Carbon-management software

Carbon-management software

Heat count

Programs that help businesses cut greenhouse gases are proliferating

Dec 3rd 2009 | From The Economist print edition

Illustration by Claudio Munoz

LIFE is looking up for managers at the 4,300 stores of Tesco, one of the world’s biggest supermarket chains. A program from CA, a big software firm, will make a tedious job much easier: gathering data about each store’s energy consumption, be it from lights, air conditioning or refrigeration. The streamlined data collection is part of Tesco’s ambitious plan to halve emissions of greenhouse gases from existing stores and distribution centres by 2020.

Tesco and CA may be pioneers, but they are not alone. While governments argue over emissions cuts, many firms have already started cleaning up their act, or at least preparing to do so—prompting more and more software firms to offer tools to help. If optimists are right, the market for “carbon-management software” could one day become at least as big as those for other important business applications such as customer-relationship-management (CRM) programs, which brought in revenues of more than $9 billion last year.

Many firms have tracked energy consumption for some time in an effort to save money. Others have monitored emissions of different kinds in order to comply with regulations on pollution. More recently, public pressure has prompted more companies to tally emissions and disclose the results in their annual reports or to outfits like the Carbon Disclosure Project. But most have used simple tools such as spreadsheets and databases.

This is changing, despite the recession, says David Metcalfe, boss of Verdantix, a consultancy. Higher energy costs, green branding and new regulation are all pushing more firms to keep track of their emissions and do so with specialised software, he argues. In Britain, for example, the Carbon Reduction Commitment will come into effect next year. Among other things, it requires firms that use more than 6,000 megawatt-hours of electricity a year to measure and report the energy they use.

Anticipating a surge in demand, software-makers have rushed into the market, mostly with web-based services. In a recent survey AMR Research, another consultancy, identified no fewer than 157 providers. Some focus on reporting, others on compliance and yet others on optimising business processes. There are firms that have been around for years, such as Enviance and IHS. Many start-ups, notably Carbonetworks and Hara, have appeared. Even big software firms have moved into the market: CA, IBM, Oracle, SAP and SAS.

At least for now, the needs of most firms are simple: making sure that data are collected regularly and can be audited. But in the years to come, this too will change, predicts Stephen Stokes of AMR. Firms will need software that collects data automatically, helps them find the best ways to cut emissions and also lets them manage other resources, such as water and waste.

Messrs Metcalfe and Stokes both expect that Oracle and SAP, which already dominate most forms of business software, will become pre-eminent in this area, too, because it fits so naturally with their other offerings. These titans also have the cash to buy the best technology. In May SAP bought Clear Standards, a start-up. Oracle is expected to make a similar acquisition soon. But they face determined rivals. IHS has been quietly buying firms selling environmental software. Some expect great things from C3, a start-up founded by Tom Siebel, who pioneered CRM software.

All this interest gives a sense of how big the business of tracking environmental performance is expected to become. Léo Apotheker, SAP’s boss, recently suggested that in time it could even be “on an equal footing with financial accounting”.