openSAP Sustainability and Business Innovation

WEEK 5, UNIT 1

00:00:15 Hello and welcome to week 5.

00:00:17 In the last week, we discussed sustainable business processes, the 2nd part, all the way from

environmental and social accounting to Green IT.

00:00:27 Now this week, it's all about stakeholder engagement. It's the who, why, and how you're

getting into conversations, and most importantly: how to trigger action?

00:00:38 In this first unit, we'll talk about engaging with line-of-business leaders.

00:00:43 And that is not an easy engagement to make because the first thing you'll run into when

engaging with line-of-business leaders is you'll have to manage some objections.

00:00:53 And, I've chosen this picture here very deliberately cause they send you in circles for a while.

And I'd like to help you a little bit understand

00:01:00 what usually is the kind of sequence through which people are going because in the most rare

cases, will you be able to get that endorsement of what you're trying to do in the first meeting.

00:01:13 So I've heard the following things: The first thing is “Oh, you know, that's not really relevant for

us, this whole green thing. You know, I know no other leader in my field who has even

considered it”.

00:01:25 “And by the way, you know, we're not going to spend more money on this. We're not going to

miss our goals because of sustainability.”

00:01:32 In essence, people coming in saying, “What we do in finance and profit has nothing to do with

what you want to do in people and planets, so leave me alone.”

00:01:44 The second type of objection that I've heard quite a lot was, “Well in principle, that's not a bad

idea but it's not our strategy.”

00:01:54 “So while I personally might be interested, it is not in my strategy. So if you want me to do

anything, you'll need to talk to my boss.”

00:02:02 So in essence, it's a deflection strategy. So they send you around in circles, and you're not

going to get very far.

00:02:09 Sometimes I even heard, “I'm not paid to do this.”, which is a very pitiful statement in my

opinion.

00:02:15 But hey, that's the world. So that's the second kind. So people understand kind of the

importance, but their excuse is, “Not my decision to make. There's some bigger forces at work

that need to be convinced.”

00:02:26 “So even though the CEO might be all about sustainability, that same person by the way also

told me to increase revenues by 10%, and to drive our margin up in the same time frame. So

hey, I have no time for this.”

00:02:40 So you'll hear that too.

00:02:43 Then there is another type of objection, which is a little bit more promising, cause that's when

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people are pushing it towards urgency.

00:02:51 “So I understand that's important. I also acknowledge it has to do with our strategy. So I kind of

follow your train of thought.

00:02:57 But we first have to solve this much bigger and more important problem before we can start

talking sustainability.”

00:03:06 So again, you know, at least they're willing to engage. They kind of give you the agreement

that it is important and that it is in line with the strategy, but they're not ready to do anything.

00:03:19 Now, the other way that I've seen this play out is people who say, “Well I understand it's

urgent, it's important, and it's in line with the strategy, BUT: I'd love to help, but

00:03:29 I don't have the people, I'm sorry. Everyone's so busy doing more, you know, other things.

Right now, I don't have the skills and if you can get me like three more people into my group,

we would happily look after this topic.”

00:03:41 “In essence, again I'm not compromised a little bit, even a little bit, on the way how I've set up

my team. I have defined my goals because of this. And even though it might be a great story,

I'm not ready to act.”

00:03:53 So these are some of the common objections.

00:03:55 And the question is how do you really get this done? And I have made the best experience in

starting engagement from the very very top, which is why in the first week we talked about

engaging the CEO.

00:04:08 And in parallel, starting engagement from all around the organization from the bottom with

employee engagement – and we'll look into that in a later unit during this week.

00:04:19 So that this kind of trend comes at them from both ways, but middle management line-of-

business leaders are...

00:04:26 as heard that many many times from different sustainability officers: they're the toughest to get

engaged.

00:04:33 Now, some of the things we've done successfully at SAP, and we've tried many things that

didn't work. But this is what created some traction.

00:04:42 Some of the engagement tactics we used are as follows:

00:04:47 The first is to come in and to clearly connect sustainable business cases to the existing KPIs of

an organization.

00:04:56 So if that organization has a KPI around margin or about new products revenues and things

like that, or using new types of technologies,

00:05:04 then you can come and say, “You know look, this is what we're doing sustainability. Just forget

about this whole conversation about environmental and social.”

00:05:12 “This is how it helps you easier achieve your objective.”

00:05:17 And then, that connection needs to be built, so you make it relevant in their frame of mind.

00:05:23 It also it helps to highlight relevant moves from within your industry or from within your

competitors, things that other people are doing.

00:05:32 And that kind of raises a little bit of the paranoia that they might miss on something that's really

important. And so that has helped us as well.

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00:05:41 We also internally promoted wins with very forward-looking organizations in front of all the

other business leaders.

00:05:50 So if your IT department is jumping on right away and creates fabulous savings, or if your

facilities organization creates fabulous savings, or

00:05:58 if you win a lot of recognition for what you do with your supply chain, let's say, then that needs

to be celebrated.

00:06:05 And these leaders need to be celebrated because they had the vision and the stamina to go

for sustainability and that again creates pressure on those who are more laggards.

00:06:18 Sometimes, we even created a compelling event. So we invited some line-of-business leaders

to speak at industry events on behalf of SAP,

00:06:27 but the topic, you know – so be it – was related to sustainability. It forced those leaders to

actually learn about the triple bottom line and how to make the business case.

00:06:39 And trust me, it was a completely different conversation after they had been out there

discussing with the public. So creating these events yourself, I think, is quite masterful so I

highly recommend that tactic.

00:06:53 You can also engage peers, direct reports, grassroot teams around those line-of-business

leaders, so they're not only hearing it from you. They actually are going to hear it from a variety

of people.

00:07:05 And you want to educate them if you can create some type of workshops, strategy workshops,

where you kind of highlight the longer-term perspectives.

00:07:13 And you're not only discussing financial long-term, you're also discussing environmental and

social long-term impacts. That's also a great way to engage.

00:07:22 But for me, the most powerful one was the first one on the top: connected to their existing

KPIs.

00:07:30 To have a little bit of an overview of how are we engaging whom and with what topic,

00:07:38 we created our own little engagement map. And this engagement map has a variety of levels,

so

00:07:45 we're talking about what are the things we want to engage Executive Management around.

What are the things we want to engage Finance and Administration,

00:07:53 and Sales, and Development, and Human Resources, IT, all the way to Communication and

Marketing? What do we want from them? What are the most pressing issues?

00:08:02 And we put little harvey balls to each and every one of those boxes to discussing the level of

engagement we have achieved.

00:08:09 So, this little overview is extremely helpful, and you might want to create your own or a

derivate thereof. So feel free to steal with pride.

00:08:19 That engagement map helped us a lot to understand who are they key players, who are the

peers, what are the conversations we want to drive, and how do we get people engaged.

00:08:31 So, that engagement map. Now, when it comes to the actual engagement, I want to give an

example of aligning your engagement with the core KPIs of the line-of-business leader.

00:08:41 And because of the strategic importance of the CFO, I thought it would be a good repetition

here to go through the things that make the CFO move.

