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Executing the Sustainability Business Case

by Marty Etzel and Jeremiah Stone | SAPinsider

July 1, 2011

Did you know that 57% of companies believe sustainability is necessary to be competitive, but only 33% actually have a business case for it? This installment of the "Sustainable Business" column offers a guide to executing the sustainability business case by addressing key areas that customers most often have questions about and laying out five strong cases for sustainability.
 

Managing a sustainable business is a broad and complex challenge. It’s truly a top priority that calls upon all parts of the enterprise to contribute. But as the breadth and complexity of sustainability expands, so does the real business opportunity coming from it. The business case for sustainability is no longer just about being a better corporate citizen — it’s about being a better-run company.

The challenge is identifying the sustainability business case (or cases) at your company and executing on it. If you haven’t yet taken these steps, you’re not alone. According to an MIT Sloan School of Management survey, 57% of companies believe sustainability is necessary to be competitive, but only 33% actually have a business case for it.1

5 Cases for Sustainability

Customers struggling with sustainability and how to develop a business case for it have voiced various questions, such as “What can we do to minimize risk during the manufacturing of our products?” and “How can we effectively manage energy consumption across our plants?” Their concerns fall into five business case categories:

  • Operational risk management
  • Sustainable supply chains and products
  • Energy and environmental resource management
  • Sustainable workforce management
  • Sustainability reporting and analytics

While each one is unique and provides both top-line and bottom-line benefits, these business cases combine to provide the holistic sustainability strategy most companies seek.

Becoming a Safer Business

Operational risk management centers on becoming a safer business, which leads to operating more efficiently. When we asked customers what areas of operational risk management they considered most important, they said managing and decreasing the number of safety-related incidents, improving employee health, decreasing their environmental impact, improving production, and decreasing liability and compliance costs. For example, avoiding safety-related incidents produces the top-line benefit of a safer environment, but also helps maintain operating continuity to create a more efficient business. When workplace accidents and manufacturing breakdowns are reduced, production levels increase and liability concerns and costs decrease, benefiting the bottom line.

Becoming a Healthier Business

Both customers and regulators are demanding greater details about your products, including the materials they contain and what precautions are needed. Creating sustainable supply chains and products requires effort throughout the products’ life cycle, from avoiding toxic materials and ingredients, to tracking and reducing the amount of carbon or sulfur dioxide produced during manufacturing. It also includes working with suppliers on similar initiatives and sharing knowledge across the supply chain. The top-line benefits include healthier people, a cleaner environment, and a stronger brand from marketing healthier products to today’s enlightened customers.

The bottom-line benefit is a healthier revenue stream. The company that monitors its supply chain closely and exchanges quality and safety data with partners will bring products to market more quickly to become more competitive. Safer manufacturing also reduces noncompliance fees and the risk of costly recalls.

Becoming a Cleaner Business

Developing a business case around energy and environmental resource management may be the most straightforward. Top-line benefits include a cleaner environment for your company, your customers, your families — for all of us. There’s brand benefit as well, but managing the amount and type of energy your business consumes is a win for everyone.

The bottom-line benefits are just as clear: a lean enterprise and reduced costs. A study by the Economist Intelligence Unit found that 49% of companies said that, in the past three years, energy efficiency programs have improved their bottom line.2 If you use less energy and reduce emissions, you decrease costs, remove volatility, and contribute more to the profit margin. This applies to energy used for both the materials going into your products and the waste streams coming out.

Becoming a Happier Business

While it’s an area SAP is still exploring, sustainable workforce management is an increasing priority for many companies, as baby boomers exit the workforce in some markets, while retirement ages rise. The top-line benefit of efforts in this area is a happier, more engaged workforce. There is a direct correlation between high-performing companies and employee satisfaction, so investments in this area have a broad impact. The bottom-line impact comes from increased worker productivity, as well as reduced turnover, an increasing cost concern for many companies.

Becoming a More Sustainable Business

Optimizing in only one area won’t produce the broad benefits that sustainability offers. To truly maximize sustainability’s overall impact, you should analyze and monitor all of your efforts across the different business cases and trade off the risks and rewards inherent in juggling short-term profit and long-term improvement of your business. This leads to the fifth and overarching business case: sustainability reporting and analytics. Success in sustainability requires data. You can automate data collection by linking your operational systems to your reporting systems. And by leveraging SAP’s analytic and reporting capabilities, you can understand overall sustainability performance, drive business change, credibly report on those efforts, and create transparency and accountability for those initiatives.

Solutions for Long-Term Success

After collaborating with customers to identify these business cases, SAP worked to ensure that it has the right solutions to help organizations support sustainability and produce long-term benefits.

For example, a concern in the operational risk management category that we often heard from customers was how to manage workplace incidents. To address this, the enhanced incident management functionality within SAP Environment, Health, and Safety Management (SAP EHS Management) focuses on using analytics to identify root causes of incidents. The package, an add-on to enhancement package 5 (released in December 2010), is designed to capture large amounts of data to aid in this analysis. Plus, there are over 30 standard reports and a sophisticated data cube in SAP NetWeaver Business Warehouse that defines best practices to help customers avoid incidents.

SAP has taken steps across the other business cases to ensure customers have a complete portfolio of sustainability solutions (see sidebar). For example, in the area of sustainability reporting and analytics, SAP BusinessObjects Sustainability Performance Management has been enhanced with Global Reporting Initiative (GRI, the gold standard for sustainability reporting) indicators.

SAP continues to invest in its commitment to sustainability. Down the road, we plan to increase reporting capabilities and develop deeper integration between solutions. Upcoming enhancements in the sustainable supply chains and products area, for example, include functionality for recycling administration and product and material safety. In the operational risk management area, we plan to add functionality for effective change management and comprehensive risk assessment. Ultimately, we’d like organizations to be able to continuously engage stakeholders, evolve their profitability, and execute their processes to achieve sustainability success. Learn more at www.sap.com/sustainability.

Marty Etzel (marty.etzel@sap.com) is Vice President of Sustainability Solutions, Solution Marketing, at SAP. He directs a team and coordinates all marketing activity across SAP for solution positioning, demand generation, and market-facing activity. Previously, he worked for over 20 years in manufacturing, much of the time in bulk chemicals.

Jeremiah Stone (jeremiah.stone@sap.com) is Senior Director of Sustainability Solutions, Solution Management, at SAP. He leads SAP’s teams for Operational Risk Management and Sustainable Supply Chains and Products. Prior to SAP, he worked in aviation.

MIT Sloan Management Review, “Sustainability: The ‘Embracers’ Seize Advantage” (Winter 2011). [back]

Economist Intelligence Unit, “Unlocking the Benefits of Energy Efficiency: An Executive Dilemma” (February 2011). [back]

 

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