What's Holding Back Corporate Sustainability Efforts?

What's Holding Back Corporate Sustainability Efforts?

SAP, the business-intelligence software giant, has thrown its weight behind sustainability in a big way in the last few years, which you know if you've been reading these pages for any length of time.

But how strong a grasp have SAP's customers got on green issues? To what extent do they factor efficiency and emissions, among many other concerns, into daily operations?

Before attending SAP's massive annual conference, Sapphire Now, I would have guessed "not much." But the answer actually seems to be "both more and less than you'd think."

I'll explain: There were plenty of deep sessions on sustainability at Sapphire Now -- but they were almost never couched in green language. Instead, many of the companies I met with have taken to heart SAP's new mantra of "making the world run better" -- where better in this case means more efficiency, and which in turn means less waste, fewer emissions; leaner, greener companies.

Because there is still an inconceivably long way to go to get every company -- or even a majority of companies -- on the sustainability train, I was heartened by both the presence of and content presented during one of the panel discussions explicitly about sustainability. During the first afternoon of Sapphire Now, SAP convened thought leaders from industry, government and NGOs to take the pulse of corporate sustainability and offer prescriptions and predictions for progress in a panel called "What Does a Sustainable Company Look Like in 2015?" [Disclosure: SAP paid for my travel to the event in Orlando.]

Nigel Topping, the chief innovation officer for the Carbon Disclosure Project, said that on the investor front, pressure is not only growing, but shareholders are burrowing in to demand more.

"This year we're working with 550 investors, representing $71 trillion in assets -- that's trillion dollars, quite a lot -- and we've started to see investors getting more demanding," Topping told the audience at the panel. "They're not just saying 'please be more transparent,' but saying we know there are savings to be had from energy efficiency, and you need to be taking those savings or explaining why you're not. We expect you to reduce, not just to disclose.'"

Although the relentless pressure for companies to disclose has been the topic of a lot of coverage recently -- see here, here and here for a few recent examples -- the panelists presented a compelling case for asking or requiring more from companies they own or do business with.

"The vast majorities of companies around the world still haven't started," Peter Graf, SAP's Chief Sustainability Officer, said. "We need to get everyone on the first rung of the ladder, whether it's by regulation, by procurement or by executive order.:

The reason most companies haven't started, Graf said, is simple: They don't know where to start. And the reason they don't know where to start is equally simple.

"No one has specifically asked them," Graf explained. "If your chairman gets a letter from $71 trillion worth of investors, you're a brave chairman who says 'Let's not answer.' If you get told by Walmart, 'we want to know this...' if you get told by executive order, 'if we don't know this, you won't be on the list,' you're a fool not to respond. But a lot of you are outside most of those barriers."

Susan Wickwire, the at the EPA, explained that the executive order signed by President Obama in 2009 that required has had a huge impact on getting the government to take stock of and make improvements in its own operations and its 600,000-company supply chain. But the executive order could only go so far.

Part of the solution for getting slow-moving enterprises and small-to-medium business alike up on the first rung of the ladder will have to be regulation. And although Wickwire spent much of her time on the panel downplaying the regulatory nature of the EPA's work, it's clear that it is a significant part of the process.

"Regulation is a baseline," Wickwire explained. "What [the] EPA has been doing over the last few years is using its Clean Air Act authorities to introduce new requirements." So far, the agency has 10,000 companies covered under mandatory reporting rules, and Wickwire said, "This is starting to get companies to think about carbon and how they need to factor it in to their business operations."

Given the glacial pace of legislation in the U.S., there will have to be other solutions. Graf said that price volatility in energy markets would make a case for sustainability investments even without a carbon tax or cap-and-trade, but that there was a bigger issue at hand.

"There's an elephant in the room, and it's called probability," Graf said. "When it comes to sustainability, we have always had a conversation about probability ... the probability of climate change happening or not, the probability of risk, and so on. What needs to happen to this is to understand that we need to move from probability and risk to a conversation about certainty and opportunity."

Topping of the Carbon Disclosure Panel echoed this later in the panel when he said that investors are much more excited about opportunities than about risk. At the CDP's last global conference, perspectives on the issue were twofold.

"First, when businesses look at their operations through a sustainability lens, they see waste that they hadn't seen before, and there's always money behind it somewhere," Topping said. "Second, is an opportunity to create new services and create new markets. Siemens announced last year that a big area of growth for it is products and services for energy efficiency; and look at what GE is doing here, too."

Of course, this being an SAP event, the conversation eventually turned to software and solutions, and how those solutions both shadow and predict the trend toward greater interest in sustainability and resource efficiency in the enterprise.

"In five years I believe you will be hard-pressed to sell an enterprise software system that doesn't have the ability to track natural resources built in," Graf said. "Think about selling a system today that doesn't allow you globalize and operate in different currencies and infrastructures - it'd be like selling something that doesn't work on the internet -- it's just impossible. And the same will happen to sustainability, because sustainability in essence is a transformation of business and business models, and that needs to be reflected in the way that business operations are run."