Small mkt for carbon tracking growing fast

LOS ANGELES, USA: A growing list of companies, from tiny start-ups to some of the world's biggest corporations, is investing in products that will help them cash in on a mad dash for businesses to track their carbon footprints.

Giant software concerns Microsoft Corp and SAP AG along with U.S. manufacturer Johnson Controls Inc and UK-based carbon offset firm Camco International Ltd, are among those piling into what is now a small but fast-growing market for tools to measure environmental impacts.

Until now, companies eager to prove their green credibility have voluntarily measured the greenhouse gas emissions of assets and operations such as buildings, delivery fleets, employee travel and factories.

Corporate behemoths including Wal-Mart Stores Inc, Coca-Cola Co and Tesco Plc are among those that already track their carbon footprints, and Wal-Mart's announcement last month that it would measure the social and environmental impact of all the products it sells is sure to kick-start carbon measuring efforts by its 60,000 suppliers.

And while pressure from corporate partners will play some role in spurring development of the market, the specter of legislation is calling more and more companies to action.

"Tens of thousands of directors will realize their firms carry carbon assets and liabilities on the books and face shockingly large fines for failure to report emissions," a study this month by London research group Verdantix said.

More and more firms are snapping up carbon-measuring products in anticipation of a mandatory program in Britain called the Carbon Reduction Commitment (CRC) that forces some 5,000 businesses to cut their emissions and reduce energy consumption starting next year. In addition, many expect a similar program in the United States won't be far behind.

"Our customers are more interested in calculating their carbon footprint now than they were 12 or 24 months ago," said Tom Arnold, vice president of energy efficiency and carbon solutions at EnerNOC Inc, a Boston company that acquired carbon management software maker eQuilibrium Solutions Inc in June.

"Many of them want to go through it in a voluntary market before they have to do it in a compliance market."

A recent study by Groom Energy Solutions, a U.S. firm that helps companies reduce energy consumption, estimated that about half of the Fortune 500 companies have calculated their carbon footprints, compared with just 4 percent five years ago.

But most of those measurements so far have been done internally, the study found, rather than with commercial software products. That, however, is bound to change as carbon legislation requires ever more data and analysis.

"Fortune 500 companies can't continue to go on managing this stuff with an Excel spreadsheet and two people in the corporate office," said Paul Baier, vice president of consulting at Groom Energy and an author of the study.

Indeed, companies including EnerNOC and Canadian start-up Carbonetworks Corp are targeting British firms scrambling to comply with the nation's CRC, which goes into effect in April.

"We are going after organizations which are just becoming aware of their commitment to the CRC and don't have the systems or expertise to support it," said Stephen Mooney, vice president of corporate development for Carbonetworks.

Mooney pointed to an Opinion Matters/Tickbox.net survey from earlier this year that found only 29 percent of UK senior managers, directors and board members were aware that their organizations would be affected by the CRC.

"The level of readiness is quite shocking," Mooney said.

Enter the providers of carbon management software. More than 50 companies offer software products that measure carbon footprints, Groom Energy's study found. Estimates of the size of the market vary wildly, though Groom Energy's Baier pegs it at about $50 million -- with the promise of reaching several billion dollars in three to four years as U.S. carbon legislation promised by the Obama Administration takes shape.

"The market is not a 2009 market, probably not a 2010 market. Maybe it will be a 2011 market. For now I don't think anyone is banking on this," Oppenheimer & Co analyst Sam Dubinsky said. "When the legislative and regulatory environment changes, it creates a big market opportunity."

But with dozens competing for a slice of what is still a fledgling market, long-term winners are difficult to call.

The Groom Energy study listed SAP, Johnson Controls, business information company IHS Inc and private companies Enviance, Environmental Support Solutions Inc, PE International and ProcessMAP Corp as the market leaders; but it said new products from Microsoft and CA Inc had recently been rolled out, and new leaders would yet emerge.

SAP, which bought two-year-old carbon management software maker Clear Standards in June, declined to say whether the business is making money yet, though its pipeline of orders has at least quadrupled since the acquisition.

"It's one of the markets that is in its nascent stages but is large enough to move the needle for a company like SAP," said Anirban Chakrabarti, who founded Clear Standards and now manages SAP's carbon impact group.

EnerNOC executives said their carbon management product will one day be a $100 million business but for now makes up a fraction of its overall business. Microsoft stepped into the market by adding its Environmental Sustainability Dashboard, a tool for mid-sized businesses to manage their carbon footprints, to its Dynamics AX business software for free.