Issue

Succinctly describe the issue or problem statement that this Decision addresses. Why is a decision required? What business or technical problem does it address?

The current carbon accounting and reporting solution Syensqo is using is a heavily customized solution in the existing BW system.  It only covers scope 1 and scope 2 of the carbon emission protocols and  another solution for capturing additional categories of scope 3 emissions is currently being deployed (Novecare is fully live whilst Speciality Polymers is under way). 

With the current BW system being phased-out by SAP and replaced in the ERP Rebuild with a state-of-the-art data warehousing solution and the concurrent push from SAP for fully-integrated sustainability solutions to measure carbon emissions effectively at the individual process and transaction level in the underlying ERP systems, an opportunity arises to re-design, simplify and standardize the carbon emission accounting solution used at Syensqo.

Recommendation

Summarise the recommendation being made for the reader, leaving the pro/con evaluation and exact decision-making process to the subsequent sections.

Based on the analysis performed, the project team recommends to pursue option A 'Deploy 'Green Ledger' for carbon emission accounting in S/4 HANA'. With this option the carbon emission impact across all sustainability scope items can be accurately captured, tracked and monitored at various levels of the organization and correlations between financial and carbon emission performance can be identified and measured against. It is the state-of-the art product from SAP for carbon emission accounting with a heavily loaded roadmap of additional features and functionalities to be added in the near future to the current scope of capabilities which makes it a future-proof and scalable solution. It comes with its own set of analytics and reporting applications that allow for insightful and comparative reporting on the performance of the organization both in terms of financial as well as carbon emission results.

SAP Green Ledger will only be available from SAP in December 2024.   It needs to be considered how the recommended solution could be de-risked as part of the implementation approach.  Hence the recommendation is to implement SAP Green Ledger with a phased implementation to allow for the stabilisation of SAP SFM to support Green Ledger functionalities.  Phase implementation meaning the use of SAP Datasphere to de-risk the stabilisation phase between SAP SFM and SAP Green Ledger.  

Background & Context

Explain the context in which the decision is being made.

Financial decision-making may be influenced by carbon emission considerations as regulations become stricter globally, financial incentive systems are put in place for companies to accelerate their carbon emission curbing and consumer as well as investor decisions are becoming increasingly driven and influenced by a company’s public perception of its environmental impacts and sustainability efforts. Publicly listed companies such as Syensqo are also obliged to disclose sustainability outlooks and carbon emission performance details in the annual reports published by the company. All these factors call for a growing need of companies for a reliable, robust and auditable system with transparent and governed mechanisms to digitally track its carbon emission footprints end-to-end from cradle-to-grave.

SAP recognised the need and potential benefits for companies to operate with a more accurate, integrated and automated carbon accounting solution and has recently launched a new product, under its comprehensive product suite of sustainability-focused solutions, called the ‘Green Ledger’ to facilitate this process. The SAP roadmap and development pipeline for new product features and planned capabilities to be added to the Green ledger functionalities over the next two years is remarkably packed with over 35 items available in the list at the time of writing (refer to section 'See Also' for a complete list of SAP roadmap items). This is another indicator which evidently shows that SAP is serious and committed in its efforts to provide companies with a capable and comprehensive carbon accounting solution embedded in the core ERP system going forward.

The green ledger allows for transaction-oriented accounting of carbon emissions thereby applying the same rigorous rules that are required for accounting data to comply with Financial Accounting standards. This guarantees accuracy, full traceability, clear accountability and reportability of carbon emissions throughout the organization. It gives the Finance departments and other interested stakeholders also the ability to track any direct or indirect correlations between Financial results and carbon emission impacts at the various levels of the reporting hierarchies defined as part of the ERP Rebuild Program (e.g by market, GBU, entity, region, group). The green ledger will also provide useful insights to the involved teams to further facilitate emission trading as it allows for accurate reporting of actual CO2e consumptions as well as simulation and forecast capabilities based on planned financial or operational data. Needs to replenish or sell CO2 certificates can therefore be identified early on in the process. During detailed design it will be further explored if Procurement and Sales activities for emission trading can be further automated based on information available in the green ledger and/or SAP Sustainability Footprint Management (SFM).

