The hole is for the overflow from your coolant pump. It directs any coolant to the outside of the engine instead of contaminating the engine oil.
If the bike is fairly new and a little crust forms, wash it off. If it persists, there is a leaking coolant pump seal.
I don't know what the sponge material is. There should be no material in that hole. If it is a blue/green colour, it may be the coolant that has crystalized.

 

The only silly question

Is the one you don't ask...

 

There are several threads on this forum related to this issue. Here is one.

http://www.r1200gs.info/forum/14-maintenance-modifications/9506-2013-r1200gw-lc-water-pump-leak.html

Agree it could be crustallized coolant. There shouldn't be a sponge in there. I would clean whatever is in there out so I had an accurate understanding of how big the leak is. Most of the posts I've seen say that if it is a few drops here and there then leave it alone but if it is steady discharge then you should replace. I have not heard of the pump failing from this issue. My 2014 had this issue and I had the pump replaced under warranty.

 

This is called a weep hole and it is normal to see a little coolant escape from the hole, there should not be enough leakage though to result in you having to add coolant to keep the level up.
The sponge (Foam Rubber Insert BMW Part # 11 11 8 546 228) is installed at the factory to hold a tiny amount of coolant to give it time to dry and prevent it from draining out of the hole so the owner doesn't see coolant and figure that the pump seals have failed.
Push the sponge back into the hole with a small pointed item so it doesn't fall out.

 

BMW considers a small amount of leakage normal. The early production bikes did this more than later ones. I'd say ride it and watch.

- John

 

thanks guys, learning every day, hope in time i acquire some knowledge