Five years ago, the notion of measuring your company’s carbon footprint might have seemed quaint, or foolish, or just plain impossible. And not too many large companies were interested. But a recent report from the consulting firm Groom Energy Solutions finds that corporate emissions reporting is fast becoming big business (Groom describes itself as a “provider of renewable and energy efficiency systems to commercial and industrial companies.”)
The Groom analysis focuses on “enterprise carbon accounting” software, or, in plain language, technology that helps companies track their emissions. According to the report, venture capitalists invested $46 million in enterprise carbon accounting (ECA) software in 2009, and it predicts that purchases of the technology will increase 600% by next year.
According to Paul Baier, VP of consulting services for Groom, 60% of Fortune 500 companies currently report their carbon emissions, and that number is growing rapidly.
“By the end of 2010, if a company is not reporting, it will be seen as a laggard in the industry,” said Baier. “It’s increasingly mainstream for corporations to be doing this now.
Ninety percent of reporting companies are using “spreadsheets and consultants” to determine their footprints, said Baier, and the rest are using ECA software. Three years from now he expects that 80% will be using the software, which helps companies track hundreds of different data points related to operational emissions.
“They don’t keep track of their financial information with spreadsheets anymore, and they won’t be using them for carbon reporting much longer,” he said.
In general, corporate carbon accounting is limited to what the Greenhouse Gas Protocol Initiative (which sets the widely accepted standards) refers to as Scope 1 and Scope 2. These include the direct emissions of company operations such as on-site fuel combustion and electricity use. Significantly, Scopes 1 and 2 leave out the potentially enormous, yet elusive footprint of a company’s suppliers and the myriad of other associated carbon sources. In the works are standards for measuring Scope 3, which Baier calls “everything else,” but for now, there is no generally agreed-upon template for measuring this wider footprint.
Which leaves room for debate, such as when The Wall Street Journal raised questions about the 2008 pronouncement by Dell Inc. that it had achieved carbon neutrality. The Journal article reported that Dell was measuring only a small fraction of total emissions associated with the company. Dell had taken into account employee air travel and building electricity use, but not emissions produced from transporting products or the footprints of the factories around that world that supply it with computer parts.
Given the inconsistencies and uncertainties of corporate carbon accounting, not to mention the cost in employee time and technology investments, why are companies flocking to do it?
According to the Groom Energy report, the three main drivers, in order, are:
- Increased pressure from customers and investors for companies to create a “greener” public image
- Cost and energy savings
- Mandates from buyers, like the Walmart Supplier Sustainability Assessment Program, intended to measure the environmental impact of its 100,000 suppliers.
Reducing CO2 emissions to help mitigate the effects of climate change did not make the list.