Take your ESG data to the next level with SAP and NTT DATA
In the business world, Environmental, Social, and Governance (ESG) considerations have grown to play a key factor influencing both day-to-day operations as well as longer-term investment decisions. In this blog post, we'll examine the challenges created by ESG and the important role SAP technology and NTT DATA's accelerators can play in addressing these challenges.
The growing importance of ESG has many parallels with the way the financial reporting was transformed following the 1929 Stock Market Crash, which led to the adoption of generally accepted accounting principles (GAAP).
Before that crisis, US companies reported financial information in different formats, making it difficult for stakeholders to understand and compare. To improve transparency and help avoid another crash, the US government called for standardized accounting practices, which eventually became GAAP.
In a similar way ESG information is today reported under different frameworks, leading to a lack of comparability and accuracy.
To solve this problem, new regulatory frameworks for measuring and reporting ESG compliance are emerging. In Europe, for example, the European Sustainability Reporting Standards provide one such framework, while the EU taxonomy for sustainable activities is defining what can be considered.
This taxonomy aims to direct investments to those economic activities most needed for the transition, in line with the European Green Deal objectives, by creating a classification system that allows investors and other businesses to easily identify economic activities that can be considered sustainable.
Clearly, compliance with these regulations will become increasingly necessary as more governments, public bodies and institutional investors are likely to insist that businesses wanting to attract investment or win contracts can demonstrate their commitment to ESG principles in a way that is standardized and easy to understand.
Digitalization and Automation of ESG Information
To help meet more complex ESG reporting requirements, companies are turning to digitalization and automation. The benefits include increased efficiency, data quality assurance, and the ability to exchange data with supply chain partners, stakeholders, and other interested parties.
While many large companies already have corporate ESG reporting at a strategic level, aligning operations with ESG strategy requires more granular data and analytic capabilities. Just as financial P&L statements help identify areas for improvement, companies need analytical ESG information by business area, product, or service to pinpoint opportunities for enhancement.
By integrating ESG data into day-to-day business processes, SAP software provides a global and integrated vision of a company. This ensures the alignment of financial and sustainability goals, creating a seamless link between business and ESG information.
SAP has developed specific solutions to help enterprises better align their activities with their ESG goals. For example, SAP Sustainability Control Tower simplifies reporting by automatically generating ESG KPIs from the data held in S/4HANA Cloud. This enables the C-suite to better understand the interrelationships between financial, operational and sustainability performance.
As its name indicates, SAP Sustainability Footprint Management enables enterprises to calculate a wide range of corporate, product and value chain footprints by directly acquiring master data and activity data from transactional systems, such as SAP S/4HANA.
NTT DATA Accelerators Help Leverage ESG Data
Recognizing the strategic importance of ESG issues for our large enterprises customers and the difficulties they often
face putting ESG initiatives into practice, NTT DATA has developed a range of accelerators that address specific ESG
needs and are mentioned below.
Specifically for European enterprises, NTT DATA has created a Gap Analysis Tool for comparing current reporting of
non-financial information with new European requirements. This asset streamlines the analysis process and serves as
input for auditing, ensuring companies include relevant ESG topics in their reports.
Earthinsights is an NTT DATA tool designed to collect essential ESG data and streamline reporting based on the new European framework. Earthinsights can be used with any source of data, so bridging the gap for data not yet stored in SAP and providing a comprehensive solution for regulatory compliance.
To address the need for deeper analytical ESG information, NTT DATA offers Green Digital Passport. This tool leverages blockchain technology to calculate the carbon footprint by product or service, allowing companies to assess environmental impact at every stage and make informed decisions to reduce their footprint.
The growing range of SAP solutions in the sustainability space and accelerators offered by NTT DATA shows how the integration of predictive analytics, trend analysis and more sophisticated reporting tools enables ESG data to be used for much more than simple “box ticking”, as it enables companies to proactively take a lead in ESG initiatives and help shape a more sustainable future for businesses globally.
Koen Janssens
Director Digital Finance and ESG