It has been a while since I had anyone from SAP on the podcast, and since SAP recently held its SAP Sustainability Summit, I wanted to catch up with the team to see how things are progressing.
For this episode I invited Gunther Rothermel to come on the show. Gunther leads the Sustainability Engineering teams at SAP, so he's the perfect guy to let us know how things are shaping up. And given most of the world's business transactions use an SAP system, enabling SAP customers to more easily make sustainable choices is a major imperative.
I thoroughly enjoyed the conversation being the total electro-head that I am and could have kept talking for another forty minutes. I hope you enjoy it too.
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Music credit - Intro and Outro music for this podcast was composed, played and produced by my daughter Luna Juniper
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Music credits - Intro by Joseph McDade, and Outro music for this podcast was composed, played, and produced by my daughter Luna Juniper
Thanks for listening, and remember, stay healthy, sta...
More and more of our customers also give themselves ambition, ambitious goals about you know, decarbonisation reducing waste. And it's definitely a business topic. Now it's a business opportunity and challenge at the same point in time for many organizations. So, for us, it matters a lot as well. It's part of our strategy and that's why we are here.Tom Raftery:
Good morning, good afternoon, or good evening wherever you are in the world. This is the climate 21 podcast, the number one podcast showcasing best practices and climate emissions reductions. And I'm your host, global Vice President for SAP. Tom Raftery. Clemmer 21 is the name of an initiative by SAP to allow our customers calculate, report and reduce their greenhouse gas emissions. In this climate 21 podcast, I will showcase best practices and thought leadership by SAP, by our customers, by our partners and by our competitors if their game in climate emissions reductions. Don't forget to subscribe to this podcast in your podcast app of choice to be sure you don't miss any episodes. Hi, everyone. Welcome to the climate 21 podcast. My name is Tom Raftery with SAP and with me on the show today I have my special guest, Gunther Gunter, would you like to introduce yourself?Gunther Rothermel:
Yeah, thank you, Tom. My name is Gunther Rothermel. And I lead the sustainability engineering teams in SAP. So it's a pleasure to be here today.Tom Raftery:
Okay, sustainability engineering. This sounds like it's going to be an exciting episode. Great. I'm looking forward to it. So tell me first of all, going through sustainability engineering. Why, first of all, is sustainability important to you personally, and then more broadly to SAP?Gunther Rothermel:
Well, for me, personally, it's probably like for most of us these days, we all encounter you know, daily episodes or impressions where we feel that it's very important, we make a difference, we help to reduce waste in this world, you know, we help to maybe live our selves more sustainable. So I, I travel less these days, I try to avoid unnecessary packaging and things like that. And I think that's something that we probably share as a feeling in the society today. So for me, personally, it matters a lot. But of course, for our company and overall for for the enterprise world. I would say it also matters a lot these days. And for various reasons, right? You you you have a lot of legal regulations coming up. But more and more of our customers also give themselves ambition, ambitious goals about you know, decarbonisation reducing waste. And it's definitely a business topic. Now, it's a business opportunity and challenge at the same point in time for many organizations. So, for us, it matters a lot as well. It's part of our strategy, and that's why we are here. Okay.Tom Raftery:
Yeah, I was giving a talk at an ASUG, an American SAP user group event last week. And one of the points that I led off with, to your point about regulations, one of the points I lead off what was that the EU has mandated, legally binding emissions reductions of 55% by 2030. It became legally by they mandated it in in December that became legally binding just a couple of weeks ago. So it's now legally binding 55% on our 1990 baseline, the US is talking about 52% reductions by 2030. And China's talking about net zero by 2060, but also mandating provinces to get 40% of their energy from renewables by 2030. So three of the largest global economic bloc's have set incredibly ambitious, decarbonisation and sustainability goals for 2030. So this is I mean, and that's the low hanging fruit by 2030. Then after that, we've got to get the rest of the way to net zero by 2050, the next 20 years. So the next 28 and a half years from here to 2050, the global economy is going to become the climate economy, every decision an organization makes will have to take into account the emissions implications of that decision.Gunther Rothermel:
Absolutely. Right. And also, what you clearly see is that all organizations that we talked to, are seeing this need and they start to respond to this in a very structured way. So absolutely. We will have a few decades ahead of us where we will work on the on this reduction goals and where we have to implement those, you know, corresponding actions. Absolutely.Tom Raftery:
And you said sustainability engineering. You're not just concerned with emissions reductions. What Other aspects of sustainability? Are you engineering?Gunther Rothermel:
