SAP sustainability chief sees IT as net plus for environment

SAP, the ERP market share leader and Europe’s largest software company with $33.8 billion in annual revenue, is both a major consumer of resources and a high-profile player in the effort to make IT more sustainable and apply the technology to environmental challenges.

SAP’s chief sustainability and commercial officer, Sophia Mendelsohn, leads its efforts to balance the positive and negative impacts of IT. She joined the company in September 2023, having held similar positions at Cognizant and JetBlue, at a time when SAP’s stake in sustainability technology was already firmly planted. The company, which has offices in 130 countries, has used 100% renewable energy since 2014 and set a goal of reaching net zero — the point where it adds less greenhouse gas to the atmosphere than it removes — by 2030. In recent years, SAP has made sustainability a focus of its product offerings, releasing products for measuring and controlling environmental impacts and meeting increasingly stringent reporting requirements.

TechTarget editors sat down with Mendelsohn at SAP’s Sapphire 2024 conference in Orlando, Fla., to talk about her role and the ways technology can help and hurt the environment.

Editor’s note: The interview was edited for clarity and conciseness.

What is SAP’s top sustainability initiative?

Sophia Mendelsohn: Collectively going from Sustainability 1.0 to Sustainability 2.0. In 1.0, in the market and technology holistically across the world, we seek a primary outcome of environmental improvement. In Sustainability 2.0, we still achieve the original outcome and add the ability to shift the customer’s business model through multiple business processes.

We see sustainability as fundamentally ERP-centric, cloud-native and AI-enabled.

How might sustainability applications like the Sustainability Control Tower and Green Ledger evolve to support Sustainability 2.0?

Mendelsohn: We have SAP sustainability applications as part of the larger SAP suite, and we’re constantly integrating sustainability into S/4HANA, the mother ship of ERP. You can start with something like SAP Sustainability Footprint Management and really come to understand the embedded energy, plastic and water, for example, in your core products. From there, you can go to Sustainability Control Tower, where you bubble up all the information you need to respond to the myriad regulations using your ERP audit and control systems, which is where customers get quick time to value because they save on their audit experience.

You can take that audited, accurate information and put it into your general ledger. Because it’s sustainability information, it becomes a Green Ledger, which is an S/4HANA Business Technology Platform application that allows you to combine sustainability and financial information in one place at the point of decision-making.

What’s so important about the end-to-end carbon management experience is you’re making what has traditionally been inaccurate and unstable accurate, granular and stable. Then you’re translating it from the sustainability perspective — Scope 1, 2 and 3, which is fundamentally operational — and turning it into the language of finance.

How far along is SAP with the more stringent Scope 3 requirements?

Mendelsohn: We can cover all of a customer’s Scope 3 [reporting] and do it in a number of ways, ultimately using the same data and calculation engine. That was one of our big announcements here: the further enhancement and empowering of our corporate carbon calculator as an emissions calculator. It can take materials or data from your product lifecycle management [PLM] system and multiply it by an emissions factor.

How about SAP’s own Scope 3 requirements? We asked your chief marketing officer, Julia White, about applications hosted on hyperscalers, which Scope 3 requires you to report even though you don’t own the servers.

Mendelsohn: Yes, [we need to report] even if we don’t own the servers, but have operational control over them. SAP has a net-zero commitment, which we moved up from 2050 to 2030, and that really makes us unique among most companies. We specifically look at our Scope 3, which covers everything we purchase. That includes — and this, for me, is the most significant part — a contract we hold on behalf of a customer for the applications they run on a hyperscaler.

There are huge sustainability questions around AI and the amount of power it’s going to need. Where does that fit in?

Mendelsohn: The sustainability team and the AI team work very closely together. There are practical things you can do, like train a large language model at the right point and use the most efficient workload to get the same result. The good news for sustainability and emission reduction is that those factors correlate to cost, so you can trust companies to be on top of it.

The question of energy and AI is going to orient around the hyperscalers, who already have very aggressive renewable energy targets and have been on the record saying generative AI poses a challenge. The hyperscalers were already decarbonizing the data centers that our customers — and we, through our customers in Scope 3 — are exposed to. The hyperscalers will also be in conversation with the nation’s electric grids about the amount of energy they need.

From there, we get very quickly into my personal perspective on what market-based measures might come in, such as power-purchase agreements. The really interesting macro question is: How is this going to turn into an ROI calculation? What will happen first? Will GenAI use more energy, or will it be able to save more energy? I come down firmly in the latter camp.

A customer at Carrier, which makes air conditioners, said, ‘We’re using GenAI to cool GenAI. We’re using GenAI to solve the problem of intermittent renewable energy to the grid.’ The grid likes very stable hydrocarbons. GenAI is making it possible for us each to have a battery in our home and connect the batteries to make a grid.

We are so early in the game that the baseball team isn’t even on the field yet. But I’m already seeing phenomenal use cases just in my SAP world.

