Discovering the Current Market Point of View

Market Overview

The sustainability market incorporates several overlapping subsegments and continues to evolve and expand at a fast pace, driven by regulations, the need for transparency, and to mitigate risk (and positively also differentiate) on brand sentiment and supply chain efficiency. Adjacent market segments and LoB functions are incorporating and absorbing sustainability capabilities. Sustainability remains a top business priority for most organizations as they look to close the sustainability gap between publicly disclosed commitments and the reality needed to achieve these goals.

Landscape

Similarly, the vendor landscape continues to evolve, with a mix of enterprise software vendors and best-of-breed independent software vendors (ISVs), with Systems Integrators and Management Consultants providing a supporting role. Expect more enterprise software vendors to enter the market and expand their product portfolios, both organically and consolidating the market through acquisition from the long tail of specialist vendors. Best-of-breed ISVs are also expanding from their core competence, for example, environment, health and safety (EHS) vendors expanding into ESG.

SAP Opportunity and Differentiation

The SAP addressable market was approximately $3–4 billion in 2021, growing at a CAGR of around 22%, to be at least a $10–14 billion opportunity by 2027. SAP differentiates on providing abroad portfolio of sustainability solutions covering ESG reporting, carbon management, eliminating waste, pollution, carbon footprints, and providing health & safety. SAP can also differentiate on integration with business apps and platform, end-to-end coverage of the entire business cycle, the path to the Green Ledger and SAP’s own sustainability performance.

Explore the four key hot topics that are currently shaping trends and challenges in the sustainability market. These insights will help you understand how to drive more accurate and actionable sustainability management across the entire enterprise.

In the current market landscape and despite global back lash on ESG regulation, Sustainability Reporting is crucial for organizations that need to comply with regulatory reporting requirements and/ or aim to enhance ESG transparency and sustainable business performance by gaining accurate insights into their sustainability KPIs, transitioning from averages to actuals more swiftly.

Trends

Trends and Facts show that 92% of executives believe their organizations need to invest more in technology to meet the demand for consistent and reliable sustainability reporting (Gartner Insights, 2024). The global ESG reporting market is projected to reach $17.1 billion by 2025 (SAP Insights, 2024). Companies with strong ESG performance financially outperform their peers (McKinsey Insights, 2024). Additionally, integrating ESG into strategy builds trust and reputation with stakeholders, and digital platforms enable real-time ESG tracking and reporting (McKinsey Insights, 2024).

Challenges

However, several Challenges exist. Inconsistent data collection methods across companies and sectors make comparisons difficult (PwC, 2023). The large and growing number of sustainability reporting frameworks lead to confusion and data management challenges (Harvard Business Review, 2023). Limited access to reliable data, particularly on environmental and social impacts, poses a significant barrier (McKinsey Insights, 2023). Furthermore, integrated reporting of financial and non-financial data a required for example by the EU Corporate Sustainability Reporting Directive remains challenging (SAP, 2024).

Why SAP?

SAP captures ESG factors with actual, not averaged, data automatically aggregated across systems for more accurate records. It generates audit-ready sustainability metrics and reports company-specific targets with a solution that supports the largest sustainability ecosystem. Additionally, SAP embeds sustainability into business processes, addressing unmet goals with actionable insights and robust planning through solutions like SAP Sustainability Control Tower.

Interested in more information? Then visit our Value Storytelling App ESG Reporting

In today's business environment, taking decisive action to reduce organization's negative impact on the climate is not just a moral imperative but also a strategic necessity. Implementing end-to-end carbon management and striving towards net zero by adopting a green ledger approach can significantly reduce the carbon footprint across the value chain, based on actual business transactions.

Trends

Trends indicate the urgency and potential of carbon management and accounting. To preserve a livable present and future on our planet, global warming needs to be limited to a temperature increase of no more than 1.5°C, for that, emissions need to be reduced by 42% by 2030, and by 57% by 2035 (UN Emissions Gap Report, 2024). This goal is not only vital for the environment but also financially beneficial; 40% of executives estimate an annual financial benefit of at least $100 million from meeting emissions reduction targets (BCG, 2023). Furthermore, AI has the potential to help reduce global greenhouse gas emissions by 5% to 10% by 2030 (BCG, 2023). Based on these trends, business is acting: 37% of the world's largest companies have set public targets to be net zero by 2050 (Accenture Research, 2024).

