openSAP

Sustainability Through Digital Transformation

Week 1 Unit 1
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Hello and welcome to the openSAP course on Sustainability Through Digital

Transformation.I'm excited to have you with us.
My name is Daniel Schmid and I am the chief sustainability officer of SAP.In 2014, we
launched the first openSAP course: Sustainability and Business Innovation.
It covered key learnings from the sustainability journey of SAP and its customers. Together
with 14,000 learners we explored
how sustainability drives innovation and growth, creates competitive advantage, and
reduces risks and cost,
how to articulate, embed, and execute a sustainable strategy at an organization, and how to
build successful business cases for sustainability initiatives.
We received tremendous feedback and still see many people accessing the course material
as a basic introduction to corporate sustainability.
Since we created that first course, the world has evolved further. Looking at global events
like the draught in California, the European refugee challenge,
and the revived push for climate change action by public and private sector leading up and
following COP21,
it is clear that sustainability is becoming ever more relevant. At the same time, digital
technologies are maturing and penetrating
how we do business, how we work, how we live. They are becoming key enablers for
sustainability.
With this new openSAP course, Sustainability Through Digital Transformation, we want to
show you how IT and digital technologies help create positive
economic, social, and environmental impact, thereby improving your business and the
world.
Starting today, we will explore opportunities to master the "Fourth Industrial Revolution". We
will look at examples how to leverage digital innovation to transform industry sectors
including health, mobility, financial services, and education also for the better.In today's first
unit, we'll talk about the course objectives and learning objectives.
We'll discuss how sustainability and integrated reporting within companies has further
evolved since our first course.
This will include an introduction to the recent developments of integrated reporting and how
social and environmental impact can be created.
We will end the first week by looking at investors as one of the key stakeholder groups for
companies and try to understand the recent trends in the investment community
in terms of responsible investment strategies. In week 2, we will continue to present new
and accepted global frameworks around sustainability
like the 17 United Nations Sustainable Development Goals, also called Global Goals, or the
COP21 Paris Agreement on climate change.
But the main focus of the course will be on how digitization and technology will help
companies run more sustainable operations.
We will do this by presenting selected UN Global Goals and try to link those goals to
information technology.
The first goals we will examine include Goal 3: Health and Well-Being, Goal 5: Gender
Equality,

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and Goal 8: Decent Work and Economic Growth.Week 3 will then continue with the Goals
11: Sustainable Cities and Communities,
12: Responsible Consumption and Production, 13: Climate Action, and 17: Partnerships for
the Goals.
We will wrap up the course at the end of week You will meet my colleagues and experts
Barbara Flgge and Will Ritzrau
who will present specific units in weeks 2 and So what actually happened since our last
course in 2014?
Since the final IIRC integrated reporting framework was launched in 2013, we have seen an
increasing interest by the investor community.
A recent Ernst & Young report shows that more than 60% of more than 200 respondents
consider non-financial information relevant for all sectors,
up from 33% in 2014.70% consider an integrated report essential when making investment
decisions.
And even 80% believe that executive boards should feel responsible for non-financial
reporting. Until recently, focusing on sustainable company operations was considered
sufficient.

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Globalized supply and value chains, however, have enforced a shift towards a broader view
of a company's performance.
Investors start to expect companies to analyze and disclose how they create social,
environmental, and economic impact
beyond their own operations. Only this holistic view will ensure a long-term viable business
model.
Growing request by regulating bodies.In 2015, the EU has passed a regulation

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requiring companies with more than 500 employees or with a legitimate public interest

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to disclose information on their non-financial and diversity performance by 2017.

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The regulation must still be transferred into national laws, but the European guidance is
given.What's next?
There are various reporting frameworks, such as the International Integrated Reporting
Council, the Global Reporting Initiative,
or the Sustainability Accounting Standards Board. With few exceptions which we will see
later,
integrated reporting or generally reporting of non-financial performance is still optional.One
reason is that information between companies is not easily comparable.
Cross-sector comparisons are even more difficult.Therefore, efforts towards standardization
and comparability have started
amongst the various involved organizations. Investors increasingly consider non-financial
data for investment decisions.
They realize that non-financial factors affect measurable aspects of a company's economic
performance.
Therefore, they see an integrated report as the second most important information source
for investors,
after the traditional annual report.Investors see non-financial information as a proxy for longterm prosperity.
That's not only because integrated reporting discloses mid and long-term targets. There is
also the assumption
that the holistic integrated view on internal and external impact creation influences potential
business model transformations
and by this contributes to long-term success. Investors expect information about social and
environmental performance
as well as risks to be reliable. To meet this expectation, we have our social and
environmental data audited

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by an external third party.When we meet with investors, we are always asked

