Businesses need faster evolution of carbon management software as new regulations drive demand for more forward-looking capabilities, according to a new report from independent research and consulting firm Verdantix.
New rules, including the European Union’s directive on corporate sustainability reporting, which will see its first draft set of standards adopted in October this year, as well as the proposal from the Securities & Exchange Commission (SEC ) from the United States to align with the TCFD framework, is driving demand for enhanced software.
Around 49,000 companies in the EU will have to disclose their carbon emissions from next year, with the SEC’s proposals also likely to require reporting from a significant number of companies in the United States. Therefore, companies are looking for technology solutions that will help them meet these new demands. However, Verdantix finds that no single software vendor today has a comprehensive product portfolio capable of reporting on key elements including financial, climate and physical data.
by Verdantix Green Quadrant: Enterprise Carbon Management Software 2022 report states that new software features required by regulated entities include verifiable, investor-grade data; carbon calculation methodologies; climate risk assessment of physical assets; and financial management functionality.
The carbon management software market has been around for over 15 years and has always been dominated by environmental, health and safety software vendors with a proven track record in data modeling and emissions calculations. A flood of new entrants who have raised substantial sums of money (often through private equity) are now spurring a new wave of innovation as software companies compete for a share of corporate spending.
Verdantix’s own data shows $418 million invested in the carbon management software business over the past 12 months and indicates that investment is unlikely to decline in the immediate future.
Jessica Pransky, Principal Analyst at Verdantix, said, “Tens of thousands of companies are actively seeking software solutions to help them meet their carbon management requirements as they navigate a new regulatory landscape. However, our analysis shows that today no software provider offers a complete wallet offer.
The size of the award for software companies capable of developing holistic solutions is vast, so we expect that to change as developers race to bring new solutions to 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, Director of Research at Verdantix, said, “We are thrilled to have launched what we believe to be the strongest carbon management software analytics report on the market. As companies strive to achieve their net zero goals and respond to changing societal expectations, there is a clear need for independent and accurate insights into the solutions available today – and the probable direction of future innovation”.
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