Envizi WHITEPAPER
Green Quadrant: Enterprise Carbon Management Software, AUGUST 2022
most advanced all-round carbon management software
This report provides a detailed fact-based comparison of the 15 most prominent carbon management software vendors in the market. Based on the proprietary Verdantix Green Quadrant methodology, our analysis encompassed two-hour live briefings, desktop research and vendor responses to a 103-point questionnaire covering 17 capability and 10 market momentum categories. Verdantix analysis finds that although carbon management software has existed for over 15 years, the market has grown substantially over the last three years, due to increased pressure from internal and external stakeholders, resulting in numerous new use cases and functionality requirements. Among the software vendors featured in the Leaders’ Quadrant, seven firms—Cority, Enablon, IBM, Intelex, Sphera, UL Solutions and VelocityEHS—demonstrated the most advanced all-round carbon management software capabilities.
To answer these questions, Verdantix assessed 15 suppliers using a 103-point questionnaire, two-hour live demonstrations by vendors, and interviews with more than 25 carbon management software customers across a range of industries, such as consumer goods, retail, pharmaceuticals, tourism, manufacturing, transportation and technology. The resulting analysis is based on the proprietary Verdantix Green Quadrant methodology, which is designed to provide an evidence-based, objective assessment of vendors offering comparable products or services.
The State Of The Carbon Management Software Market
The market landscape for carbon management software has evolved rapidly over the past three years, driven by mandatory reporting rules based on the Task Force on Climate-Related Financial Disclosures (TCFD), the need to deliver on the Science Based Targets initiative (SBTi) and other net zero pledges, and pressure from external stakeholders. These new drivers have required carbon management software applications to expand beyond calculating and modelling Scope 1, 2 and 3 emissions to incorporate a wider range of functionality – such as forecasting future emissions to deliver on net zero goals, tracking the progress of decarbonization projects, incorporating financial analysis into asset investment planning, producing investment-grade financial disclosures, and conducting physical asset risk assessments – to fit a wide range of industries and use cases (see Verdantix Best Practices: Creating an RFP For Enterprise Carbon Management Software). With the rapid evolution of regulations and the increasing integration of carbon emissions into disclosures, the carbon management software market is in an expansion phase.
Given the rapid pace of change in the market, this report provides individuals responsible for selecting, implementing and deriving value from carbon management software applications with a detailed assessment of the 15 most prominent platform solutions providers and their product offerings. The customer questions answered by this report encompass:
What is the current state of the carbon management software market?
Which carbon management software applications lead the market?
Which carbon management applications will best match the requirements of my firm?
How can I benchmark the capabilities of carbon management software applications?
What factors indicate that a carbon management software vendor is a reliable partner for the future?
A New Wave Of Enterprise Carbon Management Software Arrives
Over the past three years, rising pressure from investors to identify climate risks, the realization that firms can achieve a competitive advantage with a lower carbon footprint, and increasing regulations have led to a surge in demand among buyers across all industries, as well as greater interest from the C-Suite. Growing demand has created a fast-evolving marketplace for carbon management software.
Carbon Management Software Has Been Available For 15 Years
The carbon management software market has been evolving since the 2000s, when this type of software was mainly used by emissions-intensive industries to ensure compliance with existing regulations. Verdantix research shows that:
Initial use cases for carbon management software were primarily compliance-related.
In the 2000s, the main purpose of carbon management software was to respond to regulations to reduce GHG emissions, such as the EU Emissions Trading System (ETS) and the GHG Reporting Program of the US Environmental Protection Agency (EPA). To a lesser extent, some corporates used carbon management software to differentiate their products and service offerings with lower embodied carbon. Firms generally incorporated the software into their larger EHS software offerings, used by heads of EHS or Sustainability. Vendors with a history of providing EHS software, such as Cority, Enablon, Intelex, Sphera, UL Solutions and VelocityEHS, have spent years developing robust air emissions calculation engines and modelling functionality – as well as data acquisition and management capabilities – to help their customers meet GHG regulations.
Demand for voluntary sustainability reporting and national disclosure requirements has grown.