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00:08:49 Stock price, so you're engaging around sustainability reporting, about socially responsible

investor relations.

00:08:59 You're talking about margin, and you're making the business case for specific initiatives over

and over again.

00:09:04 Also, how you can optimize your supply chain by using environmental footprints as a proxy for

process inefficiency (we've talked about those things in the past).

00:09:16 You can engage around risk and operational efficiency and transformation. These are all

things important to the CFO: existing KPIs. And if you can build the bridge between what you

do what they do, that's really the way to go.

00:09:29 So I wanted just to kind of throw that in as a little example.

00:09:34 The last slide in this unit is all about how you can sense that your engagement has been

successful.

00:09:41 Cause essentially, sustainability and CSO's job is essentially to kind of hand over the baton.

00:09:49 It's like a relay race. You want them, you know, to catch that baton and to keep running with it

and to start to create even more change going forward.

00:10:01 So, good signs are that the sustainability is seen as a strategic priority.

00:10:08 Essentially, people start to look at the sustainable impact of what they do. So they look broader

than just the financial impact.

00:10:16 It's also that sustainability is analyzed and broken into specific actions for a team. I've seen

that being done very very effectively in some organizations of SAP, for example, in Facilities,

00:10:27 who when they heard that we have a carbon emission goal immediately started to cascade

that,

00:10:34 to execute really by putting it into the MBOs and to really cascade that and pay for

sustainability performance in their own team.

00:10:44 And the process started to become more frequently inspected, mostly also because suddenly it

was on everybody's paycheck, if you will.

00:10:53 On the compensation side, that's a little bit tricky. I see many sustainability organizations who

carry a lot of sustainability KPIs, and then nobody else around them carries any sustainability

KPIs. And that obviously doesn't make life easier.

00:11:06 Most of the conversation is about the compensation of Executives and whether or not

sustainability has made inroads in, let's say a Management Board's pay.

00:11:18 And usually, they're being compensated through the stock price development, cause they

usually get a lot of stock revenue and margin. So they have a lot of things that are kind of

backward-looking.

00:11:30 Now, the question is how can you create more forward-looking goals around sustainability

issues like employee engagement, customer satisfaction, environmental performance, and,

and, and...

00:11:42 And the communication is also a good sign. If the line-of-business leaders start to embrace

sustainability as part of the way how they discuss with their teams and how they promote it

internally/externally

00:11:54 without being triggered by you, that's also a good sign.

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00:11:57 And once these things happen, if you see a couple of those, then you usually are well-advised

to take your focus to kind of keep an eye on them but not engage as proactively and drive

engagement with other groups who are a little bit further behind.

00:12:12 That's the way how you can create that engagement and create that change but make sure

you're absolutely in line with the KPIs that they have.

00:12:20 And the good news is that in sustainability that business case is strong enough to get that

engagement going.

00:12:28 This is the end of unit 1 in week 5 “Engaging Line-of-Business Leaders”. In the next unit, we'll

talk about engaging employees. And until then, be the change!

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WEEK 5, UNIT 2

00:00:14 Hello and welcome back. It's great to have you with us. We are now in week 5, unit 2:

Engaging Employees.

00:00:22 In the previous unit, we discussed how to engage line-of-business leaders.

00:00:27 And we were going through initial objections, we discussed the engagement map, and how

you can actually see that you're making some traction with those folks.

00:00:36 In terms of how to hand over the baton, if you will, to ensure that they're driving sustainability

and multiply the sustainability course further into the organization.

00:00:48 So this unit: Engaging Employees. And that is so difficult!

00:00:53 The definition that Wikipedia has on this topic defines an engaged employee as one that is

enthusiastic about their work

00:01:02 and takes positive action to further the company’s success.

00:01:06 So engagement is actually something you can observe through the actions that people take.

00:01:12 And that's how we are also defining engagement in sustainability terms:

00:01:17 An engaged employee in sustainability consistently practices and promotes sustainable

actions in work and in life.

00:01:26 I find it quite interesting. Many of the people that I know in SAP who are extremely engaged in

sustainability,

00:01:32 they don't really differentiate between their attitude at work and at home.

00:01:38 It's a continuous, if you will, drive that they have to further sustainability no matter where they

are.

00:01:45 And they're extremely happy that the company provides them this platform.

00:01:48 In fact, I do believe there is quite a good connection between engagement overall and how it

can be furthered with sustainability.

00:01:56 And on the other hand, if you do not have an engaged workforce, it is hard to engage it with

sustainability alone.

00:02:07 Let's take a look at employees and obviously, they come in all different shapes and forms—we

discussed diversity before, but not only this.

00:02:15 They also have very different motivations why they are looking in sustainability. And if you're

engaging employees,

00:02:22 it is important that you understand what the triggers are:

00:02:27 Is it altruistic? Are they doing this to serve a bigger purpose? Is it idealistic or maybe is it

because they've become a parent or a grandparent?

00:02:36 Often triggers that make people want to engage in altruistic fashions.

00:02:41 Other people are much more motivated by innovation and competition. They want to win, they

want to win for their personal benefit.

00:02:48 Others are more opportunity-driven, financial opportunity-driven or just by opportunity to make

business.

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00:02:55 So, there are very different drivers. And when you engage employees, you need to be aware

that you need to be

00:03:03 precise and you need to continue to repeat the same messages so that they have a chance to

sink in.

00:03:10 And while you're doing that, the employees that you're talking to are going through a variety of

phases—

00:03:16 from awareness, to being enabled, to being engaged, and then to have changed, which is what

you can witness through their behavior.

00:03:25 So at the beginning, it's all about even hearing your voice and understanding what you're trying

to say so that they can become aware.

00:03:33 That's often hard enough in a large organization where many people are communicating,

00:03:38 which is why you want to enlist the help of the CFO

00:03:42 or widely regarded line-of-business leaders in the company to engage the employees in the

first place.

00:03:48 Then it's also about believing. So, you know, I hear you but do I believe that you have a point?

00:03:55 So you need to create an environment where you have the factual underpinnings to make your

case.

00:04:00 Then it's about acting. And often, the first action is triggered externally so that they're really

now getting engaged, they have done something different because of this engagement.

00:04:12 But what you want to have happen is that they continuously and repetitively start to show an

adjusted behavior.

00:04:20 And that's when they have truly changed, and that's obviously where you want to get them.

00:04:24 But it will take time to go through all these phases.

00:04:30 You also want to make sure that there is different potential for contribution, depending on

people's local conditions,

00:04:38 on the roles and the content of work that they have.

00:04:40 And it's important that you engage people not just in a more generic way, on a global scale.

00:04:47 For example, we run engagement campaigns in specific countries, in specific cultural

backgrounds. And the way how we communicate and the kind of values we use to get people

to act and to act repetitively are different by region.

00:05:04 The framework we're using to engage employees is the McKinsey Engagement framework.

00:05:09 And I want to kind of quickly go through this and show you an overview and then we'll go into

each and every one of those four a little bit more specifically using an example.

00:05:17 So this framework here is helping to manage organizational, process-related, people, and

individual change aspects.

