Corporations around the world are being challenged to measure, manage and report their organizational energy, carbon and sustainability performance.
Whether due to rising energy prices, legislation, good corporate citizenship or market and stakeholder pressures, these obligations can be onerous and costly.
However, few organizations have the tools to track and manage their energy and carbon performance with audit level assurance – nor the capacity to assess the impact, payback period or return on investment of their efficiency and abatement programs.
As businesses seek to better manage their energy, water and waste and greenhouse gas emissions, the focus is turning to managing vast quantities of disaggregated data.
This drive for measurable performance improvements comes as investors factor carbon disclosure and climate change risks into funds management decisions.This is proving to be no small task. Thousands of businesses are grappling with how to monitor, benchmark and share critical sustainability data across globally distributed enterprises.
The need for sustainability data management is multi-focal, ranging from compliance reporting, managing the rising cost of energy, stakeholder communications, brand and reputation management, and opportunity capturing.
In October 2009, the Environmental Protection Agency (EPA) launched the Greenhouse Gas Reporting Program, requiring carbon intensive firms and those producing carbon intensive products to annually report on their emissions for purposes of aiding the government in making informed decisions and creating improved programs to reduce greenhouse gases.
Regional governments are following suit with cities such as New York, Chicago, and Austin adopting policies and legislation specifically aimed at reducing energy usage. Additionally, in January 2010, the Securities and Exchange Commission (SEC) ruled that companies needed to inform investors of any serious risks that global warming might pose to their businesses.
Companies in big energy-using industries such as mining, steel production and aluminum smelting have long had the means to track and manage their environmental performance. However, companies in all sectors of industry are now realizing they lack the systems and experience to manage their environmental data as we shift to a higher cost, lower energy-using economy.
Too often organizational energy, carbon and other environmental data is siloed in disparate information systems characterized by varying degrees of accessibility, accuracy, and usability rendering it almost unusable.
More organizations are therefore turning to cloud-based enterprise sustainability management platforms (ESMPs) to better manage the increasing responsibility to measure, mange and report their environmental impacts.
Some key benefits of enterprise software platforms:
- Reduce the time and cost of data management
Today’s ESMPs speed and simplify the capture of disaggregated data via robust electronic data interchange (EDI) with internal business systems, utilities and supply chain operators – freeing time and resources to focus on strategic sustainability management rather than data management.
- Timely, financial grade reporting
ESMPs produce financial grade reports and dashboards summarizing energy, emissions and other key environmental data. They typically feature powerful tools such as exception-reporting, automated error checking and audit trails that provide data assurance and confidence in compliance reporting and decision-making.
- Reputation management
Environmental reporting has become a matter of corporate governance now scrutinized closely by CEOs, CFOs, boards, investors and the media. In an age of social media and instant communication, nobody wants to be accused of “greenwashing” or issuing inaccurate environmental reports. Companies therefore require the capability to report their environmental performance with financial grade assurance. Only ESMPs have the capacity to capture, verify, aggregate and analyze vast quantities of environmental source data with audit level assurance.
- Operational efficiency and cost savings
Rising energy costs make it vital for companies to have real time visibility of their energy use and costs across all business units, geographies and functions so they can benchmark and accurately target energy efficiency programs. ESMPs provide a range of analytical, modeling and real time management tools that provide a strong performance management capability. These tools deliver internal and external benchmarking capabilities that mean companies can identify areas for operational improvement and cost saving.
- Verifying ROI and payback of environmental initiatives
Because ESMPs deliver robust financial grade data on energy, emissions and other sustainability metrics, companies using this technology can accurately assess the impact, payback period and return on investment of energy efficiency of their environmental initiatives. This is vital given constraints on capital expenditure in the current economic environment.
Industry reports reveal that the market for ESMPs is large and growing. A 2011 report by Verdantix revealed that the US market this year would be $207 million, growing to more than $558 million by 2014 – an impressive 51 percent compound annual growth rate. According to research firm Forrester the global market for enterprise management software is growing at 83 per cent annually and forecasted to reach $903 million by 2013.
Budget holders like CFOs are increasingly engaged in sustainability issuesThe Verdantix survey of 1800 large US firms (revenues exceeding $1 billion) reveals that ESMP expenditure is led by a broad mix of industries – oil and gas ($32m), telecommunications ($27m), utilities ($19m), technology ($17m), retail ($17m), banks ($16m) and industrial engineering firms ($14m), media ($8m), chemicals ($8m), insurance, food and beverage, travel and transport ($7m each).
These numbers point a broad based demand - a shift that is becoming commonplace around the globe as corporations seek to raise their ability to track and manage their energy performance and make sound data-driven investments in sustainability.
Dozens of large multinationals have already demonstrated that efficient business behaviours translate to a better bottom line; companies such as such as Marks & Spencer, Nike, Target, Cisco, Campbell’s Soup, Hilton, TXU Energy, and Chrysler have reported saving tens of millions of dollars by adopting renewable energy, energy efficiency and recycling schemes.
This drive for measurable performance improvements comes as investors factor carbon disclosure and climate change risks into funds management decisions. For example, the Carbon Disclosure Project (CDP) managed by the Investor Group on Climate Change represents institutional investors with total funds under management of about $600 billion.
For the past decade, the CDP has surveyed the worlds’ largest listed companies on how they are managing climate change risks and carbon emissions. Some 3,000 organizations in 60 countries now report to the CDP and its findings are distributed to institutional investors, corporations, governments and the public.
This means that budget holders like CFOs are increasingly engaged in sustainability issues and investment in business tools that can assess the impact, payback period and return on investment of organizational energy efficiency and carbon abatement programs.
Sustainability tracking, monitoring and reporting has become an indispensable part of doing business in a world of rising energy prices, carbon emissions and climate related risks. Demand for ESMPs will therefore grow as companies shoulder the growing need to save money, protect their reputation and improve environmental performance.
Ralph Breslauer is President of Americas operations for CarbonSystems, a world-leading provider of energy management software with offices in New York, San Franciso, London and Sydney.