Strengthening an already-robust alliance that has delivered business transformation solutions to clients in over 80 countries, PwC and SAP recently announced a co-innovation strategy to embed sustainability across customers’ standard business operations worldwide.
Unveiled in December, the strategy will focus on creating solutions to address key environmental, social, and governance (ESG) business challenges, from carbon measuring, reporting, and steering to supply-chain decarbonization, climate risk, and competitive analysis. The strategy builds on existing collaborations, including PwC Germany’s Climate Excellence tool, based on SAP Business Technology Platform (BTP). It will address challenge areas, such as reporting and disclosure, operationalizing sustainability, and supply-chain risk management, monitoring, and compliance.
ASUG asked Sebastian Steinhaeuser, Chief Strategy Officer, SAP, to detail the strategy’s co-innovated solutions, created with PwC’s ESG and accounting expertise and leveraging the SAP Cloud for Sustainable Enterprises solution, along with SAP Sustainability Control Tower and SAP Product Footprint Management.
This is an edited version of the discussion.
Question: Can you provide some context on the pre-existing alliance between PwC and SAP and what led you to formulate this new strategy?
Answer: We have built upon an already existing strong alliance with PwC, with joint customers in more than 80 countries worldwide. Together, we can continuously drive transformation projects in core business processes. At SAP, we believe that we urgently need to accelerate to include sustainability in any business transformation discussion with our customers. Our global ecosystem, especially our Global Strategic Partners like PwC, supports our focus on carbon reduction, circularity, and equality in business.
At World Economic Forum 2023, you could experience the SAP Executive Board acting together with our ecosystem on ESG. With regards to PwC, we co-hosted, for example, a breakfast session, “Sustainability: From Commitments to Action Leveraging Technology,” bringing together in-person supply chain and network participants and stakeholders. You might want to have a look at a video we shot afterward: Building a Sustainable World Together | WEF 2023 - YouTube
Co-innovating with our ecosystem on Business Technology Platform (BTP) and in the context of business applications is not new to SAP. We are building upon decades of joint industry and business innovation. What’s new with sustainability is the permanently present multidimensional risk if we fail to act on actual data, the need for velocity, and ultimately the need to cooperate in business networks.
Managing this sustainability ecosystem complexity, and setting the right focus, has become crucial. We need trustful partnerships, innovation investments, and expertise focus at the same time from many stakeholders. It starts with recording actual business data, reporting the real status instead of averages, and driving action. With PwC, for example, we focus on:
- Reporting and disclosure: helping to satisfy requirements to materially report and disclose investor-grade carbon measuring data to meet the demands of investors, lenders, regulators, and customers
- Operationalizing sustainability: supporting the incorporation of ESG measures, especially carbon issues, directly into business functions, such as trading, capitalization, and tax
- Supply chain risk management, monitoring, and compliance: extending support for ESG measures to cover the impact of suppliers on organizational performance
We are building upon our long track record of co-innovation on SAP BTP in the context of Enterprise Resource Planning and also on PwC’s business advisory expertise, where our Sustainability portfolio, including Sustainability Control Tower and SAP S/4HANA, and the future of sustainable finance meet.
By the way, our ecosystem is built upon multi-stakeholder architecture to offer our customers flexibility and the best expertise. We enable our SAP partners to drive ESG in business.
Q: In terms of day-to-day operations, how will this co-innovation strategy work between PwC and SAP? As Chief Strategy Officer, how is it changing the way you work, and what excites you the most about that? What will it allow you to achieve in your position?
A: Co-innovation on BTP with SAP partners helps us to adapt more quickly in fast-changing environments. Both teams involved will jointly focus on customer demand. I’m also heading the growth area of Sustainability at SAP. We need agility to adapt to requirement changes, as well as data intelligence within a fast-learning organization, in order to offer our customers a No. 1 enterprise application portfolio.
As we enter true business network collaboration, I’m convinced that is the key to offering a transparent platform strategy, along with many additional governance topics in terms of who’s doing what. PwC has built a climate excellence solution that fits nicely into SAP’s sustainability portfolio; you can find it in SAP Sustainability Navigator (ondemand.com) as well.
Our partners also drive SAP in day-to-day business. What excites me most is that there is no more questioning whether to adopt sustainability and write business plans around it. Now, the question is: how can we act even faster with customers? And we should not forget that we leverage the power of the Cloud, which allows us to deliver sustainability.
Q: PwC Germany’s Climate Excellence tool is based on SAP BTP. What lessons have you learned from this solution and its success about the ways PwC and SAP can collaborate?
A: Climate Excellence is a great starting point for customers’ ESG transformation journeys. Each company’s business change sustainability project is unique and comes with different urgency patterns and focuses. PwC is very experienced in developing solutions on SAP BTP and helping its customers innovate faster. What’s new from a collaboration point of view is that we will integrate certified Build partners’ SAP BTP-based ESG solutions around “Climate Excellence” in our sustainability portfolio. The next step is to enhance our core solutions, like SAP Sustainability Control Tower, with partners based on our open technology architecture. Let me emphasize again that we can adopt business processes faster and transform toward circularity and net zero, but only if businesses all start to record, report, and act on actuals with the help of transparency tools based on BTP and integrate them into the sustainability portfolio.