Well, we believe we, you know, sustainability for us has numerous aspects. And you're right that the need for decarbonisation and giving our customers you know, tools and methodologies at hand to do this is, of course, a very important pillar, but it's not the only one. So, another very important topic that we tackle is the whole notion of circular economy, being able to introduce more circularity and more reuse into our business processes, but also you mentioned legal obligations, it's there's also laws out there for the circular economy part of the world right. So, you we for example, we need to cover extended producer responsibilities in many countries, where you got to take care of for example, your packaging waste along your your business processes, so, circular economy with with the handling of obligations, but also, you know, the possibility to design out waste very early in product life cycles is is the second very important part of our strategy. And then And then third, what we also see more and more with organizations giving themselves ambitious goals, there is of course, the the need and the wish to have a very holistic view and visibility into all of these goals. So what what companies require from at least from what we observe is a way to get all data and all KPIs and metrics for all of their sustainability related activities, bead, decarbonisation beads, circular economy, or also very important social KPIs, for example, diversity and inclusion and so on so decarbonisation circular economy and a holistic view into all, you know, sustainability related activities is what we drive. And then if I may add one more sentence of shows, there's also a more classic, yet still important part of sustainability. Sometimes I call this operational when you look at environment, health and safety, or product compliance, where we also add a safety and operational perspective into it with with established products as well. So that's what we overall mean, when we talk about sustainability management as an overall practice.Tom Raftery:
Okay, interesting. I've had a couple of guests on the podcast in the last number of weeks from the likes of JP Morgan and the London Stock Exchange. And the conversations there talked very much of both the requirement for ESG reporting and the requirement for standards around that because the investment community are looking very much at this to see, you know, a our company's reporting and be if they are reporting, what is the quality of the reporting, like because the investment community wants to take decisions based on organizations a reporting or not, and then be the quality of their reporting? Is, is this something that's Translating into these solutions that you are bringing to market?Gunther Rothermel:
Yeah, totally. It's, it's one of the major drivers for this holistic visibility that I tried to describe, right. So there are you know, requirements from the investor community from from stakeholders, but also customers want to have more and more transparency into what you know, companies are doing where they buy the products from. So then the need for college ESG reporting or a holistic view on on your activities is absolutely strong. And it's it's getting even stronger. And again, this goes across various dimensions it touches the people aspect it touches emissions and carbon waste. And this is for example, by we are also supporting some of the, you know, well known frameworks which are out there and under definition, things like World Economic Forum, the IBC group, for example, where we also work with with other entities to define the standards. And of course, we we want to map all of our capabilities and the data to the standards as well. So that, for example, an investor community can can have a complete view into what a company is doing. Right. So absolutely, strongly that we also seeTom Raftery:
Okay, fascinating. We, in SAP got together with an organization called the Oxford economics group and produced a report where we surveyed over 1000 executives in supply chain, and, you know, ask them, you know, are they interested in sustainability? And if so, what are they doing about it? And, you know, what challenges are they seeing and the kind of the outcome of that big picture? It's a long does it Huge survey lots of different questions. But one of the overarching takeaways from it is that organizations have strong ambitions in the sustainability arena, but are being held back a little by the solutions that are available to them. Do you think that's a fair representation? What what, in your opinion, is holding companies back? If anything is holding them back?Gunther Rothermel:
Yeah, that's one of my favorite questions, actually. Because as an engineering lead I, I should better engineer products that actually address some of these challenges. Right. So we did also we did some, some research, we looked into that, and there are numerous things that our customers or potential users report back. One certainly is, you know, on a strategic level, what kind of sustainability activities should I do? And how do these activities relate to my corporate strategy? So if you translate that, that that's a need for more guidance, and, you know, strategic approach to it. And I think I see a lot of partners of SAP, for example, developing methodologies to help customers with that challenge, right. So, for example, together with Accenture, we we announce something which we call StG ambitions, which which is a methodology to map company goals to the SDGs that are well known and out there and help customers to find the initial way into the activity. S o unclarity about strategy and where to start is one challenge. A second one. And that's highly interested. That is also reported back in our statistics is the question on where in my business processes do I embed this? And where do I start? Because when you look at decarbonisation, for example, and introducing carbon footprint, what