Harness the Power of SAP Ariba to Drive the Sustainable Enterprise
Functionalities, Advantages and Implementation Options
Sustainability, both environmental and social, is a growing priority for many enterprises. A 2021 Harvard Business School article cites that an estimated 90 percent of S&P 500 companies published a Corporate Social Responsibility report in 2019, compared to just 20 percent in 2011. This increasing focus on sustainability is largely driven by the recognition that respecting and protecting the planet and its people is the right thing to do, but there are also some important external drivers
- Consumer behaviors are reflecting growing environmental and sustainable awareness. Market researcher Nielsen reports in 2023, consumers will be holding brands responsible for progressing the world’s state of sustainability.”
- Millennial and Gen Z workers expect high environmental and social standards from employers, as highlighted in a November 2022 fortune.com report
- News and social media pick up and amplify perceived corporate sustainability transgressions, impacting brand value and causing reputational damage.
- Sustainability regulation and reporting requirements continue to grow. In December 2022, the EU published its Corporate Sustainability Reporting Directive for large companies and listed SMEs as part of its wider Green Deal.
Sustainability is set to become as much a part of the fabric of business as financial and operational performance. SAP Cloud for Sustainable Enterprises delivers company-wide functionality and industry-specific features to help incorporate sustainability in business at scale. It embeds operations, experience, and financial insights into core business processes, helping enterprises in their drive to achieve the targets of zero emissions, zero waste, and zero inequality. This article considers the use case of managing supplier risk to assure ethical practices throughout the supply chain. It looks at how SAP Ariba helps enterprises fulfill their ethical obligations and meet regulatory requirements in this area and the value that Arvato Systems adds for enterprises in their sustainability journey.
Managing Supplier Risk Across the Supply Chain
As part of the sustainability drive towards global ethical business practices, enterprises are being held to account for assuring that these practices are sustained throughout their supply chains. In Germany, the Act on Corporate Due Diligence Obligations in Supply Chains came into effect at the start of 2023 for enterprises with at least 3,000 staff. From 2024, it will be extended to enterprises with at least 1,000 employees. Meanwhile, Draft EU legislation is in progress “to better integrate risk management and mitigation processes of human rights and environmental risks and impacts, including those stemming from value chains.”
It seems likely that the German and EU legislation will come closer together over time and will be followed by regulation in other countries to assure ethical and environmental supply chain practices. This places additional obligations on enterprises to assure ethical and environmental practices across their supplier network, nationally and globally. Extending established supplier risk management processes is the logical solution to meet these obligations.
The SAP Ariba Solution
SAP Ariba fits within the overall SAP Sustainability Portfolio under the goal of Zero Inequality – Social Responsibility. It provides specific extensions to its established Lifecycle and Risk Management modules to enable enterprises to meet the requirements of German legislation. Templates were added to the April 2022 standard on the basis of March 2022 German Federal Office of Economics and Export Control (BAFA) reporting requirements.
The SAP Ariba modules that face the legislation are:
- Supplier Management
- Risk Management (Risk Evaluation, Risk Reduction, Complaint Management)
Further sustainability-focused solutions are offered through:
- Sustainability Control Tower
- Responsible Design and Production
- Product Footprint Management
These extensions offer:
- Legally compliant evidence of digital collaboration within the organization and with direct and indirect suppliers
- Standardized import/export of supplier data & risks with Swiss Solvency Test (SST) to third-party tools and Environmental, Social, and Governance (ESG) control systems with templates
- The flexibility and scalability of SAP Ariba Solutions as a SAP standard product
How to Adopt the SAP Ariba Solution
Adopting the SAP Ariba solution to meet regulatory requirements should be part of a broader business strategic approach to assure ethical and environmentally sustainable practices throughout the supply chain.
The stages of this approach are:
- Define business strategy and goals
- Develop a transformation roadmap (Assess the current status quo around supplier risk management, determine the gap between the current status quo, business goals, and regulatory requirements, select the solution approach – develop minimum requirements, identify opportunities and solution USPs, design the transformation)
- Deliver, monitor, and optimize the transition
- Report and communicate key measures
- Harvard Business School: 15 Eye-Opening Corporate Social Responsibility Statistics
- Nielsen: Trend watch 2023: Sustainability
- Fortune: The employers Gen Z is rejecting show where companies need to step up
- White & Case: Corporate Sustainability Reporting: New EU rules for large companies and listed SMEs
- European Commission: A European Green Deal
- SAP: Building a sustainable world. Together.
- Federal Ministry of Labour and Social Affairs: Development Minister Schulze and Labour Minister Heil are travelling to Ghana and Côte d'Ivoire together
- European Union: Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937