AMR's Stokes: think carbon management, not tactical accounting

Simply replacing custom spreadsheets with database-driven software packages as a means of tracking greenhouse gas (GHG) emissions is a tactical view of the carbon management software opportunity, according to a sustainability expert with AMR Research, the Boston-based IT analyst firm. Dr. Stephen Stokes is VP of sustainability and green technology for AMR, coming to the firm last summer with more than 20 years of experience in geologic and environmental science, carbon management, and compliance.

Earlier this week, I got the chance to talk with Stokes about the market for carbon accounting software . Stokes says AMR has been studying the carbon management opportunity, and finds that user companies often take a more strategic view of managing carbon and GHG emissions, rather than simply trying to quantify emissions for regulators or third parties like the Carbon Disclosure Project. Interest in carbon management software is strong, he says, but not just for tactical carbon tracking or “accounting.” Instead, he sees manufacturers moving toward an era of “environmental business intelligence” in which carbon can be thought of a key input to operations, with emissions as outputs that need to be managed as part of operational excellence.

“That’s one of the big points we [AMR] is trying to get across,” says Stokes. “Much of the focus for companies is actually around competitive advantage, rather than tactical compliance.”

AMR’s surveys back up this view, with 30 percent of respondents to a 2008 survey of 300-plus companies naming “business opportunities” as the number one driver behind environmental initiatives, followed by corporate brand (see  bar chart below). What’s more, says Stokes, it’s misguided to assume that most manufacturers will be directly regulated under proposed U.S. cap & trade policy. As proposals currently stand, only those facilities emitting more than 25,000 metric tons of carbon per year, or about 6,000 energy intensive sites, are expected to be directly impacted. Stokes says that for most manufacturers, cap & trade could certainly increase the price of energy and elevate the importance of energy and carbon management, but it is not a direct reporting/compliance hurdle for most sites.

AMR’s surveys show strong interest in purchasing solutions for GHG data management. According to an AMR alert from February, 2009 (based on research in 2008), 52 percent of high tech manufacturers planned to acquire solutions in the next 24 months (but only 10 percent currently had them), while in consumer product goods,  31 percent planned to purchase in the next 24 months. According to Stokes, AMR’s carbon management survey from 2008 did not quantify the current size of the carbon management software market, but a dollar figure for the overall market for carbon management services and software could be extrapolated against the size of the U.S. economy, resulting in a market size estimate of roughly $3 billion. However, notes Stokes, the portion of this dedicated to commercial software packages can’t be pinpointed.  In about eight weeks, he notes, AMR will have results of a new survey with more findings on the carbon management software market.

I’ll be following up with Stokes to report on AMR’s latest estimate for the carbon management software market. But as Stokes points out, software market sizing is really secondary to what you can accomplish with the software. I agree that the goal should be more around operational excellence and strategic issues such as stronger (read “greener”) brand reputations, not just tracking or “accounting” for emissions.