you want to do, of course, is have carbon footprint as a decision making factor available wherever you need it. I give you one example. Lots of companies actually source a major part of their carbon footprint from their suppliers when they buy the raw material when they buy the goods that they need in their production process. So the the act of procurement is a point in time where you would want to make use of carbon footprint as a decision making factor. Right? So and that was just one example. But overall, how how do we embed sustainability truly as a new dimension into business processes and where to start? That's certainly a second challenge. And then the third one, just to complete the list a little bit, is data integration and data quality. And I think you mentioned that we see a lot of great ambition and a great commitment. But then, of course, we have to live up to this, we got to be able to get all of the data we need to report to improve, also to for example, give the appropriate reports to the financial community, for example. So having the right data and the right in the right quality is certainly also a challenge that we see.Tom Raftery:
Okay, interesting. I remember, a number of years ago, long before I joined SAP, I was in Sweden, talking to a Swedish chemicals company, who happened to be using SAP software, and I was talking to them about the use that they make of it for producing labels. And I know that sounds way off topic, no. But essentially, the the guy was saying that they input all their data for their chemicals, all the ingredients, everything like that. And they are then able to output just from that one set of input data, they're able to output all the labels to meet the labeling regulations and every different region in the world. And it's very straightforward. It's just one set of data, but completely different requirements to be met in different regions and different countries. And it occurs to me, and maybe I'm way off base, or you can correct me, but it occurs to me that that would be the kind of thing that organizations would require for producing sustainability reports as well. They put in one set of data, but they've got a lot of different stakeholders and a lot of regions, the the financial community, be it regulatory requirements in different countries, whatever, so that they should just be able to give a click and out comes a report for this region, out comes report for this region, out comes a report for this stakeholder be at CDP be at whomever and straightaway. It's just one single operation. Is that is that the kind of endgame that we're looking at here.Gunther Rothermel:
So I think you mentioned a very important part of what I call this operational sustainability, functionality and quite directly answered there is Even functionality in our existing products for for example, Safety Data Sheet generation, we have a dangerous goods management in one of the products that I mentioned. Right. So where if you if you transport hazardous goods or or different difficult chemicals that you are giving these right labels to aid, you have to transport it that way. And last but not least, there is a functionality, which we call product market ability, where if you enter a market with a specific offering, and you have a specific packaging, and that consumes chemicals and so on, you're totally right, then you have to declare that you have to handle it accordingly. And we clearly see the need to take this broader not only for for chemicals, or dangerous goods, but but basically for all packaging for all, you know, related parts. So the answer to your point is absolutely yes. We need to declare way more along the business processes, you know, what is the packaging? What's the ingredients in it? You know, also, and this is debated very much also in Germany from a like, from a legal perspective, if we have to declare a carbon footprint at a certain point in time together with goods, right. And then the last one, just to, you know, related, again, to your example, when you look at extended producer responsibilities, this is also exactly like your outline, did you generate a so called EPR declaration for a specific region? So you say, Okay, I ship this product in France, and I have the following packaging in the following quantity. And, and that's what I pay my recyclers and so on. And that all goes into this EPR declaration. So long story I know, but but we need to declare way more aspects of sustainability along the business processes. And this is happening big time in, in basically almost all major industries. Okay.Tom Raftery:
Okay. And what's our role in SAP in this? Where do we fit into this kind of ecosystem?Gunther Rothermel:
Yeah, that's an interesting one. I mean, when you look at some of the challenges we just started to discuss, right, maybe you know, the need for, you know, embedding sustainability in business processes, but also helping customers with the underlying data integration challenges, and some of the other topics we just mentioned, then, of course, it's clear that with the breadth of SAP offering, we have the chance to actually help our customers with some of those challenges, because we, we have a broad solution portfolio that, that spans across many different business processes with our customers, were in our SAP systems, that actually is a lot of the data that is needed to address some of these sustainability challenges, right, they take diversity and inclusion, which is in our success factor systems, you know, we we have a lot of supply chain information. So overall SAP is in a, in a really great position to realize some of these values for our customers, of course, we got to do it. And it's, it's engineering work, and it means needs a lot of input from our customers. But that's, I believe, why SAP has a good role to play. And it's very motivating, I have to say, for us and for the teams to be able to maybe contribute to have in a very positive impact to you know, carbon emissions and waste reduction.Tom Raftery:
