Issue

The essential building blocks for CSRD reporting is based on tools from many vendors and Syensqos existing technology.  It requires combining into a solution for ESG reporting.  A decision is required on the long term solution post the implementation of RFI ESG Disclosure and Performance in 2024.  

Recommendation

Background & Context

RFI on ESG Disclosure and Performance was launched in 2024 to consolidate all Sustainability data in one place, create reporting layer and insights layer on top.  The RFI is aiming at a one to two year contract, which is to be revisited with ERP Rebuild.  Demos have been presented by SAP in 2024 to the business together with PWC.   RFI supported by KPMG experience with other clients and finalised in July 2024 based on 2.5 weeks response time for providers to answer by mid June 2024.  June/July 2023 Go-No Go decision.  

The required capabilities are:

• Centrally managed calculations. Avoid large proportions of pre-calculation in various source systems across the landscape. 
• Centralisation of ESG data and reporting.
• Long term solution committment.
• Annual or quarterly reporting metrics.
• Leverage of AI where beneficial.

Process

1. Assess metrics and data: Priortise ESG topics based on risks and issues
2. Automated data collection and preparation: data capture for emissions and ESG reporting
3. Centralised ESG data: granularity
4. Metric calculation:  aggregation and calculation of scope 1, 2 and 3 emissions and other ESG metrics
5. Sustainability tracking via analytic insights (including visualisation) and reports and disclosures (multiple frameworks)
6. Sustainability initiatives based on actions and ESG compliance

The process is driven by a variety of internal and external data sources, which need control, tracing and verification.

Functional architecture

The following tools are data sources for storage and consolidation (automated or manual).  Enrichment with external data may also be required.  Metric calculations should make use of AI generated insights.

Design/R&I:

1. Project portfolio
2. LCA

• WeGo (accolade)
• Simapro/Gabi
• Fast LCA, checklist

Sustainable procurement (STP -Supply Tracking and Prioritisation):

1. Bio and recycled based raw material tracking (SAP - Green Token material origins?)
2. Human rights due to diligence (Ethixbase)
3. Carbon footprint sharing (Sigreen)

Manufacturing:

1. Carbon scope 1 and 2 (SAP Green Ledger, other?)
2. Emissions reporting (SAP EHS Emissions Management)
3. Waste reporting (SAP EHS Waste Management)
4. Water reporting (tbc - not readable on slide 4)
5. Star Factory project portfolio (Wave, Gensuite)
6. Accident reporting (Gensuite)
7. CAPEX tracking (SAP Finance, Colmar)

• Cerise (redundant)

Supply Chain:

1. Carbon scope 3 (SAP)

• EcotransIT
• Concur
• BW Tiers

HR:

1. Diversity, Equity, Inclusion (DEI) (SAP SuccessFactor)
2. Training and performance (xls offline)
3. Gender pay gap (Payroll)
4. Living wages (Payroll)

Business:

1. Marketing (Sustainability Portfolio Management - SPM)
2. Inventory (SAP Product Compliance: Substances of Very High Concern - SVHC)
3. Life Cycle Analysis (LCA - tbc)

• PCF - redundant?

Greenomy

smaller scope plus AI as an option to combine with other tools for supplier interaction and environmental accounting. Risk of remaining a spot solution for compliance. Greenomy as short term solution, plug and play, so not overspend.  Quickest time for return, off the shelves.  For various reasons not signed in August yet. Committee will sign off in September 2024.

SAP Sustainability Control Towers (SCT)

Launch of 2024 RFI on ESG Disclosure and Performance was extended to SAP.  2024 RFI response by SAP not satisfactory with off the shelf slide pack containing access issues to links.  SAP Sustainability Control Towers (SCT) currently not mature enough, but could be revisited in three years. Scope, AI and insights not good enough. 

ESG data, elements on basic reporting using tools creating KPI library.  This should be covered by SAP.  SAP lacks enhancement of this data SAP i.e. reporting layer including e.g. KPIs, emission factors as per toole Ecoinvent and Ecotransit.  For example carbon accounting.  

Pureplayers look into public data where plant data is missing, to make assumptions where there is gaps.   Other functionality, AI native pureplayer is integrated benchmark.  Competitors in tool for KPIs in market based on public information. SAP solution does not cover this.  No company in manufacturing uses the Sustainability Control Towers. 

 Disclosure SCT was not to be solution.  

very limited AI, no disclosure tool, would require interface, requires custom integrations until S/4 is implemented. S/4 will bring SCT features.

Roadmap?

SAP overestimated level of integration which may be issue for disclosure.  Marginal only if Green Token or Green Ledger were implemented.  Emissions is game changer where solution is. 

Emissions mgmt in S4 would swing decision closer to SCT.

 SAP datasphere has no prepackaged off the shelf data for sustainability.

Possible to use Fabric as datalake, then SCT on top.

Microsoft Sustainability and Fabric. 

Queried during RFI.  Performance was promising.  Proof of concept in Taveau site launched last week for 2 months.   Goal to automate the calculation and gathering, traceability of 20 environmental KPI from SERF.  Technical feasibility to create some insights.  Does it need to integrate with S4.  no emissions in SAP at the moment. Integrates with MES system now based on data lake project where data collected by sensor.  Data lake Startek.  Idea is to collect water flow taking flow combined with Labware for analytical with pollutant, results in KPI as Microsoft had pre-packaged solution.  

Fabric has many more functionalities.  KPI library in Sustainability. Its just performance.  In relation to disclosure look to Microsoft Purview compliance Manager.  SCT is last mile disclosure.  Possible to use Fabric as datalake, then SCT on top.  Maybe separate Disclosure and Data e.g. KPI library.  Could also put Greenomy on top of Fabric.  SAP Datasphere is an option instead of Microsoft datalake.  Microsoft cloud may be good move with regards to Microsoft workstations. 

