Beyond Greenwashing Using SAP Product Footprint Management to Monetize Circular Economy Models

1. Beyond GreenwashingUsing SAP Product Footprint Management to Monetize Circular Economy Models The New Financial Mandate: Monetizing the Circular Economy For years, corporate sustainability was seen as a cost center, a compliance headache, or simply "greenwashing." Today, driven by fierce regulation (like CSRD) and investor pressure, this paradigm is collapsing. Sustainability is now the new operational efficiency and the key to competitive advantage. The true transformation lies in moving Beyond Greenwashing transitioning from basic emissions reporting to fully monetizing resource reuse within a Circular Economy (CE) model. This shift demands total financial and operational transparency. The challenge? Accurately tracking product lifecycles, valuing secondary raw materials, and linking these metrics to your financial core. I. The Financial Shift: A New Kind of P&L The linear "take-make-dispose" model is simple but unsustainable. The Circular Economy, however, introduces complex financial questions: •Valuing Reused Materials: How do you account for the embedded value (material, labor, energy) of a recovered, refurbished component? •Product-as-a-Service (PaaS): How do you manage shifting revenue from one-time sales to recurring service fees, and adjust asset depreciation? •Extended Producer Responsibility (EPR): How are regulatory end-of-life fees accurately allocated to the responsible products and customers? The Solution: This complexity requires a financial backbone capable of granular, real-time costing linked directly to sustainability metrics. SAP S/4HANA Finance, with its Universal Journal, provides this foundation, linking sustainability data (as attributes) to material ledgers, asset accounts, and profitability analysis (COPA). This allows businesses to determine the true, comprehensive, audit-ready cost both financial and environmental of every product. II. SAP PFM: Calculating the True Cost of Everything SAP Product Footprint Management (PFM) sits at the intersection of logistics, manufacturing, and finance. Its purpose is to automate footprint calculation (e.g., carbon, water, waste) using real transactional business data, not just estimated averages. How PFM Works: 1.Data Ingestion: PFM connects to operational data in S/4HANA (Procurement, Logistics, Manufacturing).

2. 2.Calculation: It applies industry standards (like the GHG Protocol) and emission factors to calculate the footprint from cradle-to-gate. 3.Allocation: Critically, PFM allocates the total environmental footprint across co- products and batches with the same precision as monetary cost. The output of PFM is a granular cost component ready to flow back into S/4HANA Finance to inform pricing, profitability, and investment making circularity a financially sound model. III. Life Sciences Imperative: The Need for Hyper-Accuracy The need for accurate footprint data is most acute in highly regulated sectors like Life Sciences: •Sterilization and Contamination: PFM tracks the energy, water, and chemicals used in rigorous re-use cycles for medical devices, determining the optimal, profitable number of safe reuses. •Packaging Footprint: PFM justifies the higher initial cost of sustainable materials by tracking the full footprint of reusable cold chain containers versus single-use plastics. •Regulatory Compliance: PFM provides the verifiable, auditable data necessary to meet evolving global environmental disclosure mandates, mitigating massive legal and financial risks. IV. The Integration Imperative: Beyond Your Walls A true Circular Economy requires visibility far beyond the enterprise, spanning suppliers, manufacturers, consumers, and recyclers. This relies on seamless data exchange enabled by SAP Cloud Integration (part of SAP Integration Suite). Cloud Integration solves the "last mile" data retrieval challenge: •Connecting the Network: It uses the SAP Business Network to facilitate secure, standardized exchange of Verified Product Carbon Data (PCD) from suppliers directly into PFM. •Data Harmonization: It ensures disparate external data formats and measurement units are correctly mapped before feeding into PFM. •Real-Time Visibility: For PaaS models, it enables the secure flow of IoT data from connected assets back into SAP for continuous service billing and real-time footprint calculation. Without automated SAP Cloud Integration, PFM is isolated. With it, PFM becomes the central nervous system for the entire sustainable value chain. V. Conclusion: Unlocking the Revenue Stream The era of simple sustainability reports is over. The competitive edge belongs to businesses that embed environmental and social data directly into their financial core. The shift to the Circular Economy is a business model transformation. SAP Product Footprint Management is the engine, moving the focus from calculating a cost to unlocking a revenue

3. stream. By leveraging SAP S/4HANA Finance and SAP Cloud Integration, enterprises can prove their claims, meet demands, and fundamentally change how they create value. Ready to Future-Proof Your SAP Strategy? Contact our experts today to design your roadmap for S/4HANA, BTP, and the intelligent, sustainable enterprise of tomorrow. Email us at: sales@2isolutionsus.com Visit our website: www.2isolutionsus.com