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Showcasing the End-to-End Capabilities of SAP's Sustainability Solutions

Objective

After completing this lesson, you will be able to highlight one key end-to-end process where SAP's Sustainability Solutions connect to the overall system landscape and their various processes

Sustainable Source to Pay

The "Sustainable Source to Pay" process is a comprehensive approach that integrates sustainability into sourcing and procurement activities. This process includes several potential initiatives for the Chief Procurement Officer (CPO) to enhance supply chain sustainability.

Key imperatives for Sustainable Source to Pay

Enable Procurement to buy Sustainable products: Ensuring that procurement teams prioritize purchasing products that meet sustainability criteria.
Automate Sustainable Procurement Execution: Leveraging technology to streamline and automate procurement processes with a focus on sustainability.
Include ESG risks in Strategic Supplier Risk Management: This involves assessing environmental, social, and governance (ESG) risks when evaluating suppliers.
Create a Safer workplace for External Workforce: Implementing measures to ensure the safety and well-being of external workers involved in procurement activities.

Typical Challenges to these Imperatives for the Chief Procurement Officer (CPO)

Challenges in using static ESG reports for sustainable procurement, and commensurate knowledge gap concerning suppliers' diversity and sustainability certifications.
Inability to systematically gather and share sustainability data with suppliers (and customers).
Complexity to gather part-level data for Scope 3 emissions and supplier-plant level data for anti-slavery and anti-deforestation efforts.
Difficulty in influencing or terminating suppliers with respect to their sustainability practices (or lack thereof).

To address these challenges and take action towards sustainable procurement, the following steps can be taken:

Steps


Sustainable Sourcing	Embedding sustainability into ERP gives procurement teams real-time access to data on carbon footprint, certifications, and material traceability, enabling more sustainable sugar sourcing decisions. SAP’s ERP-centric approach to Sustainability puts sustainability data in the context of business decisions, like Procurement. The right data granularity, in the right place, at the right time.
Sustainable Procurement	This integrated data supports both upfront sourcing decisions and downstream business activities like inventory management and sustainability reporting, ensuring transparency across the supply chain. For our CPO and his procurement team, this granularity allows them to produce ISCC+ declarations with confidence, giving the company market differentiation as well as compliance with regulations.
Relevant Green House Gas Scope Areas	Scope 3.1: Purchased Goods and Services: Tracking the carbon footprint of purchased goods and services. Scope 3.4: Upstream Transportation and Distribution: Monitoring the carbon emissions associated with upstream transportation and distribution. Scope 3.9: Downstream Transportation and Distribution: Assessing the carbon footprint of downstream transportation and distribution.

SAP's ERP-centric approach to sustainability integrates sustainability data into procurement processes, enabling direct access to information on carbon footprint, certifications, and material traceability. So now procurement teams can consider price, delivery, quality, and sustainability – all in the context of their work – and drive action. This approach ensures that procurement teams can make informed decisions that align with sustainability goals.

Sustainable Procurement

To address these challenges and take action towards sustainable procurement, the following steps can be taken:

Scope 3.1: Purchased Goods and Services
Tracking the carbon footprint of purchased goods and services.
Scope 3.4: Upstream Transportation and Distribution
Monitoring the carbon emissions associated with upstream transportation and distribution.
Scope 3.9: Downstream Transportation and Distribution
Assessing the carbon footprint of downstream transportation and distribution.

SAP's ERP-centric approach to sustainability integrates sustainability data into procurement processes, enabling real-time access to information on carbon footprint, certifications, and material traceability. This approach ensures that procurement teams can make informed decisions that align with sustainability goals.

Here is a detailed explanation of the story.

Sourcing and Procurement are on the front lines now with initiatives to procure more sustainable parts and products to help their firms achieve ambitious sustainability goals. Traditionally, procurement teams look at multiple suppliers and evaluate based on price, delivery, and quality. For example, "I like your price, but your quality has issues," or "I love your quality, but your price is high and you’ve had trouble meeting committed delivery schedules." Procurement teams are actively trying to figure out Scope 3 Product Carbon Footprint (PCF) estimates for their parts. The GHG Protocol allows four methods to estimate this, with the lowest accuracy being spend-based, followed by secondary estimates, hybrid methods, and supplier-specific methods being the most accurate. Today, most companies are just using spend-based methods. Point solutions are often chosen for this – beyond having low accuracy, the larger issue is that the final result, the Product Carbon Footprint (PCF), is in a silo. It’s disconnected from the daily procurement process of weighing the trade-offs of price, delivery, and quality.

SAP’s ERP-centric approach to Sustainability puts Sustainability PCF right in the heart of ERP, the Material Master (MM). SAP Sustainability Footprint Management (SFM) saves PCF to MM via our SIC API. MM today tracks vendors' price, delivery, and quality – each vendor's purchasing details are stored in Purchasing Info Records (PIRs). This is done in SAP core Procurement, which sits at the heart of ERP alongside MM.

Note

SAP Ariba suite builds on core Procurement, so even a customer without SAP Ariba gets these features
So now procurement teams can consider price, delivery, quality, and sustainability – all in the context of their work – and drive action.

Scope 3 accuracy & SFM

The GHG Protocol allows four methods: spend-based, secondary estimates, hybrid methods, and supplier-specific methods. Spend-based is most often used and easiest to achieve, but taking the parts you buy and multiplying the spend by an associated emissions factor can be off by 30% or more. What’s worse is that using the spend-method, the only way a company can reduce Scope 3 PCF is to not grow, reduce spend, and hope inflation doesn’t rise. The second method is secondary estimates, which use the weight (specifically mass) of products and multiply by an associated emissions factor. This is starting to be done, and many of our SFM competitors mainly do this. While more accurate than spend-based, it assumes all manufacturers have the same manufacturing process (not true) and manufacture products in the same grid location (not true). Supplier-specific method is the most accurate – as it has supplier-specific manufacturing methods and can also have plant locations with very accurate grid emissions. SFM supports all four methods, allowing our customers to start with the easier methods to get a quick win – but then to take the materially high emissions products and walk up the curve, at their pace, to more accurate methods.

SFM has two other big advantages. First, it gets all monthly MRP processes, out of the box, from S/4HANA. Material Requirements Planning (MRP) considers all products, their exploded BOM of parts, all incoming goods receipts, and all outgoing goods issues. SFM automatically gets each location's monthly MRP run, then Sustainability experts associate one of the four methods to get a PCF. SFM now uses AI to help automate product to EF mapping. The last and most important SFM advantage is it saves the output of PCF back to S/4HANA MM.

To learn more, open the following Interactive Value Journeys for SAP Sustainability Solutions:

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