1 00:00:00,000 --> 00:00:11,440 Hi everyone, welcome to GreenMonk TV. My guest on the show today is Peter Graff. Peter is 2 00:00:11,440 --> 00:00:14,560 SAP's Chief Sustainability Officer. Peter, welcome back to the show. 3 00:00:14,560 --> 00:00:20,880 Thank you. Peter, we talked about the previous two parts of the announcement you made a couple 4 00:00:20,880 --> 00:00:24,720 of weeks ago. We'd like to talk now about the environmental health and safety management 5 00:00:24,720 --> 00:00:30,720 solution that you guys have announced. Why would anyone want an environmental health and safety 6 00:00:30,720 --> 00:00:37,520 management solution? First of all, we look at sustainability broader than just environmental 7 00:00:37,520 --> 00:00:43,200 aspects. And as I said before, sustainability is all about driving profitability in the long and 8 00:00:43,200 --> 00:00:50,880 the short term by holistically managing economic, environmental and social aspects. So what EHS 9 00:00:50,880 --> 00:00:57,680 management actually does is it combines economic and social questions. So it helps companies to be 10 00:00:57,680 --> 00:01:03,520 more efficient, effective, more profitable by driving social sustainability. Now let me dive a little 11 00:01:03,520 --> 00:01:09,520 bit deeper. First, these solutions are not new. What's new is they have been brought together into 12 00:01:09,520 --> 00:01:16,800 one solution, that is product safety and stewardship, people health and safety, as well as environmental 13 00:01:16,800 --> 00:01:23,600 compliance. Because there's one target customer, which is the EHS manager in an organization who 14 00:01:23,600 --> 00:01:28,800 usually buys the solution. That's number one. They also have been extended, so there's easier 15 00:01:28,800 --> 00:01:36,320 integration into the SAP suite. There is compliance for new regulation, most specific reach and ROSP, 16 00:01:36,320 --> 00:01:41,040 you know, very important regulation that's coming out that companies will have to comply with in the short 17 00:01:41,040 --> 00:01:47,120 run. So these products have been created and they drive sustainability from a social element. Let me 18 00:01:47,120 --> 00:01:54,160 help you understand what I mean by that. People health and safety is one of the dimensions of the EHS 19 00:01:54,160 --> 00:02:03,840 management solution is very much around managing the well-being of your employees, drive greater productivity 20 00:02:03,840 --> 00:02:11,680 because you're reducing the risk that your employees are exposed to. You're reducing the time they miss 21 00:02:11,680 --> 00:02:18,400 at work because they're getting sick. It has to do with managing exposure to hazardous waste, for example. 22 00:02:19,040 --> 00:02:25,840 It's about incident management, you know, reporting around those. It's about managing the, as I said before, 23 00:02:25,840 --> 00:02:30,320 the health of them so that they go and take the safety trainings, they go and take the health checks, 24 00:02:30,320 --> 00:02:37,920 all those kind of things. So that's what the solution does. It's very timely because between 2008 and 2010, 25 00:02:38,560 --> 00:02:45,600 the overall worldwide investment in those type of challenges is going all the way up to 80 billion 26 00:02:45,600 --> 00:02:54,480 dollars and it's actually double the amount that people invested in 2008 in these type of areas, 27 00:02:54,480 --> 00:03:01,280 mostly driven by proliferating local, regional, and global regulation. The solution around... 28 00:03:02,560 --> 00:03:07,200 So because it's regulation-led, it's not going to be affected by the financial crisis? 29 00:03:07,200 --> 00:03:14,080 Right, and absolutely correct. Many people say, "Why is this interesting now? I need to focus on economics." 30 00:03:14,080 --> 00:03:17,280 And the point is that regulation comes whether you like it or not. 31 00:03:18,320 --> 00:03:26,800 The scarcity of raw material, wood, oil, water, and all these other things will get more, 32 00:03:27,440 --> 00:03:31,840 will have much more of an impact on the price of those commodities. We've seen a little bit of a 33 00:03:31,840 --> 00:03:38,480 glimpse of that last year with the oil price. Others will come. And finally, there's a great risk to the 34 00:03:38,480 --> 00:03:44,160 brand, but there's also an upside from a revenue perspective. That risk of the brand is mostly driven 35 00:03:44,160 --> 00:03:51,600 by the awareness by people who ask for businesses to take more accountability and the social media is 36 00:03:51,600 --> 00:03:55,280 actually driving a lot of that alignment with the internet as a tool to spread the news good or bad 37 00:03:55,280 --> 00:04:00,560 very quickly. Businesses can't control their brands anymore like they did in the past. So they're exposed. 