The environment for sustainability is evolving rapidly – in some cases, teams are concerned that new IT systems will not be in place in time to meet the first deadlines. While SAP’s Cloud ERP-centric approach will be generally available soon, organizations can already be reaping the benefits of their existing investments to deal with some primary concerns.
Planning Sustainability KPIs
To change business practices to reach sustainability goals, finance teams need to include key metrics in both their strategic and operational planning processes. SAP Analytics Cloud has shipped sustainability planning processes as part of SAC Business Content package “Integrated Financial Planning” on February 19th, 2024. This content supports a collaborative planning process designed to integrate seamlessly with Financial Planning, but it also can be used standalone for companies who want a dedicated approach.
Teams can plan greenhouse gas (GHG) emissions integrated into existing business plans, using sales quantities, material resources, or expense planning to calculate not only the financial outlook, but also the product and corporate footprint.
Starting from a spend-based emission calculation, retrieving emission factors from SAP Sustainability Footprint Management or using planned activity quantities and rates, business users can forecast and simulate GHG emissions for cost centers, products or assign planned GHG quantities to financial statements.
This planning tool presents companies the opportunity to execute their sustainability strategies and plan the GHG footprint alongside their economic goals. And progress toward sustainability goal achievement can be measured.
Figure: Planning flows for GHG
Analyzing Sustainability KPIs
The SAP Sustainability Control Tower is an analytics solution that supports teams in their management of reporting sustainability metrics. Companies can use predefined integration to pull data from SAP and other systems, easing data collection and centralizing all relevant data in one place. SAP delivers pre-defined content which can be extended with customized metrics, emission calculators, and templates to meet the evolving sustainability reporting needs. With this transparency, companies can define and execute on ESG goals and track sustainability action.
Sustainability risk management
The SAP GRC (Governance, Risk, and Compliance) portfolio contains solutions that can help companies manage the risks associated with sustainability. Using the risk management capability of SAP Risk and Assurance Management (formerly known as SAP Financial Compliance Management), business and operational managers owners can identify, assess, and respond to sustainability risks, as well as raise and respond to identified issues, in a documented and auditable collaborative process. In addition, teams can set up and structure internal controls for sustainability and test the controls regularly using the process control capability) to address segregation of duties demands for sustainability. For companies already using these solutions, adding an additional sustainability risk and control category is a quick-win for transparency. The short implementation time of the solutions means that teams can start getting value for their risk management use cases quickly.
Entity-level carbon closing activities
With the introduction of new sustainability reporting requirements, finance teams are not only tasked with new data collection, preparation and reporting requirements, but also with the need to orchestrate and coordinate sustainability period-end processes and activities.
SAP’s entity closing orchestration solution, SAP Advanced Financial Closing, is a tool that teams can use to organize and automate many repeatable activities in the financial but also in the sustainability-oriented record-to-report process. It allows teams to run a combination of automated jobs, bots, workflow-supported and status-triggered manual follow-on tasks, and to document sign-offs by experts. With this, sustainability reporting can benefit from this structured approach as well. From organizing and automating data collection, to running automated routines, and providing assurance checks and variance analysis, the oversight and status reporting helps teams identify roadblocks and stay on track to meet reporting deadlines.
Collecting data from subsidiaries with a systematic approach
A key capability of SAP S/4HANA Cloud for group reporting is data collection, which ensures non-financial data is collected from all subsidiaries in a structured, traceable approach. SAP delivers sustainability content for SAP Group Reporting Data Collection, but teams can also define their own forms. These forms can include data validation rules to ensure the data being collected is the highest quality. Process support ensures central teams have a good overview of the collection process, so that reporting deadlines can be met.
Group-level carbon consolidation
Teams can use SAP S/4HANA Cloud for group reporting to account for group-level greenhouse footprints using GHG consolidation methodologies based on operational control alongside the financial consolidation methodologies and standards. Finance teams do not have to learn to use a new tool – rather the existing consolidation capabilities and automation routines can be re-used for financial and sustainability consolidation. The specific consolidation rules which consider control differences (which may differ between financial and non-financial consolidation principles) can be flexibly and accurately modeled according to ISSB, ESRS or other sustainability standards and rules.
Disclosure Management with SAP and partner solutions
Finally, the immediate task facing Finance teams is to coordinate the external reporting related to carbon and sustainability and make that information available to authorities. This “last mile of reporting” combines data and commentary and requires a traceable and verifiable approach.
With SAP Disclosure Management and other SAP partner solutions, organizations are already compiling greenhouse gas emissions metrics for the external filings and making this information available in the required XBRL technical formats. There is standard integration between SAP Disclosure Management and SAP S/4HANA for group reporting which can be used to make sure the non-financial information flow is accurate, and there is extensive collaboration support to structure the process of dozens of experts working together under time pressure to deliver a high-quality report.
Conclusion
In summary, finance teams can begin today making the most of their existing estate to prepare for future sustainability business reporting requirements. Companies can provide Sarbanes-Oxley compliance for ESG reports and enable data ownership and governance with traceable and verifiable data using tools that are already in place.
Read more about how SAP broader suite of SAP solutions - Cloud ERP, Supply Chain Management, Spend Management and Business Network, and Business Technology Platform - are delivering SAP solutions for sustainability.
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