00:05:25 And the first is the structure. So what is the governance, what are the formal mechanisms,

what are the targets that you're really trying to put in place.

00:05:33 That is one big element of the framework.

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00:05:37 And the theory says that you need to have all four, by the way, to get people to act repetitively

and to truly embrace change.

00:05:46 The second element is processes and tools. So these are the best practices, the skills

development, the IT support that you create,

00:05:54 the process changes you implement that should really drive that change.

00:05:56 And then communication is all about the change story. What is the way how you communicate

that effectively with your target audience?

00:06:09 What are the actions, what are the visible wins that everyone can see and then simulate,

emulate, in order to go forward?

00:06:16 And then finally, role models and incentives are really key.

00:06:21 So your leadership needs to be enlisted. They need to start behaving differently first.

00:06:26 And the incentives you create, they can be non-financial, they can be financial. But they need

to be there and they need to be understood.

00:06:34 And most importantly, they need to have an immediate benefit. We'll talk about that a little bit.

00:06:41 But if you say you can help the planet in 50 years, that is only marginally as effective as an

incentive as, let's say, I can help you save money tomorrow.

00:06:51 And by the way, you're also helping the environment.

00:06:54 Okay, so let's take a deeper look.

00:06:57 From a structures perspective, you really want to get your governance organized.

00:07:01 The organizational structure needs to be clear. We discussed different ways of line

organization, matrix organization, network organization.

00:07:10 Whatever that is, how you want to drive that change, and whatever the policies are that you

want to accompany that change,

00:07:17 That needs to be clear, and it needs to be clear before you start communicating.

00:07:23 The formal mechanisms, the engagement leader that you potentially employ in order to drive

that engagement with employees,

00:07:30 the line managers who need to cascade some of those messagings and targets that have

been set.

00:07:36 All those things need to be in place. Those mechanisms need to work.

00:07:40 And then additional measures, like a Change Agent Network can be employed.

00:07:48 These are people—for example at SAP we have more than 100 of those—

00:07:53 who can spend up to 10% of their work time driving sustainability within their line of business

and their location.

00:08:01 And because we are such a widespread organization, this is a fabulous way to continue to

engage employees locally in ways that matter to people

00:08:11 from where they actually work and the cultural background that they actually have.

00:08:17 The targets need to be clear and measurable. We've had a beautiful section about targets

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before. And you want to publicly monitor the progress.

00:08:26 As we move forward to the tools, this is all about the best practices.

00:08:30 This is about, for example, idea management.

00:08:33 And one of the things I wanted to do as we're going through these different phases is I wanted

to a little bit explain what we've done

00:08:42 with the background of enabling and helping our employees to carpool to work,

00:08:47 specifically because about one third of the target-relevant emissions that we have at SAP are

caused by cars—

00:08:56 employees commuting to work, corporate cars, or employees on business trips who are using

rental cars.

00:09:03 What we have done then is we have understood that we want to do something about this and

put a special focus around that.

00:09:10 We created the governance and the ability to measure the impact of cars on our overall carbon

emissions.

00:09:17 Then we went out and we did an idea contest.

00:09:21 So we were collecting ideas from employees, and two employees had the idea of creating an

app that would automate finding carpools to work.

00:09:33 This tool is called TwoGo.com. You can see it online.

00:09:37 That's embedding, if you will, sustainability into everyday work. In this case, into the actual

commute.

00:09:45 Next to the skills development that you need in order to have people understand those

processes and tools,

00:09:52 no matter what they are, if it's a carpooling app or if it's something much, much bigger, like an

app that can help you analyze your sustainability performance,

00:10:02 it's really key that IT is not just seen as a tool to track and to analyze, but actually a tool to

engage.

00:10:11 I want to show you a little bit how that looks by giving you a glimpse into the TwoGo

application.

00:10:19 So this is the Web page around TwoGo, and you can see that you can log in and sign up up

here.

00:10:27 You have the mobile applications, so you can actually go and download this app. Even what

I'm showing you right now, you can download that from Google Play or the App Store if you

search for “TwoGo by SAP”.

00:10:41 And in essence, what this tool does is it helps you define your location of work, define your

location where you live,

00:10:49 and then it starts looking for potential rides to get to work automatically.

00:10:55 So for example here we have a couple of rides that are now coming in for people who are

trying to go from Fronreute to Markdorf, somewhere in southern Germany next Wednesday.

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00:11:07 Once you download this app, and let me just open the app quickly for you,

00:11:12 it first of all will show like this. So just tap on the Free Demo button on the top and the

application will log you in.

00:11:20 Many people who have used SAP apps before, they see that this is different from what they

thought an SAP app looks like,

00:11:28 so this is built for the consumer, for the employee.

00:11:33 Essentially, the application finds you shared rides to work.

00:11:38 So obviously at 06:01 on Monday the 17th there's a ride there that was happening between

that person, Gerd Bosch, and Michaela Schneider.

00:11:51 You can find a little bit about Michaela specifically. You have her cell phone in case you want

to find out where she is.

00:11:58 You can also obviously look at the ride. You can see from where to where this ride is going.

You can actually see the route.

00:12:06 Because TwoGo would only find you a match if it is within the type of restrictions you set, how

many minutes of detour do you want to do,

00:12:14 and where do you want to pick people up? Only close to the originated destination? Or are you

willing to pick up people along the whole route?

00:12:23 You can define routes, you can create recurrences, and so on

00:12:28 Also what's quite nice is that creating a new request is extremely easy.

00:12:35 For example, you can say Okay, on Thursday I have an early meeting, I want to be at work at

7:15.

00:12:40 And because I start early, I'm trying to find a way to go home after 4:30 that day.

00:12:47 And you just push that one button and it's going to find you a shared ride. There are some

things in terms of where you can define whether you want to be a drive or a passenger or so

on.

00:12:56 Essentially, we created this beautiful app and 12,000 people at SAP are using this app right

now.

00:13:04 If we go back to the slides, we were expecting that this is enough.

00:13:10 Just giving people the tool, promoting it a little bit internally to get great adoption. And we

forgot about a couple of things that needed to become clear.

00:13:18 First of all, the communication initially was very, very important because just carpooling to work

didn't serve that bigger purpose.

00:13:28 So we created that change story, about the fact that every day at SAP, our employees

collectively commute from earth to the moon, moon to earth, and back to the moon. Every day.

00:13:42 The enormous waste of all these people driving by themselves, while they could share rides,

00:13:48 while they could enhance their professional network within SAP, while they could communicate

about the greatest innovations that are happening in the company,

00:13:56 while they could save money or even go in the carpool lane.

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00:14:00 All those things needed to be said much more prominently than we did. Because originally, we

thought this is a carbon reduction app.

00:14:09 We underestimated the attraction of this thing in terms of its social value, and that's what has

then been promoted much, much more strongly.

00:14:18 So in other words, we went from “save the planet” to “know the gossip” as the key reason why

people would come in.

00:14:26 There are really three steps in terms of how to establish this kind of awareness.

00:14:33 And the overall holistic need for change should be understood by everybody.

00:14:39 If you can tie that to your, let's say, innovation strategy, and that's why you want to give people

a platform to talk about that innovation in the car, that's creating this kind of connection.