Technically, the green ledger relies on underlying data captured by the Sustainability Footprint Management (SFM) solution. Once implemented, SFM tracks the carbon emission footprint of all transactions relevant to scope 1, 2 and 3 as defined by the GHG protocols. For further details on the capabilities of SAP SFM, please refer to the KDD on ' EHS - Sustainability Footprint Management '. The multiple layers involved in the transition from aggregated data down to the transactional data available in the green ledger can be viewed in the below chart:

The below screenshots offer a look-and-feel for analytics and reporting features available out of the green ledger in S/4 HANA:

1. Carbon emission totals for each section of the P&L and Balance Sheet (e.g. at carbon totals at contribution margin level).

2. Drill-down abilities from top-level Financial Statement position to individual carbon collection documents causing carbon emission total for reporting period (e.g. drill-down from inventory account balance to goods receipt/goods issues impacting carbon emission total for inventory holdings):

3. Break-down of each carbon collection document by scope and GHG category:

4. Translation of carbon collection document into Financial Accounting document inside the 'Green Ledger' (e.g. carbon emission impact from goods receipt/goods issue posting assigned to same G/L account and profit centre/cost centre as source posting in Financial Accounting):

5.) Dashboard Reporting of GHG emissions based on Financial Accounting dimensions and reporting hierarchies (e.g. visibility of scope 1 to scope 3 footprint in operating income of company by financial period and company code/segment/profit centre):

The SAP Green Ledger is, however, still an unreleased product from SAP at the time of writing (official release expected by end of 2024). There are also some uncertainties associated with its licensing and availability in private cloud environments. It is therefore important to also consider other options for carbon emission accounting should there be any delays in the SAP roadmap for the planned product release or other licensing constraints imposed by SAP in recent months. A reliable system for carbon emission accounting and reporting has become a key strategic pillar for Syensqo’s sustainability efforts in recent years that must not be compromised in the ERP Rebuild solution. 

Against this background, the following options are considered in this KDD:

1. Deploy ‘Green Ledger’ for Carbon Accounting and Reporting in S/4 HANA.
2. Re-build current solution for carbon emission accounting and reporting in SAP Datasphere.

Assumptions

Clearly describe the underlying assumptions which informed or limited the choices available, or impacted the decision: cost, schedule, regulatory requirements, business drivers, country footprint, technology, etc. Include links as necessary. This section is important because a future change in circumstances might invalidate some key assumptions, which then prompts a decision to be revisited. 

• SAP Green Ledger will be released as per current release schedule in Q4 2024.
• SAP Sustainability Footprint Management will be implemented in the ERP Rebuild Program.
• Automatic event-based triggers of Procurement activities with regards to external emission trading due to carbon footprint requirements (e.g. additional need for CO2 certificates due to increased production levels) will be explored in detailed design under the umbrella of SAP Sustainability Footprint Management functionalities.
• SAP Green Ledger is available as part of the licensing package acquired by Syensqo for S/4 HANA, private cloud edition.
• SAP Green Ledger is currently only available in SAP RISE. To be confirmed in December 2024 if SAP RISE part of ERP Rebuild scope.

Constraints

Capture any constraints or limitations inherent to the recommended option. This could be aspects which, if changed or removed in future, could cause the decision to be revisited or invalidated. For example, a constraint might be that a new product has significant gaps in important functionality, which caused an older alternative to be recommended. If those gaps are closed in future, this might cause the decision to be invalidated.

• Should SAP Sustainability Footprint Management not be implemented in the to-be solution or should there be any delays in the planned product release for the 'Green Ledger' by SAP, the recommendation shifts from 'Option A' to 'Option B'. 

Impacts

Describe the impact of the decision on other aspects such as other processes, infrastructure, other SAP modules or systems, data cleansing and migration, developments, automations, interfaces, in-flight projects, etc.

