Sustainability & Human Capital Management

Global Trends & Implications For Business

Dr. Shane Hodgson, SAP Business Transformation Services Prof. Christian Berg, SAP Business Transformation Services

June 20, 2011

Sustainability and Human Capital Management

Sustainable Development And what it means for Business

Drivers for Corporate Sustainability SAPs Approach to Sustainability

Where Global Trends affect HCM

Implications for Sustainable HCM Q&A

2011 SAP AG. All rights reserved.

of CEOs believe sustainability should be integrated into the strategy and operations of a company (up from 72% in 2007).

96%

Source: A New Era of Sustainability, UN Global Compact-Accenture CEO Study 2010

Sustainable Development And what it means for business

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. World Commission on Environment and Development (the Brundtland Commission), 1987

Corporate Sustainability or Corporate Social Responsibility

is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders.
European Commission, Green Paper on Corporate Social Responsibility, 2006

Corporate Sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.
Dow Jones Sustainability Indexes, 2010

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Implications of a sustainable development approach

Sustainable development therefore involves:

A broad

view of social, environmental and economic outcomes;

A long-term

perspective, concerned with the interests and rights of future generations as well as of people today;
An

inclusive approach to action, which recognises the need for all people to be involved in the decisions that affect their lives.

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The Business Case for Sustainability

New Cost and Risk Drivers; New Opportunities Competitive Advantage
Protect/enhance the brand. More sustainable offerings and practices.

Economic

Environmental

Social

Cost & Risk of Regulation

Automate compliance

Price (Volatility) of Natural Resources

Optimize resource productivity

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The Business Approach to Sustainability

PROFITABILITY
by holistically managing economic, social and environmental risks and opportunities.

Increase short and long-term

2011 SAP AG. All rights reserved.

Sustainability and Human Capital

Sustainable Development And what it means for Business

Drivers for Corporate Sustainability SAPs Approach to Sustainability

Where Global Trends affect HCM

Implications for Sustainable HCM Q&A

2011 SAP AG. All rights reserved.

Why Corporate Sustainability? Drivers for change

Compliance Pressure from stakeholders Risk Management Enhancing brand image Increased employee motivation Ethical considerations

2011 SAP AG. All rights reserved.

Sustainability and Human Capital

Sustainable Development And what it means for Business

Drivers for Corporate Sustainability SAPs Approach to Sustainability

Where Global Trends affect HCM

Implications for Sustainable HCM Q&A

2011 SAP AG. All rights reserved.

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SAPs Approach to Sustainability: A Dual Strategy

Sustainability @ SAP
SAP as Enabler
Lead the market for sustainability solutions

SAP as Exemplar
Transform SAP into a role model for sustainability

Biggest lever for SAP: Green IT is only addressing 2% of overall greenhouse gas emissions, what about the other 98%? There is a business case and a market for sustainability software solutions Market driven development approach

Credibility requires transparency Strong governance and change management model required SAP has to manage economic, social & environmental risks and opportunities, too Everybody needs to be involved
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2011 SAP AG. All rights reserved.

SAP Sustainability Map

EXECUTIVE MANAGEMENT ENVIRONMENT, HEALTH & SAFETY OPERATIONS SUPPLY CHAIN PRODUCT CONSUMERS HUMAN RESOURCES IT

Strategy Management
Environmental Compliance Facility Energy Management Sourcing & Procurement Product Compliance Personal Footprint Diversity

Engagement & Corp. Citizenship

Industrial Health & Safety Production Energy Management Traceability & Recall Material & Product Safety

Benchmarking & Analytics

Process Safety Carbon Management

Materiality & Assured Reporting

Risk Assessment & Reduction Natural Resource Management Green Logistics

Financial Risk & Performance

Emergency Management Smart Grid Participation

Supply Chain Design & Planning Product Footprint Residential Energy

Recycling & Reuse Mobility

Sustainable Design

Strategic Workforce Management

Labor Compliance & Human Rights

Travel Management

Availability, Security, Accessibility & Privacy

Green IT

Sustainability Reporting

Operational Risk Management

Energy & Resource Management

Sustainable Supply Chain & Products

Sustainable Workforce

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Sustainability and Human Capital

Sustainable Development And what it means for Business

Drivers for Corporate Sustainability SAPs Approach to Sustainability

Where Global Trends affect HCM

Implications for Sustainable HCM Q&A

2011 SAP AG. All rights reserved.

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Where Global Trends affect HCM (1)

