How IBM can help our SAP clients to transform into a Sustainable Intelligent Enterprise

20 April 2021

Blog by: Mihir R Gor/UK/IBM, IBM Distinguished Engineer, UKI EA CTO

8 min read

CONTEXT

As some of our clients who are running large SAP estates emerge out of COVID19 lockdown restrictions during 2021, they have a unique opportunity to pivot their business models by adopting sustainable business processes that balance the need for environmental responsibility, economic growth, and social responsibilities. 

Until now, enterprises have been operating large complex ERP systems that are designed to drive business process efficiencies, across finance, sales, warehouse inventory, logistics, and procurement in order to support complex just-in-time supply chains across distributed business networks. These processes continue to be orchestrated, traditionally through SAP ECC6, but now modernised and optimised with S/4HANA, to maximise productivity and remove process inefficiencies and waste.  

Our clients have, for decades, managed their entire supply chains from raw material resources through to end products and services, with a clear focus on financial KPIs.  Now that Sustainability is a major corporate priority, we are advocating the introduction of sustainability KPIs that align with the UN’s Sustainability Development Goals SDGs, especially around moving enterprises towards Net Zero emissions, ideally within 5-10 years.  

No-one party can achieve this in isolation, so we, at IBM, we use our IBM Garage for Sustainability method to co-create, co-execute and co-operate together with our clients, and our experts in the industry, process design and technology to identify creative solutions that meet our client’s business needs around Sustainability using our Design Thinking approach.

In this blog, we describe the journey towards Sustainability by taking 3 steps:

1. Carbon Footprint Analytics
2. Decarbonisation
3. Circularity

This approach allows us to deal with GHG emissions from 3 sources: 

1. Scope 1 - Activities owned or controlled by your organisation that release direct emissions straight into the atmosphere.
2. Scope 2 - Emissions associated with your consumption of purchased electricity, heat, steam and cooling.
3. Scope 3 - Emissions that are a consequence of your actions, which occur at sources which you do not own or control and which are not classed as scope 2 emissions. 

ANALYTICS

This means we need to define and implement new KPI metrics and reporting dimensions for each scope such as, for example, how greenhouse gas emissions GHG into corporate data models. This makes a significant difference in the way processes are executed and products are manufactured and sold. This is where our IBM + SAP Sustainability assets and accelerators come in. 

In 2020, SAP launched their Climate21 initiatives starting with the SAP Product Carbon Footprint Analytics solution where customers can analyse and visualize their end-to-end process and the Cost of goods sold from a Carbon footprint perspective by collecting and evaluating how carbon intensive the manufacturing, supply chain, distribution and sales process really are. 

In IBM, we have complementary offerings like our Net Zero platform solution where we integrate with other valuable solutions through our strategic ecosystem partners. To name one of our partnerships - the Carbon Disclosure Project CDP - gives us historical Carbon footprint data for material master at SKU level. We are also founding members of the Open Group’s Open Footprint initiative to help define the new reference architecture framework as a means of organizing intelligent workflows that drive decarbonization. With IBM-CDP partnership, we get access to a meta model by industry right down to SKU to develop industry best practices, benchmarks and baseline data for Scope 1-2-3 including question to ask, metrics, finance impacts. This way, we can actually help clients to consume this as pre-configured dashboards + content using a common industry-specific data model.  In fact, in Feb 2021, we committed to Net Zero GHG emissions by 2030

Our aim is to enable our clients to gain more transparency and visibility with actionable insights across their entire business value chain using new Analytics KPIs. This will enable clients to make interventions and introduce process optimisation, not only from an economic efficiency perspective but also from a carbon footprint perspective. Here are some example Sustainable KPIs:

• Direct CO2 emissions (metric tons)
• Indirect CO2 emissions (metric tons)
• CO2 emissions from business travel per employee per year (metric tons)
• Non-renewable materials used in production processes (%)
• Energy consumption (kWh/year)
• Energy used in offices (KWh/m2)
• Recycled materials used (%)
• Packaged material recycling rate (%)
• Product recycling rate (%)
• Energy Saved due to improvements (kWh/year)

This image below represents a set of KPIs that apply to an Enterprise across Business Functions to drive sustainability and carbon intensity metrics where data could be sourced from both SAP and non-SAP sources to drive deeper insights and actions. 