Q: What can you say specifically about the co-innovated solutions included within this enterprise-wide ESG strategy?
A: We need all of our enterprise applications to support ESG transformation based on one ESG architecture masterplan with clear transparency targets of emission reduction, circularity in processes, and equality. Standardized co-innovation processes delivered in the Cloud are key. If we take the example of frameworks relevant to reporting and disclosure, these are evolving fast. Therefore, we need strategic partners with proven accounting expertise to combine this expertise with sustainability data in the SAP S/4HANA core or supply chain applications to enable a sustainable BTP enterprise to act on actual data instead of averages. This is a masterpiece of team effort and collaboration. We leverage several co-innovations in parallel to deliver on our united strategy.
Q: These co-innovated solutions will leverage the SAP Cloud for Sustainable Enterprises solution, along with the SAP Sustainability Control Tower solution and the SAP Product Footprint Management solution. Those solutions have all been introduced within the past two years. How has their release and adoption influenced and enabled the SAP sustainability strategy?
A: SAP Sustainability Control Tower, SAP Product Footprint Management, and SAP Responsible Design and Production have all been introduced within the past two years and are core elements of our SAP sustainability strategy. Through these solutions, we help to reduce emissions by managing the product carbon footprint, accelerating actuals recording, reporting, and acting on global evolving frameworks, as well as supporting local plastics tax requirements and supplier due diligence acts.
Based on BTP technology, we’ve co-developed solutions with partners, we continue to co-innovate the portfolio, and most importantly, we are adopting all solutions within our ecosystem. Our strategy, built upon our responsible and innovative sustainability ecosystem, goes hand in hand with our portfolio development and agility.
Q: In announcing the co-innovation strategy, Christian Klein and Bob Moritz both commented upon the urgent role that ESG transparency has to play in helping companies reinvent business models and deliver sustainable outcomes. Could you expand on that belief in ESG transparency and how this strategy centers it?
A: Corporate ESG management has become a catalyst for companies to minimize their carbon footprints, reduce waste, and create fair, safe, and just working environments for employees. Many companies are responding to rapidly increasing regulation in this area and have set ambitious ESG targets. Current ESG management relies heavily on data averages and estimates. Most companies have not fully integrated their ESG data recording and control into their core financial, procurement, supply chain management, and human resources (HR) systems. This financial and non-financial data is disconnected, stored in spreadsheets, not updated from real-time systems, and not easily shared within the company or with partners such as upstream suppliers or downstream logistics providers. Considering that, on average, 90% of a business’s carbon footprint lies within its supply chain, the inability to track, manage, and gain insights from live data and embed it into core business processes can cripple even the best-intentioned ESG efforts. Worse, it can mislead investors, create compliance issues, and misguide transformation efforts. Unifying ESG data provides significant gains in capabilities and competitive performance. Companies cannot make sustainable business decisions using data they do not have or cannot use. That is why we developed SAP Sustainability Control Tower.
Companies push increasingly to record ESG factors based on actual data, not averages. SAP Sustainability Control Tower imports cross-enterprise data from SAP systems like SAP S/4HANA, SAP Product Footprint Management, and SAP Environment, Health, and Safety. It also integrates with non-SAP systems using a range of APIs to create audit-ready data. Businesses can integrate and analyze granular ESG data using the established structures from their finance, HR, and operations teams using templated data models and calculations. Our partner knows their customers’ data best and helps to find the recommended start point to record actuals. In order to innovate faster, to escape spreadsheet and restatement “hell,” we offer joint value journeys.
For customers who want to report to existing and future standards, we offer to effectively share and organize ESG data from across the company. With complete and integrated ESG data, companies can more accurately and readily report their performance to various reporting requirements and frameworks, such as GRI, WEF, TCFD, the E.U. Taxonomy, and upcoming U.S. SEC requirements. Through APIs, customers can further extend functionality by bringing in their own metrics as well as industry and regulatory content and using other applications in addition to our co-innovation partners’ solutions. By reducing efforts in manual data collection and reporting variation with different regulatory requirements and timelines, we standardize processes and help to rethink how enterprise resources are planned sustainably.
Q: The co-innovation strategy furthers the SAP promise to embed sustainability across standard business operations, in part by addressing three top challenge areas for ESG, net zero, and sustainability reporting: reporting and disclosure, operationalizing sustainability, and supply chain risk management, monitoring, and compliance. Can you touch upon these top challenge areas and how SAP and PwC arrived at each of them?
A: As companies, both PwC and SAP are committed to using technology to improve our planet by satisfying United Nations (UN) Race to Zero targets, monitoring and mitigating climate and ESG risks, and reporting transparently. We currently adopt our co-innovation strategy in multiple customer projects around the world together. I’d like to share also with you that we observe a strong momentum of SAP S/4HANA projects accelerating with sustainability workstreams covering all the topics you mentioned. Intelligent enterprise projects ultimately all transform into sustainable enterprise projects. Sustainability data intelligence needs to be on everyone’s business agenda, from recording data and reporting to compliance to sustainable leadership. And finally, what makes me confident is that we are working together with and challenging each other in our strong ecosystem to learn and adopt every day so that we can act even faster.
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