| Status | |
| Owner | Stefanie Schwartz |
| Stakeholders | Marie Flourie, Sandrine Rochat, Vincent Desthieux, Nicolas Thomas, Laura Roger-Giuliani |
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?
Currently, there is no process or tool to measure sustainable raw material percentages through the supply chain processes in Syensqo. The company does not have visibility into the origin of materials and to which extent they are truly sustainable. Syensqo will have to disclose zero percentages as part of reporting as Syensqo is unable to determine actual percentages. It carries a considerable reputational risk for Syensqo, which is turning into a financial risk as only Green Bond financing opportunities are considered by green investors. Green bonds are fixed-income financial instruments which are used to fund projects that have positive environmental and/or climate benefits. Syensqo can only be considered for Green Bonds if sustainable raw materials are procured.
In contrast, Syensqo is making claims to customers about the sustainability of some of their products. It is contradictory to the annual company reporting stating zero percentages of sustainable raw materials. Syensqo needs a solution to enable the company to disclose sustainable raw material percentages based on actuals to customers in line with CSRD requirements going forward to alleviate further reputational and financial risks.
Recommendation
Summarise the recommendation being made for the reader, leaving the pro/con evaluation and exact decision-making process to the subsequent sections.
In order to meet disclosure requirements Syensqo must collect and propagate some raw material data end-to-end. The recommendation is the implementation of SAP Green Token solution (Option A) to cover the end-to-end traceability of raw materials and related calculations.
Background & Context
Explain the context in which the decision is being made.
Supply chain sustainability is based on the traceability and transparency of sustainable material usage for commingled and bulk-traded materials. There is a regulatory drive by the Corporate Sustainability and Reporting Directive (CSRD) to disclose percentages of sustainable raw materials as part of Scope 3. It is relevant for non-bio-sourced (e.g. fossil-based plastics to circular plastics) and bio-sourced (e.g. vegetable or animal origins and biodiversity) raw materials.
Today the information relating to raw material percentages is collected and stored in a redundant, unstructured and non-auditable manner, which is reflected in the current process. The inconsistency reflects the disconnect between Marketing and the regulatory requirements.
- Initially the customer requests a non-GMO certificate.
- Questions arrive at the frontline desk.
- Questions are then forwarded to the Sustainability champion of the relevant GBU.
- The Sustainability champion then asks the buyer to send a form to the supplier. Data needed from supplier is GBU specific e.g. Aroma and food.
- Alternatively the Sustainability champion contacts Product Stewardship.
- The completed forms are finally stored on a personal Google drive.
Audits
At company level, Syensqo has KPIs on circular sales hence asking each GBU for sales of renewable products twice per year asking. There is a lack of transparency as part procurement process resulting in Syensqo having to change as auditors will not accept current way of working. Circular sales KPIs have been audited for four years by Deloitte. Since last year these KPIs have been audited by Ernst and Young, which nearly failed in first year. If audit fails next year then the figures cannot be published in the annual report. Sysensqo's credit rating as well as credibility might be impacted.
It holds a different level of risk at product level, where products are sold at higher price due to being sustainable e.g. the purchase of palm oil which is certified sustainable. Audits are possible from customers at random and fines and commercial disputes are possible due to breach of contract.
(how many? p175 exta financial statements, for biochemical products meaning needs to be stored for all products to determine e.g. 1% sustainable, currently maintained by procurement directly in BW, print queries only accessible for purchasing, not useable for downstream e..g marketing, data not connected, 15k suppliers, estimated 30-50 raw materials).
Certification
The mass balance approach is an important milestone on the pathway to a circular economy and bioeconomy. It has been designed to trace the flow of materials through a complex value chain. The mass balance approach is used among other in ISCC Plus certification. ISCC Plus is a voluntary sustainability certification for e.g. plastics and chemicals to reflect that traceability along the supply chain is given.
Current Landscape
No impact on current Sustainability landscape as currently managed using Excel files only.
SAP GreenToken
SAP Green Token is a chain-of-custody business application designed to help organizations trace and account for certified sustainable versus conventional products throughout the supply chain network. Organisations can trace the inbound material’s origins from their suppliers and outbound product sold to downstream partners. It is a SaaS (Software-as-a-service) cloud stand-alone solution. SAP GreenToken has been previously investigated by Syensqo in 2023 when it was decided to await the implementation of SAP S/4HANA. It has been implemented as a solution for other companies in the extended chemicals industry e.g. Eastman Chemical and DIC Corporation.
The solution capabilities include the following:
- Mass balance accounting
- Traceability and transparency of attributes
- Managing supply chain complexity
- Accessibility and onboarding
- Certification management
- Reporting and auditing
- Data privacy and process transparency
- Automation via integration: Open APIs for non-SAP systems, integration with SAP sustainability solutions e.g. SAP Product Footprint Management (PFM)
Using the principles of mass balance, tokenization and blockchain, SAP Green Token acts as a multicommodity platform that enables you to account for the full chain-of-custody of commingled raw materials to their origin. By combining Tokenization, Blockchain and Mass Balance the solution supports certification management for e.g. ISCC+.
Use Case Example:
Sustainable and conventional (non-sustainable) commodities are traced through your supply chain and production processes using mass digital twins (tokens) on a blockchain. This allows transparency from different origins to be measured by counting the tokens.
Each organization or member of the supply chain forms part of your network, and may be responsible for operations like:
Aggregation of sustainable or conventional commodities.
Processing of commodities through comingling commodities for the purpose of refining or production of new commodities or products.