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about our governance structures in terms of independence. This shows that compliance is
another important sustainability-related topic for investors.
Recently, more and more investors are also interested in the diversity of the executive and
the supervisory board.
Companies evolve toward social and environmental impact creation.The traditional view
relates sustainability with CO2 emissions
as well as product and worker safety and recognizes little business impact.But this is
changing.
More and more leaders believe that social and environmental initiatives also lead to better
financial results.
The best way to prove this relation is to present your non-financial performance in the same
currency as your financials.
Putting a euro or dollar sign next to your sustainability performance most definitely gets you
management attention
and raises stakeholder and leadership awareness. We will explain this in greater detail in
unit 2.
Also, connecting non-financial and financial performance helps you to establish a more
integrated thinking in your organization.
In line with this trend, corporate materiality assessments are expanded to incorporate the
impact a company creates on relevant externalities,
which are affected by your business model. This includes the impact your own operations
create on the local communities,
the societies your employees live in, but also for the environment. Based on the acceptance
of global trends like
population growth, climate change, or resource scarcity, the impact of products and services
has recently become more prominent, too.
Thought leaders evolve from integrated reporting to integrated steering. They create
seamless transparency on all material aspects
to successfully steer the company.There is a growing request by regulating bodies and
stock exchanges
to disclose information on non-financial performance. Here we list just a few new regulations
from 2014 and 2015.
For example, CSR reporting is mandatory according to GRI G4 for listed companies in
Taiwan.
The Singapore Stock Exchange is making final plans to make sustainability reporting
mandatory.Corporate Governance Code is revised for listed companies in Spain
and requests 30% female board members.Canadian Securities regulatory authorities
request transparency on women in leadership.
A new national Corporate Governance Code is launched in Zimbabwe.Malaysia releases an
SRI framework for socially responsible investors.
The new EU regulation requires disclosure of non-financial and diversity from most
companies.
In Japan, the FSA publishes a first draft of "Principles for Responsible Institutional
Investors." And the Bombay Stock Exchange establishes CSR exchange in India.
Where does reporting go in the future? More and more integrated reports describe business
models in the context
of impact and value creation for their operations, but also through products and services.

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Transparency is the biggest asset to build and maintain trust. That is true internally with
your employees,
but also externally for all stakeholders who are interested in your company. It is relevant as
an investor, as a customer, as an employee, or even an interested new talent.

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What is not measured does not get done. Therefore, set and communicate ambitious extrafinancial targets.
Leverage the recently ratified United Nations Sustainable Development Goals (or SDGs) as
framework to communicate your purpose
but also consider how you as a company can help to make the United Nations' 2030 vision
real.
Establish more frequent progress reporting. I even heard about external reporting on
demand arising.
That requires a significant mind shift, but would be consistent with the accelerating pace of
business also driven by digitization.
Finally, I encourage you to leverage digital technologies to enable holistic and nearly realtime transparency with reliable,
accurate, and dynamic data disclosure.Which challenges need to be overcome to even
increase the acceptance of integrated reporting?
The lack of comparability still hinders greater acceptance of integrated reporting for
stakeholders but also within companies.
The alignment activities between various framework providers are under way and will
support regulatory bodies
which think about making disclosure of non-financial information mandatory.Audits of nonfinancial information will help enhance data quality and reliability
and thus the acceptance of information.We need more perseverance.

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Financial reporting evolved over decades. Integrated reporting has just started.

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While we have already come a long way, it simply takes time to progress further.Before we
close today's session,
I would like to give you an outlook on the course structure. The course is running across
three weeks and one extra week for the final exam.
Each week, you will have several videos, and each of those videos is accompanied by a
self-test.
The self-test will help you manage and understand your learning progress. At the end of
each week, there's a weekly assignment, which is an online graded test
where you can collect points. And there's an online forum that I recommend you to use

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in order to collaborate with fellow participants of the course, or to talk to me and other
experts from SAP about some questions you might have.
We believe that for each week it's about a half day of effort for you. In week 4, we've got
that final exam, which again is a graded online test.
You will receive the Record of Achievement if in all the graded tests the weekly online tests
and the final exams
you achieve 50% of the points over the total length of the course. This is the structure, and
with that I would like to conclude unit 1.
I look forward to seeing you again in the next unit and until then: Consider impact!

Week 1 Unit 2
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Welcome to week 1, unit 2: Integrated Company Performance.In the first unit, I welcomed
you to the class.
We talked about the course structure and started exploring the evolution of corporate
sustainability and trends in integrated reporting.
In today's unit, we will discuss integrated company performance. This means extending the
way you measure and manage a company's performance
beyond the pure financials to also include non-financial aspects such as social and
environmental.
We will look at how connecting non-financial and financial dimensions will lead to better
economic and more sustainable success of an organization.
We truly believe that transparency on integrated performance management elevates
stakeholder trust because it provides a more holistic view
of past performance and future potential. This applies to internal as well as external
stakeholders.
But how to get there and what will you get from it? In the next minutes, I will share with you
what experiences SAP and SAP customers made
as we shifted to integrated performance management.We will explore together how it helps
you create leadership awareness,
how to prove that social and environmental aspects drive financial performance, how to
understand the cause-and-effect chains as foundation,
how the business case can be made based on an example, how increased transparency will
enable integrated steering,
and how a holistic view on social and environmental impact improves portfolio prioritization.
Create leadership awareness.How to get on the radar screen of your organization's
leadership?
Here are a few things you might want to consider to raise not only the amount of awareness
but also the quality of awareness.
To start with, take into account that social and environmental initiatives used to be
perceived as "tree hugging" or "philanthropy".
To change this, it is key to make sustainability relevant for the business. Show the additional
financial value social and environmental initiatives can bring.
This is often easier for environmental initiatives. It is obvious, for instance, that reducing
energy leads to lower cost and less emissions.
It is a lot more difficult to demonstrate the financial benefits of social initiatives in a similar
way. But that's especially material to us.
SAP as a software company depends heavily on the well-being of our employees.Therefore,
we needed to make the financial aspect of employee and organizational health transparent.
Don't wait for "integrated thinking".We joined the pilot phase of the International Integrated
Reporting Council (IIRC)
early on and published the first integrated report before we had integrated thinking fully
established within the company.
We and other companies that we talked to experienced that working on your integrated
report helps you to continuously develop holistic thinking.
It triggers a matching of external feedback and internal leadership discussions and
facilitates the mind shift within your company.
Use an integrated report for management engagement like, for example, CEO, Finance,
HR.An integrated report offers many ways of engagement leadership across the company
while compiling it, e.g., by making them part of the steering committee of your integrated
report or by involving them in the sign-off process.