This way, our clients can quickly determine and manage their product footprint at different levels in their organisation from company, production plant, product category level and right down to the SKU/product level.  

DECARBONISATION

This fine grain level of insight makes a huge difference and that allows our clients to encourage their own customers to make real time procurement decisions based on Carbon intensity e.g. you should be able to see the carbon footprint on a product sold in the supermarket, from vendors to customers in the supermarket having direct visibility of the carbon footprint of a specific product.  This can be done directly just before the point of sale purchasing decision. 

This way, our clients can start to get ahead on carbon regulation which is likely (and necessary) if we are to avoid catastrophic climate change. By disclosing the carbon and environmental impact of every product based on the raw materials used in creating that product, customers get to influence the shape of the overall supply chain so that the enterprise makes more sustainable product development and management decisions very quickly.  Even with composite products defined in a bill of materials BOM so entire composite products can have a combined view of its environmental footprint, aggregated from each of the sub-components of the BOM. This way we can create a GHG dashboard using a combination of customer defined KPIs and industry benchmarks from example CDP.  

By using the SAP Climate 21 functions and features across SAP S/4HANA and SAP Business Technology Platform BTP, clients can remodel their business process hierarchy and configuration to really identify carbon intensity across business-critical value chains so that new sustainability business decisions can be made and enable process decarbonisation across the business architecture. 

All of this requires vast quantities of data to be collected, analysed and catalogued from a range of emission sources, and then allow process improvements. Clients can start with their own business + IT operations and then start to look at their suppliers that contribute to the aggregated carbon footprint of a product. 

This means sharing of emissions data across supply chains from suppliers, vendors and customers. This may require curated data from third party providers like Carbon Disclosure Project CDP, but you may also need data from 3PL Logistics providers to cover the entire value chain of your product. Getting the transparency about the extent of greenhouse gas emissions, right across the enterprise, generated by the production, distribution and sales process is now within reach. 

This data fuels the Decarbonisation initiatives to drive process optimisation that reduce or eliminate carbon intensity from the value chain and business process underpinning business operations. By evaluating your core S/4HANA processes with this new insight, across O2C, P2P, R2R, HR and CX, clients can really start enhancing business models using Intelligent Workflows that can radically introduce whole new business experiences into the enterprise, and to deploy new decarbonised processed designed for efficiencies for both economic and environmental benefits. Intelligent workflows can help clients get to net zero carbon footprint.

IBM have a clear message about open Hybrid Cloud powered by our Red Hat capabilities. We understand that many of our clients operate a multi-cloud landscape, while the majority of their legacy applications still reside on-premises contributing to potentially high TCO due to a complex combination of technical debt and a diverse legacy estate. We can use OpenShift as a modern containerisation and orchestration platform that provides an application hosting platform that is agnostic to applications, programming languages, middleware and cloud platforms. Containerisation brings standardisation to development and management processes and tools which simplifies automation and improves efficiency which in turn reduces costs and delivery time.  Using Red Hat OpenShift across a multi-cloud landscape, clients can automate and distribute some of the SAP workload component e.g. SAP Data Intelligence to operate in a way that reduces Carbon footprint, especially since each of the major SAP Hyperscalers offer reduced carbon footprint from the outset. For instance, IBM Cloud has among the lowest carbon footprint for enterprise workloads in addition to Microsoft who have committed to carbon negative platforms.

CIRCULARITY 

All this takes us to enabling a circular economy based on 3 key principles:

1. Designing out waste and pollution through a sustainable design
2. Keeping products and materials in use – leveraging Product as a Service & Sharing models
3. Regenerating natural systems – moving from doing less harm to doing good. 

We start by challenging the linear process value chain and asking questions on what we do with physical and logical waste. We start by shifting from a ‘take, make, use, dispose’ mindset to a more sustainable mindset comprised of ‘re-use, re-furbish, re-manufacture, re-cycle, re-purpose, re-cover and reduce’.

