Measuring carbon impact: IT's next Sarbanes-Oxley
New environmental regulations coming into favour in the United States, Europe and soon in Canada as well will require many companies to be able to measure the environmental impact and carbon emissions contributed by their business and their product. That will require technology, and SAP (NYSE: SAP) sees opportunity for the IT industry and the channel around measuring sustainability.
Europe is much further ahead around accountability and sustainability, with new product labeling regulations requiring companies to disclose the carbon impact of products on the product labels. And the U.S. is catching-up. New regulations from the Environmental Protection Agency(EPA) will require companies in certain industries, such as utilities, oil and gas and factory farming, to report to the EPA on their carbon impact beginning January 1, 2010. Canada is further behind, but at the provincial level the push by several provinces to establish cap and trade and a carbon market will require companies to measure their carbon output.
As an enterprise business intelligence vendor, SAP feels it is well positioned to provide businesses with tools to both measure their carbon impact as well as profile possible investments to mitigate environmental impact said Peter Graf, SAP's chief sustainability officer.
"When you have regulations coming up, and carbon labeling, you need to make sure your information is correct and that's what SAP has been doing for a long time, providing audit trails," said Graf. "We can now do that for sustainability and carbon impact."
Through its acquisition of Clear Standard, SAP has acquired and developed Carbon Impact, an on-demand carbon measurement that connects with businesses' SAP backend systems to leverage that data to provide a truly end-to-end measurement and dashboarding of a company's carbon impact.
There are three customer camps, said Graf. Those moved only by regulation, those that look at sustainability opportunistically to drive business value, and those that look at is strategically as part of sustaining their business model for the long-term.
"There is definitely a sense of urgency," said Graf. "Not every industry is going to be regulated, but we're concerned most of the organizations impacted aren't even aware of haven't tools in place to measure what their carbon impact is."
Graf said SAP sees sustainability as both a direct and a channel business opportunity, and the solutions are currently available through SAP's channel partners. It's also as much a consulting engagement as it is a software implementation.
It's also about getting the data out of spreadsheets and into software where it can be shared and leveraged. One challenge companies face today, said Graf, is trying to move budget from travel to IT to address in video conferencing, when those budgets are controlled by different people. Sustainability tools can help make the case for the move to the CFO from a green perspective.
Stephen Stokes, an analyst and vice-president, business of climate change with AMR Research, said sustainability is the new flight to quality and is enabling a new business model that companies would be wise to be ahead of the curve on.
"We're looking down the barrel of an economic change the likes of which we haven't seen for 100 years and sustainability, if leveraged properly, is the lubricant to enable a transition into this new economy," said Stokes. "We're seeing very rapid changes."
And technology, said Stokes will be a key enabler. It's moving from a reporting platform exercise to business intelligence and process and product optimization. This positions SAP well, and Stokes said vendors such as Oracle, IBM and Microsoft are also getting into the space.
"It's fair to say SAP has gotten their game together and built a high-level business plan of where they'd like to be in delivering sustainability tools for their customers," said Stokes.
At its heart, though, Stokes said it's not about carbon. It's about running a more efficient business, with lower carbon impact as an outcome of that efficiency.
A utility company concerned about its own carbon impact, SunPower choose Clear Standards as a partner to help it measure its carbon impact, said Doug Richards, vice-president of human resources. The on-demand delivery model was appealing to enable collaboration across SunPower's global operations.
"Our employees are very cynical and they didn't want to do green-washing. The software helped give us a factual baseline and develop measurable and achievable plans and goals," said Richards.
Betsy Atkins, CEO of Baja Ventures, an independent venture capital form focused on the technology and life sciences industries, said sustainability will be a risk that will need to be measured by corporate boards, identifying it as the next Sarbanes-Oxley.
"You'll need to do it for your brand, you'll need to do it for your investor base, you'll need to do it for your product, and you'll need to do it to avoid fines," said Atkins. "It's going to be important for CEOs and board rooms to be aware of this."
It's not enough to just measure your carbon impact however said Emma Stewart, senior program lead of Autodesk's sustainable business & operations program . It's not just the information; it's what you do with it and what you do about it.
"There's a lot more than measurement to get to management," said Stewart. "I would caution us to remember that measurement is step one. It's not enough to just report, you need to act on it."