Embedded AI capabilities superior.

Pilot in autumn to test automation of environmental metrics and modelisation for data cleaning and then consume clean data on corporate level.

Automation can obtain consistent data and metrics to pinpoint sustainability issues in real-time.  Tech-enabled governance of the reporting process can manage complexity and risk.

Pure/Gensuite vs S4.  scop 1-3 about 20 metrics, 15 in scope 3.  Validation workflow most important.

not advanced enough for reporting (no CPD, taxonomy etc), lack of integration. Syensqo leaning more towards Microsoft. 

PAPM (SAP) currently used for tax purposes by Finance in scope of ERP Rebuild to deal with complex reporting requirements.  Might be an option to cover circularity for Sustainability.  SPM may not be the way forward as missing master data.  Additional option?

Financial transactions are influenced by carbon emissions, which is also related to energy purchase and energy consumption.  Should be able to rely on financial transaction.   That is how Cerise was designed with transactional financial transactional flow. Good idea to move carbon accounting into SAP as finance project.   

Economic accounting and carbon accounting same: buy raw materials, production, transport, man power, waste.  

Supports promotion of sustainable capital flows for sustainable enterprises.  ISAB set standards in combination with IFRS requires sustainability standards and disclosures.  EU policy CSRD different to US, China, but all are influenced by TCFD framework established 2025, which used by global investment companies e.g. Black Rock.  

TCFD

Climate related financial disclosure:

Structural assessment of CAPEX impact.  Forecast of financial impact of sustainability impact.  

Needs access and transparency in one central place in the company.  Currently spread throughout the company in complex landscape.   Solution SCT for holistic steering and reporting on aggregated/periodic level.  

SAP SFM enables to automate the data collection at more granularity.  e.g. scope 3.1 which can make up 80% of emissions.  SAP SFM connects to ERP system e.g. goods receipt, goods issue, suppliers, products purchased, assigns emission factor.  Results in footprint extraction possible.  Eventually solution can calculate corporate and product footprints.  basis for SCT. 

Supplier footprint often manual currently, no standard footprint sharing, error prone.  SAP Sustainability Data Exchange publishes and makes available footprint to the network.  

Finance dimension covered by Green Ledger.   What is the footprint impact on balance sheet, assets, cost centres, budgets.  Consolidates financial and sustainability data.

SAP EHS Environment for collection data from smart meters and other device.

Ambtions:

SCT showing trends, targets.

SFM:

One step deeper in granulirity.  Shows emissions for purchased and sold goods.  Can also calculate product footprints.  System knows greener footprints by adding products used to e..g build a car.  System extracts data from ERP via BOM with all components needed to build a car.  e..g calculate costs.  Can assign certain footprints to materials in BOM, like already done with costs, also using SAP EHS.  Includes assigning footrpints to activities e.g. car assembly line.  

Data can be published back from SFM into S/4HANA and post green ledger journal entry.  If product sold, post finish goods account and debit COX account.  Same for sustainability.  Takes calculated data from SFM, takes it and posts it in Green Ledger.  Can analyse finance and sustainability data in one dashboard.  Adds additional dimension to enterprise performance management over and above regulatory and standard reuqirmeent to report on sustainabilty.

CSRD for FY2024 more granularity of information.

Green Ledger does not calculate footprints.  It relies getting them from another source e.g. SAP SFM.  

Green Ledger data reporting via Fiori UIs or SAC to make data accessible.  Green Ledger is a data repository, which can be seen in Fiori apps, SCT, Datasphere etc, simliar to finance processes.

Green Ledger posted to cost centres or business segments/company code level, which are available for reporting.   Enables simulations exchanging a material inhouse production or external sourcing, supports decision making as such. 

Green Ledger data format for external regulation requirements can be achieved.  Asset or CAPEX accounts with emissions for data preparation for e.g CSRD via SAP SCT.  Can model and structure KPIs in SCT, which can then be sourced from Green Ledger to calculate and fulfil requirements.  From SCT with disclosure management tool into XPRL format to send to authorities.  

There are elements of Green Ledger that sit in ACDOCA table universal journal in S/4HANA core.  Other elements are outside.  Product costing entry will be enhanced with Green Ledger, new object universal component breakdown, new input in product costing entry, which sits in ACDOCA table.  Green journal entries are outside technically.  As business user no difference. 

More info:

👉Find more information: https://www.sap.com/assetdetail/2023/... 👉https://www.sap.com/events/sapphire/n... 👉https://www.sap.com/sustainability.html

Assumptions

Implementation of related SAP Sustainability functions to support SCT.

Constraints

Impacts

Business Rules

Options considered

Option A:  SAP Sustainability Control Towers (SCT)

“The Control Tower gives the impact overview, the Footprint gives the detail, but it is still using business averages to gauge how much carbon is being produced.  The aim is to help to move away from averages and start using actuals, to start getting sight of actual data from suppliers, and their suppliers’ suppliers.

It’s here that SAP really ‘begins to differentiate on a global level’. The Data Exchange will become a standard-setting engine that allows businesses to exchange data, securely, across value chains, thus unlocking ‘the carbon calculation of impact’.

Option B:  Microsoft Fabric

Option C:  Greenomy - Do nothing

Evaluation

	Option A - SCT	Option B - Microsoft	Option C - Greenomy
Criterion 1	Pro Con	Pro Pro	Pro Con
Criterion 2	Pro Con	Con	Pro Pro
Criterion 3	Pro	Con	Con

See also

Change log

Workflow history