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It also is a great tool to engage top executives in communicating varying parts of it after
publication.
Monetization of non-financial performance will raise management awareness.Putting euros
next to extra-financial KPIs
helps engage with leadership and raises the awareness of the importance of sustainability
The majority of organizations are still managed based on monetary or financial
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mainly revenue or cost and profit. That's where the focus of management is.

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If you want to play par and get heard, you need to express social and environmental
performance in the same currency.
Therefore, linking non-financial or, better, extra-financial performance to monetary benefits
or risks helps you get the attention of your organization's managers.
Leverage integrated financial and non-financial performance for holistic steering.Once you
have shown the financial impact of social and environmental performance in euros,
the next step is to get the non-financial aspects embedded into the regular cycle of target
setting and business steering.
Our CFO, for instance, expects the various lines of business to manage their organizations
not only by financial performance
but also consider social and environmental aspects and asks them to set individual targets
relevant to their respective business.
Through this approach, we attempt to drive holistic thinking into the core business of each
organizational area.Great external differentiation towards stakeholder.
For a few years the integrated performance analysis of SAP's integrated report has been
one of the highlights which is heavily discussed with
investors, customers, or at various speaking opportunities.Social and environmental aspects
drive financial performance.
In our first course, we introduced our qualitative model describing how our social and
environmental KPIs
are linked to our leading financial targets, which are revenue and profit.Since then, we have
taken this model a step further.
Based on SAP data, we were able to identify and prove statistical correlations and express
the impact of our social and environmental performance
not only qualitatively but also in euros.We showed that our non-financial performance
impacts our gross profit.
Since 2014, utilizing such techniques as linear regression analysis, we have been
documenting the financial impact of four non-financial indicators:
our Business Health Culture Index, employee engagement, employee retention, and carbon
emissions. We assessed the first three indicators in terms of
what a change by one percentage point would mean for SAP's operating profit and we also
assessed what a 1% decrease in emissions would mean for operating profit.
For the 2015 integrated report, we applied our connectivity model and calculated the
impacts based on our 2015 performance.
To pick one example, a change of 1% of the Business Health Culture Index would create a
financial impact of 75 million to 85 million.
These numbers you can see on the slide present very clearly that social and environmental
activities and the related company performance can have a significant impact on the gross
profit of our company.

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A key foundation for monetizing the financial impact of non-financial performance is

understanding the cause-and-effect chains first.
Modeling the cause-and-effect relationships is key.To create and validate these chains of
cause and effect, we turned to both internal and external stakeholders.
We started with those inside SAP, meeting in small groups that examined the cascade of
impacts from

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activities related to each of our non-financial indicators. We next conferred with external
stakeholders,
including academics, financial investors, and SAP peers, to vet our findings.We then used
real data from SAP to translate our cause-and-effect chains
into a documented impact on operating profit. For example, our initial assessment found
that by fostering work flexibility,
we could improve work-life balance, which in turn enhances productivity. Building on this
assessment, our analysis determined
that this greater productivity leads to tangible financial gains. To the right you see the
cause-and-effect chain for the Business Health Culture Index
illustrating how we established the financial impact of this non-financial indicator. The
Business Health Culture Index assesses the health of both our organizational culture and
our employees.
Our chain starts with activities that support health at SAP, from flexible work arrangements
to leadership development
to our global health and innovation awareness weeks. Each of these strengthens our
organizational culture
and helps our employees manage stress, achieve work-life balance, feel empowered in their
roles, and perform at their best.
Close the loop with a business case. In our 2014 report, we lacked the insights in specific
projects to close the loop
for a complete business case. In 2015, we were able to evaluate the impact of a focused
health initiative
on our Business Health Culture Index.And it turned out, focused health initiatives have a
fast return for SAP Germany.
So here is our case study: "Join In Stay Fit!", a health initiative at SAP Germany.
For the first time, we were able to calculate the return on investment for a concrete example
along one of our cause-and-effect chains, using real data
from the Join In Stay Fit! program at SAP Germany. The result: a positive ROI of 3.9.