While this is easier said than done, it is achievable if we start to zoom out from individual use cases and start to look at the processes that underpin the Enterprise functions, starting with the CBM and the wider business network and ecosystem partners, then we can unlock value streams at every process step for entire global processes and systems. 

In our IBM Sustainability Garage, we use techniques like Design Thinking that map out user journey through to materials lifecycle and journey, so that we can start to leverage partnerships to optimise system effectiveness, and then start to drive Circularity through Process re-engineering. This need not be expensive or incur long turnaround times because we can start with tactical transformation activities. 

Using tools form IBM partners like Celonis to do process discovery and mining, in combination with IBM IMPACT Blueworks live process accelerator, we can quickly see opportunities to decarbonise existing processes and introduce new circular lifecycles for core products and services. 

Let’s take the example of plastics. We have offerings around IBM Net Zero platform that can drive insights that eliminate waste in both manufacturing and post use recycling processes. This is the genesis for developing a circular economy as this can dramatically bring down emissions.  

We see Circularity as a strategic priority for many companies. By understanding the lifecycle of plastics, we can provide transparency using a network-based solution across marketplaces and integrating waste-management services across global value chains.

We bring in Intelligent Workflow to avoid linear lifespan of single-use plastics. With a deeper understanding of consumer needs and behaviours, we can incentivise the packaging, distribution, sales and disposal process so that each step is tracked + traced using our sustainability platform. That way we are not only as efficient as possible in the production process, but also enable workflows that allow recycling of waste by overcoming industry boundaries and integrating players from key brand/suppliers and connecting them with retailers and the waste management and recycling companies, and chemical industry.

So, this is about using a business network as a foundation for circularity while also designing products with having a mindset of ‘no waste’. It’s not as difficult as it sounds. By using Intelligent Workflows that extend your business processes using SAP BTP, the producer adopts more end-to-end responsibility in the total lifecycle of the products produced. This is how the Open Footprint initiative provides that Architectural framework to drive Circularity by using Platform services, Open API/Microservices to enable process integration, common data models and new ways consuming that data using intelligent AI solutions. 

Indeed, we have a strong track record in delivering the decarbonisation and circularity through new business models. For example, our work with IBM Food Trust and IBM Responsible Sourcing Business Network RSBN shows how important it is to get the architecture for design for Data Exchange right, and this highlights the need for Data to be harmonized across the ecosystem, so hence the need for Open Footprint initiative mentioned above.

NEXT STEPS

1. For Analytics: We have already developed our IBM Sustainability Component Business Model CBM, using our IBM CBM.AI tool, which enables our clients to see their strategic business capabilities and operational functions. By applying a heat map using a set of industry metrics, including those mentioned above, we can help our clients visualise the carbon intensity of their business functions. This way, they can prioritise intervention and actions through decarbonisation initiatives. Using flexible cloud hosted Data Lake solutions, integrated with SAP Data Intelligence and SAP Analytics Cloud, we can provide actionable insights.
2. For Decarbonisation: We have announced our partnership with Celonis which will help with process discovery, process mining and process engineering in combination with new set of business KPIs that can help redesign processes to eliminate carbon intensity. Since most AS IS processes are tightly coupled to applications and data they run on, we can introduce Intelligent Workflows that span multiple applications and data sets to drive new decarbonised business processes, while addressing business needs around richer customer experience CX and automation across Design To Operate, Lead to Cash, Source to Pay and Record to Report processes that operate across both the SAP and non-SAP application ecosystem. 
3. For Circularity:  Using Design Thinking, we can develop new circularity business processes that integrate and co-exist with new decarbonised business processes, but introduce new revenue streams while addressing the product decomposition lifecycle processes with less environmentally impacting outcomes such as waste, business or environmental outcomes. Using the Open Footprint Forum to drive new architectural framework for enabling circularity is going to be key.

Please connect with the IBM SAP Sustainability Team with @Allan Coulter @Mihir Gor @Jade Farrell @Martin Kuhl @Jasmin Scholl so we can start to engage on helping your organisation to transform into a Sustainable Intelligent Enterprise using the latest IBM + SAP capabilities.

Together, we can help defeat climate change through innovation and technology.