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Hello and welcome to our next instalment as we continue to explore the world of digital transformation.
Organisations in the UK and European Union face the tough challenge of navigating digital transformation while also aligning with their governments' ambitious plans to reach net zero by 2050. It's like walking a tightrope—rapidly adopting new technologies and improving processes to stay competitive, while also reducing carbon footprints, optimising resources, and meeting strict sustainability and ESG standards. Yet according to a recent SAP LeanIX survey, 87% of organisations still use MS Excel to manage their ESG initiatives. In January 2023, the European Commission launched the Corporate Sustainability Reporting Directive (CSRD), which obliges organisations to submit reports of their sustainability practices, then followed by European Sustainability Reporting Standard (ESRS) 6 months later, which defines the rules governing what and how the reports must be submitted. The regulations are initially applicable to EU-based organisations but will expand to non-EU and UK companies with significant operations in Europe in the very near future. The first mandatory reports are due for submission for the 2024 fiscal year, putting pressure on companies to innovate in ways that not only maintain their profitability, but also support the world's bold sustainability goals. Can both be achieved? Let's explore.
The importance of sustainability and ESG for companies today.
Sustainability and ESG (Environmental, Social, and Governance) are increasingly vital for companies today as they face growing pressure from customers, investors, regulators, and employees to act responsibly and transparently. Incurring penalties for demonstrating poor ESG practice standards can be very damaging to how an organisation is perceived. Embracing strong ESG practices can enhance a company’s reputation and brand image, attract investment, and unlock new market opportunities. It also drives long-term value by fostering innovation, reducing operational risks, and ensuring resilience against environmental and social challenges. In a world where climate change, social equity, and ethical governance are at the forefront, companies that prioritise sustainability and ESG are better positioned to thrive and maintain their competitive edge. As organisations begin to explore and familiarise themselves with the topic of sustainability and ESG, a term that will start to become increasingly prominent, is the so called 'twin transition' approach.
What is the Twin Transition and why is it relevant?
The twin transition and ESG are interconnected concepts that focus on promoting sustainability and addressing environmental and social concerns. The twin transition refers to the simultaneous pursuit of digital transformation and sustainability, combining technological innovation with efforts to reduce environmental impact. This approach is essential because it enables organisations to leverage digital tools and technologies to enhance efficiency, reduce waste, and lower carbon emissions, all while staying competitive in a rapidly evolving market. By aligning digital and green agendas, businesses can drive growth, improve resilience, and contribute to broader societal goals like achieving carbon neutrality, supporting economic recovery, and meeting rising stakeholder expectations around Environmental, Social, and Governance (ESG) standards.
Business Process Transformation (BPT) and Enterprise Architecture Management (EAM) in support of the Twin Transition.
Business Process Transformation (BPT), Enterprise Architecture Management (EAM) and ESG (Environmental, Social, and Governance) go hand in hand by creating a holistic approach to achieving both digital innovation and sustainability goals. Business process transformation (which oversees both disciplines of business process management (BPM) & optimisation (BPO)), focuses on optimising and redesigning workflows for greater efficiency and reduced resource consumption, while enterprise architecture management aligns IT infrastructure and digital capabilities with the organisation’s strategic objectives. Together, they provide the structure and agility needed to integrate ESG principles into core operations, ensuring that digital advancements are not only innovative but also environmentally responsible, socially equitable, and governed with integrity.
BPT & EAM support the CSRD & ESRS directives by enabling organisations to systematically integrate, monitor, and report on sustainability practices across all operations. BPT helps streamline and redesign processes to reduce environmental impact, improve social practices, and enhance governance, ensuring compliance with the detailed disclosures required under CSRD/ESRS. Meanwhile, EAM provides a clear framework to manage and align IT systems and data architectures, ensuring accurate, reliable data collection and reporting on ESG metrics, which is crucial for meeting the stringent transparency and accountability standards set by these regulations.
How SAP Signavio and SAP LeanIX can help SAP-centric organisations achieve their sustainability and ESG goals.
SAP Signavio and SAP LeanIX are two core components of SAP's S/4HANA transformation strategy, enabling businesses to optimise processes and manage their IT landscapes. Supported by the increasing integration and use of AI, tools such as SAP Signavio and SAP LeanIX are fundamentally important for gaining insights and transparency into SAP processes and the applications on which they run. This in turn influences key stakeholder decision-making around improving processes and streamlining applications with an ESG mindset.
Here's a summary of the key ways these powerful platforms can help organisations achieve the twin transition of digital transformation and sustainability.
- Get the Full Picture: SAP Signavio and SAP LeanIX provide visibility into business and IT processes to identify inefficiencies, obsolete systems, and high environmental impact, enabling better alignment with sustainability goals.
- Make Smarter Decisions with Transparent & Reliable Data: Real-time analytics from SAP Signavio and SAP LeanIX enable informed decisions to optimise resources, reduce waste, and minimise the carbon footprint of IT assets.
- Blend Digital Transformation with ESG Goals: SAP Signavio and SAP LeanIX integrate digital transformation with ESG strategies by streamlining processes and managing IT assets sustainably.
- Weave ESG Criteria into Everyday Operations: SAP Signavio and SAP LeanIX embed ESG criteria into daily operations by way of process performance indicators (PPIs) to target inefficiencies, ensuring sustainable procurement, inventory & waste management, together with IT decisions that are aligned with sustainability goals.
- Stay Compliant and Facilitate Reporting: Both SAP tools support compliance with ESG regulations by offering robust process documentation, audit trails, and frameworks for data governance and reporting.