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This means that operating profit increased 3.90 for every 1 invested in the program.The
cause-and-effect chain for our Business Health Culture Index illustrated on the previous
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was taken as the basis for the calculation.In 2014, we implemented a number of specific
measures within SAP Germany with around
4,800 staff that were aimed at improving work-life balance. Measures like, for example,
employee workshops
that raised awareness and provided concrete tips on how to change one's behavior. We
were able to clearly map the direct and indirect costs of this implementation.
We were also able to measure the difference in the work-life balance plus its effect on the
Business Health Culture Index before and after the program's launch.
The calculation of the ROI in this example is based on the direct and indirect costs of the
measures
as well as the positive monetary impact of the resulting change in the Business Health
Culture Index. It clearly shows that the measures make sense from a financial perspective,
too.

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Increased transparency will enable integrated steering.By creating transparency for all
managers and employees on the extra-financial performance
we continuously work on establishing integrated thinking within the entire organization. The
annual integrated report, which contains the key performance indicators on a corporate
level,
forms the basis for more transparency and measurability.But to encourage every manager
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it is beneficial to break down the numbers in terms of time, location, and organization. The
Sustainability Dashboard builds on this concept
and offers the ideal starting point to monitor and compare sustainability data of the
individual line of business or SAP site.
It visualizes vividly and appealingly non-financial KPIs in the area of environment as, for
example, CO2 emissions or flights,
as well as social ones, for example, employee retention or women in management. Key
features include simple and timely data acquisition with quality checks,
single source of truth with reliable and consolidated data, scenario-based analysis
capabilities,
and sophisticated simulations enable forecasts.With its varied and variable possibilities to
compare the numbers,
the Sustainability Dashboard is a fruitful tool to stimulate dialogue about sustainability topics
in the individual teams.
Due to the higher visibility of the individual achievement, an incentive is created to reflect on
strength and potential for improvement
and increasingly embed sustainability into one's thinking and acting.It becomes a stimulus
for behavioral change
and drives gradual improvement in the area of sustainability, together with other
measures.Finally, holistic or sustainable steering also helps make better strategic portfolio
or investment decisions.
It improves portfolio prioritization and enhances revenue and profit growth based on
sustainability criteria.
Let us look at the sustainability journey of BASF as an example and review how holistic,
sustainable steering defines the product portfolio at BASF.
Secure license to operate.As a chemical company, the original motivation for sustainable
operations
was focused on securing the license to operate. Resource and cost efficient production.
Friedrich Engelhorn, the founder and goldsmith by profession, coined the term "waste is
gold".
Thus BASF's integrated production concept was always geared towards efficiency gains
which leads to resource productivity and cost benefits.
New market opportunities and reduced risk.BASF expanded its approach towards product
differentiation,
addressing new markets while controlling and reducing risk.Sustainable steering
methodology.
Finally, BASF revisited the entire product portfolio to classify all products along key
elements of sustainability.
The company defines accelerators as products meeting high sustainability criteria, in terms
of risk, social and environmental impact, and profitability.
The target is to reprioritize and clean the entire portfolio.The current result: 23% revenue
from sustainable accelerators.
Examples of sustainable products are synthetic sodium nitrate to replace oil-based heat
transfer in solar power plants,
high-performance resins for wind turbine blades, N2O decomposition catalyst lead to N2
and O2.
We mentioned the example of BASF. But this trend of portfolio evaluation is very prominent
across the chemical industry.
It is also discussed at the World Business Council for Sustainable Development.This
concludes unit 2.
In the next unit we will look at how to create social impact. Until then: Consider impact!

Week 1 Unit 3
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Welcome to week 1, unit 3: Creating Social Impact. In the last unit, we talked about linking
social and environmental performance
with the financial results of a company. That was mainly focused on impact generation
within an organization.
In this unit, we will expand the view to the social regime an organization works in and how
companies can create social impact externally.
Societal investment is stable and strong. The societal engagement function

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often called corporate citizenship, corporate responsibility, or corporate social

responsibility is an established practice in most large companies.
Total giving as a percentage of revenue remained stable from 2012 to 2014, at 0.13%.

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During the same three-year period, a notable 56% of companies even increased giving.

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However, in recent years the approach has shifted from pure donations to impact creation.
You may remember the unit about how to create a sustainable strategy in our first course.
In line with the overall development toward embedded sustainable strategies, also corporate
giving or social investments are moving deeper into the core business
of the various departments of organizations. This paves the way to define more effectively

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how the company is a force for good in society. Accordingly, companies change the
underlying question from
"How much do I give?" to "What difference do I make?"
And this requires to look into how to assess the difference. Measurement and evaluation are
on the rise.
According to a recent Conference Board study, 84% of companies measured the outcomes
and/or impacts of at least a portion of their portfolio of social investments.Creating social
impact easily portrays the company purpose to key stakeholders.
Telling stories about social engagement or giving that is tied to a corporation's core
business
helps a company to explain its purpose in a more vivid and tangible way. If Deutsche Post
DHL, for example,
sends disaster relief teams wherever a catastrophe has happened to organize local logistics
for,
they leverage their core competency of moving goods effectively and fast.SAP, as another
example, provides IT expertise
to teach digital skills to underprivileged kids through free massive open online courses.
Societal investments positively impact financial performance.The same study from the
Conference Board
shows that societal investments correlate with financial performance. It encourages
companies to take a long-term view toward strong and sustainable returns
and reinforces the connection between employee engagement and social investment. 55%
of CEOs asked
believe that employee engagement is number one among the most valued benefits of
expanding societal investments.
Brand reputation is seen as a distant second by only 34%.The study consequently confirms
the findings from our last unit
where we discovered what a huge financial impact increased employee engagement has.
So how do you start?
Identify key stakeholders and beneficiaries.Understand what difference you want to make.