38 00:04:00,560 --> 00:04:05,040 They need to manage that really, really tight. So you don't even need to believe in global warming 39 00:04:06,080 --> 00:04:09,680 or in the fact that wealth is a little bit unfairly distributed in this planet. 40 00:04:10,480 --> 00:04:14,400 You will just be forced by business fundamentals to take care of these things, no matter if there's 41 00:04:14,400 --> 00:04:19,120 a downturn or not. And that's validated from the research we get from our customers. 42 00:04:19,120 --> 00:04:23,200 So let's go back to the, we talked about product safety as the next topic. 43 00:04:23,200 --> 00:04:23,600 Sure. 44 00:04:24,480 --> 00:04:31,760 In the US in 2007, we had 231 product recalls in the children's products area alone. 45 00:04:32,560 --> 00:04:41,680 In 2008, it's about 800. So in 2007, 45 million toys units got recalled. And the damage to the brands 46 00:04:41,680 --> 00:04:48,240 of those companies is huge. You can look at their stock prices plummet even without a financial crisis. 47 00:04:49,760 --> 00:04:56,800 So what product health and safety allows you to do is to make sure that you comply with all regulation in 48 00:04:56,800 --> 00:05:01,760 terms of, you know, what is allowed to be in these products and whatnot and to drive that across your 49 00:05:01,760 --> 00:05:06,800 entire business process from the design of the product through the sourcing of the product. 50 00:05:06,800 --> 00:05:11,600 So you make sure you're not inheriting anything bad from your supply chain, all the way to the 51 00:05:11,600 --> 00:05:17,040 production distribution and taking back the product and recycling. There's a lot of new legislation that 52 00:05:17,040 --> 00:05:23,360 limits the way how products can look like today. And the regulation there also is very strong. 53 00:05:24,480 --> 00:05:32,000 And the third piece is environmental compliance of EH&S. Just to give you an idea how big the challenge 54 00:05:32,000 --> 00:05:36,720 is, if you're running a plant, and we got that information from one of our customers in Europe, 55 00:05:37,360 --> 00:05:48,720 today they're forced to report out water, air, and waste status around 50,000 different points in a single 56 00:05:48,720 --> 00:05:53,440 plant. So 50,000 measure points that need to be reported out, highly regulated. 57 00:05:54,160 --> 00:05:59,840 And if you go into nuclear power plants, for example, it's even more crazy. So there's a lot of work to be 58 00:05:59,840 --> 00:06:03,760 done that needs to be managed. You need to have your incident management, you need to be able to 59 00:06:03,760 --> 00:06:10,320 clarify with regulators, you know, what actions you have taken afterwards. It's a big challenge that needs 60 00:06:10,320 --> 00:06:16,800 to be managed by organizations. The way we do that is to allow customers to add capability to their business 61 00:06:16,800 --> 00:06:24,320 and other products. It doesn't have to be SAP to manage those processes by including environmental and 62 00:06:24,320 --> 00:06:28,480 social aspects of running the business. Okay. And is this directed at any particular 63 00:06:28,480 --> 00:06:34,720 verticals or does it cross? I mean, if I'm a utilities manager, is this relevant to me? If I'm a pharma 64 00:06:34,720 --> 00:06:39,280 manager, it is obviously because you've talked about reach. Yes. Are there any specific verticals like that? 65 00:06:39,280 --> 00:06:44,960 Yes. A lot of the regulation is on a vertical basis. So if you're running a hydro power plant and you need 66 00:06:44,960 --> 00:06:51,280 to now make sure the fish from the lake can get around the turbines into the river, there's different 67 00:06:51,280 --> 00:06:56,960 type of regulation as compared to now being an airline. And in 2012, even airlines need to have 68 00:06:56,960 --> 00:07:04,320 carbon credits when they fly into or within the European Union. So regulation usually happens by 69 00:07:04,320 --> 00:07:09,600 industry. There are other industries who have been regulated for a long time, like the chemical industry, 70 00:07:09,600 --> 00:07:14,720 oil and gas is a lot of regulation. But more and more industries are added. Reach is a 71 00:07:14,720 --> 00:07:21,280 very significant one specifically for chemicals. We mentioned that before because now for every 72 00:07:21,280 --> 00:07:26,720 product that is shipped into the European Union, you need to have a detailed list of which chemicals 73 00:07:26,720 --> 00:07:32,160 are in this product. And that now goes beyond just the chemical world into other areas and other 74 00:07:32,160 --> 00:07:39,280 industries. So there's a big avalanche of requirements that are now hitting businesses around the world. 