(Bloomberg)-SAP SE Chief Executive Officer Christian Klein said the software maker is looking for growth in tools to help businesses track diversity and sustainability, betting that the company’s strength in supply-chain and procurement programs give it an advantage in emerging markets.
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Investors are increasingly demanding that businesses set goals for ESG-environmental, social and governance-issues, but there is debate about how companies should disclose their progress. Early dominance in the sector could give a software maker an influential voice in helping develop what could be mandatory reporting standards, similar to quarterly financial disclosures.
In an interview, Klein said the German company has a fresh start over rivals like Salesforce.com Inc. at ServiceNow Inc. in providing businesses with the technology tools needed to support ESG reporting, a market that could reach $ 2 billion by 2030.
“You can only act on something when you have transparency,” he said. “We’re using our current solutions and we’re expanding the data model to make ESG transparent.”
SAP sells applications that support operations from supply chain and factory oversight, to travel costs and human resources management. Compared to a program like Salesforce’s customer relationship manager, Klein argued that SAP systems provide more valuable data to help companies track workforce diversity, eliminate child labor use, reduce the greenhouse gas emissions and fulfill other ESG commitments.
“Software for sales people, where is the carbon footprint? And what kind of carbon footprint do you create when you do pipeline management? ”Klein said.“ You need data. And the data is in the SAP system. “
Salesforce, in turn, announced its ESG product called “Net Zero Cloud,” which the company also uses for its own efforts to lower emissions. Remember, Salesforce reported its retention progress along with financial metrics since fiscal year 2012. ServiceNow, which released an ESG reporting tool in October, declined to comment.
At its core, ESG reporting is a data problem. The information needed can often be found in various applications around a company. Many of those apps have their own proprietary data formats and work largely siled from one another. While some companies can use SAP for most of their software needs, others use a wider range of tools. That’s why businesses have experienced so much trouble in the initial step to pull information into a common storage that can serve as the basis for further action.
The problem becomes even more lofty when a company wants to look beyond its own direct operations. Thinking of carbon emissions from a factory, for example, can be as easy as looking at a utility bill. But to get a full view of a corporation’s carbon emissions, a business needs to examine its entire supply chain, which can include hundreds, if not thousands of partners-some of whom may be unwilling or countless. their own footprint. For example, up to 60% of carbon emissions from automotive production are outside the major manufacturer, according to Klein.
SAP is trying to address that challenge in many ways. It created a machine to help customers calculate the average overall impact using a common emission factor from a provider such as EcoAct, which alleviates the need to obtain information from each individual supplier. SAP is also in the process of compiling its own supplier data ledger that customers can use to determine the environmental impact of their production efforts.
And for the automotive industry, the software company helped launch Catena-X, a consortium of leading manufacturers and suppliers such as Mercedes-Benz AG and Daimler AG that aims to develop common data standards that can be made easier. monitor ESG progress throughout the production chain.
“The standard will be defined in a system that runs the most energy processes. And the most intensive processes are the supply chain, manufacturing, travel and cost,” Klein said. “Here it is clear that SAP has the right to set the standard.”
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