Venture Capitalists See Profit Potential in Carbon Accounting As Wal-Mart, Others Embrace Sustainability

Vendors discuss sustainability at Wal-Mart's Global Milestone meeting earlier this month.

As Congress debates a Climate Change bill, big business, entrepreneurs and other start-ups see a future — and big profits — in carbon accounting, which allows companies to track their carbon footprint. With giants like Wal-Mart Stores Inc. of Bentonville encouraging vendors to be more energy efficient in their manufacturing processes, its clear that carbon accounting might be ready for the big time.

According to this story from American Public Media’s “Marketplace” radio program, venture capitalists have been — and still are — investing in carbon accounting businesses. But now others are getting in on the act:

Venture capitalists have been pouring money into carbon accounting start-ups over the past few years. But big software and consulting firms smell potential profits as well. Some have begun gobbling up the start-ups in this field.

Others, like Microsoft, are coming out with their own carbon-accounting products. These corporate giants knows it’s not just oil companies and utilities that will buy this kind of software. Consumer companies like Coca-Cola are doing it already.

[Consultant Paul Baier at Groom Energy Solutions]: The fastest-growing area in this market are companies which will face no regulation. Companies like a Starbucks or a Whole Foods, they need for competitive reasons, to protect their brand, to attract the best and brightest, do need to be increasingly more environmentally responsible.

Still, the market for enterprise carbon accounting is in its infancy, with just 300 deployments so far worldwide, according to Manfacturing Business Technology. And service providers are increasingly moving from on-site installations to the software-as-a-service model, which removes upfront costs for customers.

After the jump, we talk about the costs for such services and assess carbon accounting’s possible future in Arkansas.

So what is the cost of such carbon accounting services?

“Almost all of the vendors offer their solutions under the software-as-a-service model, so annual subscription fees might range from $25,000 to $150,000 depending on number of modules used and the number of end-users,” says Baier.

While costs can vary beyond this range, adds Baier, it’s possible for [enterprise carbon accounting] solutions to start at a relatively small price tag with SaaS.  “You can get into [an ECA solution] for under $100,000,” he says.

With more carbon regulations in the legislative forecast, carbon accounting will become more crucial for private and public business, as well as government and nonprofits, creating new opportunities for venture capital, new businesses and innovation in the field.

And with Wal-Mart’s plans to create a global sustainability index, we wonder whether Arkansas entrepreneurs might have a unique opportunity to be pioneers in this emerging business. Wal-Mart’s only now beginning its five-year plan to implement the index — a plan that will involve a host of entities:

Wal-Mart is initiating the process but inviting other companies to participate. In addition to surveying vendors, Wal-Mart will help create a consortium of universities that will collaborate with suppliers, retailers and government entities to develop a global database of information on product lifespans.

So the questions are: What kind of a future does carbon accounting have in Arkansas? Are Arkansas venture capitalists and entrepreneurs looking at this area as an emerging field in which to invest and innovate? And how can Arkansans be involved in Wal-Mart’s long-range sustainability plans? Give us your perspective in comments.

Related

Among Microsoft’s carbon-accounting software packages is an online tool called Project 2 Degrees. The effort, of which the Clinton Climate Initiative is a part, is for cities across the world to monitor greenhouse gas emissions.

The full text of the American Clean Energy and Security Act of 2009, which passed the U.S. House.

More on carbon accounting the software-as-a-service model.

Arkansas manufacturing consultants react favorably to Wal-Mart’s sustainability plans.

Wal-Mart’s sustainability questions for vendors (PDF).

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