Challenges

Challenges in carbon management and accounting are significant. Companies need to reduce emissions, but only 10% of companies comprehensively measure all their emissions (BCG, 2023), and particularly lack insights into scope 3 emissions, and many organizations rely on averages instead of actual data for carbon footprint calculations (SAP, 2024). However, insights into emissions are key for emission reduction, because you cannot manage what you cannot measure. Currently, only 16% of companies who have set a net zero target are on track to reach their target (Accenture Research, 2024). Moreover, there is increasing pressure from stakeholders such as customers and investors for accurate and standardized carbon footprint disclosures (SAP, 2024). Additionally, greenwashing concerns have made consumers skeptical about companies' true commitment to sustainability (Harvard Business Review, 2023). The lack of standardization in sustainability reporting further complicates the ability to compare and track progress (MIT Sloan Management Review, 2022).

Why SAP?

SAP offers robust solutions to overcome these challenges and leverage emerging trends. SAP’s comprehensive suite of sustainability tools ensures that businesses can track their carbon footprint accurately, comply with regulatory requirements, and make data-driven decisions to reduce their environmental impact. SAP Sustainability Control Tower and SAP Sustainability Footprint Management enable companies to decarbonize their value chains by accurately calculating corporate and product footprints and hence gaining actionable insights into emissions and emission hotspots that need to be reduced. SAP Sustainability Data Exchange provides scalable and standardized carbon data exchange with customers and suppliers to increase the share of actual data and decrease averages, which further improves transparency into the critical Scope 3 emissions. SAP Green Ledger integrates carbon with financial information and thus enables companies to balance carbon and cost. By integrating these solutions, companies can move towards net zero with confidence, demonstrating true commitment to sustainability and gaining competitive advantage in a climate-conscious market.

Interested in more information? Then visit our Value Storytelling App - Climate Action

In today's rapidly evolving business landscape, incorporating circularity into supply chains and creating corporate sustainability models is paramount. The concept of a Circular Economy, which emphasizes building regenerative businesses, managing material flows, and embedding circularity into core business processes, is gaining traction. This approach not only addresses environmental concerns but also drives economic growth and innovation.

Trends and Facts

Trends indicate that the global push towards a circular economy is increasingly critical. Rising material extraction has led to a decline in global circularity, from 9.1% in 2018 to 7.2% in 2023 (Circularity Gap Report, 2023). Embracing a global circular economy can fulfill people's needs with only 70% of the materials we currently extract and use (Circularity Gap Report, 2023). The potential for economic growth is evident, with the circular economy projected to generate 4.8 million additional jobs in Europe by 2030 (SAP Insights, 2024). Moreover, regenerating natural systems is key, necessitating a shift in product design and manufacturing from linear to circular processes (McKinsey Insights, 2024).

Challenges

However, challenges remain. Scaling up circular economy initiatives is complex due to intricate supply chains and fragmented regulations (McKinsey Insights, 2023). There is insufficient collaboration between businesses, governments, and consumers to achieve true circularity (UN Environment Programme, 2023). Additionally, limited access to data and technology hinders the optimization of circular economy processes (Circular Economy Club, 2023). Designing and producing sustainable products with actionable insights to eliminate waste, circulate materials, and regenerate nature is difficult (SAP, 2023). Furthermore, there is a shortage of funding for research and development of innovative circular economy solutions (Ellen MacArthur Foundation, 2023).

Why SAP?

SAP's solutions are pivotal in addressing these challenges and trends, empowering businesses to incorporate circularity into their supply chains and create robust corporate sustainability models. SAP helps build regenerative businesses by managing material flows and embedding circularity into core business processes. By tracking global EPR schemes (Extended Producer Responsibility – the so-called ‘Polluter Pays Principle’), plastic taxes, and public commitments, SAP ensures compliance with regulations and sustainability goals. SAP's tools analyze the impact of regulations on products and packaging, manage declarations, and foster strategic partnerships for compliance and growth. Automated certification management allows for the efficient collection, generation, and transfer of declarations, ensuring compliance and efficiency. SAP enables adherence to ISCC¹, RSPO², REDcert³, and EUDR⁴ standards using segregated or mass balance accounting, ensuring sustainability and regulatory compliance.

