SAP Announces Its Intention To Compete Aggressively In The Carbon Accounting Software Market

SAP Announces Its Intention To Compete Aggressively In The Carbon Accounting Software Market

During its Sapphire conference, €31-billion-revenue software provider SAP disclosed a wide range of information about its Sustainability Footprint Management architecture, and specifically about its carbon accounting product. With its huge customer base, SAP is familiar with firms' current carbon accounting challenges: over-reliance on spreadsheets, working off estimates rather than measurements, inaccessible supply chain data and problems converting CO₂ data into meaningful financial metrics. How is SAP proposing to crack the code of carbon accounting complexity?

Firstly, the carbon accounting application resides within the SAP Sustainability Footprint Management platform which integrates with SAP's S/4HANA business software portfolio. The native integration with other SAP applications is intended to facilitate deployment and simplify data flows. Secondly, following the vendor-agnostic methodology of the Partnership for Carbon Transparency (PACT), SAP has developed a data exchange application that can securely manage the flow of CO₂ data along the value chain. Thirdly, SAP has created a 'green ledger' concept that aligns with reporting policies such as green asset ratios, the EU Taxonomy and the London Stock Exchange Green Economy Mark. The idea is to facilitate the infusion of CO₂ data into financial metrics and business performance analysis.

SAP's unifying theme is the idea of helping customers embed sustainability data into core business processes. The firm is also pushing the need to migrate from estimated data to actual data. This can be achieved because SAP's other applications have transactional information relating to data such as invoices and material movements. The current version of SAP's Sustainability Footprint Management software enables customers to gather and compute 'cradle-to-gate' emissions data. This covers upstream supply chain data such as raw materials, transport to factories and capital goods. A future release will extend the software's functionality to calculate CO₂ emissions associated with product use and end of life. SAP is also touting a wide range of analytical capabilities that reflect the integration of CO₂ data into core digital business processes.

What does this mean for the market? SAP's product team have clearly devoted a lot of careful consideration to the overall information architecture. They have folded in customer requirements relating to improving data accuracy, facilitating compliance audits, collecting accurate supply chain data, generating product carbon footprint analysis based on actual data and embedding CO₂ insights in other applications. Put together, this is what SAP means by “transactional carbon accounting”. For existing SAP S/4HANA customers, this product will be the obvious first system to test before going to market with an RFP. The majority of firms will need support from SAP services partners, such as EY and PwC, which employ consultants who understand climate and sustainability regulations and business issues.

This move by SAP ramps up the pressure in an intensely competitive market. Carbon management start-ups and midsize software firms will need to understand how to position their value proposition to the many thousands of organizations that already run as 'SAP shops'.