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Define the core competence of your organization.And measure the impact and link to
financial proxies.
Measuring and managing to impact.A wide variety of measurement methods exists.
Many are tailored to very specific initiatives or projects, with different purpose, timelines, or
groups of beneficiaries.
The already cited Conference Board study lists 30 frameworks created by official agencies,
private foundations, universities, or consulting firms
between the 1990s and 2010. We would like to focus on explaining the common and
underlying Impact Logic Model.
It is well described in the guidelines for social return of invest (SROI). Let's look at two
examples.
The first is about Malaria prevention through the distribution of mosquito nets.Input is about
what resources go into a program or project.
In this case, for money and staff.Processes are activities to create output,
like source and deliver nets and train involved volunteers to educate beneficiaries.Output
comprises services and products that are created.
For example, number of nets distributed, number or households educated.Outcome is
represented by the effects created directly in the target group.
In our case, percentage of households covered or percentage of children or pregnant
women using the nets.
Impact means mid and long-term social and/or environmental effects on the stakeholders,
like reduced death rates, sickness averted, or lives saved.
Now a second example: The model is applied to a software company.Input in this case is
the intellectual property of employees.
Processes consist of software development.Output is the implementation software or
technology application.
Outcome is a process improvement through, for example, increased transparency or
automation. Impact is increased resource productivity,
reduced emissions or water demand, more and better trained children qualified for better
jobs.
This example is important if we want to understand how digitization can enable sustainable
operations and create impact.
Therefore the key advancement of former external social initiatives is to really go beyond
outcome and look at created impact.
Outcomes represent specific and measurable changes to program participants that happen
as a direct result of program activities.
Impact represents longer-term changes, often influencing communities or systems.
The W.K. Kellogg Foundation characterizes impacts as "results expected 7 to 10 years after
an activity is underway
the future social change your program is working to create." Meeting a particular outcome
may represent a step toward impact,
but it is not impact itself.Let's look at a few selected examples of social impact creation.
The examples are from accepted reporting frameworks like the Global Reporting Initiative,
the United Nations human rights charter,
or the UN Global Compact agenda.Areas they cover include:
Human rights, for example to ensure product safety and to eliminate child or forced
labor.Labor rights, such as ensuring health and safety of workers
and establish diversity, equal opportunity, and fair pay.Economic development, for example
the creation of sustainable jobs and relevant education opportunities.
Inclusive business, like integrating smallholders in value chains, also known as shared
economy, and providing access to basic financial services.

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We will look at three of these in more detail in the following.Compliance to human and labor
rights is the basis for sustainable value chains.
Even though for many of us human and labor rights are a given, in some regions of the
world human and labor rights are far from normal.
It is estimated that 60 million people still work under slavery-like conditions today.Millions of
children are working instead of going to school and getting a decent education.
This ranges from children collecting hazelnuts, working mines, or in other sweat
shops.Creating impact in supply chains will have a significant effect
on the well-being of people around the world.Therefore, companies sign the United Nations
Global Compact principles,
which are an accepted framework for sustainable social operations globally.They have
understood that unethical business behavior,
especially human and labor rights violations in their global supply chain, poses a significant
business risk.
Just recall the example of Nike from our former course.Elevated transparency through open
data and social media
can help buyer make different buying decisions that punish violators and create an
increasing pull to
end child labor, eradicate forced labor, establish fair pay, and elevate worker safety and
abolish hazardous work conditions.
We will dive deeper into how this can happen later in the course.Now let's talk about how
economic development creates significant social impact.
Creating jobs, and especially good jobs with reliable income, is the most effective way to
create social impact for individuals and communities.
A well-educated workforce is one of the crucial elements to attract foreign investments to
create jobs and consequently enable economic development.
A recent study of the Development Progress organization showed that good education can
enable emerging countries
not only to create productive employment, but also to create the potential to leapfrog the
traditional route of economic development
via industrialization toward more service-based economies. That is similar to the fast growth
of the software and service industry in India.
SAP is engaged to provide quality education to children in Africa.Approximately 35% of
Africa's youth
lack the basic skills required to perform a job, especially technology knowledge.SAP is one
of more than 100 partners of the Africa Code Week,
a project to enable future generations with the skills they need to become key actors of
Africa's economic development.
Nearly 90,000 youth from 17 African countries participated in more than 3,000 free coding
workshops.
More than 50% of the participants were girls.The impact created includes
a foundation for better and quality employment opportunities for children in the region as
well as expanded external knowledge of SAP technology.
Through projects such as Africa Code Week, SAP also attracts new future talents.Overall,
SAP creates and enhances its brand reputation in an emerging future software market.
Finally, let's turn to how inclusive business offers opportunities for the private sector,
society, and individuals.
We selected the classical shared value approach of Porter and Kramer to present how
inclusive business can create positive social impact for individuals,
but also for involved private sector organizations.The original concept describes three
elements of shared value creation.
First, by reconceiving products and markets.Second, by redefining productivity in the value
chain.

