January 2, 2021
Driven by investor pressure, companies of all sizes are committing to ‘net zero’ — the holy grail sustainability status where carbon emissions are balanced out through reduction, removals and offsets.
The first step for any business hoping to achieve net-zero is to measure its carbon footprint.
Carbon accounting is typically a labour-intensive process, focussed on pulling together retrospective data for annual reporting requirements. Traditionally, this is where a consultant such as McKinsey or BCG or Arcadis would be called in.
But now a number of SaaS vendors are turning this complex process into a product.
The tech layers they have added include rapid assessment tools where companies can plug in their own data to calculate their carbon footprints, dashboards that help businesses to monitor progress (and see if they’re doing better than their competitors) and easy-to-purchase, curated ranges of carbon offsets.
To get there, businesses need to spend a fair bit of money on measuring their carbon footprints.
There are a number of challenges such as onboarding, which takes a long time because clients need to find all of that data. Accuracy is an issue as a lot of the rapid tools estimate to get to a footprint that’s probably quite accurate, but doesn’t allow clients to see the detail.
Looking ahead carbon accounting SaaS platforms have a captive audience in front of them.
According to the Energy and Climate Intelligence Unit, 21% of the top 2000 public companies around the world have now set net-zero targets.
Spending on sustainability is up, too: an October 2020 survey by the Carbon Trust found that 63% of corporates plan to increase their sustainability budgets over the next year.
Carbon accounting falls under the large umbrella of Digital EHS management software industry
The market landscape for environment, health and safety (EHS) software has seen substantial evolution, as EHS vendors have raised their profile and expanded product offerings to serve increasingly diverse cross-functional teams across EHS, quality, operations and product stewardship management.
These traditional stalwarts are expanding in carbon accounting as well. Some key trends which have been observed are
Acquisition-led product growth has provided EHS software buyers with a wide array of applications - For example, between January 2019 and December 2020, there were more than 40 transactions involving firms with EHS technology propositions
There are more than 100 EHS management software companies but from the most prominent platform product vendors offering software across diverse EHS applications at least 10 are majority-owned by private equity funds which means they have capital to make big tech developments and further acquisitions
In its absolute core essence carbon footprint management is a data challenge and therefore there is large investment required in technology development
There has been some lateral movements in this space as well with traditional tech and data companies such as Salesforce and SAP entering the carbon management space to bring their expertise in data management and completing the “One customer view”
Among the most prominent EHS software vendors, activity can be concentrated in specific geographies or industries which means already there are companies which are really good in one industry or country and weak in others