75 00:07:39,280 --> 00:07:44,480 So sustainability now is a lot more than just marketing. Sustainability is more addressing 76 00:07:44,480 --> 00:07:49,440 regulation, addressing health and safety, addressing sales, all these kind of things. 77 00:07:49,440 --> 00:07:55,120 Yeah. So let's face it. I mean, a business intrinsically is not motivated by being green or philanthropic. 78 00:07:55,120 --> 00:08:00,320 There's very few of them. Most of the businesses are trying to improve their profitability. 79 00:08:01,680 --> 00:08:08,720 If you look at the Dow Jones Sustainability Index, A.T. Kearney published great research in February this year. 80 00:08:08,720 --> 00:08:13,520 They've looked at the businesses in the Dow Jones Sustainability Index and how their stock valuation 81 00:08:13,520 --> 00:08:19,360 fared between May and November, including the financial downturn. And the result is, compared to the 82 00:08:19,360 --> 00:08:26,560 Dow Jones, the companies in the Dow Jones Sustainability Index were 15 percent, had a 15 percent higher market cap 83 00:08:26,560 --> 00:08:31,520 through that time. So the market values that. And there also seems to be a correlation of the 84 00:08:31,520 --> 00:08:36,320 success of those businesses that look not only at the short term profitability, but have a long term 85 00:08:36,320 --> 00:08:42,080 strategy for profitability. That's what we're trying to help businesses with. Reduce the cost of regulation, 86 00:08:42,640 --> 00:08:50,960 because regulation comes whether you like it or not. Get your, increase your resource productivity, 87 00:08:52,880 --> 00:08:57,680 because that makes you less vulnerable to the price, you know, price changes that will happen as things 88 00:08:57,680 --> 00:09:05,840 become more scarce. Fundamentally reduce the risk to your brand by managing not only yourself, but also your 89 00:09:05,840 --> 00:09:10,960 supply chain according to the things that the public cares about. If there's an accident in the coal mine, 90 00:09:10,960 --> 00:09:15,520 you read about it in the news, right? And if there's a, if there's child labor in your supply chain, 91 00:09:16,480 --> 00:09:22,880 you know, customers punish you. And finally, it's about understanding that it's not only 92 00:09:24,000 --> 00:09:29,840 protecting your brand, it's also can enrich your brand. There are companies like Born Free that 93 00:09:29,840 --> 00:09:35,120 produce little baby bottles. They researched the market, they found bisphenol A is a chemical 94 00:09:35,120 --> 00:09:40,640 released into the milk when you heat the bottle that causes brain damage with babies. They produce 95 00:09:40,640 --> 00:09:45,280 the first bisphenol free bottle. You can pretty much charge whatever you want for that, 96 00:09:45,840 --> 00:09:49,680 because people are very aware that this is an issue they don't want to run into. So it's also, 97 00:09:49,680 --> 00:09:54,880 there's also an upside. So in spite of not being a regulation there at the time they discovered this, 98 00:09:54,880 --> 00:10:00,160 they made a big, you know, big marketing campaign out of it. And they created a unique position for them. 99 00:10:00,160 --> 00:10:06,720 There's more to that in many industries that people are looking at, how can I increase competitiveness by 100 00:10:06,720 --> 00:10:11,760 playing the situation as it is right now. Sure. Great. Peter, thanks a minute for coming on the show. 101 00:10:11,760 --> 00:10:18,080 Thank you. Great. We should, we should have, and I'm sorry, I talked a lot because I'm getting too 102 00:10:18,080 --> 00:10:25,360 excited about this. Okay, that's great. We didn't touch on SPM. What's SPM? Sustainability performance 103 00:10:25,360 --> 00:10:29,840 management, like the big umbrella on top of that. Oh, okay. And we didn't, we didn't, we didn't touch on the, 104 00:10:29,840 --> 00:10:39,520 you know, this is all AHS, so. No, let's do a bit about SPM and work that in. Sustainability, 105 00:10:39,520 --> 00:10:42,320 what do you call it? Sustainability performance management. So that means, 106 00:10:42,320 --> 00:10:47,360 how can you, now business is usually, you know, has got many, many things running. They do, 107 00:10:47,360 --> 00:10:51,040 they have a production, they look at carbon there, they've got like a, you know, they've got, 108 00:10:51,040 --> 00:10:55,360 they're supply chain, they've got different elements and how does it all come together? 109 00:10:55,360 --> 00:11:00,080 Okay. And how can you drive a strategy around sustainability? Does SAP have any support there? 