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And third, by enabling local cluster development.A principle of shared value is to create
economic value
by meeting societal needs and challenges of individuals and local communities. The pool of
value creation is expanded
to local and, in many cases, underprivileged people, but also to companies.

00:14:22

Both benefit from this additional social and economic value.Our example of Unilever
Hindustan
addresses the third element: creating a local cluster development.Hindustan Unilever is
creating a new direct-to-home distribution system
run by underprivileged female entrepreneurs in Indian villages of fewer than 2,000 people.

00:14:30

Unilever provides microcredit and training and now has more than 45,000 entrepreneurs

00:14:37

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covering some 100,000 villages.The results are impressive and clearly describe mutual
value and impact creation
for Unilever and the local communities in terms of growing income but also health.Unilever
benefits from an increased brand value and extra untapped revenue.
On the other hand, the female entrepreneurs receive a reliable income and the enhanced
access to hygiene products helps fight infectious diseases.
This concludes unit 3. In the next unit we will look at how to create environmental impact.

00:15:17

Until then: Consider impact!

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00:14:46
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Week 1 Unit 4
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Hello and welcome to week 1, unit 4: Creating Environmental Impact. In our last unit we
discussed how to create social impact.
Today's unit is dedicated to environmental impact creation.I will use selected examples
which describe how to create environmental impact in four key areas.
Firstly, in the area of resource productivity through optimized resource usage. Secondly, in
the area of climate change through control
and reduction of overall greenhouse gas emissions. Thirdly, in the area of ecosystem
protection
for example, by avoiding negative impact through sourcing of raw materials causing, for
instance, deforestation,
or by preventing air, soil, and water pollution. And finally, in the area of biodiversity
by preventing further reduction in number of species. Let's start with the area of resource
productivity.
Caterpillar is an excellent example.It shows that increasing resource productivity
creates economic benefits for Caterpillar and their customers.On its sustainability journey,
Caterpillar focused on customer value and resource productivity.
It made sustainability part of its employee code of conduct, which is publicly accessible and
a very recommendable read.
It establishes the focus on resource productivity within the employee base.And to indeed
make optimal use of resources,
Caterpillar started taking back and remanufacturing 37,000 tons of end-of-life materials.
That was equivalent to 7,000 parts.The result is remarkable. So far, Caterpillar is making
18%
of its revenue from its sustainable progress portfolio. That underlines the economic viability
of its approach.
At the same time, Caterpillar managed to create significant environmental impact optimizing
usage of its assets at and also across sites.
Caterpillar also introduced a new service offering called job site solution consulting. The
onsite fuel consumption has a significant impact on the operational costs of the heavy
Caterpillar machinery.
The new service helps Caterpillar customers improve fuel and production efficiency. It even
guides them to reduce the fleet size required to complete the job.
Last but not least, Caterpillar also improved the environmental footprint of its products by
combining heat and power systems with alternative fuels.
A great example where a company generates revenue while creating a positive
environmental impact.The next example describes an entirely different industry.
Philips leverages innovative lighting technology to reduce overall energy consumption of
their products. And by this, Philips even increases its revenue stream from sustainable
products.
The company started its sustainability journey with an early focus on compliance and
efficiency.Over time, Philips evolved its business model
more towards cost efficient and sustainable operations and implemented a focus of "reuse,
reduce, recycle".
These are initial elements of a circular economy.The last and key step was taken when
Philips turned to its customers' needs
and leveraged sustainability to differentiate its products in the market.The current result is
very promising.
In 2014, the company made $14.1 billion revenue from sustainable products, which is
equivalent to 52%.
Based on this success, Philips increased its research and development spend on
sustainable products to 28.3% in 2014, up from 22% in 2010.

00:04:57

The environmental impact is impressive. LED lighting is very energy efficient

00:05:03

00:07:19

and has the potential to reduce energy demand by almost 90%.Philips recycles and reuses
material for household products.
This reduces the overall demand for plastics. Philips' expensive healthcare systems are
refurbished,
which extends the lifespan of the used resources significantly. Proving to be an innovator,
the company even considers to move into new business models
such as selling light as a service. That means shifting from selling a product to selling a
service.
This will have a significant impact on sustainability because Philips as the provider of the
service
will have the greatest interest to operate its asset costs and resources efficiently to meet its
own margin targets.
Here is another example from the consumer goods industry. To be attractive to end
consumers, Kimberly-Clark is always looking at opportunities
to differentiate its products in the market.The company decided to create a toilet paper
which reduces ecosystem degradation
and embarked on a remarkable sustainability journey.Since wood fibers are the most
important raw material for paper, including toilet paper,
Kimberly-Clark started by evaluating how to limit dependency on wood fibers. After all, trees
are not only the raw material for toilet paper, but they also absorb CO2.
Acknowledging that the logistics are an important element of the CO2 footprint of a roll of
toilet paper,
Kimberly-Clark wanted to reduce the weight per paper roll. You can imagine that you really
have to think hard to figure out
what solid waste comes from a roll of toilet paper! In addition, to make the product
attractive,
Kimberly-Clark finally also needed to overcome the perception that eco-products are of low
quality but expensive.
So what are the achievements so far? 37% revenue is made from sustainable products.

