How to Track and Reduce Carbon Emissions with the Help of Your SAP ERP?

It is not news that businesses are under pressure to track, control and reduce carbon emissions. Existing and potential customers, investors, legislation, employees, potential employees – everyone demands for the change to happen now and many organisations want to take the leap. However, it is still unclear for some on how to utilise existing technologies, like your ERP, in helping you reduce your CO2 footprint or what and where to invest further in. This article aims to bring some clarity on how to kick off your business’ carbon neutral journey, track and reduce carbon emissions with the help of your SAP ERP.

So, what is the role of SAP ERP software and SAP consultants in solving the greatest problem of our time and where do we start?

Measuring and reporting carbon emissions

The greenhouse gas protocol sets out accounting standards for businesses and is used by 9 out of 10 Fortune 500 companies that report to the global disclosure system for investors and companies CDP.

The greenhouse gas protocol divides emissions into three scopes:

• Scope 1: Direct Emissions from sources owned or controlled by the business, for example boilers, furnaces and vehicles
• Scope 2: Indirect emissions from purchased electricity and heat
• Scope 3: Other indirect emissions including purchased goods and services, transportation and distribution, waste, business travel and employee commuting, leased assets, processing, use and disposal of sold products, franchise and investments

Scopes 1 and 2 are the easiest to measure, report, and control so they are mandatory to report. Scope 3 brings in a range of emissions that may be double-counted by multiple organisations and are harder to control, so reporting is not currently mandatory, but some of the greatest opportunities reside in reductions in scope 3.

Reducing Scope 1 and 2 emissions through ERP

Scope 1 emissions are literally direct emissions of greenhouse gasses from machinery that is owned by the business. Scope 2 emissions are purchased energy. Both are reduced by doing less: making less products that are wasted and running more efficiently.

Naturally, an ERP system can help run more efficiently but that is a very generic benefit of running ERP. Initiatives to improve business performance through ERP are usually driven by the financial benefits so reduction of emissions is an additional advantage. However, incorporating emissions reduction in business cases can justify projects that may not have stacked up on a purely financial basis.

Furthermore, when looking at a global business, there are possibilities to introduce various ways of working in order to reduce direct emissions. For example, individual plants and machinery will produce different emissions for the same end result. Grid electricity emissions might be similar but won’t be identical compared from one location to another. Climate has a big effect too – a high cooling-demand enterprise like a data centre emits less in colder climates.

An ERP system can track detailed carbon emissions for multiple activities as well as different approaches to specific activities. Taken together, complex detail on plants, production lines, shifts, materials and ingredients, a carbon dimension can be added to the production of products. Maintenance and other activities that generate direct emissions are also managed in SAP so both reporting of carbon footprint and optimisation for carbon emissions are possible.

Having fun with Scope 3

Scope 3 is a chaotic world of unmeasurable uncontrollable emissions including many that will be double-counted as scope 1 and 2 emissions of other businesses, so much so that reporting them isn’t (yet) mandatory.

Yet scope 3 is where the biggest emissions often are and where the the most considerable impact can be made. For example at Absoft our own Scope 1 emissions are nil and Scope 2 essentially amounts to office heating and some electricity. Most of our actual emissions are in Scope 3.

Scope 3 includes

• purchased goods,
• purchased services,
• transport and distribution,
• waste,
• business travel,
• employee commuting,
• emissions from leased assets,
• use and disposal of sold products.
• and even emissions related to investments held.

Many consumers would expect a number of these areas to be reduced and reported, particularly business travel, purchased goods and services, transport and distribution, and emissions from leased assets.

Meanwhile, sold products and disposal is slightly more controversial. For example, if you buy a litre of diesel and choose to burn it in your car, is that the fault of the oil company, the manufacturer, or your own? It is under control of all three entities in the sense that all could have stopped it from happening…

Reducing Scope 3 emissions

Similar to Scope 1 and 2, many Scope 3 emissions can be influenced in an ERP system through generic benefits of ERP. Namely: running more efficiently, wasting less, and optimising logistics for example. Financial savings from efficient logistics also carry a carbon footprint reduction value.

Some far more specific options to report and reduce scope 3 emissions from the functionality of SAP ERP 6.0 and S/4HANA include:

• Optimising procurement for carbon emissions as well as cost for multiple suppliers of a single material.
• Optimising transport and distribution with capabilities in warehouse management, stock management and remote logistics management.
• AI-enhanced capability such as forecasting future orders to fill spaces in lorries or focusing production into time periods with better weather for renewable energy to feed the grid.
• Geospatial analysis of employee locations and travel to optimise travel expenses through SAP Concur or optimising remote working and hot-desking from SAP SuccessFactors or HCM data.
• Integration of SAP with Microsoft Teams for effective collaboration, whether to augment a traditional remote meeting to save business travel or for an advanced case that could save a helicopter trip in the Oil and Gas industry with augmented offshore inspection rounds.
• Taking insights from the manufacture of a specific part to reduce or change materials, for example with reports of detailed material usage and carbon emitted for a part a design can be changed to reduce product carbon emissions.

What else can we do to become carbon neutral?

Absoft has worked around the areas above for our customers and delivered some tangible examples, too. Every conversation I have on this topic reveals more opportunity to track and reduce carbon footprint.

• Why not watch the replay of our “Sustainability in the Food & Beverage industry” webinar – check it out here.

This is an active area of research and I’d love to bulk out this article to cover the world’s possibilities, so if you have an idea I haven’t covered here, please reach out to me!