00:14:49 The big picture is extremely important here.

00:14:52 And then you want to break it down to tangible actions. One of those tangible actions is

download the app and then go and use it.

00:15:00 And you want to share visible wins. You want to show, within the company, the 12,000 users

that are using this.

00:15:07 You want to share the kind of impact that they have, for example, that they avoided 130 tons of

carbon,

00:15:14 for example, that they avoided 1 million kilometers driven,

00:15:17 and for example, that they created 3,000 person days of networking where they could enhance

their personal network.

00:15:24 Those things need to be shared. And they need to be shared repetitively because not

everyone listens all the time to every one of those channels.

00:15:32 When you communicate, it is very important to understand your audience and to communicate,

whenever it's possible, in a variety of ways.

00:15:42 And this communication should be additive, not subtractive. in other words, rather than saying,

“Don't drive to work alone”, which is subtractive,

00:15:51 say, “Have more fun driving to work by sharing a ride”. That's additive. I'm giving you

something. I'm not taking something away.

00:16:00 The conversation should possibly be in person and not virtual. That means you want to enlist

lots and lots of multipliers.

00:16:07 But we're also running things like coffee corners about sustainability

00:16:11 in addition to the big, virtual all-hands meetings.

00:16:16 You want to create pull mode, not push mode.

00:16:18 What you do should create value, and people want to go after that value.

00:16:23 You shouldn't have to shove it into their faces.

00:16:26 So everything from blogs, and things where you have online discussion forums where people

like to engage

00:16:33 that's an effective way of driving this type of communication.

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00:16:37 And do it in a fun voice, not a corporate voice. So we had lots of stories shared about how

people, for example, commuted together with the CEO,

00:16:47 which is a beautiful extension of this from just the communication into the role-modeling.

00:16:54 Trust me. When the CEO offers you a ride in his or her car, going to work, that is a fabulous

incentive.

00:17:02 And it shows leadership because now it's a public endorsement of what you've been saying

00:17:08 and it's a personal story of the CEO too.

00:17:11 It was just amazing to see all the blogs written about people who had ridden to work together

with our CEO.

00:17:19 And that, then, creates more adoption of the behavior. Because if the CEO can do it, or if that

line-of-business leader can do it, then I can do it to.

00:17:29 And there obviously is an advantage.

00:17:32 The incentive, as I said before, only then is an incentive if it creates a personal and immediate

benefit.

00:17:41 Everything else is not an incentive. I always like about WII FM, which is the world's most

favorite radio station.

00:17:49 And it stands for What's in It for Me? WIIFM.

00:17:54 That's what people are interested in.

00:17:57 When you create incentives, the first reaction is to create a financial incentive because that's

probably one of the most powerful ways to do it, you believe.

00:18:07 But honestly, at SAP, people mostly can afford to drive to work alone. That financial incentive

is not so strong.

00:18:16 So we were venturing into other ways of creating incentives.

00:18:20 One idea we had was that during the month of service, when we are doing a lot of

volunteering, we're also paying €1 for every kilometer that was shared between employees.

00:18:33 So you're creating a social benefit for other people. You appeal to people's altruism.

00:18:38 And then they start picking up ride-sharing more.

00:18:41 But really what happens, really the best way to create this kind of engagement and to drive

incentives is if you give people things money can't buy.

00:18:52 So, for example, that backstage ticket at a large corporate event, where they can meet that

musician they've always wanted.

00:18:57 Create a lottery around that, and you'll have lots of engagement.

00:19:00 People want to do things like that. Give them recognition. Give them time.

00:19:06 Reserve that parking place so that they don't have to go look for parking when they carpool to

work. Those are the kind of things.

00:19:13 And highlight the social aspects of what they do.

00:19:16 We are human beings and we like the social connection, so that's a very strong motivator.

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00:19:22 It could be making new friends. It could be meet the CEO.

00:19:26 Those kind of things work truly well.

00:19:28 And then sometimes, innovation is also a great incentive if you're allowed to be the first to use

this.

00:19:35 So we have beta users of TwoGo who get to use new features before others,

00:19:40 and that is a way for us to say thank you to those who use it extremely often and we value their

feedback very much.

00:19:48 So these are the four areas of this framework,

00:19:53 all the way from setting your structures to processes and tools to communication and then

finally role models and incentives.

00:20:01 And again, if all four are applied, there's a really good chance you get that change going,

00:20:07 and you can move your organization and engage your employees in powerful ways to embrace

sustainable practices.

00:20:15 This concludes unit 2 about employee engagement. In unit 3, we'll discuss engaging society

with what's also known as corporate social responsibility.

00:20:26 I look forward to seeing you then. Until then, be the change.

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WEEK 5, UNIT 3

00:00:14 Welcome to week five, unit three. Thanks for stopping by.

00:00:18 In the last unit, we talked about engaging employees.

00:00:22 And we discussed the engagement framework of McKenzie,

00:00:25 those kind of four elements that all need to be present for you to successfully engage the

workforce.

00:00:31 Now in this unit, we talk about engaging society.

00:00:33 In other words, corporate social responsibility, or CSR, as it's often abbreviated.

00:00:40 Here's a note of caution.

00:00:42 In some cultures, CSR is used as a synonym, as an equal term, to sustainability.

00:00:51 I see CSR more in the tradition of what has evolved from corporate citizenship,

00:00:57 which was mostly about philanthropy,

00:00:59 now into corporate social responsibility, which is much more about

00:01:03 creating shared value, creating simultaneously value for both society as well as the business.

00:01:12 So this is not just about the imputs of, you know, how much cash did you give or how much

time did you give or how much technology did you give away.

00:01:21 It's not just about how bad is the situation in society.

00:01:25 It's about truly understanding two questions.

00:01:29 The first one is: How can you add value by evolving business activities and goals?

00:01:35 And number two: How do you invest in society in a way that helps both society and your

organization and your industry?

00:01:44 So in other words, whatever you do needs to be in line with your long-term goals,

00:01:48 and it should be crafted in a way that you do create shared value.

00:01:54 Now, when you look at the core assets that you have, then...

00:01:59 At SAP, we are leveraging mostly three things.

00:02:02 First the talents. So volunteering or team volunteering to do team building on the site of

volunteering,

00:02:08 mentoring and coaching activities,

00:02:11 as well as top-talent sabbaticals. And I'll give you a couple of examples of how that played out

for us.

00:02:17 The second thing is to truly do donations of technology,

00:02:22 so you actually leverage the things you've already built and make that available to people in

need or emerging entrepreneurs.

00:02:31 Because if we create value for emerging entrepreneurs, that in turn drives economic activity,

and that's what we thrive on.

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00:02:42 In the same way, if we drive education, that in turn creates people who have the right skills and

the right appetite to going into IT,

00:02:53 and so again we benefit from that.

00:02:56 And finally, you have strategic social investments where you tap into capital.

00:03:01 And I said before that the most powerful engagements are those

00:03:05 where you invest your talent, your technology, and your capital

00:03:09 to solve one problem in a way such that that value to society comes back to you as a

company.