00:07:26

That is 296% growth from 2010 to 2013. Very impressive!

00:07:35

Let's come back to the solid waste component of a roll of toilet paper.In addition to soft
leaves there is the center roll, which is made from cardboard.
That is the key to saving material and weight.So Kimberly-Clark's Scott Tubeless Toilet
Paper does not have the center roll.
This means no solid waste for you, and less trees for the roll.That's not all. Kimberly-Clark
also looked at how to substitute traditional wood fibers.
And they found bamboo. Bamboo grows 5 times faster than classical wood.

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Their Viva paper towels is fully made from bamboo fiber. So next time you buy toilet paper,
think about saving trees.
Next, let's discuss an entirely different topic. We agree that human activities have an impact
on the environment,
that climate change is man-made, and that over centuries we did not use natural resources
in a sustainable way.
The United Nations Environment Programme estimates that there are 8 to 10 million
species on the planet.
Nobody really knows how many species go extinct but there are roughly 17,000 species on
the red list of endangered species.
According to high estimates, up to 120 species, mainly unknown, are extinct every day.Why
do we actually talk about this topic?
Not only because we love snorkeling in coral reefs.Our health and well-being is directly
dependent on biodiversity.

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For example, 10 of the world's 25 top-selling drugs in 1997 were derived from natural
sources.
The global market value of pharmaceuticals derived from genetic resources is estimated at
$75 to $150 billion annually.
Some 75% of the world's population rely for health care on traditional medicines, which are
derived directly from natural sources.
Therefore, ensuring biodiversity has an economic impact.And the situation looks bad.
The loss of biodiversity is accelerating.At the same time, there is only little understanding of
the economic value of natural capital.
Why is this so bad? Very few people know and care about the richness of nature's species.
In addition, there is no consistent integrated database of species available. The scientists
work mainly based on assumptions.
How can this be changed? Similarly as in business, creating transparency is always the first
step.
SAP technology enables the International Barcode of Life initiative to build a central
database. Barcode of Life is an organization dedicated to identifying species by its DNA.
Using DNA barcoding based on a Big Data approach, Barcode of Life and related efforts will
expand the worldwide knowledge base
on biological diversity and help organizations across the globe protect previously unknown
and already known species.
Crowdsourcing helps increase the funding and reach scale.And the crowdsourcing is also
an easy way to engage with the public
to raise the awareness about the value of biodiversity. With this I would like to conclude unit
4.
In the next unit we will talk about responsible investments. Until then: Consider impact!

Week 1 Unit 5
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Hello and welcome to week 1, unit 5: Responsible Investments.In our last unit we discussed
how to create environmental impact.
Today's unit is dedicated to looking at the importance of investments on sustainability.In the
last four units we discussed the evolution of sustainability within organizations.
Thought leaders understood that integrated thinking ensures long-term success and
therefore sustainable business models.
They need to react to external trends and expectations. Therefore these business models
must include consideration of how they create
external social and environmental impact, not only through their operations but also by their
products and services.
And viable business models are fundamental for investors to put money into a company.
The financial crisis and recent business scandals have not only increased concerns about
corruption
but also the lack of correct governance processes in various companies.The increasing
transparency through social media puts violation of human rights into the news.
And also climate change is understood as a growing business risk. The last two topics in
particular can have a significant impact on the money invested
but also on the expected return.But there is more.
The clients of investors expect that their money brings return, but increasingly they want
that their investments support good things.
Since environmental, social, and governance has an impact on the financial performance of
a company, investors must consider them as part of their fiduciary duty to their clients and
beneficiaries.
The financial crisis has shown that short-termism impacts returns negatively. Offering
sustainable investment portfolios
presents a competitive differentiation for institutional investors.And I have already
mentioned the ethical motivations of clients and beneficiaries.
However, sustainable investments not only ease your conscience. They are also very
competitive in terms of their performance.
Overall, there are about $59 trillion worth of assets under management in responsible
investments. That is roughly one third of overall global institutional investments.
The volume of responsible investments is growing fast with an average annual growth of
27% since 2006.
There are regional differences which also reflect the global differences towards
sustainability.Two thirds of global SRI assets reside in Europe,
with the rest basically in the United States. Very little in Asia. However, despite this,

00:03:26

the lower base growth of SRI assets is highest in the US and fairly similar in Canada and
Europe.Theme investment and the integration of environmental, social, and governance
topics in investments

00:03:40

have the highest growth rates. Are responsible investments really competitive?