110 00:11:00,080 --> 00:11:06,000 And it's really strategy management, risk management and performance management, all for sustainability 111 00:11:06,000 --> 00:11:11,120 coming together, helping people drive the strategy and make the right decisions on the highest level 112 00:11:11,120 --> 00:11:18,800 of the business. Okay, okay, great. So, Peter, can you talk about your sustainability performance 113 00:11:18,800 --> 00:11:24,000 management solution? Right. Sustainability performance management really brings all the 114 00:11:24,000 --> 00:11:29,120 different aspects of sustainability together, economic, environmental and social sustainability. 115 00:11:29,120 --> 00:11:36,080 And the way how that it's done, how that is done is by being able to centrally manage the risk 116 00:11:36,800 --> 00:11:41,600 and the strategy that you're executing and bringing the information from across your business together 117 00:11:41,600 --> 00:11:50,080 in one way that the CSO or the CEO or the, you know, the C-suite can actually make informed decisions 118 00:11:50,080 --> 00:11:57,200 around sustainability. It's mostly driven by the need for and the requests from the market and the customers 119 00:11:57,920 --> 00:12:05,120 for people to take accountability as a business and to report about that. And you should look at 120 00:12:05,120 --> 00:12:09,840 sustainability reporting almost like an extension of financial reporting. You want to be auditable. You 121 00:12:09,840 --> 00:12:14,720 don't want to mess around with that stuff. You want to have your assertions, you know, in your report. 122 00:12:14,720 --> 00:12:19,920 And in order to be able to drive your strategy and to report out in an auditable fashion, that's why you 123 00:12:19,920 --> 00:12:25,280 need sustainability performance management. We're delivering that today on the basis of our business 124 00:12:25,280 --> 00:12:30,960 objects products, which are greatly suited to gather information from across the business, no matter in 125 00:12:30,960 --> 00:12:36,800 which system it sits, bring it together, map it to the strategy, visualize progress, and then actually 126 00:12:36,800 --> 00:12:41,680 drive the reporting out of that. Okay, you talked about financial accounting and it's an interesting 127 00:12:41,680 --> 00:12:46,480 question because it's very easy to look at the financials of two separate or three separate companies 128 00:12:46,480 --> 00:12:51,120 and cross compare them. But with sustainability reporting, it's very much more difficult to look at 129 00:12:51,120 --> 00:12:55,120 sustainability reports of different companies and cross compare them. Will the sustainability, 130 00:12:55,120 --> 00:13:01,680 will SAP's SPM, sustainability performance management product, allow much clearer cross comparisons of 131 00:13:01,680 --> 00:13:09,440 companies? Well, first of all, we need to acknowledge that, you know, GRI made great, you know, 132 00:13:09,440 --> 00:13:14,400 made great progress in helping to standardize how people are actually reporting on that. And kudos to 133 00:13:14,400 --> 00:13:19,680 them, they've done an amazing job. There's still quite a lot of leeway, as we discovered ourselves, 134 00:13:19,680 --> 00:13:24,480 bringing the first, you know, report out. I do think that software solutions can actually help the 135 00:13:24,480 --> 00:13:31,040 standardization and accelerate that. And we're obviously, you know, working with those organizations, 136 00:13:31,600 --> 00:13:37,360 both because we're reporting ourselves, but also in understanding, okay, how can we actually make it 137 00:13:37,360 --> 00:13:43,840 easier for businesses and making those things more comparable. The, you know, people today are reaching 138 00:13:43,840 --> 00:13:48,400 comparability, comparability by saying, okay, let's compare ourselves to people in the same industry. 139 00:13:48,960 --> 00:13:53,680 And then let's look at, you know, carbon footprint, for example, per revenue dollar or carbon footprint 140 00:13:53,680 --> 00:14:00,880 per employee or carbon footprint per square foot plant. So, there's still many different ways. As a 141 00:14:00,880 --> 00:14:05,760 matter of fact, as I said, we're at the beginning of this, I think we're all learning. And the punchline is 142 00:14:05,760 --> 00:14:09,280 that the solutions we bring need to be flexible enough to incorporate these learnings. 143 00:14:10,000 --> 00:14:14,640 And SAP has been pushing the flexibility of its own solutions for quite a while. So we do believe 144 00:14:14,640 --> 00:14:19,360 we are well positioned in this area. Superb. Great. Peter, thanks for coming on the show. Thank you.