Sustainability through software: Q&A with SAP's Peter Graf

Sustainability through software: Q&A with SAP's Peter Graf

SAP Chief Sustainability Office Peter Graf has been working for the company for 16 years, but says that now "is probably the most exciting time" to be there.

It's not that the rest of the company's history has been boring. Every decade or so, the 40-year-old software company has seen fundamental change in the way business is conducted, Graf says.

There was globalization, which changed the division of labor across the planet and offered new challenges and opportunities to software providers. "People who do software who did not see this coming do not have software companies anymore," Graf says. Then came the Internet and, with it, a wave of disintermediation, when consumers began interacting directly with car-rental companies and airlines – for example – without travel agents or other intermediaries.

Now SAP is seeing another transformation, Graf says. A growing population and resource scarcity are creating major challenges, which new technologies can turn into large business opportunities, he adds. "This is an exciting moment where new technologies meet business challenges."

Among other trends, volatile natural-resource prices, the explosion of mobile devices and more regulation around the world are changing the landscape for companies. And the new business environment creates the need for new software, Graf says.

SAP, the world's largest enterprise-software company, already has a hand in the majority of worldwide business processes, touching more than 60 percent, Graf says. Organizations use its software when they search for a new supplier, send an invoice to a customer, hire somebody or track a shipment, among many other examples. As Graf puts it, "It's mind-boggling how deeply we have ingrained ourselves into the world economy."

The company is having its Sapphire Now and ASUG Annual Conference together in Florida this week. I sat down with Graf in advance of the events to discuss the challenge of cutting emissions while growing the company, engaging customers and tapping new business opportunities. Here's an edited excerpt from our conversation:

Jennifer Kho: The ability to grow without increasing emissions is a big challenge for many companies and key to meeting your target of dialing back emissions to 2000 levels by 2020. According to SAP's 2011 sustainability report, its emissions rose 7.4 percent as revenue grew 25 percent last year, while in 2010 the company was able to cut emissions 5.7 percent while boosting revenue 17 percent. Are you running out of low-hanging fruit?

Peter Graf: This is one of the things that's really driving home the message that, around energy and energy management, there are two areas you can look at -- one is transformational and the other is efficiency gains.  If we replace a flight with telepresence, that's transformational; if an airplane uses biofuels and better engines, that's efficiency. We're always trying to improve both.

Efficiency changes are easier because they usually don't drive behavioral change. We've gained more than 10 percent efficiency in facilities, 10 percent in IT, 10 percent efficiency in corporate cars, but the real challenge is the transformational one. That's really where you need to engage people. Most of what we do after harvesting low-hanging fruit is engage the individual. And usually it doesn't work if you say, "Don't be a bad boy; you shouldn't drive your car." What works is saying, "Hey, if you carpool you will have more fun getting to work."

Kho: How are you working to engage your employees?

Graf: You first need to decide on what you really need to engage them on, what's material to your business. That's often a challenge. We really put a lot into understanding how employee engagement relates to revenue and margins. … We engage all of our leaders in the company in order to drive employee engagement and motivation, and every leader has an element of compensation tied to how well she engages her employees.

For things that are material, we have to consider if paying for performance is something we want to do. But people are not only motivated by money. In a knowledge-driven industry like software, purpose is also a big driver. Knowing that more than 60 percent of all business transactions touch an SAP system in some shape or form, we realize that we have an opportunity beyond making business better, but also to make the world better. 

From stories about the shea nut producers in Ghana to what we do in Haiti with construction companies, those are stories that capture people's imagination from a technical perspective and, equally importantly, capture people emotionally. It ties employees to their community and a purpose and the future and how they can contribute. …

We're also trying to increasingly track emissions from the individual – their hotel, flight, taxi usage, rental usage and dividing the building impact – to find out what is your impact. That's where we're trying to take this in the future. You would be surprised what they can do as an individual.

Kho: Tell us more about your latest purpose-driven activities. Is employee engagement the main reason behind them?

We view our efforts to create social impact as more than just the right thing to do, but as strategic to our success. We are investing in education and entrepreneurship to create sustainable growth, as well as new business opportunities for SAP. Focusing on education ensures helps us identify future talent.

At the same time, we see enormous opportunity to user our technology, our employees’ skills, and our other resources to help improve people’s lives throughout the world. One example is the Soda village. A unique project in a small desert village in India gives residents technology that enables faster access to records and services, a stronger system of governance and a virtual classroom in the center of town.

Kho: Is SAP's goal of cutting emissions back to 2000 levels realistic given all of its growth?

Graf: Frankly, I don't know. If it were easy, if we already knew we would make the target, we would have a bad target. It needs to be a stretch. … As a company growing at this rate and with employees being the major driver of emissions -- and we're adding employees -- it's going to be tough. We had 24,000 employees in 2000; today we have about 60,000.

[If it comes down to it,] we can revert to buying more renewable energy or offsets. We've increased the purchase of renewable energy to more than 50 percent. But we don't want to buy offsets and, if so, it'll be only Scope 3, not 1 or 2. We would need to cut our emissions of 2007 in half in order to meet that goal. We're around 20 percent in.

Kho: With the convergence of data and energy, transportation and buildings, which we like to call VERGE, are you seeing new opportunities and market challenges?

Graf: Every two years or so, the amount of data in the world is doubling. So how do you actually sift through all this data and do things with it that you couldn't imagine doing before? SAP has invested lots of resources and brain trust into what we call SAP HANA, which allows data to live in memory and not on a disk. It's a very exciting thing because, No. 1, memory has gotten so affordable … and, No. 2, you overcome the limitations of a rotating disk.

If you want to have large amounts of data and need to read billions of records on a rotating disk, it takes hours, weeks, months, forever. Essentially, [with HANA], data … can be rearranged in a way optimal to communicate effectively for a given business problem. SAP has taken this approach and engaged many different aspects of business to do things that -- only a year or two ago -- people thought absolutely impossible.

I just want to mention two in relation to sustainability: The first is a very exciting project we've done with one of the largest U.K. utilities, Centrica in London, with smart meters. The utility is looking at ways to transform its business model and is starting to sell services to help customers reduce their energy bills. HANA is now collecting data from all these smart meters across London and puts it into memory storage in a way that the utility can see automatically if a customer has atypical consumption patterns and can go and offer products to that customer.

The second is with Givaudan, related to fragrances, a very complicated chemical. With REACH regulation in Europe, every product you sell needs to be able to specify ingredients and you need to make sure to have no toxics or forbidden materials. With HANA, not only do they ensure REACH compliance with half a million products – half a million different chemical formulas – but while people are creating the fragrance, they can see what the potential market is, depending on where its ingredients are allowed and where they aren't. This is really pushing value creation, not just checking afterwards. And, again, we're talking about big amounts of data.

These things break the traditional deadlock between flexibility and speed. And that's the new kind of frontier; that's how we will manage Big Data. We can do this for energy, for water, for so many things.