Over the last 15 years, the need for carbon management software to meet voluntary and national disclosure requirements – often incorporated into ESG disclosure requirements – emerged. Providers of carbon management software solutions have developed templates that allow customers to gather and generate data that can flow directly into a Carbon Disclosure Project (CDP) or other voluntary reporting template, such as the Sustainability Accounting Standards Board (SASB) or Global Reporting Initiative (GRI) frameworks, or into national disclosure requirements, such as the EU ETS or the National Australian Built Environmental Rating System (NABERS) requirements.
TCFD-Aligned Climate Disclosure Rules And Investor Pressure Have Reshaped RequiremenTS
Support for the TCFD’s climate-related financial disclosure recommendations, which were released in 2017, has grown rapidly over the past two years. In 2021 more than 2,600 firms pledged support for the framework (see Verdantix Strategic Focus: Mastering TCFD Disclosures). The TCFD framework initially operated at a voluntary level, but several countries – such as Brazil, Japan, New Zealand and the UK – have recently instigated mandatory TCFD disclosures. Additionally, the EU’s Corporate Sustainability Reporting Directive (CSRD) will incorporate TCFD recommendations, with the first draft set of the standards to be adopted in October 2022, and the US Securities and Exchange Commission (SEC) has proposed carbon disclosure requirements that align with the TCFD framework. To meet these requirements, corporates now need their carbon management software to incorporate more forward-looking capabilities, in addition to the carbon calculations and disclosure requirements that were included in the first generations of the software. New capabilities cover:
Investor-grade, auditable data.
As carbon disclosures move from voluntary to mandatory, the pressure to prepare investor-grade data – as well as the legal risk of publishing inaccurate data – is mounting (see Verdantix Strategic Focus: Transitioning to Investor-Grade ESG Data and Decision-Making). The new wave of carbon management software incorporates tools that securely store data, associate emissions quantities with operating assets and legal entities, have data-gap-filling capabilities, and facilitate data audits and assurance of processes, including allowing auditors secure access to software for visibility into emissions calculation formulae.Carbon calculation methodologies.
The GHG Protocol Corporate Accounting and Reporting Standard, which covers key principles and sets organizational boundaries, is widely used as a global accounting platform for carbon emissions. Most enterprise vendors have also incorporated the GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard to meet increased demand to calculate Scope 3 emissions. Newer entrants to the market, such as Persefoni and Sweep, have sustainability advisory boards with deep industry knowledge and expertise, helping them to align with upcoming requirements.
Evaluation of physical asset climate risk.
The TCFD requires analysis of the impact of climate risk on the core business model of a firm. Specifically, the framework recommends describing climate-related risks and opportunities over the short, medium and long term, as well as the impact of climate-related risks and opportunities on an organization’s business, strategy and financial planning. As a result, firms must conduct complex scenario analyses to quantify potential risks and opportunities, taking into account industry-specific, geographic and supply-chain-related risks. The use of geospatial data to achieve these goals is becoming increasingly important. Vendors with these capabilities tend to be specialist firms, such as machine learning (ML) specialist Pachama and climate risk analytics firm Jupiter Intelligence. Geospatial data are not consistently being integrated into enterprise-wide carbon management software (see Verdantix Strategic Focus: Growing Reliance On Geospatial Data For ESG And Sustainability). One exception is IBM, which can provide customers with access to a variety of continually updated geospatial-temporal information through its Environmental Intelligence Suite (EIS) platform.Financial management functionality.
The TCFD recommendations include describing the impact of climate-related risks and opportunities on an organization’s business, strategy and financial planning. Corporates therefore need to be able to apply an internal carbon price to business activities, purchased services and raw materials. Additionally, as the financial sector must comply with TCFD requirements, there is an increased need for banks, investors and asset managers to calculate, understand and manage financed emissions across their entire portfolios.
Firms Are Pledging To Reach Net Zero By 2050 Or Earlier
Net zero strategy development and programme implementation.
