In July 2023 the UAE announced the Third Update of the Second NDC (Nationally Determined Contributions) under the Paris Agreement to reduce greenhouse gas emissions by 40% till 2030 (which is a 9% elevation compared to the previous goal set in September 2022). This move couldn’t be more timely as the planet experienced the hottest summer on record.
To reach this ambitious goal, businesses and households have to cut their share of emissions, starting right now. This climate action doesn’t necessarily imply slowing down. In fact, companies can switch to a more efficient business model in which every move is calculated and predicted and based on this, weighed decisions are made.
Let’s see how it works.
Anthropogenic emissions change climate faster than expected
The Paris Agreement signed by 196 parties in 2015 set the goal to hold the increase in the global average temperature to below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C. Crossing this bar will unleash severe climate change impacts, like more frequent droughts, heatwaves and rainfall. And that’s exactly what we’re witnessing: strong wildfires across the planet, extremely hot sea surface, accelerated loss of ice sheet and, consequently, an increase of sea level, persistent heatwaves and so on.
Experts in climate change are unanimous in the anthropogenic origin of the current global warming. And the main driver of rising temperatures are man-made emissions of carbon dioxide, methane, nitrous oxide and water vapour, which are known as greenhouse gases.
The United Nations (UN) Organization predicts that if nothing changes the world will exceed 1.5°C by 2035 and will face a 2.5°C warming by 2100. The regions that are already exposed to harsh climate conditions will suffer most. With its extreme heat, the Arabian peninsula is definitely in the elevated risk zone.
To combat climate change and its impacts, it’s crucial to significantly reduce greenhouse gas emissions. According to the Paris Agreement, the acceptable decline is 43% by 2030. The UN insists that it should be net zero emission by 2050. The most important thing is the action should be accelerated.
The UAE’s contribution to stopping climate change
To stop anthropogenic global warming, the absolute majority of countries have joined the struggle to reduce emissions. The UAE addresses climate change with a proactive approach, progressively raising goals in less than three years.
As per the latest update, the country aims to reduce man-made greenhouse emissions by 40% in the next 7 years, which correlates with the global goal set in the Paris Agreement. This milestone implies that all domestic sectors, including power and water generation, heavy industry, transport, waste, buildings, and agriculture, will collectively reduce emissions in accordance with specific sectoral targets and national roadmap. This move accelerates the UAE’s journey to net zero emissions by 2050.
Within this ambitious strategy, the UAE has also launched other sustainable initiatives. For instance, Dubai Municipality aims to increase recycled water utilization to 100% by 2030 to optimise its natural resources.
Besides, in 2019, the country joined the Climate & Clean Air Coalition (CCAC) to support minimizing air pollution and short-lived climate pollutant (SLCP) emissions. And there are plans to triple the investments in renewable energy in the coming seven years.
Adhering to a ‘pro-climate, pro-growth’ philosophy, the UAE announced 2023 as the Year of Sustainability. And with the COP28, 2023 United Nations Climate Change Conference, to be held in Dubai at the end of the year, the issues of reducing environmental footprint while driving economic, social and sustainable opportunities have never been more timely and important.
How SAP integration helps businesses to reduce emissions
The United Nations Climate Change Organization states that zero-carbon solutions are becoming competitive across economic sectors, representing 25% of emissions. By 2030, such solutions could become more widespread and be competitive in sectors responsible for 70% of emissions.
We understand that currently or generally zero-carbon is not an option in some industries. However, when it comes to fighting climate change even the smallest input counts and every company can be sustainable. On their own corporate level, businesses are able to monitor, track and even plan emissions, particularly in their supply chains. All they need is an appropriate solution cleverly integrated.
SAP IBP for a sustainable supply chain
For such cases, SAP introduced a cloud-based planning software for supply chain management, SAP Integrated Business Planning (IBP). Powered by SAP HANA, this solution combines sales and operations planning (S&OP), forecasting and demand, response and supply, demand-driven replenishment and inventory planning.
With SAP IBP, carbon footprint data and emission evaluation can be incorporated into the S&OP planning process to enable better decision-making.
For instance, SAP IBP helps organizations to:
- accurately forecast demand to prioritize products by their ecological footprint and optimize inventory positioning to reduce transportation emissions and resource consumption
- decrease cost, waste and emissions as per an optimized demand and supply matching
- get visibility into the entire supply chain ecosystem to ensure overall transparency, with carbon footprint tracking as well
- create various scenarios and ‘what-if’ situations to simulate changes and compare the outcomes in terms of emission.
SAP IBP solution helps to switch to complex planning with all the departments integrated:
Marketing, Sales, Operations and Finance. With this helicopter view, organizations have the necessary data to consider standard business process drivers and understand future carbon emissions. Thus, they can develop an efficient strategy aimed at reducing emissions with no compromise on productivity and customer experience.
How Axellect can help you thrive with SAP IBP implementation
Many businesses and countries, including the UAE, aspire to not only reduce emissions but to make their efforts transparent and easier to track. With a smart digital solution, like SAP IBP packed with visibility tools, this goal can be reached easily.
Besides, by implementing SAP IBP, businesses can attain new horizons in many other aspects.
Data unification in quantity and values. While aiming to reduce their emissions, organizations will also be able to take advantage of a new approach to data treatment. SAP IBP allows to unify the structure and consistency of master data and transactional data, e.g. transportation lanes between internal and external locations, production source data, demand, transportation procurement plans, etc. That was exactly the benefit that a global beverage producer managed to get as a result of SAP IBP implementation executed by the Axellect team. Upon data unification, the organization managed to increase the visibility of its data and get fast and transparent responses on aligned tactical plans.
The utmost precision of production and procurement plans. SAP IBP increases the reliability of calculations and decreases the number of corrections when it comes to planning production and procurement. For instance, businesses can take into account supply chain constraints, like lead times, lot sizes, production coefficients, validity of lanes and so on, when they perform calculations and generate plans. Also, with SAP IBP, they can calculate carbon emissions dependent on production, transportation and procurement plans. Plus, an additional feature of scenario modeling allows for comparing different possible plans and choosing the most appropriate one from the perspective of revenue, costs and emissions.
Better demand and production balancing. To plan and eventually reduce emissions, organizations try to coordinate their demand and production more efficiently. In other words, if a company eliminates the cases of overproduction and manages its logistics and transportation in accordance with the real demand, the carbon footprint will consequently decrease on its own. For example, by implementing SAP IBP, Axellect helped an oil producer significantly increase its plan accuracy and align it with the monthly sales and operations planning process. As a result, six months after the amount of their adjustments decreased by 25%.
Streamlined S&OP process. SAP IBP takes on all the calculations and does it flawlessly. Not only does it eliminate human-factor errors, but also speeds up the whole S&OP process. And this means a company has more time to simulate different scenarios and contemplate emission reduction. For instance, by streamlining the S&OP process in a pharmaceutical company, Axellect reduced their time spent on plan preparation by half. Consequently, the quality of the plans also increased because the company had more time for scenario modeling and exception handling.
During 30+ years of experience, Axellect has gained deep expertise in strategy consulting and digital solutions implementation that helps supply chains be more efficient and resilient. With dozens of supply chain planning experts and more than 400 SAP practitioners, Axellect has realised over 60 projects in S&OP planning and SAP IBP deployment. Now, when the whole world is struggling to stop global warming, Axellect brings its best competencies to join this climate action by helping businesses reduce their carbon footprint with the latest digital technology.