00:03:15 In essence, that's the only way how you will stick to doing this

00:03:19 even though you might have new leadership that has different priorities and different

backgrounds.

00:03:24 Because this is making sense for the long term of your business.

00:03:31 We at SAP focused initially a lot about the input,

00:03:35 and we weren't so much focused on the output of the initiative.

00:03:38 So we would ask, you know, how many copies of a piece of software have we given away to

non-government organizations?

00:03:35 Now, this is changing when you ask the question of what's the actual impact you've had by

giving that software away.

00:03:51 And that's one example of how you're shifting from input to outcome.

00:03:55 Another example is we were actually counting the hours of volunteering that SAP employees

have performed.

00:04:05 And we have a volunteering culture of which I am very proud.

00:04:09 However, what we really want to do is we want to use the special skills that our employees

have in volunteering.

00:04:15 So, for example, rather than painting a school building,

00:04:19 I'd love our people to go into the school and teach computer science.

00:04:23 That's using their skills to the max, and that's really where we are elevating not just from

quantity,

00:04:30 but from a quality perspective with regards to our social activities.

00:04:34 So that's a little bit of an overview.

00:04:36 Let me give you three examples.

00:04:38 The first example is from the world of social sabbaticals, which we find very, very compelling.

00:04:45 And it's not what it sounds like. It's not working while you're on vacation.

00:04:50 It's actually helping give NGOs and entrepreneurs access to world-class talent.

00:04:56 So you're actually working, but it's not vacation. It's actually work time.

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00:05:01 And it gives them the ability to tap into the new ideas, into new practices, into new

technologies and relationships

00:05:08 that those skilled employees of SAP, in this case, are bringing with them.

00:05:14 The value for us is very, very much increasing the loyalty with the company.

00:05:20 Also helping in talent acquisition.

00:05:22 I mean, how exciting is this to go to Brazil and help some startup that takes people out of

poverty to develop, let's say, a business plan?

00:05:30 Those things are truly attractive to people who want to make a change in the world while

working for a large company with a lot of impact.

00:05:39 Also, leadership development—those people who go on sabbaticals—

00:05:42 when they arrive, they have skills that are usually not present,

00:05:48 at least not hugely present, in the places where they go.

00:05:51 And they can truly add value.

00:05:53 That helps with their self-esteem, with their own understanding of their capabilities

00:05:58 and it improves their leadership skills overall.

00:06:03 And then obviously there is a social impact for employee engagement that we really like to see

as well.

00:06:09 So the impact for the first year where we've done these type of social sabbaticals

00:06:14 we had around 50 participants in 30 nations,

00:06:18 44% women, 33% Millenials,

00:06:21 and with a mix of skills and expertise.

00:06:25 That number doubled in 2013 to 72 participants who were actually sent and working with

00:06:34 16 different organizations in 4 different geographies.

00:06:37 So a lot of activity. This is very, very attractive.

00:06:40 We have lots of people within SAP who'd like to do this

00:06:43 because it's making their skills count in a socially relevant way

00:06:48 and that creates shared value for those who are being helped and for us, in terms of a

leadership development perspective

00:06:55 and in terms of our social performance.

00:06:58 The second example—and by the way, I forgot—

00:07:01 if you look below the pictures you can always see the link.

00:07:04 If you type that in, you can actually watch videos that are giving you more details on these kind

of different examples.

00:07:14 The next example is a way how SAP helps schools in a public-private partnership

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00:07:22 to help with creating more knowledge around science, technology, engineering, and

mathematics, often abbreviated as STEM.

00:07:32 Our goal here is to really develop the next generation of leaders. And what we created is the

B-TECH.

00:07:38 It's called the Business Technology Early College High School.

00:07:42 It's a six-year high school program, so to the 14th grade.

00:07:47 And it's done in partnership with the state of New York and Queensborough Community

College as a first pilot.

00:07:53 And we're also pursuing similar models in other geographies, like Chicago and Vancouver.

Hopefully launch those the fall.

00:07:59 So here's how it works.

00:08:01 Students follow the traditional high-school curriculum, but they have the choice of choosing

one of two tracks:

00:08:08 technology design or technology developer.

00:08:12 And what they do then is embrace these topics but in addition to just the knowledge, they are

also developing their business acumen,

00:08:21 their ability to present, their ability to perform design thinking, problem solving skills, and so

forth.

00:08:29 We are also not just helping the students by creating these programs,

00:08:33 we're also helping with educating the college professors and the teachers of those students

00:08:38 to teach these types of skills that we, as a company, have a lot of demand for.

00:08:43 Every student has an SAP mentor, so an SAP employee who can help them ask questions

00:08:50 and help them find their way into life at that young age.

00:08:54 Students also work with SAP, and we're pursuing things like internships and so forth with

them.

00:09:03 The impact was 100 students in a first student cohort.

00:09:08 We launched it in three schools in North America. I talked about them.

00:09:13 A very, very exciting project. We love education.

00:09:18 And this is a way how we believe those kind of private-public partnerships can work out really

well.

00:09:23 So let's move on to the final example,

00:09:26 where we are trying to breed not just the new employees and the new kind of people who work

in companies that are SAP customers,

00:09:33 but we are truly trying to breed the leadership, the type of businesses that can become our

partners and customers in the future.

00:09:42 This is really where we are providing very experienced senior expertise to the business leaders

of those types of companies

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00:09:53 so we are helping those to overcome barriers to success,

00:09:58 access to SAP technology, all those kind of things.

00:10:01 And in fact, what we do is we're building very tight connections with some small and medium-

size enterprises

00:10:08 in emerging countries and emerging economies.

00:10:11 We help them scale their business models.

00:10:13 We like business models where there is a social impact, so that's a multiplier effect.

00:10:17 So we help others and they are actually trying to help others as well.

00:10:23 One of the most prominent examples is an entrepreneur who has actually taken lots of people

who lived in poverty, has given them work,

00:10:32 and has been very, very successful becoming a supplier of very large, North American retail

chains.

00:10:38 We have selected more than 50 entrepreneurs and have matched them up with mentoring,

00:10:45 have created tremendous value for them,

00:10:47 and these are the kind of strategies that I believe are very compelling

00:10:53 because they create value for SAP and for society.

00:10:57 I want to quickly conclude this unit by giving you a little bit more insight in how other

companies are doing things.

00:11:04 I like the example of Unilever,

00:11:08 who is distributing specific types of goods like soap and shampoos and other personal care

products

00:11:18 through rural women to villages of less than 2000 people, so you're actually improving hygiene

there,

00:11:25 which has obviously a positive social effect in terms of health and so forth.

00:11:30 And Unilever found a way to engage these rural women and help them become, if you will,

00:11:38 resellers of their goods that are essential.

00:11:40 And they can sell into areas where usually there is no access to these types of products.

00:11:45 GE has an interesting project called heathymagination

00:11:52 in which they are driving access to health care through a variety of activities

00:11:58 where they are bolstering their own product line at the same time as they're helping

underprivileged people gain access

00:12:04 to state-of-the-art medical equipment.