Firms that have set medium- or long-term abatement targets must disclose these targets under the TCFD framework. This requirement is in line with the SBTI’s new Net-Zero Standard, which launched in October 2021 and includes a mandatory near-term abatement goal of no more than 10 years into the future, as well as with the ‘Race to Zero’ campaign of the UN Framework Convention on Climate Change (UNFCCC). The new wave of carbon management software needs to assist corporates in establishing data and baseline controls to accurately make emissions forecasts, as well as controls to handle the impacts on baselines and forecasts of any acquisitions or divestments, which can significantly alter a firm’s carbon inventory. Firms will also need project portfolio management software to track enterprise-wide decarbonization projects, covering emissions associated with buildings, equipment, data centres and vehicle fleets, and the upstream and downstream emissions associated with their operations. To help firms get to net zero, software must be deployed across a variety of functions, such as sustainability, EHS, risk, finance, operations and the supply chain.
Firms are announcing net zero emissions strategies to align with stakeholder pressure and climate change policies. Announcements on negotiations at the UN Climate Change Conference COP26 have added to the momentum behind business strategies aligned with reducing carbon emissions. To address challenges in this area, carbon management software vendors have added new functionality that moves beyond compliance to meet a broad range of customer demands, such as:
Incorporation of carbon credits and allowances.
Corporates may leverage carbon credits as part of their net zero transition plans (see Verdantix Market Overview: The Future of Voluntary Carbon Markets). Carbon management software can incorporate functionality that allows these firms to view the impact of offsets on their carbon footprint and demonstrate that these are being used in a manner compliant with SBTi certification. In 2021 the value of carbon credits traded on the global voluntary carbon market exceeded $1 billion for the first time. Enterprise-wide carbon management software that supports carbon trading activities, especially in emissions-intensive sectors, allows corporates to view the impact of offsets on their overall carbon footprints. Vendors currently offer a variety of options that include carbon credits and allowances. For example, OneTrust features built-in carbon credit purchasing functionality, while Intelex maintains a partnership with carbon removal platform Cloverly to allow customers to purchase and track carbon credits.Ability to track renewable energy sourcing and contracts.
By incorporating renewable energy source tracking, software vendors can enable their customers to collect, unify and validate data from their renewable energy sources. Customers can consolidate data from on-site renewables and off-site energy purchases in the form of Energy Attribute Certificates (EACs), Renewable Energy Certificates (RECs) and Guarantees of Origin (GOs), which can be further used to monitor Scope 2 emissions and prepare accurate reporting. Witness SINAI Technologies, which has developed an EAC tracking platform, as well as UL, which maintains a platform to help customers evaluate the financial cost and carbon emissions associated with different solutions.
IBM Acquires Envizi To Deliver A Comprehensive Carbon Management Software Platform
Global technology firm IBM was founded in 1911 and is headquartered in Armonk, New York. IBM has over 282,000 employees and operates approximately 600 offices in 175 countries. In January 2022 IBM acquired Australian-based carbon accounting and energy analytics software firm Envizi. Founded in 2004 Envizi’s approximately 70-person team developed a carbon management solution, which is being used by approximately 150 enterprise clients – with approximately 5,000 users – across a variety of industries, such as commercial real estate, financial services, retail, government, education, healthcare and manufacturing. Notable clients of Envizi include IBM (prior to the 2022 acquisition), CBRE, Celestica, Commonwealth Bank, Microsoft and SL Green. IBM also maintains its Environmental Intelligence Suite (EIS) platform, which has the capability to apply climate risk mapping and forecasting, as well as platforms that help customers with intelligent facilities and assets, resilient IT infrastructures, and circular supply chains. Due to the recentness of the Envizi acquisition, the Envizi platform is not yet fully integrated with EIS, although this integration is expected to be completed in 2022.
Strengths And Differentiators
Based on the Green Quadrant analysis, Verdantix finds that IBM has strengths in:
Data quality control.
