[Editor's note: This article was authored by BSR, a global business network and consultancy focused on sustainability.]

Despite (or perhaps because of) last year's failed climate talks in Copenhagen, the demand for tools and software programs that help companies track greenhouse gas (GHG) emissions has increased dramatically over the past year.

A 2009 study (PDF) by Massachusetts-based Groom Energy Research estimated that approximately 60 companies worldwide offer GHG accounting software, and more than US$46 million was invested in GHG accounting software start-ups in 2009.

According to a recent report by Colorado-based Pike Research, the global market for GHG accounting software and support services grew by nearly 84 percent from 2008 to 2009, representing a total market of US$384 million. They predict the market will achieve 40 percent compounded annual growth through 2017. Australia's S2 Intelligence reports that worldwide spending on green accounting systems will total US$595 billion through 2015, including both GHG accounting software and environmental accounting software more broadly.

With new regulations from the U.S. Securities and Exchange Commission, and increasing pressure from other regulatory bodies, as well as investors and customers, GHG accounting has become an expected practice for multinational enterprises. The Carbon Disclosure Project alone contacted more than 1,000 companies through their investor and supply chain programs in 2009 to measure and disclose their carbon footprint. And large buyers such as IBM, Tesco, and Walmart are also setting precedents by asking suppliers to report on -- and reduce -- their annual carbon footprint. Any company that aims to effectively respond to the mounting pressure and establish a comprehensive climate strategy must start with GHG accounting. That's relatively simple for companies with only one site, but for companies with larger operations, GHG accounting becomes a complex challenge of gathering a large volume of decentralized data on a regular basis.

That's where GHG accounting tools come in.

The market, however, is nascent and rapidly changing, which makes it difficult for companies to evaluate and commit to a solution.

Types of Tools

GHG accounting tools range from those that focus solely on carbon measurement to those that enable companies to trade carbon credits. Before purchasing a tool, it's important to understand the options and select a tool that best meets your objectives. The range of tools can be categorized as follows:

• Historical analysis: Many of the early tools on the market focused strictly on backward-looking tabulations of annual corporate GHG emissions. These tools are typically straightforward to use and provide a good point of entry into GHG accounting, particularly for companies that do not have a strategy for proactively managing business risks associated with climate change and energy consumption. These tools also typically enable participation in reporting initiatives, GHG registries, and GHG trading programs. The most basic example is the suite of excel-based tools provided by the World Resource Institute in support of the Greenhouse Gas Protocol.

• Historical analysis plus forward projections: Many tools not only provide a backward-looking accounting of corporate GHG emissions, but also a forward-looking projection of future emissions based on different scenarios. Projections can include a range of areas, including business-as-usual emissions trajectories and project-specific emissions forecasts (for example, the impact on annual emissions as a result of investments in energy-efficient lighting). These are particularly helpful for enterprise resource planning (ERP).

• Life-cycle-analysis-based: Companies interested in product carbon footprinting should consider tools that estimate a product's total carbon impact based on a life cycle analysis (LCA). GHG emissions for a product are estimated based on macroeconomic assumptions about process emissions. A listing of LCA-based resources and software solutions can be found at www.life-cycle.org.

• Supply chain-based: Some tools focus on gathering data from a company's supply chain partners. Unlike LCA-based tools, these tools focus on gathering primary data from suppliers. If taking this approach, companies should prioritize key suppliers to focus on, such as major manufacturers or logistics and transportation providers. In some tools, carbon-data gathering can also be integrated into supplier labor compliance assessments.

• Operational integration: This newest category of tools seamlessly integrates GHG accounting into existing corporate operating systems (such as financial accounting or ERP), setting companies up to report on both environmental and operational performance on a quarterly basis. These tools could include other features, such as projections and scenario planning, or may focus just on historical accounting and analysis.

• Ecosystem-based: Some software providers are anticipating companies' need for accounting tools that look beyond GHG emissions to include other environmental issues, such as water and waste, and the interplay between environmental issues on broader ecosystems. This category of tools looks at GHG emissions as one element in a company's impact on ecosystem services and the business risks presented by a company's dependence on ecosystems. A 2010 report by BSR reviews many of the leading ecosystem services tools available today.

 

The Groom Energy Research study provides a short description of several perceived leading tools that span these categories, including Enablon, Enviance, Hara, IHS, Johnson Controls, PE International, ProcessMAP and SAP Carbon Impact.

Next page: Selecting the Right Tool