• Reporting: Native SAP Fiori apps are available to support reporting out of the green ledger. These reports may require some form of customization to fulfill current reporting requirements with regards to carbon emission accounting for Syensqo.
• Change Management: Intensified user training and awareness campaigns needed to ensure seamless transition from legacy to new green ledger solution.
• Data: Historical data needs to be migrated and potentially converted for year-on-year reporting out of S/4 HANA.

Business Rules

The decision may translate into business rules which enforce the decision and will require configuration. List these business rules here. For example, "An Outline Agreement cannot be created via the RFQ process. An awarded RFQ can only result in a Purchase Order". 

• None identified at the time of writing. This section may be revisited and updated during detailed design.

Options considered

List the options (viable options or alternatives) you considered. These often require a longer explanation with diagrams, or references to other documents (links are best, but attachments are also possible). Use enough detail to adequately explain what you considered so that a project or business stakeholder reviewing this decision will not come back and ask "did you think about...?"; this leads to loss of credibility and questioning of other decisions. This section also helps ensure that you considered enough suitable alternatives rather than just copy/pasting SAP's recommendations.

Option A: ‘SAP Green Ledger’ 

In this option, it is assumed that the ‘SAP Green Ledger’ will be released by SAP according to its currently laid out roadmap. 

The SAP Green Ledger allows for holistic management and accounting of carbon emissions across all 3 tiers of scope. It is closely linked to the Financial Accounting data captured in the S/4 HANA system following typical rules for capturing accounting data in an audited ERP system (e.g. zero-balance between debits and credits per ledger entry) to allow for comparative reporting of financial results and the environmental impact the financial performance of the organization brings about. 

The SAP Green Ledger requires data feeds from Sustainability Footprint Management to be able to use it efficiently. It is assumed in this option that Sustainability Footprint Management will be introduced as part of the ERP Rebuild Program. SFM is capable of capturing carbon footprints of all business and supply chain activities at the various scope levels. Carbon emission accounting in the SAP Green Ledger will subsequently be performed based on data captured in the SAP SFM module. It can be posted at various levels of granularity using objects from the SAP enterprise structure and organizational units depending on the reporting needs for the respective activities (e.g. company code, cost centre, plant, sales area, profit centre, etc.).

Option B:  SAP Datasphere 

The current As-is solution for Carbon Emission Accounting and Reporting named ‘Cerise’ is a heavily customized solution built in the existing BW system with data extracted from various modules in WP1 and PF1 as the main source of information for its calculations and computations of the actual carbon emission footprint of Syensqo’s scope 1 and scope 2 operations. 

In this option, the intention would be to re-build the core parts of the existing solution in a similar fashion based on new S/4 HANA master and transactional data designs. Efforts would be made to extend its current coverage beyond scope 2 to also include scope 3 categories, which are becoming increasingly important to the company. With the deployment of SAP Sustainability Footprint Management in the to-be solution and its comprehensive coverage of data capture across all 3 scope categories this should become a realisable improvement opportunity.

The classic BW system will be replaced with the succeeding and roadmap-aligned data warehousing software from SAP called ‘Datasphere’ as part of the ERP Rebuild program. It is expected that similar and potentially more advanced data extractors and calculations models as currently used in the BW system can be replicated in Datasphere allowing for at least like-for-like reporting to what's available at the moment in the legacy BW system. 

Evaluation

Outline why you selected a position. The best format could be a pro/con table (sample below), but is up to you as the author. You must consider complexity, feasibility, cost/effort to implement, but also ongoing operational impact and cost. You must consider the program principles and explain any deviations in detail. This is probably as important as the decision itself.

The below table provides an overview of each option's pros and cons against selected key pillars of the project charter and other important evaluation criteria in the context of the solution that need to be considered in the selection process:

See also

SAP Roadmap for 'Green Ledger' as of September 2024 - click 'expand' below:

Change log

Workflow history