly tackle. To achieve the goal of the Paris Agreement of limiting global warming to 1.5°C — which would reduce the possibility of initiating the most dangerous and irreversible disasters of climate change — net zero CO2 emissions need to be secured globally around mid-century. The European Union (EU) set an even more ambitious target to reach climate neutrality by 2050.

This means, in short term, that GHG emissions need to be reduced by more than 50% by 2030 in order to set a responsible pathway to meet the net zero target.

Although the largest companies have specifically articulated sustainability or carbon neutrality as their strategic goal, few have painted a clear and comprehensive action plan for the transition. Regulations such as the Corporate Sustainability Reporting Directive (CSRD) or new rules proposed by the United States Securities and Exchange Commission (U.S. SEC) on disclosing corporate carbon data leave businesses no time for empty green statements. The time to act is now!

Why is it so difficult to report on carbon emissions? emissions has already been well established in many companies throughout the world, visibility into the GHG emitted through the supply chain (scope 3), which constitute the significant share of the overall emission, is often not sufficient.

In the automotive industry for instance, . That is why it is even more crucial to identify carbon footprint reduction opportunities along the supply chain. Lack of trust, lack of access to high-quality data, inconsistent methodology or standards of data accounting, and lack of interoperable technology solutions across the highly complex automotive supply chain are the main obstacles to overcome.

Unleash the Network Power for Decarbonization

To meet sustainability and regulatory requirements, companies need to work together with partners, suppliers, and customers and establish transparent processes and common data standards — from material acquisition to manufacturing to distribution.

As the first open and collaborative data ecosystem, is targeting a more sustainable industry value chain by incorporating all participants involved and enabling the data transparency. Tracking the product carbon footprint is one of the first use cases that Catena-X is now addressing. This is the starting point for a better understanding of the scope 3 GHG emissions, which sets the foundation of enforceable decarbonization opportunities.

On one hand, a common accounting and reporting methodology on product carbon footprint data is required to support the consistency, comparability, and verifiability of the data sourced from the network partners. By partnering with the World Business Council for Sustainable Development (WBCSD), Catena-X adopts the framework of CO₂ calculation scheme and data model.

Earlier this year, 51ˇçÁ÷was the first organization in the world to achieve a standardized carbon footprint value in a WBCSD proof of concept. Importantly, the standardized approach also encourages network partners to move away from unspecific industry average measurements and toward using accurate primary emission data.

On the other hand, technology is key to operationalizing emission accounting and sharing. With its longstanding industry process know-how as well as solution best practices, 51ˇçÁ÷acts strongly as a key enabler in product carbon footprint data tracking within the automotive network.

Industry Network Solutions Empower Automotive Value Chain in Chasing Zero

With , companies can share their product carbon footprint with their business partners in an easy, efficient, and secure way.

GreenToken is a Web-based, subscription SaaS solution striving to create accountability and transparency across the material supply chain. Being compliant with the standardized data model defined with WBCSD helps ensure data consistency across the network.

The product carbon footprint data can be managed and transferred easily on material level between direct business partners.

It leverages to notarize and transfer carbon emissions via tokens from one supply chain member’s wallet to the next, without disclosing private or confidential data. As these tokens travel along the supply chain downstream, the collected information gets shared, creating a reliable, immutable, and auditable chain of custody. In addition, not only CO₂ data but also other information such as the origin of parts and certifications can be shared via this trustful and verifiable approach.

The solution provides a secured open API, accessible to other carbon emission calculation tools or back end solutions for transactions. A direct integration with 51ˇçÁ÷ERP Central Component 6.0 and 51ˇçÁ÷S/4HANA software is in place.

Transactions can also be driven by import of CSV files or manually, which means that small and midsize enterprises (SMEs) without back end enterprise resource planning (ERP) solutions can also leverage GreenToken for carbon data sharing within the network.

“GreenToken’s novel approach has the potential to create an accountable and auditable network to scope 3 reporting that is lacking today,” said James Veale, co-founder of GreenToken by SAP. “What is more, we have already proved GreenToken at scale in other supply chains, and the solution is now ready for Catena-X.”

