SAN FRANCISCO -- Given that just two days ago at the State of the Union, President Obama spoke about the government's commitment to sustainability and that manufacturing would be the backbone of sustainable economic recovery, it is fitting that SAP would host a roundtable on exactly that topic.
SAP published its preliminary report of greenhouse gas emissions for 2011 on Thursday, and one of the key points is its company goal of reducing emissions to 2000 levels by 2020.
Thanks to its sustainable business practices, the global business management solutions provider has seen a cumulative cost avoidance of €190 million ($250 million) since 2008 and €25 million ($33 million) alone in 2011.
Scott Bolick, vice president of sustainability solutions for SAP, explained at the event that SAP's commitment to sustainability solutions and services for its customers really evolved in 2008 -- especially as there were a "proliferation of regulations" issued between 2007 and 2009. Regulations about product compliance alone grew by 70 percent during that period.
"Companies were realizing how they were operating in the past was not going to enable them to succeed in the future," Bolick said.
SAP simplified its objectives for its customers down to four categories: sustainability reporting and analytics, risk management, environmental resource management, and sustainability supply chain and products.
Based on the customer experiences discussed at the roundtable, it would seem that product compliance and safety as well as sustainable design being popular choices among SAP's customers when it comes to asking for help.
Varian Medical Systems, a Silicon Valley-based company that creates technology for treating cancer as well as X-ray products, uses two of SAP's platforms for health and safety as well as product life cycle management to understand the chemical composition of its products in order to redesign them, eliminate hazardous substances and comply with regulations such as RoHS and REACH.
Another motivation for Varian, and many other companies, was to safeguard its revenue in the European Union where regulations are much stricter than the United States.
About 25 to 30 percent of Varian's business is in Europe.
Ashish Sarkar, senior manager of enterprise at Varian, explained that a good deal of Varian's equipment had been designed in the 1970s and 1980s, and it's no surprise to anyone that these machines are likely outdated -- especially when it comes to the chemicals they use.
Mike Kirshner, president and managing partner of Design Chain Associates, a San Francisco-based design and environmental consulting firm, pointed out that many companies are reluctant to go back to the drawing board and see the chemicals they use to replace older ones then become targeted themselves.
He added that many businesses typically have one of two reactions when it comes to rethinking supply chains in the face of new regulations: shrink the supply chain and recreate vertical enterprise, or work with supply chain and use increasingly sophisticated tools to enable you to manage your extended supply chain.
But what Sarkar's company learned from redesign efforts was to design for compliance by default going forward.
So far, it seems to have worked, and here's a snapshots at some of the results from the Varian/SAP partnership so far:
- Varian is re-engineering products at faster pace (down from 18 to five days) and predicts it will save $870,000 annually on ROH-S-related charges alone.
- The company can now safeguard its $700 million revenue exposure in the European Union from regulatory fees. ROI from its SAP deployment is anticipated to be $2.5 million.
Varian has also been able to safeguard its revenue in the E.U., going to show that this becomes an issue not just about product safety and sustainability, but also staying competitive in the global market.