00:12:07 Other companies like Western Union was running a great program where they're helping

migrant workers be economically successful

00:12:16 in order to turn them into customers.

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00:12:19 Most importantly, with all those types of schemes is that you tap into your core assets.

00:12:25 As a software company, it's your software.

00:12:28 As a bank, it's how you're actually making people your customers.

00:12:35 And that the value you create is truly shared.

00:12:38 So there is significant value for those in society and there is long-term value for you as an

organization.

00:12:47 This concludes the third unit of week five, called Engaging Society, or Corporate Social

Responsibility.

00:12:53 In the next unit, I will outline the topic of engaging business partners, authorities, and opinion

leaders.

00:13:00 I look forward to seeing you again there, and until then—be the change.

20

WEEK 5, UNIT 4

00:00:13 Welcome to week five, unit four. Thanks for stopping by.

00:00:17 In the last unit we discussed engaging society and we looked at corporate social responsibility.

00:00:24 In this unit, we'll give you a very brief overview on how companies are engaging business

partners, authorities, and opinion leaders.

00:00:34 I've brought you a slide here that describes, in a little more detail, how companies are

engaging with suppliers.

00:00:40 And we had the conversation in week three about what the new business processes look like

00:00:48 that take sustainability into consideration.

00:00:51 So here today I brought you the example of a company that is extremely well-versed in doing

this, and that's Phillips.

00:00:59 If you have the time, go and check out their supplier sustainability involvement program that

they have launched in 2013. It can be found on the Web.

00:01:07 And also, we have taken a screenshot of part of the activities that they are concerned about

here.

00:01:15 In their supply involvement program, they take a look at things like labor, health and safety,

environmental questions,

00:01:22 as well as ethics and the management systems of their suppliers.

00:01:25 And in each and every one of those categories, they focus on a variety of topics.

00:01:31 So for example, when it comes to labor, they are dealing with questions of free chosen

employment.

00:01:37 Is there any forced labor there? Do you have child labor? Can you guarantee, or what are you

doing to avoid it?

00:01:43 What are the working hours here? Is this humane treatment? What are the wages and

benefits?

00:01:48 Do you have nondiscrimination regulations? How are you enforcing it? Things like that.

00:01:53 So it's a very, very broad way of engaging with your suppliers to partner up with them.

00:01:58 And that's really the best practice.

00:02:00 It's not so much just “I'm telling you what to do” to your supplier,

00:02:04 but I see lots of sustainability conversations focused at using the buying power of one

company

00:02:10 to gradually evolve the supply chains to do more things in better ways.

00:02:15 One of those things to engage, to start that engagement, is a supplier code of conduct.

00:02:23 You can also, for example, ask for sustainability declarations that usually originate from the

suppliers to be delivered to you.

00:02:31 But in essence, what these engagement tools provide is they define the standard,

00:02:38 the kind of vision that the supplier and their customers want to share in order to evolve the

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sustainability strategy.

00:02:48 It's not just about giving them the questionnaire or giving them a supplier code of conduct

which says:

00:02:54 Thou shalt not have any child labor in the value chain.

00:02:57 What needs to happen is also an engagement, for example,

00:03:01 where the customer is training the supplier in ways to find out,

00:03:06 to go and audit their suppliers to avoid these types of incidents.

00:03:11 So it's not just pushing requirements down.

00:03:14 It's actually also providing help, training people to implement what you want to see

00:03:19 not just within their own four walls, but with their suppliers as well.

00:03:24 Scorecards are a very common way of creating this type of engagement and to make things

measurable.

00:03:30 Now this measurability is key because you want to see, over time, how your suppliers are

evolving.

00:03:36 And if they're not, you want to intensify the collaboration and the dialogue with them.

00:03:42 There's also risk assessment and audits happening. I've mentioned those before.

00:03:47 And what really needs to happen in many cases is some type of consequence management.

00:03:52 Initially, when companies are engaging suppliers, this happens in the form of a questionnaire,

for example,

00:03:58 and you get a lot of answers.

00:04:00 But you haven't really decided what to do with answers you do not like to hear,

00:04:05 or your suppliers just do not disclose that information.

00:04:08 So you need to create the consequences. You need to understand what you're going to do if

the suppliers do not play along.

00:04:17 And that is a very broad set of opportunities,

00:04:21 all the way from cutting them off as a supplier

00:04:24 to asking again for the information in this questionnaire.

00:04:29 So you need to.... Usually what happens is that over time, over many years,

00:04:34 the type of reaction that the customer shows if suppliers are not moving along becomes more

and more severe,

00:04:39 including the termination of the business relationship, potentially.

00:04:45 The impact here, we've discussed that, is online questionnaires, product safety, and

stewardship systems who hold the recipes.

00:04:53 You need to be able to manage the entire life cycle of the product here.

00:04:57 Sourcing and procurement systems have all been mentioned.

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00:05:01 But essentially, it is a journey that needs to be taken not by one company, but by a whole set

of companies,

00:05:08 which is why the cloud offers fabulous opportunities for companies to come together and share

that information from one hub.

00:05:16 And that, I believe, accelerates the movement of the entire value chain toward more

sustainable practices

00:05:23 if the biggest customer in the chain, for example, the retailer,

00:05:29 is enforcing that kind of transparency and movement within the entire chain.

00:05:34 But, I think this example from Phillips shows very nicely

00:05:38 what a state-of-the-art engagement with suppliers looks like.

00:05:42 Much more collaborative than you might think, because everyone has their way to cover to

become a truly sustainable company

00:05:50 So companies are engaging, trying to figure things out together.

00:05:55 Let's talk a little bit about non-governmental organizations, or so-called NGOs.

00:06:01 NGOs are trying to make companies move towards more sustainability.

00:06:06 So they can be a distraction, as interpreted by some companies, and they can be of

tremendous help and support as interpreted by other companies.

00:06:15 And they have different points of view because NGOs have a big, big variety of tactics that

they use in order to make companies move.

00:06:25 So there are the very friendly tactics of dialogues

00:06:29 where they're just trying to help you understand, see there is an issue in your industry, and we

think this issue is very, very important.

00:06:36 So can you, for example, adopt a voluntary code of conduct?

00:06:41 Can we do to you what the more sophisticated sustainability companies do to their supply

chains with supplier codes of conduct?

00:06:49 Could you, for example, voluntarily commit to a carbon reduction or to using less water or to

using less toxic materials?

00:06:57 That's the very, very friendly opening conversation.

00:07:00 Then it becomes a little bit more sophisticated with advocacy of sustainability reporting.

00:07:05 So they say you should have a sustainability report or

00:07:08 we'd like to see you do an integrated report because you should actually take your

sustainability strategy

00:07:14 and you should more closely connect that with your business strategy.

00:07:18 So an integrated report would be great for you.

00:07:21 They also do a lot of advocacy work with relating to government standards,

00:07:26 so they're always trying to be involved in those conversations, to further their cause.

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00:07:31 But also, they could go to more, let's say, uncomfortable practices for the companies involved,

for example,

00:07:39 by filing shareholder resolutions.

