Sustainability — Arrival of a new corporate focus June 14, 2007Posted by Amit Chatterjee in Business User, Enterprise Software, General Enterprise Musings, Governance, GRC, Uncategorized.
Awakening of a new trend
Last week, I was invited to a McKinsey presentation on the impact of Green or Corporate Sustainability Management (CSM). When McKinsey offers to give a presentation, people stop and listen. In a packed room, Matt Rogers, a director of the Firm led the audience through the impact that carbon and other green house gas initiatives were being addressed by the clients that the Firm serves (Low Carbon Future).
During the presentation, it was clear that there was a significant need for changing behavoir. I was trying to determine how long it would take to make this trend a reality vs. short-term FAD status. Then I was hit with the most interesting stat of the whole presentation. Another director of the Firm announced that McKinsey was currently serving 20 of the Fortune 100 around establishing or building out their corporate sustainability program.
Ladies and gentlemen, CSM has arrived. Basically, when a large corporation is willing to hire McKinsey brainpower (which does not come cheap) to establish a strategy, it is no longer a fad, but a true initiative for change within an organization. Thus marks the arrival of CSM into our lexicon as a legitimate method for competitive advantage or lever for shareholder value. This is truly exciting news.
Basics of CSM
CSM is defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs.
Corporations are increasingly under attack if they disregard environmental and social concerns. For example, the Financial Times considers climate change to be the next legal battlefield. Just few months ago the State of California filed a lawsuit against six automakers for global warming damages.
Corporate Social Responsibility (CSR) is a strategic weapon that companies in all industries around the world use as a reaction, to protect their key value drivers – their good name and brand reputation. Companies like BT, General Electric and Wal-Mart (Carbon-Neutral companies) are helping change the game by building sustainability factors into their competitive strategy. This explains the burst of non-financial /CSR reports over the past few years. According to Al Gore, “the full spectrum of value that represents a corporation’s activities can only be understood if you look outside the narrow confines of financial reports.”
However, hardly any company has a systematic approach to manage their non-financials (like energy consumption, emissions, degree of diversity among workforce etc.). They rely on manual operations, on number crunching, and time-consuming processes, which lack transparency and are difficult to audit.
What SAP can do to help
Therefore, SAP has recently committed to systematically cover the domain of non-financial indicators. We’re planning a solution which automates key elements of the process of CSR reporting (List of reporting). This solution will automatically extract non-financial indicators from the backend, allow analytics, drill down and benchmarks. This can be the first step to integrating financial and non-financial indicators. Management of the triple-bottom-line (financial, social and environmental issues) will become as powerful, transparent and accountable as one can expect from SAP. This can become a paradigm shift, expanding SAP’s traditional core competence to the area of non-financials.