Hagen Heubach is global vice president and head of Industry Business Unit Automotive at SAP, and a Board Member of the Catena-X Automotive Network.
Heiko Flohr is senior vice president and head of Product Management for 51ˇçÁ÷for Discrete Industries, and a member of Guidance Board for Catena-X Automotive Network.
Leyi Liu is part of Solution Management for 51ˇçÁ÷Industry Network for Automotive and Catena-X Automotive Network.

researchers predicted shipments of electric vehicles, battery electric and plug-in hybrid, will increase at a CAGR of 26% to reach 36 million units by 2030, up from 3 million in 2020. However, to make good on the automotive industry’s commitment to , the entire supply chain – from battery manufacturing through infrastructure and recycling – needs to rethink just about everything.

“EVs are transforming the concept of mobility in society,” said Thomas Pohl, senior director of Marketing at SAP. “Automotive suppliers are committed to sustainable business models through the entire product lifecycle, including batteries. As carbon-free operations become table stakes, leaders will stand out by applying their deep industry expertise and advanced technologies to champion sustainable, ethical practices as a new business model for many industries.”

Automotive Networks Redefined

EVs are literally energizing the competitive automotive supplier landscape that’s expanding beyond traditional to , as well as other consumer electronics players, eager for a piece of this promising future. As suppliers toe the “green line,” new ecosystems have emerged to sustainably build and manage the battery lifecycle of EVs.

One example is , an open community of automakers, suppliers, and other partners creating common data standards to track environmental, social, and governance (ESG) progress across automotive industry production chains. The idea is to collaborate, often in near or real time, sharing information across the network.

Tracking and exchanging data throughout each EV’s lifecycle provides intelligence to guide transparent decision-making from initial battery manufacturing and delivery, through certified disassembly and potential reuse. Members are also exploring use cases for traceability, which would help companies track battery components to meet CO2 footprint reduction commitments and ethical sourcing regulations while becoming more self-sufficient in manufacturing operations through recycling battery components. What’s more, with complete information across the value chain, automakers and suppliers can quickly find members with the capacity to address fast-changing demands, sourcing new suppliers, adjusting production schedules and other operations, before major threats like shortages materialize.

Circular Economy Redraws Automotive Supply Chains

Electric vehicles are blurring traditional industry boundaries across the automotive supply chain in new ways because they capture so much data. Securely connecting charging network information, from consumer-facing data through accounting and finance software systems, opens up tremendous sustainable business opportunities. Retailers can offer discounts to shoppers as they charge their car onsite. EVs can operate as virtual power plants using solar power from photovoltaics as a renewable alternative. To gain insights across the lifecycle of an electric car’s battery, some organizations are building digital twins.

“Connected data from digital twins helps OEMs and suppliers calculate the health and residual value of the battery,” said Johannes Weber, solution manager for 51ˇçÁ÷E-Mobility. “For example, charging histories reveal how much stress a battery has experienced, including trips and stationary use. 51ˇçÁ÷E-Mobility is a cloud-based solution that captures charging totals by location, date, duration, and EV. This is the kind of data that can be incorporated into digital twins, supporting sustainable in-life, second-life, and end-of-life decisions.”

EVs are among the seismic events shocking the automotive supply chain to its core. Sustainability begins with the batteries powering the car, but certainly doesn’t end there.

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The industry generates about five percent of industrial waste in the entire world,* and with increasing demand for electric vehicles (EVs), battery material consumption grows significantly.

Circularity is the key in order to tackle the environmental challenges by maximizing the value retention throughout the entire life cycle of products and materials. At the same time, the use of secondary materials avoids excessive use of finite natural resources and minimizes waste at a vehicle’s end of life while also reducing emissions from their manufacturing process.

According to the Ellen MacArthur Foundation, the implementation of circular business practices could save to 45% of carbon emissions and 90% of wasted materials. More than that, by implementing a data-driven “R-strategy” (reuse, remanufacturing, recycling), a circular economy does not only help enterprises meet their sustainability goals but also generate new business opportunities for the industry.