Okay, one one thing I want to dig into a little just because it's kind of a broad term, which could mean a couple of things. So, when you say embedding sustainability into business processes, can you kind of give a concrete example of what you mean by that?Gunther Rothermel:
Yeah, one example I think we touched upon already is in the procurement process, if you are a strategic purchaser and you want to select your suppliers, you you have to buy your raw materials or other goods. Then of course, you want to take you know the carbon footprint of these goods and the suppliers overall into into consideration. Some customers even ask us to introduce a kind of supplier rating in the system's according to sustainability factors, right. So that you make your decisions not only based on price and available quantities, but also on corresponding footprints. So that's one example, which I think is highly relevant or take transportation management, when you plan your routes, your transportation styles and means and then of course, you also want to optimize what does that mean for my cabin? footprint? And how can I optimize that. And there are more examples like that in finance, travel management, and so on. And so we will bring these this sustainability data into the processes where it makes sense and where it can provide value.Tom Raftery:
Interesting, because I was reading a McKinsey report, which I think comes from 2015, where it said that something like an excess of 80% of an organization's carbon footprint comes from its supply chain. So I didn't think I knew was high. I didn't realize it was that high. So that it's it's hugely important, I think, to your point about procurement particularly. And I think increasingly, we're going to see organizations mandate that as part of their RFPs, that their suppliers report the carbon emissions associated with whatever it is that they're sourcing.Gunther Rothermel:
totally true. And if you if I take this, even one step further on that, I would say, if you're if you want to truly decarbonize your organization, and your company, then you can only do this with the help of the full network. Which means we are seeing more and more activities also into defining standards on how we exchange carbon emissions information. How can you share this with your suppliers downstream with your customers? Unfortunately, this standardization efforts are still early. But I'm But I'm confident that over the next one or two years, we see lots of traction, and we as SAP are in involved in several of them to actually give our customers this this perspective across the whole spectrum. Yes, absolutely.Tom Raftery:
I think one easy first step for organizations is probably to demand from their utility companies that they supply them with 100% renewable energy. And while that might be challenging for the utility companies, it sends a demand signal straight away. And if enough organizations do that, and enough demand signals go out there, then the utilities will have no option but to support but to build and source new renewable sources for customers.Gunther Rothermel:
Absolutely. I just come from a call of a customer in UK actually, who did this as one of the very first steps to that decarbonisation strategy, right, you know, renewable energy across the board. And that gives them already a boost in towards their goals and numbers. It's not the only thing, of course, but it's a great first step. I totally agree.Tom Raftery:
Yeah, cool. Gunther, we're coming towards the end of the podcast. Now, is there any question that I have not asked you that you kind of wish I had, or any topic that we've not touched on that you think it's important for people to be aware of?Gunther Rothermel:
Well, I think we touched upon most relevant aspects that I wanted to talk about, maybe the one thing that remains is, you know, check out our sustainability summit, which we recently did, the material is is online, you can register for it free of charge. And then we, of course, explain the topics of you know, climate 21 circular economy, but also this holistic steering and reporting we we just touched upon in more detail so that you can check it out and see what it what it can do for your organization,Tom Raftery:
Superb, superb And I'll put a link to the sustainability summit in the notes of this podcast. If for people who want to know more about yourself, or about sustainability, or SAP or any of the topics we discussed today, where would you have me direct them?Gunther Rothermel:
Well, one place certainly is the summit, which we just mentioned, but then we have a sustainability community or a also a dedicated climate 21 community that you could turn to where we answer questions, keep you posted on new developments. Well, and then of course, we are here If so, if any, if any additional questions come up that are not answered in our communities, or what have you done, let us know. And we can also publish my email address or the one of our team so we are here to have a conversation. Absolutely.Tom Raftery:
Super, super Gunther, That's been great. Thanks a million for coming on the podcast today. Thank you very much for having me. Okay, we've come to the end of the show. Thanks, everyone for listening. If you'd like to know more about climate 21, feel free to drop me an email to Tom email@example.com or connect with me on LinkedIn or Twitter. If you'd like to show please don't forget to subscribe to it in your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time.