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. The current solution, however, only covers scope 1 and scope 2 of the carbon emission protocols, another solution for capturing additional categories of scope 3 emissions is currently under evaluation.

With the current BW system being out-phased 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 efficiently 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.

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 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 gate-to-grave.

SAP recognized the need and potential benefits for companies to operate with a more accurate, integrated and automated carbon accounting solution and has recently revealed the launch of a new product  under its comprehensive product suite of sustainability-focused solutions called the ‘Green Ledger’ to facilitate this process.

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). 

Technically, the green ledger as the state-of-the-art reporting solution from SAP 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 green ledger is, however,  still an unreleased product from SAP but it is expected to have its market launch latest in Q1 2025. There are also some uncertainties associated with its licensing and availability in private cloud environments which will be the likely mode of hosting the to-be S/4 HANA solution at Syensqo. 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’
2. Re-build current solution for carbon emission accounting and reporting in SAP Datasphere or PaPM

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:

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

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 Sustainability Footprint Management will be implemented in the ERP Rebuild Program
• SAP Green Ledger available as part of the licensing package acquired by Syensqo for S/4 HANA, private cloud edition.

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, the recommendation shifts from 'Option A' to 'Option B' as the green ledger relies on data feeds from the SAP Sustainability Footprint Management module.

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.

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 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: Deploy ‘Green Ledger’ for Carbon Emission Accounting in S/4 HANA

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

The 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 following typical rules for capturing accounting data in tne system (e.g. zero-balance between debits and credits per ledger entry) to allow for comparative reporting of financial and environmental impact data. 

The 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 green ledger will subsequently be performed based on data captured in the SFM module. It can be posted at various levels of granularity using objects from the SAP entreprise 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: Re-build current solution for carbon emission accounting and reporting in SAP Datasphere or SAP Profitability and Performance Management (PaPM)

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 extend it current coverage beyond scope 2 to also include scope 3 items 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 realizable 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. 

Alternatively or complementarily to the implementations performed in SAP Datasphere, reporting capabilities in the retained legacy reporting application SAP Profitability and Performance Management (PaPM) can be explored as part of this option for an enhanced user experience.

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.

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.

Change log

Workflow history