Additionally, SAP produces up-to-date audit reports that meet certification standards, ensuring transparency in reporting. Among its innovative solutions, SAP Green Token and SAP Responsible Design and Production stand out. SAP Green Token ensures the traceability and transparency of raw materials, leveraging blockchain technology to verify sustainable origins. SAP Responsible Design and Production integrates environmental and social considerations into product design, helping companies reduce waste and optimize resource use. These tools enable businesses to adopt sustainable practices that meet regulatory demands and consumer expectations.

In conclusion, SAP's comprehensive suite of solutions supports the transition to a circular economy by addressing key challenges and leveraging emerging trends. Through advanced analytics, regulatory compliance, and innovative sustainability models, SAP empowers businesses to build a dynamic, sustainable, and future-ready economy.

You can find more information at the following link: Circular Economy

Operational compliance refers to an organization's ability to meet regulatory, environmental, and safety requirements to ensure its license to operate. Traditionally crucial for industries like manufacturing and chemicals, this need now extends across value chains, especially as businesses face growing expectations around environmental, health, safety, and operational compliance.

SAP Environment, Health & Safety Management (EHS) and SAP S/4HANA Cloud for Product Compliance are core solutions addressing these needs. With growing complexity in global supply chains, operational compliance now also involves monitoring and mitigating risks across suppliers and logistics networks.

Trends

• Informal Labor Risks: Over 2 billion people globally (60% of the workforce) operate in informal jobs without protections, increasing compliance exposure for businesses relying on extended supply networks (ILO, 2023).
• Hazardous Waste: Each person generates nearly 60 kg of hazardous waste annually, with growing scrutiny on how companies manage and track this across production and supply (The World Counts, 2024).
• Executive Pressure: 89% of executives say regulatory risk is a primary driver for improving social responsibility (Gartner Insights, 2024).
• Financial Impact: Companies with strong operational compliance policies see up to 13% lower cost of equity, making compliance a business advantage (McKinsey, 2024).

Challenges

• Balancing environmental stewardship with economic growth and cost pressures.
• Inconsistent or unclear regulations across supply markets and regions.
• Limited visibility into supplier practices, especially across second- and third-tier suppliers.
• Difficulties in reporting and tracking compliance efforts across decentralized supply chains.
• Pressure to act quickly while managing long-term sustainability goals and addressing stakeholder expectations.

Why SAP?

SAP empowers organizations to extend operational compliance across their entire value chain, providing integrated solutions that address both internal operations and supplier collaboration:

• Environmental Compliance: SAP EHS Management for SAP S/4HANA Cloud helps track and report air pollutants, greenhouse gases (GHG), and wastewater emissions, streamlining regulatory environmental compliance and reducing environmental impact sustainably.
• Worker & Environmental Safety: SAP EHS identifies and mitigates workplace hazards, supports connected workers, and improves situational awareness through real-time data and IoT integrations.
• Regulatory Assurance & Transparency: SAP S/4HANA for Product Compliance enables automated classification and oversight of dangerous goods across production and distribution, ensuring compliance from plant to shelf.
• Supplier Risk Monitoring: Through SAP Business Network and sustainability data integrations, companies can assess and collaborate with suppliers on regulatory requirements and ESG targets.
• Centralized Reporting & Incident Management: Real-time dashboards and streamlined documentation improve visibility across the enterprise and supply chain, ensuring faster, compliant responses.
• Cost Efficiency: Automation, analytics, and embedded regulatory updates reduce manual work and ensure organizations remain audit-ready.

Interested in more information? Then visit our SAP S/4HANA Cloud for Environment Management | EHS software

In conclusion, SAP's comprehensive suite of solutions supports the transition to a circular economy by addressing key challenges and leveraging emerging trends. Through advanced analytics, regulatory compliance, and innovative sustainability models, SAP empowers businesses to build a dynamic, sustainable, and future-ready economy.

Discovering Why Climate Action Is Important Today

Navigating Environmental, Social, and Governance (ESG) Reporting

1. ISCC - International Sustainability & Carbon Certification
2. RSPO - Roundtable on Sustainable Palm Oil
3. REDCert - Certification schemes for sustainable biomass, biofuels and bioliquids
4. Regulation on Deforestation-free products - European Commission