00:07:42 They are working with shareholders to say hey, by the way, we are the owners of this

company,

00:07:47 and we help those owners to articulate the kind of vision they would like to see

00:07:53 or the kind of importance that the shareholders see in specific long-term practices and how

they should be dealt with.

00:08:00 They can also get involved in the documentation of abuses and they also like to do moral

shaming.

00:08:07 There have been IT companies with “hazardous material” written on the roof and that shows

up all over the Internet.

00:08:14 So public shaming is a very effective tool of some NGOs that point the finger

00:08:20 usually not only at the company who's actually making the mistake somewhere down in the

value chain.

00:08:27 The public shaming works best if you have very strong brands

00:08:31 because that usually creates an immediate reaction or a very quick reaction by those strong

brands

00:08:36 to counter the effect of this public shaming by adopting more sustainable practices.

00:08:43 Sometimes they call for boycotts or de-investments, which is a very dramatic activity for them.

00:08:49 And finally, they could also seek punitive damages, litigation,

00:08:55 asking or seeking to get resolution around issues where they believe companies broke the law.

00:09:03 So the best practice here is very, very simple.

00:09:07 We have done really well with non-government organizations

00:09:11 by actively involving them into the conversations about SAP and about our strategy.

00:09:16 In fact, in our advisory council we have members from CDP and BSR to very well-known non-

government organizations in the sustainability field.

00:09:26 They're actively advising our senior management.

00:09:30 And that dialogue usually reveals the best way forward.

00:09:34 And the recommendation is go and reach out to them.

00:09:38 If you don't, they will find you. That happened to us in some cases.

00:09:42 But very often we reached out to them, specifically as part of our materiality analysis where we

said okay,

00:09:49 who has the ability and the willingness to engage with us,

00:09:53 discussing the most important, the most material aspects of our sustainable strategy?

00:10:01 The final slide I have for you in this unit is about legislators and regulators.

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00:10:08 Obviously, what you want to do is you want to be transparent about your engagement with

them,

00:10:16 and you also want to stay true to your primary interest as a company.

00:10:22 Because what's often happening is that companies, on one hand,

00:10:27 are creating a marketing message about sustainability and about energy efficiency and about

all the great things that they have done,

00:10:34 and then you find out they're actually lobbying against regulation that could create, for

example, environmental progress.

00:10:41 People are very, very sensitive to these kinds of perceived conflicts of interest.

00:10:46 What I've seen as a best practice here is that companies stay absolutely true to their primary

interest, which is their business interest.

00:10:55 And if they believe it's in their best business interest to be against specific regulation, for

example, that could preserve the environment,

00:11:03 then they should absolutely refrain from making marketing claims that just assume or suggest

otherwise.

00:11:11 However, if you have a sustainable strategy,

00:11:15 then obviously you have made environmental and social questions part of your business

strategy.

00:11:21 Then, obviously, you will stay true to your primary interest.

00:11:25 You do not need to resolve these types of conflicts.

00:11:28 And in this way, that's when people appreciate it because people also know that

00:11:33 not everything you would maybe want to do can be done immediately.

00:11:38 What you can also do as a company is assisting in fact-finding and research,

00:11:43 and many people question the reason why there is so much lobbying going on with

governments in the first place.

00:11:49 And while you might not find it satisfactory that specific companies are using

00:11:58 their power, their economic power, to influence the way how rules are made,

00:12:03 I think it is also a question of fairness to allow companies to makes sure that their voice is

heard in terms of the regulatory process,

00:12:11 for example, to help the legislators understand what actually is possible.

00:12:17 However, we also need to understand that lobbying and lobbying spending and the number of

lobbies are very, very high.

00:12:25 We brought you a couple of statistics from a database called OpenSecrets.org that has

actually unveiled these kinds of numbers.

00:12:34 So there's lots of lobbying going on.

00:12:36 If you do engage with government, stay true to your primary goals and primary interests.

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00:12:42 In this way, you're not running into conflicts.

00:12:44 But you need to make sure, obviously, that a sustainable strategy is in your primary interest,

and then everything will be fine.

00:12:52 Alright. So I said it's a short unit. There you go.

00:12:56 This concludes week five, unit four: Engaging Business Partners, Authorities, and Opinion

Leaders.

00:13:01 In the next and last unit of this week, we'll discuss the topic of engaging investors.

00:13:07 I look forward to seeing you then.

00:13:10 Be the change.

26

WEEK 5, UNIT 5

00:00:13 Welcome to week 5, unit 5: Engaging Investors. Thanks for stopping by.

00:00:18 In the last unit we talked about engaging business partners, authorities and opinion leaders.

00:00:24 And we talked about some tips and tricks how to deal with suppliers, with legislators and also

with non-government organizations.

00:00:33 Now, this unit is really exciting because it's about the big, big money. This is about socially

responsible investing.

00:00:41 And it is defined as an investment strategy that considers two things: both, the financial return

of an investment

00:00:49 and the social good that this investment creates. So, they're asking about the sustainability

impact, the, you know,

00:00:56 whether this investment creates green technologies, or how green is it, how socially conscious

is it.

00:01:01 How ethical is it to invest in this industry or in this company. So, those are the things that these

SRIs, these investors are asking.

00:01:10 And they often want to talk about ESG, and ESG is an abbreviation you hear a lot in this field.

00:01:17 And ESG stands for environment, social performance, and governance.

00:01:23 So, they ask questions about environmental things like your energy use, biodiversity, land use,

you know, those kind of things.

00:01:30 They talk about your social performance, you know: How is the diversity in your company, how

engaged are your employees, how much tax are you paying, are you donating any money to

society and so on.

00:01:40 And they talk about governance. They'd like to understand the checks and balances in your

company: What's the structure of leadership,

00:01:47 What is the compensation of your executives, what are the corrective factors, the corrective

ways that,

00:01:56 you know, people can drive this company to perform great in the long run.

00:02:02 Now, as you know investing is always a game with the future: Stock price represents the hope

that's in a company

00:02:10 and so socially responsible investors are not just looking at the financial prospect of the

company; they're taking a more holistic point of view,

00:02:18 considering ESG in addition to just the dollars or the euros or whatever currency you have.

00:02:26 Now, the exciting part of sustainable investment is that it is very, very large and it is growing at

an amazing speed.

00:02:35 More and more money is being spent, not just in investing,

00:02:40 but investing in a way that meets the values of the investor and not just the expectation of

financial value from the returns.

00:02:49 So, currently, in 2014, an amazing 1.3 trillion dollars are assets are under management.

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00:02:59 So AUM stands for assets under management; and you can see on the right-hand side how

this number has been growing over time.

00:03:06 Actually, it's growing at a compound annual growth rate of 26 percent, and it has been growing

in this way between 2010 and 2013

00:03:16 from 510 billion in 2010 to 1,293 billion in 2013.

00:03:27 About 9.2 percent of the total institutional investment in Europe is social, is SRI-types of

investments.

00:03:38 That's an amazing number and it's growing so fast. So, it is absolutely important, if you want to

have a positive impact on your stock price that you do engage with those investors.

00:03:50 Those investors come in two different forms: They, for example, come as, what I would call,

core SRI investors.