00:03:48

Based on the resources you read, responsible investments perform at least as well as

00:03:54

or even outperform standard indices like Morgan Stanley Capital International, the Dow
Jones Industrial, or Standard & Poor's 500.
To create some guidance and common understanding about sustainable investments,
investors partnered with finance initiatives of the United Nations Environment Programme
and UN Global Compact.They agreed on the six principles of responsible investments.

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To date, lots of investment companies have signed up. By signing up, they commit to follow
the six principles.
Let's look a little closer at those principles.Signatories will not only look at pure financial
performance

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but consider ESG issues in investment analysis and decision-making processes.They will
act as active asset owners and establish ESG issues
in their policies and practices when they select and build their portfolios.They will request
appropriate disclosure on ESG issues from the companies in which they invest.
They will help promote and establish the six principles within the investment industry.With
joint efforts, they will make implementation of the principles more effective.
And finally, they will report on how far they have implemented the principles.So who are the
key participants of the investment community?
They are basically separated into two categories: institutional investors and retail
investors.The institutional investors are, for example, venture capital and private equity
funds
which are publically traded. They collect money from individuals, companies, pension plans,
or insurance reserves.
These funds invest collected money on behalf of the individuals or organizations. But there
are also mutual funds which are not open to the market
but make dedicated investments for specific purposes.Investment trusts are another type of
institutional investor.
Retail investors are individuals like you and I. And you can invest your money directly.
But you also invest time. So-called "sweat equity investors" invest their time volunteering to
provide expertise, knowledge, or specific skills.
A very interesting and growing type of investment is "angel investors": individuals or groups
of individuals who provide financial capital
mainly to seed innovation or support specific themes they believe in. Crowdfunding is a
great way to get capital.
This type of fundraising is very successful, especially in the area of social innovation. It is
also a great indicator of how good and viable a business idea is.
Now that we've looked at who the key players in the investment community are, let's see
how they decide where to invest.
What are the investment strategies they use to build their portfolios? In the negative
screening process, they basically exclude companies based on specific criteria.
Accepted exclusion criteria are production of military goods, alcohol, tobacco, and gambling.
The positive or best-in-class screening selects companies who are very transparent on
performance and meet the high ESG expectations of the investor.
Norms-based screening relies on compliance with the minimum standards of internationally
accepted business practices. More and more investors include ESG factors into traditional
financial analysis in a systematic way.
Investing into specific sustainability topics like green energy or sustainable food is called
"theme investing".
We will look at impact investment in greater detail in the next slide. And finally, investors
engage with corporate management to influence them toward more sustainable thinking.
As shareholders, they can leverage their voting rights to influence company behavior. Using
a few selected examples,
I would like to show how dedicated investments or divestments can have a significant
impact on sustainability topics.
I mentioned social impact or community investments as one of the accepted investment
strategies. The investments are directed mainly toward the underprivileged around the
world.

00:08:55

The intension of the investment is focused on ensuring a reliable income or increasing

efficiency. They support community development and, in many cases, provide access to
education.

00:09:09

As well as financial capital, reliable and affordable access to energy is fundamental to

economic development.This investment type is geared toward social impact.

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But how can the environment benefit from money? The World Bank Green Bonds are
dedicated to supporting the transition to a low-carbon economy
and climate-resilient growth.The World Bank invests heavily in renewable energy and also
in increasing energy efficiency.
Funding new railway infrastructures helps reduce transportation-related emissions. Water
and land use projects or resilient infrastructures
are on their radar screen as well.I would like to mention strategic divestments as the final
way to create impact.
The Paris agreement on climate change emphasizes the risk of fossil-fuel-based business
models.
Therefore, investing long term into carbon-based business models is not sustainable.
However, investing is not only about making money
but also an opportunity to change things. The decision of the Allianz
or the Norwegian pension fund to actively divest from companies dependent on using coal
is a strong signal against the traditional way of business operations.
Since the topic is fairly new, there are still significant challenges to overcome.To make
conscious responsible investment decisions, information and transparency is crucial.
Integrated reporting provides this relevant information because it connects nonfinancial and
financial performance,
information that responsible investors are looking for.However, many issuers still lack
understanding of how they can create external social or environmental impact,
never mind providing transparency on creation.There are various frameworks that enable
companies to disclose ESG aspects,
but one accepted standard is missing. And therefore ESG performance is very difficult to
compare between companies,
but also between sectors.Many investors still focus on risk and do not consider social or
environmental value creation
as a mandatory ingredient for viable business models.ESG issues still have little acceptance
in the classical investor universe.
Sustainability ratings are an opportunity to get independent information about the ESG
performance of organizations.
However, you must be very careful not to only trust those ratings. You should also rate the
rater.
The result comes out of a black box and the applied methodologies change frequently.
Questionnaire-based rankings may have some bias
because the rater relies on the answers of the companies. And finally, due to the associated
cost and efforts,
companies may not even participate in ratings.This concludes unit 5 of week 1.

00:12:26

In the coming two weeks we will expand the view more towards what is happening outside
companies, in the markets, and what trends and challenges influence business
transformations.

00:12:38

We will start next week by looking at the United Nations Global Goals and other
sustainability frameworks.
Until then: Consider impact!

00:12:45

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