SAP touts CO2 reduction as path to profitability

Company increasingly linking financial and environmental sustainability

SAP is making good on its commitments to heavily reduce CO2 emissions while at the same time increasing profitability according to its president at SAP Japan, Garret Ilg.

Speaking at a media roundtable at SAP’s Tokyo headquarters, Ilg said despite the seeming contradiction between CO2 reduction and improving the bottom line, there was a strong link between the two.

“If you look at SAP’s financial statement for the first three quarters of the year we have actually improved our margin in a time when overall sales at a top line have decreased so I think the important point is that the [margins and CO2 emissions reduction] can be linked in a way to save [costs],” he said.

“Obviously there are expenses, but sustainability whether through reduction in water or energy, or in productivity gains can be used to generate top and bottom line opportunity for companies and the ROI is much shorter than most people think.”

In March 2009 the company, in a sign of the growing link between environmental and financial sustainability, committed to cutting its 2007-level CO2 emissions by 50 per cent by 2020, while at the same time increasing revenues by 200 per cent and profits by 35 per cent, by 2014.

Under the commitment SAP is reducing company car fuel consumption and office printing/paper usage, and has invested in high-definition video conferencing, is actively purchasing renewable energy and consolidating and virtualising its data centres and running virtual events.

The company also appointed a chief sustainability officer, Peter Graf in March 2009 to directly manage the issue. Since his appointment, SAP has launched a dashboard which allows the company and public to monitor the energy consumption and CO2 emissions down to individual employees and the offices of any given SAP entity in any region in which it operates.

“There is also a benefit not just in saving money but in brand awareness – we can say to people we are on a mission, we have the tools and we are measuring it,” Ilg said. “That reflects well on the brand.”

The growth in SAP Consumer Carbon monitoring tools

Along with application of enterprise software for power companies to create smart grids, another vital factor for the success of carbon reduction would be the growth of consumer-level carbon emission monitoring tools, Ilg said.

SAP, through its acquisition of Clear Standards early last year, has begun beta testing a monitoring application running over mobile network providers to end-user smartphones for just this purpose.

“They will be more like social networking environments which create opportunities not just to report and contribute but to create a bit of competitiveness too,” he said. “We’re now giving consumers some measurement applications they might be interested in as well as power companies.

“Companies who want to market and advertise around that infrastructure – my air conditioner is more efficient than that one... – will also have an opportunity too. There is no shame in being commercial, so long as you’re doing the right thing.”

Smart City Project

The announcement follows the launch in late December of the Smart City Project in Japan – a joint initiative between SAP, the University of Tokyo’s Future Design Centre (FDC) and a number of other firms to create technology solutions aimed at addressing environmental and resource problems, food supply problems, health care problems and education problems.

Under the Smart City Project, the firms will collaborate on new technologies and joint studies with the University of Tokyo aimed at addressing key global challenges such as reducing CO2 emissions.

While the project seeks to remedy these global issues it also seeks to enhance Japan’s global technological role.

According to FDC Advocate Hiroshi Komiyama at the same time as Japan is working to solve the global challenges, the country has an opportunity to provide international leadership.

“Japanese know-how and technological ability is highly-regarded throughout the world, it should be possible to take advantage of these skills to solve our national problems,” he said in a statement on the launch of the FDC.

“There is a need to make the fullest possible use of this knowledge and technical ability, and to combine it with the best know-how and technology from throughout the world so that Japan can provide a leadership role in bringing [State-of-the-art Models] of solutions to these important problems.”

For its part, SAP is working to increase interoperability between energy providers, energy distributors and all parties involved in the energy sales process through integrating smart meters with enterprise resource planning (ERP) and customer billing software.

Currently it works with about 20 smart grid projects across the US, Europe and Australia including the SP AusNet project in Victoria.

It has also reworked several of its core software offerings earlier in 2009 to create a Energy and Carbon suite that includes energy-efficient assets, energy management, carbon management and smart grids modules.

“The age in which people pull down power when they need it, and the power company to supply it with no ability for two way interaction – except for sending a bill – is over,” SAP’s Ilg said. “There will be a push to these kinds of technologies, but also a pull, but to get that you need examples of how these technologies work and that’s where the Smart City Project comes in.”

Australia’s opportunity to lead

According to Max Roberts industry manager utilities and Infrastructure Industry Solutions Group at SAP Australia, while countries such as Italy had rolled out smart meters in the millions, Australia had an opportunity to lead smart grid technology in the area of managing and monitoring data travelling through multiple electricity market participants.

“All the smart meters [rolled out in Victoria] will capture energy usage every half hour for each residential customer that will go through to the energy provider distributor then the retail company and they will bill based on that data,” he said.

“When a smart meter is read, the meter data comes in by a participant called a meter data provider – they are tasked with reading that data and send it to the market systems, the network company and the retailer, and that doesn’t happen in any countries at scale like what we are faced with in Australia.

“In the past if a customer wanted to disconnect you had to send a business to business request, it might get done tomorrow or the next day because it’s a manual process,” he said. “Now the vision is that you have a customer who wants to move out on the phone talking to the retailer. The retailer presses a button which sends a business to business request to the network provider to disconnect the customer.

Roberts said that along with lower energy consumption and cost savings, the greater connectivity between power suppliers, network operators and retailers would likely see customers able to change providers with the same ease as mobile phone operators.

“We can get there practically, but there are challenges around the systems sending and receiving messages that quickly across the network then out to the meter and back. No one is really sure how it will operate at such scale.”

Tim Lohman travelled to Tokyo as a guest of SAP

Tags carbon emissionsJapanglobal warmingCO2SAPgreen ITsustainable ITsmart grids

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