Companies need faster evolution in carbon management software as new regulations drive demand for more forward-looking capabilities, a new report from leading independent research and advisory firm Verdantix says.
New rules, including the European Union’s Corporate Sustainability Reporting Directive which will see its first draft set of standards adopted in October this year, as well as the US Securities & Exchange Commission (SEC) proposal to align with the TCFD framework, are driving demand for improved software.
Around 49,000 firms in the EU will need to disclose carbon emissions from next year with the SEC proposals also likely to require reporting from a significant number of firms in the US. As a result, companies are searching for technological solutions that will aid them in meeting these new requirements. However, Verdantix finds that today no single software provider currently has a complete product portfolio capable of offering reporting on key elements, including financial, climate and physical data.
Verdantix’s Green Quadrant: Enterprise Carbon Management Software 2022 report says the new software functionality required by regulated entities include investor-grade auditable data; carbon calculation methodologies; evaluation of physical asset climate risk; and financial management functionality.
The market for carbon management software has been in existence for over 15 years and has traditionally been dominated by Environment, Health and Safety software companies which have track records in data modelling and in emissions calculations. A flood of new entrants which have raised substantial sums of money (often from Private Equity) are now spurring a new wave of innovation as software vendors vie for a share of corporate spending.
Verdantix’s own data shows investment of $418 million in the carbon management software sector in the last 12 months and says investment is unlikely to decline in the immediate future.
Jessica Pransky, Principal Analyst at Verdantix said: “Tens of thousands of businesses are actively searching for software solutions to help them meet their carbon management requirements as they navigate a new regulatory landscape. However, our analysis shows that today no single software vendor provides a complete portfolio offering.
The size of the prize for software firms that can develop holistic solutions is vast and so, we expect this to change as developers race to bring new solutions to the market. The period ahead will be one of rapid innovation driven by large-scale investment and high levels of competition between incumbents and new entrants.”
Kim Knickle, Research Director at Verdantix said: “We’re delighted to have launched what we believe is the most robust carbon management software analyst report in the market. As firms strive to meet their net zero targets and react to changing societal expectations, there is a clear requirement for independent and accurate insight on the solutions available today – and the likely direction of future innovation”.