Distributing finished products to end consumers or other organizations.
Process Workflows
- Conversion Workflow
- Outbound Workflow
- Inbound Workflow
- Consumption Workflow
- Multisite Workflow
Example for online partner inbound workflow:
- Consolidate relevant deliveries for the delivery period: If your instance of SAP Green Token has been set up for integration with SAP ERP Central Component (SAP ECC) or SAP S/4HANA this will be handled automatically. This may also be the case if the non-SAP ERP system used supports this step.
- Extract delivery information to Inbound Deliveries CSV: Extract the inbound deliveries identified and consolidated in the step above and populate the Inbound Deliveries CSV manually. This can happen automatically if configured appropriately in your ERP system.
- Import the CSV into SAP Green Token:
Entries on the Inbounds screen (under the Process tab) are created by uploading volumes in CSV files using the Import CSV button on the overview screen or by dragging and dropping files on the Imports screen.
After uploading an inbound deliveries CSV, you can review all inbound delivery transactions on the Inbounds screen.
The Inbounds screen provides details on the delivery of certified and conventional materials. Users can view different attributes associated with the materials as well as the status of the order.
- Fulfilment request generated and inbound delivery entries created
- Request fulfilled by upstream partner
- Tokens received and your balance is updated
Certification
Green Token allows the company to track and report GHG emissions of products that are received and sold in conformance with ISCC+ standards. It is accomplished by the persistence of attributes to the certified tokens associated to an inbound and conversion order. ISCC GHG attributes are provided out-of-the-box with Green Token. The attributes can be assigned to any material to track and report against manufacturing and delivery processes.
Track and Trace
The Chain of Custody feature provides transparency into all materials in your inventory and what materials they're comprised of. It also provides key information on the materials, the number of sustainable and conventional volumes transferred, along with the identity of the member who provided the material. This level of transparency is only available for upstream members of the network. The supply chain member accessing Chain of Custody won't have this level of transparency for downstream members of the network.
The Material Provenance view shows you the original raw material from which the selected product or material was derived, regardless of the intermediary conversions or transformations. This helps you see the sustainable qualities of raw material from its original source and introduction into the supply chain.
The primary source of input for the SAP Green Token application is through the upload of structured files in a comma-separated values format (CSV). These include:
- Inbound Deliveries CSV
- Conversions CSV
- Pending Orders Fulfillment CSV
- Goods Issued CSV
- Sales Inquiries CSV
The CSV files can be from any 3rd party system, and you upload them on the Imports screen. Uploading CSVs automatically drives other features within SAP Green Token, such as volume requests and the creation of volumes, and creating or updating entries on the Inbound Delivery screen.
Reports
Under Reports, you can find a set of complementary reports that can be used by organizations being audited for International Sustainability and Carbon Certification (ISCC), for example. The data for these reports are generated in real time through the day-to-day transactions that are executed in SAP Green Token. This reduces the level of effort and the margin for error in pulling supporting details from disparate systems. The following reports are available:
- Conversion Audit Report
- Material Balance Report
- Material Movement Audit Report
- Order Audit Report
- Transaction Audit Report
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.
There is a current RFI to replace Ethixbase for use case 1 (company information), which is not in scope for ERP as there is an immediate need for implementation due to the termination of Ethixbase in December 2024. Use case 2 (product level information), for which there is no time constraint, is covered by ERP Rebuild based on this KDD.
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.
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.
Impacts supplier management as part of procurement processes.
Need procurement and manufacturing integration peer reviews. Not finance.
How integrated with PC.
The following business process are impacted:
- Inbound - creating tokens
- Outbound - token transfer
- Data governance - token transformation/conversion
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".
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 Token
Decribe the option in sufficient detail for a reader familiar with the subject matter to understand it properly
- Ensures traceability as part of Procurement (Sourcing/Buying)
- Substantiate sustainability claims to derive value based pricing (Marketing/Selling)
- Reduce Scope 3 emissions as part of Supply Chain (Transporting)
- Follow trajectories to meet targets as part of Reporting (Finance/Regulatory)
- Access green financing
- Meet ESG expectations (customers/regulators/investors/disclosure)
helps you see the sustainable qualities of raw material from its original source and introduction into the supply chain.
Option B: Hentrac
Decribe the option in sufficient detail for a reader familiar with the subject matter to understand it properly
- Niche alternative one only called Hentrac (www.hentrac.com), start up, small company founded in 2022.
- As a dynamic start-up specializing in supply chain traceability, we've embarked on an incredible journey to transform the way businesses manage and optimize their supply chains. We are thrilled to continue expanding our network of clients and partners, forging new relationships that will redefine supply chain management.
- Claims on material characteristics are only done on physically segregated materials. This allows for strong claims that directly refer to physical characteristics. All batches are identified throughout the entire production and distribution process. This can be achieved by setting up parallel or sequential production processes.
- E2E mass traceability solution using a designated platform. Combines production data with sustainability information. Exportable. Notifications of breaches.
- Tiny use case only ISCC plus audit. Add on only.
- Not addressing Sandrine solution
Option C: Do Nothing
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.
Option A - SAP Green Token | Option B - Hentrac | Option C - Do Nothing | |
|---|---|---|---|
| Criterion 1 |
|
|
|
| Criterion 2 |
|  Con | |
| Criterion 3 |  Pro | Con |
See also
Insert links and references to other documents which are relevant when trying to understand this decision and its implications. Other decisions are often impacted, so it's good to list them here with links. Attachments are also possible but dangerous as they are static documents and not updated by their authors.
