Green IT analysis company Verdantix published a report into the business case for carbon management software, arguing that CFOs will be "compelled" to invest in carbon management software due to a combination of new compliance regimes, the financial risk of carbon liabilities, and the need for better management control over carbon data.
While previous green IT efforts have often been something of an ad-hoc activity, with multinational corporations often lacking a centralised reporting process, changing regulatory and accountability demands mean that a more structured approach is necessary. David Metcalfe, Director of Verdantix, argues that "CFOs need to get into the driving seat to assure the board that the management of carbon assets and liabilities is fully under control".
Earlier in 2009, the Confederation of British Industry warned that when proposed carbon reduction legislation comes into force, many companies "are in for a real shock". It urged businesses to think about how they intend to monitor energy use and improve efficiency in order to comply with legislation -- indicating that the time may be right for businesses to explore carbon management software.
Verdantix said that the main requirements of CFOs include the ability to assure the board that carbon liabilities are under control; the ability to integrate carbon costs into financial planning and budgeting; and the delivery of reduced compliance and audit costs. It was noted that "many board members would be horrified at the low quality and poor verification of carbon emissions data that is released into the public domain", and that CFOs need to be sure that "change costs do not break the bank" when mandatory reporting rules kick-in.
"Today CFOs focus on cash management and cost reduction. But they can't dodge the carbon management bullet forever", Metcalfe said.
Carbon management software platforms need to be able to scale globally, in order to support different compliance regimes being implemented in different markets, and can also be used in the creation of a formal carbon management organisation. They also provide accurate carbon management data, increasing corporate confidence in auditability.
According to Verdantix, its case study analysis of a $5bn revenue chemicals firm suggests a 145% return on investment over a three-year period, and a payback period of less than twelve months. Obviously these figures will vary dramatically by sector and company size, which define how carbon-heavy a business is in the first place.