In SAP Transportation Management, Predictive Maintenance and Services, Energy Management and Integrated Business Planning, AI is predicting patterns and relationships that a sustainability planner, load planner, procurement planner or electric grid manager can use to save energy and improve efficiency.

At Sapphire, we’ve launched two GenAI use cases. One that customers already use is emissions mapping, where you take data on materials from your PLM and the bill of materials in your ERP system, and map it to emissions factors automatically. This is a huge deal. Prior to this, it took hundreds of thousands of dollars and a small army of consultants.

We have a second GenAI use case that automates ESG reporting. For 10 years, the sustainability community has been having a conversation about writing sustainability reports and standards, and complaining that their entire team is working on this report. The implications for how our customers’ sustainability teams spend their time are huge.

There’s a history of people adopting things before realizing the negative consequences. Does it concern you that AI is going to start using all that energy before the grid is ready or ways to conserve energy are in place?

Mendelsohn: SAP has an AI ethics policy and committee. From an energy perspective, I was already worried about the fragility of the North American grid. We all should be.

In sustainability innovation — say, going from diesel to biodiesel, traditional vehicle to electric vehicle, light bulb to LED — the first question I always hear is, ‘What does it do for biodiversity in a particular country or Indigenous community?’ Those are valid concerns that should be looked at, but there’s also a knee-jerk reaction to say if it’s at all associated with sustainability, it has to be perfect.

I encourage people to compare apples to apples. When I was doing sustainable aviation fuel deals, I used to say it’s not going to be made of rainbows and unicorn tears, it’s going to be made of something. All materials are, so rather than comparing it to an ideal, compare it to the status quo, and we’ll see an improvement.

Sometimes IT people who talk about sustainability emphasize improving the efficiency of things they were going to do anyway. But if you’re doing a lot more of something, even if you make it more efficient, you’re still doing more. Cutting back and doing less — the first step in reduce, reuse, recycle — seems contrary to the profit motive and having to make more things in a capitalistic system. We don’t hear much of that from SAP and other vendors.

Mendelsohn: Where that analogy breaks down is in the transfer to the cloud, because there are efficiency gains going from on-premises to the cloud. You can do X amount more in the cloud and still be that much more efficient.

To speak to your macro point and this inherent contradiction between how we grow countries’ GDP and companies’ commercial activity while being sustainable, here is my look around the corner.

It’s quite clear that we spent the first part of our sustainability journey collectively on carbon because that is the forcing mechanism that makes us realize the impacts of environmental degradation. The solution will not be ‘now we do plastic, now we do water.’ It’s going to be a circular economy and circular processes, and not just whether H&M takes your shirt back. For mill and mining, chemicals, automotive, energy and this ability to recapture value from the downstream end of your value chain back into upstream is what will weave us out of this contradiction between sustainability and growth.

You report to SAP CEO Christian Klein. What does he expect of you and your team?

Mendelsohn: The answer is reflected in my title, chief sustainability and commercial officer. What that is communicating is the coming together of SAP as exemplar — how we act for ourselves — and enabler, or what we do for our customers. The truly scalable impact that will be felt around the globe through our 300 million users will come from our enabler role.

What I came to SAP to do, and what we are executing on now, is show to ourselves and our customers — both in our more traditional enterprise installed base as well as the midmarket — that they can aspire to their sustainability objectives and transition their business models to low-carbon, circular ones by leveraging their existing digital transformation. I sometimes say you write one check and you get two benefits.

Through that digital transformation — specifically, their transformation to the cloud — we leverage that existing investment, their enterprise resource planning and SAP portfolio, take that same data and make it available to them in their business processes at the point of decision-making so they can begin to look at the cost abatement curve of what materials they need to change to achieve their growth objectives and their sustainability ones.

There are tradeoffs. Everybody had to travel here. You could hold something virtual or a hybrid, but there’s obviously value in people sitting together like this. What’s the sustainability of conferences?

Mendelsohn: That contradiction is a bit of a red herring. There are practical measures to address the concern, which we have taken: high-quality, trackable, traceable, auditable and retirable carbon offsets; carbon sequestration; waste reduction; etc. We do a lot of things: minimize food waste, eliminate single-use plastics, achieve diversity goals, reduce and eliminate the travel carbon footprint.

Where I really see the value of what we’re doing here is to get out of the contradiction conversation that sustainability is stuck in and proactively address these things, which ultimately is more supportive of growth.

I was talking to a consumer goods company yesterday in the food space about how the price of cocoa has skyrocketed because it’s too hot in countries in Africa where they grow cocoa. A beverage company that invested in a plant in a location that they did not expect to be water-stressed is now water-stressed.

If someone flies here to have a conversation with SAP, and we can show them that managing the risk physically in their supply chain as well as transitionally in their general ledger is of value to their business objectives, then the conversation has been worth it. Then sustainability has come out on top.

David Essex is an industry editor who covers enterprise applications, emerging technology and market trends, and creates in-depth content for several TechTarget websites.

Jim O’Donnell, a senior news writer for TechTarget Editorial who covers ERP and other enterprise applications, contributed to this report.