Demographic change: Ageing of society and workforce in many countries Scarcity of high-skilled and educated talent Increase of work /stress related illnesses

2011 SAP AG. All rights reserved.

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Where Global Trends affect HCM (2)

Shift in values towards a Postmaterialist society

Younger generation in many countries is postmaterialist (according to R. Inglehart) Given a certain, moderate level of wealth immaterial values become more important. Lohas: Lifestyle of health and sustainability Market segment focused on health and fitness, the environment, personal development, sustainable living, and social justice Meaningful work with a contribution to the broader public good Emphasis on Work-life balance

Consequences:

...are all getting more important

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Where Global Trends affect HCM (3)

Work-life-balance

With an increasing number of women employed and gender equality families need to find new ways to share responsibility for bringing up the children and balance work and life Example: Marriott Hotels was finding it difficult to attract new recruits and to retain good managers. The company had a strong culture of face time, i.e. Managers stayed at their hotel and pretended to work even if they had completed. When the relationship with high turnover was recognized, senior management initiated a programme of flexible work which effectively reduced the turnover rate*

Diversified family situations

With the growth in the number of patchwork families, women employed and gender equality, families need to find new ways to share responsibility for bringing up the children and to balance work and life *Source: Dexter, Dunphy et al., Organizational change for corporate sustainability

Diversified Workforce
Firms need innovative ideas to sustain and to flourish and a diverse workforce has the proficiency to generate novel ideas for a companys success. Conversely, a homogeneous workforce is comparatively less likely to come up with the creative solutions faced by a national and world market that is characterized by individuals from many races, nationalities and religions http://www.starcitynews.com/the-importance-of-work-force-diversity/1602/
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Development, Freedom, and Rising Happiness - A Global Perspective (1981 2007) . Inglehart, Foa, Peterson and Welzel

ant

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World Values Survey

From http://www.worldvaluessurvey.org/wvs/articles/folder_published/article_base_54
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How Applicable is this to South Africa?

These findings also have important implications for social scientists and policymakers, for they imply that human happiness is not fixed but can be influenced by belief systems and social policies
Development, Freedom, and Rising Happiness - A Global Perspective (19812007) . Inglehart, Foa, Peterson and Welzel

2011 SAP AG. All rights reserved.

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Sustainability and Human Capital

Sustainable Development And what it means for Business

Drivers for Corporate Sustainability SAPs Approach to Sustainability

Where Global Trends affect HCM

Implications for Sustainable HCM Q&A

2011 SAP AG. All rights reserved.

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What is a sustainable approach to HCM?

This means both managing Human Capital in a sustainable way, and supporting broader sustainability with HCM practices ... for example:
Sustainable Management of HCM

Recruitment and Talent Management

Competency development
Employee Lifecycle Management and Outplacement

Supporting Sustainability with HCM

Sustainable Compensation and Performance Management

Driving Employer Branding and Diversity Promoting Collaboration and Partnering Supporting Organisational Learning and Knowledge Management

2011 SAP AG. All rights reserved.

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Sustainability in Recruitment and Talent Management

MonsterTrak.com, a career website for students found that

92% would be inclined to work for a company that is environmentally responsible. 80% wanted a job that directly improved the environment

Sustainability has a strong power of giving people a meaningful mission, a way to address their latent concerns and helping them integrate their different roles in society. Socially responsible companies tend to have employees with higher engagement. Companies also have a duty to consider the sustainability of their recruitment practices, and to nurture the external talent pool from which they recruit
2011 SAP AG. All rights reserved. 23

Sustainability in Competency Development

Companies need to continually enhance the skills of their workforce to respond to emerging and future demands of customers, investors and of society as a whole Teaching the concepts of sustainability and imparting related competencies in strategy formulation, stakeholder management and leadership is crucial to corporate success and to the future of society (University of Cambridge Programme for Industry)

Companies also need to consider the competencies in the resource pool outside the organisation, and to work with educational institutions and civil society to build the pipeline of skills that will feed their future recruitment needs

2011 SAP AG. All rights reserved.

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Sustainability in Employee Lifecycle Management

This approach allows companies to support and manage employees through every phase of their service with the company, from recruitment through training, development, retention and eventual outplacement. It also enables companies to find the best people, leverage their talent, align employee goals with corporate goals, maximize the impact of training, and retain top performers. Simply put, adopting a sustainable approach to managing the entire lifecycle of the employee and all the associated information empowers companies to make the kind of smart human capital management decisions that bring tangible benefits to your company (reference material, mySAP HCM solution).

