Article Top Ad

Five Reasons Why Carbon Management Software is the Next Big Thing

As carbon becomes an ever-bigger liability on the corporate balance sheet, carbon and energy management software is poised to be the newest addition to the list of mission-critical enterprise software systems. Read More

(Updated on July 23, 2024)

A new liability is coming onto the collective balance sheet of companies around the world: Carbon.

In the context of increasing awareness of the business and societal risks of climate change, corporate carbon emissions (and the energy consumption that creates them) are becoming a crucial indicator of business performance. And a new type of software platform, enterprise carbon and energy management (ECEM), is emerging to enable companies to monitor, manage, and report corporate carbon emissions, as well as the energy consumption which is their principal source.

Companies have long used software systems to track and manage the movement of assets around the company — people, money, parts and finished goods, and other hard assets like IT systems or furniture. Enterprises buy and maintain sophisticated systems to manage employees (human capital management [HCM]), customers (customer relationship management [CRM]), financial accounting and auditing, materials and finished goods (enterprise resource planning [ERP]), and IT systems and network management.

Now, ECEM systems are poised to join this list of backbone enterprise software systems. Adoption is driven by managers’ desire to:

  • Improve operational efficiency. Reducing energy consumption and related emissions requires running company operations more efficiently. Very simply, lower energy consumption means lower energy bills either per unit of output (relative terms) or in total (absolute terms).
  • Communicate business metrics to stakeholders. A company’s carbon footprint, reduction targets, and progress toward those targets are becoming standard business metrics that the firm must regularly communicate to constituencies including customers, shareholders, employees, and regulators.
  • Differentiate operations, product, and brand. Progressive companies have seized on carbon management and aggressive reductions in emissions as a central element of their brand positioning with consumers.
  • Comply with regulatory mandates. Governments around the world are stepping in to regulate where business and customer pressure is not sufficient to encourage corporations to act on carbon emissions. So large companies — especially heavy-emitters — are facing implementation in 2010 and 2011 of regimes like the UK’s Carbon Reduction Commitment (CRC) and regulation from the US Environmental Protection Agency (EPA) under the aegis of the Clean Air Act.
  • Mitigate the business risks of climate change. Companies are increasingly cognizant of the material business risks that a changing climate will cause (for example, disruption of raw materials supply) and incorporating such risk assessments into their planning and investment plans. In the U.S., for example, the Securities and Exchange Commission (SEC) now requires companies to include assessment of climate change risks in their financial reporting.

To meet these goals, companies need systematic processes that are instantiated in software systems. Retracing the evolution of other process-management software systems, companies are finding that ad hoc activities documented in spreadsheets no longer meet their requirements.

They need a true system of record that cuts across operational or functional silos, taps into multiple asset classes and data sources, creates structured databases of auditable information, analyzes and displays information in a role-sensitive manner, and provides return paths to the assets to enable action and management (see Figure 1 for a high-level sketch of ECEM system architecture).

Figure 1

Forrester calls these new IT systems enterprise carbon and energy management (ECEM), which we define as:

A corporate-wide system of record for monitoring, managing, and reporting energy use and carbon emissions.

Given the multiple incentives and potential rewards for implementing ECEM, it’s no surprise that our enterprise surveys find fast-growing adoption. The percentage of companies that have either implemented or are planning to implement ECEM systems jumped from 25 percent to 45 percent in just 6 months between our Fall 2009 and Spring 2010 surveys (see Figure 2).

Figure 2

These percentages probably overstate the number of companies that actually have an enterprise-wide system in place; what we are finding as we talk with prospective buyers is that companies are implementing systems at a single facility, or for a single set of assets (like buildings) before expanding. And in a number of cases, buyers are experimenting with multiple ECEM suppliers, testing the functionality and maturity of more than one system. If anything, the action is even more frenetic on the supplier side of the market. For the Market Overview research report we completed last year, we interviewed 25 suppliers of ECEM software. And upon publication, we heard from probably 25 more that were active in the market. We are currently completing our 2010 Market Overview, and have found at least 70 suppliers with some form of ECEM product or service offering; we formally interviewed 40 of them for our report.

Not only is the number of suppliers burgeoning, there are increasing connections between the suppliers. Figure 3 shows our work-in-progress mapping of publically-disclosed partnerships and alliances among ECEM suppliers. Some of these partnerships are with other ECEM vendors (those towards the center of our map), while many others are with a wide variety of suppliers of sensor equipment, analytics software, database tools, vehicle fleet-management systems, building automation software, and other related capabilities.

Figure 3

In a future post I will offer some research predictions and our market-size forecast for ECEM software systems; I look forward to your input and comments in the meantime.

Chris Mines is a vice president and research director at Forrester Research, advising tech industry strategists. He leads a research team that predicts and quantifies growth and disruption in the technology industry, focusing on the economics and business models of IT suppliers, and emerging trends in technology adoption. Currently, his research is centered on the role of information technology in enabling sustainability initiatives and improving corporate environmental responsibility.

Photo CC-licensed by Adikos.

Trellis Briefing

Subscribe to Trellis Briefing

Get real case studies, expert action steps and the latest sustainability trends in a concise morning email.
Article Sidebar 1 Ad
Article Sidebar 2 Ad