- Keep Getting Better with Continuous Improvement: SAP Signavio and SAP LeanIX support continuous improvement by enabling organisations to adapt IT architecture and processes to evolving sustainability goals and regulations.
- Boost Collaboration and Communication: SAP Signavio and SAP LeanIX foster collaboration by aligning business and IT teams around shared ESG goals, leading to more effective sustainability initiatives.
- Harness the Power of AI: The increasing integration of AI within these tools can accelerate access to key insights, of how processes interconnect and impact sustainability.
- Cut Costs and Save Resources: By optimising processes and IT spending, SAP Signavio and SAP LeanIX help reduce costs while achieving ESG targets such as lower energy consumption and resource utilisation.
How SAP LeanIX supports sustainability initiatives with the ESG Capability Map and Fact Sheet.
According to a recent SAP LeanIX survey, 80% of companies see Environment as they most important ESG initiative, but only 40% believe they are ready to meet ESG regulations. SAP LeanIX supports sustainability initiatives through its ESG Capability Map & Fact Sheet by providing CIOs, Enterprise Architects and other stakeholders with a comprehensive overview of ESG topics, initiatives, and key performance indicators (KPIs). It helps organisations develop a strategic approach to the twin transition, by integrating digital transformation with ESG goals—by identifying areas for improvement, aligning IT investments with sustainability objectives, and ensuring compliance with regulations. It facilitates managing IT assets efficiently, reducing energy consumption, optimising resource use, and continuously adapting to new sustainability requirements and market changes.
Fig 1: Support sustainability initiatives using SAP LeanIX ESG capability maps and fact sheets
Drive down environmental impact such as green house gas (GHG) emissions with SAP Signavio.
Making business processes more efficient is itself a priority as organisations embrace digital transformation, but in order to meet sustainability and ESG requirements, the importance of efficient processes is magnified. SAP Signavio is particularly useful in tackling inefficient processes in the supply chain area, which often impact emissions targets. Organisations with a low inventory turnover rate, for example, are likely to experience more waste and emissions to due to prolonged storage. Similarly, organisations prone to high numbers of customer or supplier returns will also see their emissions targets hit, hence it is important to understand the root causes of these kind of inefficiencies and eliminate them. Moreover, it is crucial to gain a solid understanding of those sustainability metrics which are most important to one's organisation (such as via the double materiality approach), whether that be through regulatory compliance or strategic ambition, and tie these back to the business processes that impact these metrics. These metrics are defined and reported on via the SAP Sustainability Control Tower, supported by SAP Sustainability Footprint Management, which helps organisations measure and monitor their carbon footprint. Results from footprint calculations can then be used to further optimise processes continuously.
Fig 2: How SAP Signavio and SAP LeanIX can help improve processes that impact ESG metrics
These process improvements can also be incorporated into the process design itself, whereby for example, a custom attribute and requirement process step for sustainability reporting can be captured and added as a dictionary entry in SAP Signavio Process Manager. There is also an existing dictionary entry for Environment Footprint Management, which upon additional licensing of the Sustainability Footprint Management tool, enables the integration of said tool with E2E processes within S/4HANA Cloud.
Fig 3: Incorporate sustainability measurement and reporting into process design in SAP Signavio
Import transactional data from S/4HANA and other SAP and non-SAP systems via APIs into SAP Sustainability Footprint Management. By using SAP Signavio, processes can be optimised and then reflected in this transactional data, which in turn positively impacts footprint calculations.
Fig 4: Calculate green house gas (GHG) emissions from SAP S/4HANA and other system data in SAP Sustainability Footprint Management
Fig 5: Measure performance and compile reports for ESRS/CSRD via the SAP Sustainability Control Tower
Accelerate sustainability management with solution component maps in SAP Signavio Process Explorer.
The SAP Signavio Process Explorer offers a wealth of sustainability management component and capability maps for implementable solutions across various industry sectors. These maps help organisations quickly understand what SAP has to offer in this space tailored to their specific industry, while the 'comments' feature and email notification functionality prompts stakeholders to actively collaborate on and discuss specific areas of interest to drive sustainability initiatives forward at pace.
Fig 6: Sustainability management component portfolio for the Chemicals Industry in SAP Signavio Process Explorer
Innovation recommendations for sustainability and governance in SAP Signavio Process Insights.
SAP Signavio Process Insights not only provides a multitude of out-of-the-box best practice KPIs but also a wealth of Sustainability and Governance related value drivers and innovation recommendations, with links to key resources. It is expected that in time SAP build on the performance indicators and process flows relevant to this line of business so that organisations can already begin to analyse the impact of current operations on key sustainability metrics related to, for example, emissions or carbon footprint.
Fig 7: Value drivers for sustainability in SAP Signavio Process Insights
Conclusion
Organisations today have an unparalleled opportunity to both digitally transform and achieve their ESG goals, whilst remaining competitive and prosperous. SAP Signavio and SAP LeanIX are game-changers when it comes to integrating sustainability into an organisation's business processes and IT landscape. They help balance SAP digital transformation with ESG goals, foster a culture of continuous improvement, and keep things transparent and accountable. With these tools, companies can successfully transform, whilst boosting their sustainability performance, meeting regulatory requirements, and enhancing their brand identity and reputation.
If you would like to know more about how SAP Signavio & SAP LeanIX can help organisations meet their sustainability and ESG goals whilst accomplishing successful digital transformation, get in touch with us today.
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