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Carbon accounting is big business
The Los Angeles Department of Water and Power's San Fernando Valley Generating Station in Sun Valley, Calif.
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TEXT OF STORY
Kai Ryssdal: When, or maybe if, Congress takes care of health-care reform, it'll turn to another amazingly complicated piece of legislation. Trying to reshape the U.S. economy to reduce greenhouse gas emissions. Whether Congress can pass a climate change bill is no sure thing. But a lot of big companies are betting it will. They've already started tracking their carbon footprints. And as Sarah Gardner reports from the Marketplace Sustainability Desk, that's opened up a whole new line of work.
SARAH GARDNER: Meet Larry Goldenhersh. He's a carbon accountant, of sorts. Goldenhersh is CEO of a southern California-based company called Enviance. Enviance sells special software that helps companies track and monitor all the carbon dioxide and other greenhouse gases they emit. And business is booming.
LARRY GOLDENHERSH: Enviance has increased its revenue 50 percent year on year over the past five years. I believe carbon accounting will drive multi-billion dollar opportunities for all companies in this space.
Enviance's clients include industrial giants like Chevron, DuPont and the biggest source of greenhouse gas emissions in the United States, American Electric Power or AEP. AEP has been voluntarily tracking and reporting its CO2 output for five years. The utility is now going to track the emissions from its delivery trucks and the barges that deliver coal to its 20 coal-fired power plants. Here's AEP's John McManus.
JOHN MCMANUS: It's certainly our expectation that at some point there will be a legislative or regulatory program governing greenhouse gas emissions. And the earlier you get a started on a program like this, I think, the better off you are.
AEP and other U.S. companies are gearing up for a "carbon constrained" economy, that is, one where the government limits yearly carbon emissions and requires big emitters to accurately report them. Consultant Paul Baier at Groom Energy Solutions says the "green" bean counting industry is rapidly developing.
PAUL BAIER: Just as in financial accounting today we have auditors and sophisticated accounting software packages to understand and track sales and costs so we know what our profits are; we see a similar thing happening over the next four or five years with carbon accounting.
Venture capitalists have been pouring money into carbon accounting start-ups over the past few years. But big software and consulting firms smell potential profits as well. Some have begun gobbling up the start-ups in this field.
Others, like Microsoft, are coming out with their own carbon-accounting products. These corporate giants knows it's not just oil companies and utilities that will buy this kind of software. Consumer companies like Coca-Cola are doing it already.
BAIER: The fastest-growing area in this market are companies which will face no regulation. Companies like a Starbucks or a Whole Foods, they need for competitive reasons, to protect their brand, to attract the best and brightest, do need to be increasingly more environmentally responsible.
Activist investors and young, green-minded employees are pushing these consumer giants. They're also getting a shove from Wal-Mart. The retailer recently announced it eventually wants an eco-label on all the products it sells.
So Wal-Mart's 60,000-some suppliers will need to start monitoring things like their water use and CO2 emissions. And that means they'll need a carbon accountant.
I'm Sarah Gardner for Marketplace.
Requirements for environmental compliance have existed for years. Adding GHG is one relatively small element to a long list of environmental compliance activities that companies in the US have been subject to for many years. Clean Air Act (1970), Clean Water Act (1977), Marine Protection, Research and Sanctuaries Act (MPRSA) (1980), Safe Drinking Water Act (SDWA) (1974), Resource Conservation and Recovery Act (RCRA) (1976), Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, or Superfund) (1980), Clean Air Act Amendments of 1990 to mention few and about 30 others similar regulations have already created a software market in the US for environmental information management and reporting. The Mandatory Reporting of Greenhouse Gases Rule of September 2009 is just small addition to already crowded space of corporate environmental accounting and reporting. Companies like ESS (now IHS), Enviance, Locus Technologies, or Intelex are about decade old and ahead with solid products, market share, and plenty of innovation.
What about SAP, Microsoft or Oracle? These are the companies that told us just few years ago that they would innovate their way and organize our health records. We all know how that project moved along. Now they will boil the ocean again and organize GHG records for the government and industry. The reality is that innovation is not going to come from Microsoft or SAP. There are already hundreds of small companies that have the lead in this space and giants like Microsoft or SAP are just playing a catch-up game.
The question is whether or not greed will create a financial catastrophe in the carbon market the way it did in the financial market. I'll bet that some cutting edge firm is applying the philosophy of credit default swaps and other derivatives to the carbon market. And they will insist that it not be regulated, and the taxpayer will be bailing them out in 5 years. That is, if there are any taxpayers left by then.
Kai and Sarah,
Great story. Carbon Accounting has rapidly emerged into the business limelight as the need for senior executives to understand and mitigate their organization's environmental impact has evolved quickly
However, carbon accounting serves as the prerequisite for the critically important objective of reduced energy costs and carbon emissions. The reduction and not the measurement of carbon emissions provide the opportunity for organizations to create competitive advantage, reduce energy costs and reduce climate related risks.
Yesterday, TRIRIGA, a leading provider of enterprise sustainability software, announced a 100 percent rebate on its leading carbon accounting software, TREES Metrics, to help organizations move beyond the measurement of their environmental impact so they can accelerate their reduction of energy costs and natural resource consumption.
John Clark
Director, Climate Change Solutions at TRIRIGA
Verdantix note that SAP,Kleiner Perkins Caufield Byers and Tom Siebel have already invested in this market - its going enterprise softare route as Excel wont cut the mustard. Early movers like Viewlocity need to 'cross the chasm' with the support of Implementation partners.
It is important to differentiate between companies with heavy emissions (Coal Power Plants) where 90+% of their emission are coming out of the smoke stake and manufactures (companies that produce products you can touch or hold) where up to 75% - 90% of their emissions are embedded in their supply chain. Winning manufactures understand integrating carbon metrics into corporate data will enable them to find greater efficiency identify opportunities for cost savings and develop a unified message to communicate brand.