00:03:58 They only invest in a stock, only, if their ESG requirement is met. So, in other words, they look

at the total opportunity to invest

00:04:07 and they look at the subset of companies that meet their SRI requirements

00:04:12 and those are then analyzed with respect to the financial return and the best investments are

being made.

00:04:19 So, there's no way they would invest in anything that is not ESG-compliant in their language.

00:04:27 Usually SRI investors are more long-term. Some of the biggest pension funds, for example,

are very, very keen on making investments that are long-term

00:04:37 which is understandable for a pension fund.

00:04:41 Now, mainstream investors have often a little bit of a different perspective. So, they

increasingly consider ESG criteria

00:04:50 as some influencers of a decision but ESG itself is not essential to investment decision.

00:04:58 So, they are looking at risk reduction, things like that, but they would not exclude, let's say,

entire industries from investing,

00:05:07 like: I'm not going to go and spend any money on alcohol or tobacco or gambling or whatever

they consider a "sin" industry in SRI.

00:05:16 They would just say, okay, I'm having a broad view and I look at my risk and I analyze not just

the financial,

00:05:23 I also analyze the other dimensions of performance we've discussed so much in this course.

00:05:29 Sometimes the mainstream investors though do have dedicated SRI funds, and then they are

working exactly the way as the core SRI investors do.

00:05:40 They would exclude anything that doesn't meet the ESG criteria that they have set up.

00:05:47 Now, the implications for companies because of this type of focus and attention that investors

are making or giving, these types of questions,

00:05:57 really means there's risk and there's opportunity. The risk is some fundamental stuff like

00:06:03 you might work in a "sin" industry. That is not easy to change, right. Something that the

sustainable or the socially responsible investors would not invest in.

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00:06:14 That creates some kind of challenge and may create a challenge in terms of access to capital

going forward or detriment your stock price.

00:06:22 On the other side, you might have some unaddressed corporate ESG issues. So, it's not a

question of the industry in which you're working;

00:06:29 it's a question of your company specifically that they are trying to get resolved and that creates

a risk.

00:06:36 They might ask for more transparency. So, a lot of the NGOs, a lot of the companies that are

dealing with increasing transparency,

00:06:46 are doing so because they have been either created or supported by investors.

00:06:51 The CDP, the Carbon Disclosure Project, is one of those initiatives which initially was born for

investors to even gain some transparency

00:07:00 such that they see how much carbon actually is coming out of this operation and, for example,

if a carbon tax were introduced,

00:07:08 what would be the impact on this organization and on its bottom line, environmentally but also

financially.

00:07:16 Good. So, there's not only risk here. There's also opportunity that comes with this increased

focus.

00:07:23 And the opportunity, obviously, is: Driving your market cap. So, you're implementing a long-

term successful strategy anyway.

00:07:30 You have now a broadened view, your sustainable strategy. Make that known to these types of

investors because that makes you a more attractive target for them.

00:07:40 And it's a lot of education that you need to make. It's education about your changed story,

about your long-term perspective,

00:07:48 about things that are so core to how these organizations are analyzing you; and it's a fabulous

opportunity to tell that story and to drive your market cap.

00:07:58 You also might gain value from intangible assets that do not show up in your P&L but would

show up in your sustainability reporting.

00:08:06 So, you can make those things known and yet become more interesting to investors.

00:08:12 You also want to get buy-in for your sustainable strategy. These people have heard a lot of

different stories from different companies and different industries.

00:08:20 They've got some fantastic questions to ask you. So, we, and I specifically, have benefitted

from engaging with SRIs tremendously.

00:08:30 Hearing the right questions and maybe getting also wind of some early developments in other

industries that might become relevant for us,

00:08:37 specifically as we build software for other companies. You want to, in a nutshell, actively

manage your SRI engagement.

00:08:47 Now, how do you do that? The tactics that investor relations are using to engage are manifold.

00:08:55 And some are just the standard way of communicating with investors is enhanced by

messages focused at SRIs.

29

00:09:06 So, for example, your annual shareholder meeting when everyone gets together, or in your

earnings call -

00:09:12 that's when you want to tell the sustainability story. I very vividly remember Jim Snabe in 2010

using the annual shareholder meeting to

00:09:21 for the first time inform our shareholders about our carbon performance and about all different

types of elements of our performance.

00:09:28 But specifically, when he talked about carbon the very, very first time, he was interrupted by

applause from the room.

00:09:36 And he was really surprised. You could see it in his reaction. He is going through his script and

talking about these things, and he was interrupted.

00:09:44 And he was very pleasantly surprised that, you know, these investors would react so positively

to this but, essentially, the message was really, really good.

00:09:53 We have come out of the crisis and we have produced less carbon than before, as we did so,

so everyone was very, very excited about this.

00:10:04 In essence, what you want to do is: You want to establish sustainability into those normal

conversations and that's really, really difficult

00:10:10 because most of the people on those earnings calls are not asking the questions that you’d like

them to ask.

00:10:19 So in essence, at SAP, we've always have the full spread of information available to our

executives in terms of carbon impact,

00:10:27 in terms of employee engagement numbers, diversity numbers, and ... and ... and, but very

rarely do you have investors jump in and ask these types of questions.

00:10:38 They'd rather ask: Okay, you know, what kind of revenue are you going... what's the outlook

for this year, you know, do you see any weaknesses in specific markets.

00:10:47 Those are the questions you usually hear in those calls. So, what does that mean? That

means we need to do more education.

00:10:53 And education usually happens in 1:1 meetings. So, I spent a lot of time with investors talking

about the sustainable strategy of SAP

00:11:02 and why it creates a lower risk investment, why it drives innovation and thus creates

opportunity for SAP, both, in the short and the long term.

00:11:12 So, that story must be told, investors are educated and once they draw these connections

between non-financial and financial performance, that's when they start getting interested.

00:11:23 We also are part of a variety of conferences that are specifically dedicated to sustainable

investors, so we usually show up.

00:11:33 We also do dedicated investor calls, so in essence, we have our normal earnings call every

quarter

00:11:40 and, in addition, we're running investor calls dedicated to the SRI investors we have visited

before, that we have targeted and bring them up to speed.

00:11:50 For example, when we launch a new integrated report, we usually do a call with them, helping

them understand the innovation that's in there,

30

00:11:58 helping them make sense of the non-financial performance that we're discussing in our

integrated report and how it relates to our financial performance.

00:12:07 Then, obviously, they create ratings and rankings. We talked about the reporting just now. Also

social media plays a role. Not as strong as in other areas, though.

00:12:18 But these are some of the tactics that are applied. The gold standard is if your CEO brings up

sustainability untriggered in those regular mainstream shareholder meetings

00:12:28 because that has the biggest impact in terms of educating them and that obviously makes you

attractive to those 1.2 trillion dollars

00:12:38 that are spent on these types of investments every year. So, good luck driving your share price

up with the fabulous sustainability story.

00:12:46 This is the end of unit 5, "Engaging Investors". It's also the end of week 5, "Stakeholder

Engagement".

00:12:55 Next week, we'll discuss about sustainability reporting. I'm very excited about this, and until

then, be the change.

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