How Can Industry Network Enable the Circular Economy?

As 51ˇçÁ÷Chief Marketing & Solutions Officer Julia White shared in Reimagining an Industry-Wide Paradigm Shift Toward a Circular Economy, technology offers the most effective way to achieve circularity at scale.

Enterprises that are undergoing the digital transformation leverage technology to eliminate surplus in their own operation. However, a shift toward the circular economy cannot be achieved within one’s own business boundaries, but through a collaborative approach across the entire ecosystem.

To realize this vision, Catena-X — as frontrunner for the automotive industry in Europe — aims to bring all business partners, including multi-tier suppliers, original equipment manufacturers (OEMs), and recycling service providers, into one network to help ensure an open, secure, and interoperable data exchange along the value chain.

The transparency of data within the network helps to gain visibility into the complete material flow of a product life cycle, from “cradle to grave.” Utilizing information available in shared digital twins improves decision making of end-of-life vehicles, thus useful parts can be circulated back for refurbishment or reuse, and valuable raw materials can be recycled in a more effective way.

Furthermore, access to carbon footprint data based on a standardized methodology along the supply chain enables network partners to identify decarbonization potential to achieve their sustainability goals.

Industry Network Solutions Empower Circular Economy in Automotive

With packages, we are closing the loop within the automotive industry in a sustainable, data-driven, and comprehensive manner.

A digital twin of vehicles as well as their components is accessible in the network. Complemented with the traceability capabilities, manufacturers are able to track quality issues back to the root cause much more efficiently and precisely. Important product information, such as compliance certificates as well as CO2 emission data, flows through the supply chain in a secure way, which provides better insights into the sustainability performance based on real data and helps to identify carbon reduction potentials.

On the downstream side, usage data such as maintenance or state-of-health (SoH) of batteries can be aggregated and analyzed into the digital twin dashboard as well. Dismantling companies can leverage this analytical insight for purchase decision of end-of-life vehicles. Moreover, with additional information on material composition or dismantling guidance provided by suppliers and OEMs, the second-life decision for reuse, remanufacturing, and recycling are more data-driven and thus improves the circularity of materials.

This is not yet the whole story. Manufacturers in the automotive industry have a constant demand to recover their secondary materials for remanufacturing and refurbishment in order to be more flexible with regards to the supply chain disruption as well as to achieve the quota of recycled materials. At the same time, sellers such as car dismantling companies have supply to meet this demand but are struggling to sell their components and parts on a very fragmented market.

As a secondary marketplace, the Encore by 51ˇçÁ÷solution is enabling regenerative business processes and empowering the network members to close the loops and make circular economy a reality. The demand-driven enterprise trading platform provides a simplified way to offer and discover secondary materials and components with integration into back-end procurement or asset management solutions. The platform enables trading of aftermarket components, such as alternators or batteries, and is looking to expand into further areas, such as secondary materials — from aluminum to polyurethane — or production waste and scrap.

This is how 51ˇçÁ÷helps to close the loop and make circular economy a reality. Together with Catena-X, we will make a more sustainable, more resilient, and more efficient supply chain happen.

If you are curious about the amazing milestones we have achieved and our vision for the years to come, please visit us at Hannover Fair:

• Catena-X: Hall 8, Booth D24
• SAP: Hall 4, Booth D04

Hagen Heubach is global vice president and head of Industry Business Unit Automotive, and a board member of the Catena-X Automotive Network.
Heiko Flohr is senior vice president and head of Product Management 51ˇçÁ÷for Discrete Industries, and a member of Guidance Board for Catena-X Automotive Network.

*Simic V (2013) End-of-life vehicle recycling—a review of the state-of-the-art. Technical Gazette 20(2):371–380
**Source: Ellen MacArthur Foundation; Global Resources Outlook; World Economic Forum; Circularity Gap 2021; World Wide Fund for Nature