In all my customer interactions, there isn’t a company I’ve spoken to that doesn’t put sustainability at the top of their business agenda. We even see large oil and gas companies taking steps towards greener operations, products, and services. No matter their size, region, or industry, companies are increasingly becoming aware that in addition to managing their top and bottom lines, they also need to focus on managing their green line. It’s also one of the reasons why many CFOs and other business leaders are looking at sustainability as an asset that adds value to a company as opposed to a liability.
Consumer awareness around global challenges such as climate change, pollution, and inequality has increased. Customers are no longer making purchasing decisions based only on products or price. They want to buy from companies that support causes they care about.
Buyers are just one side of the equation. When we look at today’s workforce, surveys show that employees expect businesses to invest in the social and environmental well-being of the communities they serve. Research from Great Place to Work found that giving back in this way is associated with greater employee retention, higher levels of brand ambassadorship, and motivated employees.
Meanwhile, many investors are seeking out companies with a strong ESG (Environment, Social, Governance) record—in 2020 alone, sustainable funds reached record highs with over $51 billion in new investments, one quarter of the total amount of new investments made last year. Research confirms that good sustainability and ESG practices correlate with lower operating costs, better profitability, and superior share price performance. According to some studies, corporate responsibility practices can help organizations boost overall sales revenues up to 20%. Put simply, sustainability has already become a key factor in how we do business.
But many companies struggle to embed sustainability into the core processes of their business. I recently talked to the CEO of one of the largest automotive OEMs. He told me that they don’t know the carbon footprint of their products because they have no transparency into their supply chain. In fact, 60% of the carbon footprint resulting from the production of a vehicle is caused by actions further up or down the supply chain.
Businesses already use technology to manage their supply chains, workforces, and business processes. These data and systems can also help businesses better understand and minimize the carbon footprint of their products and operations. Specifically, by embedding sustainability data into business processes and by using information businesses already collect—such as bills of material, energy usage and procurement data—companies can get a clearer view of their overall carbon footprints.
With technology, automakers can do a deep dive on the CO2 emissions of their plants to measure which facilities are the greenest. For instance, the automotive executive I just mentioned could have visibility not only into the carbon emissions from production of his company’s vehicles, but also emissions from raw materials, transporting supplies, and shipping finished cars. The possibilities are endless. So, what can companies do to accelerate their sustainability efforts? Based on my many conversations, there are four things that stand out:
- You can’t manage what you don’t measure. Every company needs to have clear goals, but they also need to track their progress by harnessing digital technologies.
- Avoid balance sheet blindspots: Don’t wait for regulations and carbon taxes to kick in. If sustainability is built into your strategy, you can manage the material impact on your financial results.
- We must come together in networks. No country, government, business, scientific community, or society will be able to tackle climate change alone. We will only be able to turn concepts like the circular economy into reality by bringing together all stakeholders and ensuring visibility not only within a company’s four walls, but across entire supply chains.
- Change starts from the top. As with every other transformation, reaching sustainability goals comes down to one thing: people. Every change requires a shift in mindset, organizational structure, and culture – and this starts at the top.
There is no doubt that businesses are faced with many challenges today. But they also have an incredible opportunity to set their companies up for future success by helping create sustainable communities for the people they serve. By embedding sustainability into their strategy, businesses can differentiate and distinguish themselves as leaders who create enhanced value for all stakeholders—making sustainability profitable and profitability sustainable.
Christian Klein is Chief Executive Officer and member of the Executive Board of SAP SE