This afternoon, I’m attending the sustainability session at the SAP Influencer Summit in Boston. Immediately, I’m asking myself if the sustainability market strategies of SAP and other vendors are themselves sustainable? Over the last few years the hype around global climate change and the current and proposed regulation of carbon emissions have driven the sustainability market much more than other sustainability issues like corporate ethics and non-carbon related environmental concerns.
In the opening session SAP’s chief sustainability officer shared projections that the sustainability market will grow over the next several years to several billion dollars annually. Over half of this market according to SAP will be “energy management and carbon tracking.”
Most of the SAP sustainability presentations focused heavily on carbon emissions tracking, management, and reporting. European cap and trade regulations, the requirement from the U.S. EPA starting next year for companies to start reporting greenhouse gas emissions, and the still real possibility that the U.S. Congress will pass a cap and trade bill, all support a growing market for sustainability solutions.
However, it does not take the shrewdest analyst to see that the public interest in carbon has peaked and is plunging rapidly. The East Anglia Climatic Research Unit scandal on top of the economic crisis have pushed carbon to the back burner. If the carbon part of the sustainability market suffers heavily, the rest of the susstainability market led as it has been by carbon hype could suffer as well.
If they shrug off the rapid decline of carbon as a social concern, sustainability vendors may be damaging themselves. Public policy issues are incorporated into regulation when the gap between societal expectations and the corporate responsiveness gets too wide. Societal expectations on climate change have dropped significantly, and the impact of carbon regulation may not be as significant over the next several years as SAP and other vendors are expecting. Impact depends both on the regulatory requirements and the enforcement level of regulations.
SAP’s polling of corporate executives shows they are much more interested in energy management than they are carbon emissions. This is rational behavior — execs know they can hedge on carbon emissions by focusing on energy management, and energy management has direct business impact. Energy costs have been shown to be highly volatile in recent years, and reducing exposure to this volatility has a lot of benefit to business strategies.
Taking a cue from the interest of corporate executives in energy management, sustainability vendors should focus on helping their customers with the risk management of other resource constraints as well. Resource risk management should include:
- the ability to manage compliance risks associated with regulations and partner mandates,
- the sourcing risks of resource production and logistics bottlenecks,
- resource scarcity risks in an increasingly competitive global economy.