IBM scored a 2.6/3.0 for data quality control, which was the top score in this category. The Envizi platform provides its users with a range of reporting and audit tools to identify missing data inputs and to estimate datawhen primary source information is not available. These tools include various data health checks, preparationof an accounts incomplete data report, and out-of-the-box accrual methodologies. Envizi leverages IBM’sDART toolkit to further assess data quality. Additionally, the Envizi platform uses artificial intelligence (AI) forseveral purposes, including for data accrual – account data, time-series meter data – and to incorporateseasonality and weather-related influences to improve the quality of estimated data.Physical climate risk.
IBM scored a 2.5/3.0 for physical climate risk, which was a top score in this category. IBM’s EIS platformincorporates weather, climate and environmental data to allow customers to plan for the impacts of weatherand climate change. The EIS platform includes Global High-Resolution Atmospheric Forecasting (IBM GRAF),which provides a high-precision, rapidly updating global weather model using high-resolution weather data.Additionally the Geospatial Analytics component within the EIS platform allows for geospatial-temporal (suchas maps, satellite, weather, drone, and IoT) queries and analytics services, providing customers access to adiverse catalogue of continually updated geospatial-temporal information.Renewable energy sourcing and contracts.
IBM scored a 2.7/3.0 for renewable energy sourcing and contracts, which was the top score in this category.Through the Envizi platform, users can capture bundled grid and green power directly from electricity retailers,as well as renewable power generated and consumed on site. Customers can capture unbundled renewable energy certificates (RECs) at a site, group or regional level, which can then be apportioned across theorganization. The Envizi platform enables customers to understand potential costs to achieve net zero forelectricity. Additionally, the Envizi platform contains a Renewable Asset Management module, enablingcustomers to track and validate performance of photovoltaic (PV) assets.
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Improvement Opportunities
Based on the Green Quadrant analysis, Verdantix finds that IBM could improve on:
Carbon financial management.
IBM scored a 1.2/3.0 for financial management capabilities. Through the Envizi platform, customers can trackemission reduction initiatives as well as projected emissions savings and costs against actual emissionsreductions and costs; however, Leaders in this category also have strong functionality for investment portfolioanalysis.Net zero programme implementation.
IBM scored a 1.5/3.0 for net zero programme implementation. The Envizi platform has several tools to helpcustomers implement a net zero programme, such as forecasting emissions across several scenarios and theuse of Power Report to develop custom reporting. To improve its functionality, Envizi could consider addingtools to optimize internal business processes and achieve net zero programme certification.
Selection Advice For Buyers
Considering all of the vendors’ offerings in the Green Quadrant analysis, we believe that IBM should be shortlisted by:
Enterprise firms seeking a comprehensive and reliable carbon management platform.
The Envizi platform is built on a strong carbon calculation engine with over 40,000 emissions factors andincorporates Power BI-based reports to allow customers to evaluate their Scope 1 to 3 emissions. Additionallythe Envizi platform allows users to configure its carbon disclosures under numerous frameworks – including theTask Force on Climate-related Financial Disclosures (TCFD), Global Reporting Initiative (GRI), SustainabilityAccounting Standards Board (SASB), Sustainable Finance Disclosures Regulation (SFDR), and the UNSustainable Development Goals (SDGs) – and contains a target setting and tracking module that enablescustomers to set and track energy and emissions reductions targets. The Envizi platform uses AI to ensure highdata quality, and IBM’s long-term investments in AI capabilities reflect its intentions to produce more accuratedata. Large, enterprise firms seeking a strong, well-rounded carbon accounting platform will benefit fromIBM’s global presence.Asset-intensive firms looking to better understand potential climate-related risks.
IBM’s EIS platform delivers customers insight on climate risk and geospatial analysis, advanced data modelling, and weather forecasting and event management. These capabilities allow IBM’s customers toimprove operational decision-making and would be best suited to firms looking to evaluate the climate risk oftheir assets in order to comply with climate disclosure rules, engage with stakeholder priorities, or gain a competitive advantage. The existing integration between Envizi and IBM’s other operating platforms –including Maximo and TRIRIGA for intelligent facilities and assets, Turbonomic for IT infrastructure, and Sterlingfor circular supply chains – as well as the planned integration between Envizi and EIS will allow customers tohave a 360-degree view of GHG emissions across their operations alongside integrated tools for climate riskassessment.