Expecting More From Business — Common Wealth Contributions By Business (Part 2)
Oringally posted at the SAP Business Innovations for Sustainability blog, cross posted with permission
This blog is a follow up to my prior blog Expecting More From Business — Common Wealth Contributions By Business (Part 1) where I discuss the book Betterness: Economics for Humans, by Umair Haque as a new standard for how we measure the contributions of business to society.
In this second part, my I want to investigate how well this framework can inspire thinking for “betterness” by evaluating common wealth contributions of a company I know well since I work for them, SAP. Let me be clear that these are my own opinions, and I do not speak for SAP nor any of the programs described, other than the one I directly support for marketing, SAP HANA One.
First we look at indicators whether a company’s management realizes it needs to do more – are they leveraging cause marketing, and are they reporting in sustainability and social responsibility. The second part of the framework examines direct contributions to the common wealth by operations and products.
Many companies are engaging in cause marketing because they know their customers want to feel like they are participating in something bigger than just being part of a market for a company trying to make a profit off of them. Sometimes this is just shallow “cause-washing” such as 10% of proceeds go to fund some charity, and sometimes it’s much more profound.
SAP has the challenge of many business-to-business companies. How do you explain the impact to the average person in the world of a company that sells enterprise business management software to over 250,000 other companies and institutions around the world? SAP does this by telling stories about the impact its customers are making through the use of this software. Often these are familiar consumer brand names that the public will know. This helps position SAP’s impact as being much bigger than merely selling software.
Two examples of SAP’s brand marketing around “Helping the world run better”. Click images to see original sources. © SAP
A second indicator of management awareness of the shift in people’s expectations for companies is if they do social responsibility reporting. SAP has for a number of years been reporting what first started as a sustainability report, and then broadened to a social responsibility report. For its 2012 annual reporting, SAP did something very interesting: a combined financials and social responsibility report.
Why Publish An Integrated Report?
This year, for the first time, we are publishing an integrated report – meaning that we are combining the SAP Annual Report and the SAP Sustainability Report, which enables us to highlight the connections between our financial and non-financial performance. We believe that this shift holds both practical and symbolic importance. First, we are signaling that the business landscape has changed, and the information needed to evaluate performance must change with it. Considering our past financial results and our financial outlook alone does not adequately capture our ability to respond to today’s challenges or how we create value. Instead, our future success hinges on how well we holistically navigate the social, environmental, and economic contexts in which we operate.
Image from SAP’s 2012 Integrated Financial and non-Financial reporting showing interrelationship of indicators and corporate objectives.
[SOURCE] © 2012 SAP
My finding is that SAP’s marketing and annual reporting show that SAP management is well aware of a shift in people’s expectations. Some additional comments from me:
- SAP is seems to be very advanced in this kind of social responsibility reporting. It makes sense because the company also sells software that allows companies to provide this kind of social responsibility reporting, so it’s in SAP’s interest to be a great example. However, this doesn’t disqualify the significance. In fact, I consider this kind of software a direct contribution to the common wealth as I will discuss later.
- Haque mentions that while corporate social responsibility (CSR) does correlate to positive financial performance, in the higher standard of “betterness” it’s still not good enough. In fact, he calls CSR as “not worseness” since what you are mostly measuring is less impact, generally not contributions beyond mitigation.
Now let’s consider some contributions to the common wealth on the part of SAP. According to the framework, we only count operations and products that are direct contributors to the common wealth. This means side benefit programs, donations, and products that indirectly contribute as a result of accidently beneficial third party usage are precluded.
First, this means I do not count SAP’s most well-known product, ERP systems, as directly contributing to common wealth. Yes, ERP can help companies optimize and improve quality of operations. This in turn saves money that can be reinvested in other ventures to hire other people, as well as potentially save in consumption of resources. But it depends on what the customers do with the software. It can also cause layoffs of employees, or at least mean that others won’t be hired. ERP helps customers capture market share in competition as a result of better operations, but not necessarily help them grow new wealth unless the company chooses to do so. So I consider these contributions to be indirect. SAP is at the mercy of its customers to create these impacts, and I doubt that SAP refuses to sell to any companies that people might consider not socially responsible enough.
You can view a proposed balance sheet for common wealth in in my prior blog. Let’s discuss examples of SAP’s contributions to areas of common wealth in categories that I pulled from Haque’s book. In some cases, we will also rate the degree of impact chosen by the ambition.
Common Wealth Contributions by SAP
Natural Capital: indirect only.
SAP makes investments into co-generation of renewable energy for its facilities, but does not provide this to populations around its facilities in general. The company does provide charging stations for electric vehicles at many plants, but these are mostly driven by employees.
SAP offers software solutions that help energy and renewable energy companies efficiently manage operations, as well as to agencies that manage natural resources. These are indirect contribution since its dependent upon how the utility or agency deploys and uses the software.
