How to measure sustainability – best practice at SAP

How can companies measure and compare their economic, environmental and social impact? This is the main question being addressed by the Value Balancing Alliance (VBA) an alliance of companies with the common goal of making their impact transparent and comparable. The VBA uses a method called Impact Valuation, which enables companies to translate their impact into monetary units and use the resulting figures in their controlling and reporting. The approach helps meet legal requirements and serves as a valuable management tool. WifOR is a scientific sparring partner to the VBA in the methodological conception of global sustainability standards. In addition, WifOR cooperates with several members of the alliance in implementing the Impact Valuation methodology  including SAP. In this interview, Thomas Birnmeyer, Chief Expert and Senior Director for Global Sustainability at SAP, talks about the joint project.

How to measure sustainability – best practice at SAP

What were the key needs and challenges you approached WifOR with?   

Thomas Birnmeyer: As a member of the Value Balancing Alliance (VBA), we were faced with the question of how to implement the method recommended for evaluating ESG indicators at SAP. We do not have sufficient primary data to calculate upstream effects, i.e., the impacts that occur at our suppliers. Therefore, we knew that we would have to rely on industry data and input-output analyses. To fill these data gaps, we engaged WifOR as a scientific sparring partner. WifOR has since supported us in modeling the impact measurement and evaluation of our supply chain.  


What were the milestones of the project?

The first milestone of our project was the scope definition. We determined which of the VBA indicators are meaningful for SAP and how we can elaborate on them for example, gross value added or training measures. Then, we collected the internal data that WifOR needs for further processing. The third step was the actual calculation and data modeling. Here, WifOR evaluated the VBA indicators according to the VBA method papers for the supply chain. The final step was the interpretation and presentation of the results.
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How do you at SAP use the results?   

Our project is currently still in pilot status. Our aim is not only to meet existing and future regulatory requirements such as CSRD or due diligence, but also to actively integrate the Impact Valuation results into management processes and decision-making. This is our mid- and long-term goal. However, some of the results are already applied today. For example, with the help of WifOR, we reorganized the processes for SAP's internal data collection for impact assessment and improved our calculation methods. As a result, we achieved a higher overall quality of results and reporting, which helped us to demonstrate the added value and importance of impact valuation both internally and externally.

Initial results can be found in our Integrated Report 2020 (see pages 210-216). For example, we determined the greenhouse gas impact in SAP's supply chain. The negative impact of greenhouse gas emissions was quantified at €182 million, which helped us in our decision-making regarding the implementation of our CO2 reduction strategy. 

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What have been the most important learnings since you started the project? 

Overall, there were plenty of helpful learnings. One topic, where we made a lot of progress is for instance the definitions of different VBA indicators. This helped us better understand the methodology behind the assessment of each environmental and social impact. As a result, we were able to understand which parameters are ultimately crucial for the measured impact. 

What feedback (internally and externally) did you receive during and after completion of the project in your company?  

We received a lot of positive feedback around supplementing our financial reporting with the non-financial part in a meaningful way this was only possible by translating non-financial data into the same "language" as financial data. The impact measurement approach that we implemented with WifOR contributed greatly to this. The internal feedback has also been insightful: our CFO decided to incorporate Impact Valuation step-by-step into management processes and decision-making. The fact that we were able to derive specific measures from the Impact Valuation results to foster change made this project so meaningful. 

What additional analyses are you planning in the future?  

Over the next few years, we will keep on measuring and evaluating the VBA indicators using the methodology developed with WifOR. Reporting is a requirement, but incorporating these results into decision-making processes is the truly decisive element. Impact Valuation at SAP will be developed to such an extent that the method is gradually used throughout the company and integrated across departments.