Companies adopting a sustainability approach to Employee Lifecycle Management also need to consider the impact of returning employees to the resource pool, and to adopt outplacement programmes to make this a positive impact.

2011 SAP AG. All rights reserved.

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Sustainable Compensation and Performance Management

This approach includes elements of rational and sustainable approaches to compensation of employees, both from the point of view of the company and its shareholders as well as from the point of view of society as a whole.

Companies also need to orient their performance management programmes towards a sustainable approach to working, and to reward those practices and behaviours that are in line with sustainability goals

2011 SAP AG. All rights reserved.

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Sustainability Driving Employer Branding

Employer Branding and the War for Talent

Initiatives like greatplacetowork, top-job 100, Ethics in Business address this Corporate Sustainability is an ideal approach, since it transfers several attractive values like meaning, a contribution to the common good, fairness, openness etc. Employees are increasingly choosing to work for companies that openly espouse these values.

2011 SAP AG. All rights reserved.

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Sustainability and Diversity Management

Diversity management is a strategy to

address the market, to cultivate an open and stimulating culture, but also a responsibility to include the underprivileged and minorities and give them a chance to make a contribution

In todays workplace, having a diverse population is incredibly important. The benefits of a diverse workforce include innovation, increased engagement and economic growth. Organisations are often operating in an international or multi-faceted national context, and to service customers well, they need to attract and retain people from the full range of demographic segments. Having a diverse workforce brings a range of useful perspectives to the table and there is a significant competitive advantage if organisations are able to optimise these differences in their people. Susan Ferrier, a speaker at the marcus evans HR Summit
2011 on diversity and employee engagement

2011 SAP AG. All rights reserved.

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Sustainability - Promoting Collaboration and Partnering

Increasingly, organisations need to consider their ecosystem when making strategic decisions. Walmart will be required to contribute both to labour market stability in the short term and to sustainable development of local suppliers in the medium to long term when it assumes control of Massmart
We do not live and operate in a vacuum and we need to think about the other inhabitants of our environment. HCM needs to be able to support newer ways of working with partners, competitors and a variety of other role players, and to build the competencies for this into the workforce. .
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Sustainability - Supporting Organisational Learning and Knowledge Management

Reinforcing and embedding lessons learned in sustainable development and operations, and promoting a culture of organisational learning and knowledge sharing is the responsibility of the HCM Department.
Helping people to collaborate while under the pressure of high-speed business activity is a key support HCM can deliver. Linking learning into the organisations strategy and supporting it with proper assessment and reward is crucial.

2011 SAP AG. All rights reserved.

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First Steps - what HCM can do to support sustainability

Align Human Resource Systems
E.g. Job descriptions Chevron: Understanding environmental issues is a selection criterion for CEOs

Embed Sustainability in Training and Career planning Wal Mart: provides sustainability training to its employees and encourages them to adopt personal sustainability projects
Reviews and Rewards Dow Chemical: Contest for energy-saving projects with high RoI: first year: 27 winners with RoI of 173%, after 10 years: RoI of 300% Work-life-balance support systems to reduce turnover rate, increase employee motivation, employer branding etc.

Support Corporate Reporting on Sustainability

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What HCM can do to support sustainability (2)

Measure the Benefits Use Analytics to track and control the Performance of Sustainability Initiatives, e.g. on Turnover and cancellations Absenteeism Employee satisfaction Support Sustainability Initiatives E.g. on-boarding to sustainability culture Volunteering programmes Organisational Learning Management

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SAP Sustainability Performance Management

The integrated solution which supports King III reporting

Management processes and analytics to communicate and execute sustainability strategy

Disclosures based on reliable information and data

Data gathering with automatic and repeatable collection from systems and people

2011 SAP AG. All rights reserved.

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Added Value Key Business Information Provided from multiple other IT Solutions contributing to King III Report
King III Report supported by SuPM

SAP Business Suite

Sustainability Solutions

EPM and GRC Solutions

Critical business data

Operational information

Mgt frameworks

Organizations Materials

SAP EHS Management SAP Carbon Impact

Risk Management Strategy Management Process Control

2011 SAP AG. All rights reserved.

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Thank You!
Contact information: Prof. Dr. Christian Berg Global Head Sustainability Business Transformation Services M +49 171 55 897 86 E ch.berg@sap.com Dr. Shane Hodgson Business Transformation Principal EMEA Emerging Markets M +27 7947 84082 E shane.hodgson@sap.com