Financial Capital: contributory advantage.
I will leave this to the company’s financial reporting, but I will point out that in addition to stockholder returns, the company also has a venture capital arm that invests in startups, an additional fund for startups building on its high performance database platform, and an associated startup accelerator program with well over 400 startups involved.
Line items where I would like to see more contribution from SAP are in the areas of providing products and services that help improve wealth distribution and poverty rates in countries and communities.
SAP’s startup funds and accelerator program are for entrepreneurs beyond typical SAP customers in many industry and market segments.
Intellectual Capital – contributory advantage
In terms of US patent assignments in 2012, SAP does not appear in the top 50 list, where IBM is in the #1 position with nearly 6500 patent grants, and Microsoft appears at #6 with over 2600 patent grants. SAP does claim numerous patents in production for its market-leading high performance database, SAP HANA.
Another line item that applies is new industry, sector, or market creation. SAP’s SAP HANA database has created a market category of in-memory databases in which more competitors are now entering. On this basis I rate SAP as having a contributory advantage in this category.
A line item I’d like to see a contribution from SAP is finding ways to improve freedom of speech within countries.
Human Capital – contributory advantage
While this area sounds like a company HR concern, it actually refers to populations in general. SAP has a few contributions. First is direct employment – SAP at end of year of 2012, SAP has over 64,000 direct employees, not counting contractors. Another area of contribution in the category is education. SAP provides two notable direct contributions to education in an effort to help more people become qualified to find jobs related to its software: SAP University Alliances and openSAP “massive open online course”.
SAP has been making huge improvements in this area, but when you consider how companies like Apple have directly contributed to education, there is much more improvement SAP can make.
SAP’s direct educational offerings target college students and practitioner interested in learning the latest skills related to SAP technology and applications.
Another notable line item in human capital wealth is in promoting health of people. There are a couple notable projects of SAP’s that I found with public references. First is “Care Circles”, a free app that creates a community of information about caregiving involving patients, families, and experts.
Screenshot from carecricles.com describing the Care Circles free app and service by SAP. [SOURCE] © 2013 SAP
Second is the inclusion of genomics processing libraries in SAP HANA to support development of personalized medicine applications such as in rapid cancer screening and characterization. If this capability is deployed widely and is affordable by much of a population, this would definitely be considered a significant contribution to the common wealth.
SAP’s health initiatives have the potential to help people in many communities.
Social Capital – indirect only
SAP does provide software related to social networking, but I’m not convinced that social networking contributes to social capital. SAP also encourages its employees to participate in community volunteerism, with company sponsored community volunteer projects logging over 130,000 hours in 2012. This is an indirect contribution as it is a side program, not a direct contribution through primary operations or product.
There are perhaps more opportunities for SAP to develop software that helps create better cohesion and participation by residents in communities, and perhaps improve personal freedom. I would like to see more contribution from SAP here.
Emotional Capital – no contributions
This is not an area in which I note any contributions from SAP, nor do any missed opportunities come to mind.
Organizational Capital – contributory advantage
SAP provides software for managing governments with many national and local governments as customers. This should improve transparency and of for these governments. While one might argue this is similar to the indirect contributions to SAP’s business customers, a people’s government is directly applicable to everyone, so I consider this to be a direct contribution to this category of common wealth generation. Governance and business intelligence software is also sold to SAP’s customers improving their ability to make and execute decisions, also a direct contribution to this aspect of the common wealth.
SAP’s public sector offerings directly help communities themselves in creating accountability and transparency in their governments.
In summary, I see SAP making broad contributions in the areas of Financial, Intellectual, Human, and Organizational common wealth. SAP has further opportunities to improve contributions in Financial, Intellectual, and social capital.
What kinds of contributions to the common wealth are the companies you are working for, investing in, or buying product and services from making, and what is the ambition of their impact?
Applying the Betterness Mindset to My work
This change of mindset is also making me consider new opportunities for customers of the product I support: SAP HANA One on Amazon Web Services.
With SAP HANA One, SAP has provided easy access to the SAP HANA platform for inventors in the Amazon cloud. It’s priced at a significant discount, and can be further cost-controlled by efficient use of AWS’s cloud management functions. There are some limitations in the license and size of system, but developers get access to the features of the entire SAP HANA platform. It’s enough to create, test, and prove something new that the world has never seen before.
My desire is to find more enterprising developers and visionaries who work at NGOs, or who think of themselves as social entrepreneurs to invent amazing applications that take advantage SAP HANA One’s performance and ease of deployment.« Expecting More From Business — Common Wealth Contributions By Business (Part 1) Panel: Entrepreneurship in Solid Waste Management, July 24 at 2 pm EST »