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Special Report: Environmental Business Software

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Vendor promises and real-world examples of how organisations benefit from using environmental business software

Deutsche Post was an early adopter of environmental business software
Deutsche Post was an early adopter of environmental business software

Commercial environmental business software is increasingly seen as essential to maintaining a competitive edge. A recent survey by independent analyst firm Verdantix, which asked vendors to name their five largest clients, found that these tended to be leaders in their sector.

Early adopters have been energy companies, heavy energy users and logistics firms needing to cut costs and comply with legislation, such as BP, Shell and Deutsche Post, as well as companies dealing directly with the public, such as Tesco, and those with a strong brand such as Virgin and Coca-Cola.

The next wave of buyers may include public sector organisations that need to manage their emissions to meet government targets and organisations in all sectors affected by the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme legislation.

What are the main benefits for organisations using software tools to measure and manage their environmental impacts? Published research and discussions with vendors, users and experts suggest they fall under several headings.

Locating hot spots, saving money

Simon Drury of the Waste and Resources Action Programme (WRAP) tells the story of a company that sat down to analyse its electricity data on a meter-by-meter basis for the first time, only to realise it was still paying bills for a part of its site that had been sold months earlier.

This is the kind of information that cannot be found by looking at quarterly energy bills. Businesses need data ‘granularity’, such as energy use for each building, process or piece of equipment, and time profiles to spot energy wasted overnight or at weekends.

Mr Drury thinks that even small organisations need to move beyond the spreadsheet and utility bill stage. To take waste reduction seriously, he says, organisations need to really understand their energy usage. That means looking at the sub-meter level and taking into account weather conditions and benchmarks for similar organisations. According to Mr Drury, a £75,000 submetering system which he installed at Centre Parcs paid for itself within two years through the cost savings it identified.

Simon Goldsmith of CarbonOps describes how customers often buy software for compliance reporting, but soon find it helps them identify ways to cut energy costs. He agrees that detailed data analysis is essential to identify deep and lasting savings – picking the “low hanging fruit” will only get an organisation so far.

Andrew Schafer of Verisae also emphasises the importance of granular real-time data. He finds that companies often find themselves stuck with a reporting tool that cannot deliver real cost savings. The hardware for automated submeter data collection systems may cost a little more, but real-time alerts can enable companies to respond far more quickly to reduce waste and save money.

Some organisations fall into the trap of making grand green gestures which achieve little. This is what Matthew de Villiers of Greenstone calls the “windmill on the roof” syndrome. With detailed data collection and analysis, firms can nail the parts of their activities where a real difference can be made.

Coca-Cola, for example, a Hara software customer, found that the main culprit for greenhouse gas emissions was drink equipment such as vending machines and chillers, not manufacturing or transport as expected.

Smoothing workflow

Mr de Villiers says Greenstone developed its Acco2unt software primarily to reduce the time and effort spent gathering data. He explains that in Greenstone’s carbon consulting days, typically 75% of each project would consist of “mind-numbing” data collection, followed by a “mad panic” to formulate a carbon reduction strategy.

Most clients only have two or three staff members working in the environmental department, he points out, so intensive data collection procedures can seriously distract from work to reduce emissions or improve performance. Organisations are very good at finding innovative solutions to problems, he says, but need the right information.

Simon Goldsmith of Carbonops says a key benefit of the company’s software is the inclusion of a workflow engine with automatic alerts and emails that smooth the data entry process for large enterprises. This is backed up by the findings of a 2008 report by the Carbon Disclosure Project (CDP), Making advances in carbon management, which found that automated workflow functions were a crucial user need.

A less obvious benefit is that software can help to formalise staff responsibilities and workplans. Often one of the major barriers to an effective environmental management system is that it is not clear how responsibilities should be shared between environmental managers, energy and facilities managers and staff in the health and safety, information technology (IT), corporate social responsibility (CSR) and finance departments.

Verdantix reports that when ArcelorMittel installed carbon management software, the task-tracking functions allowed these responsibilities to crystallise into a workable structure.

Verisae’s Andrew Schafer finds that not only is sustainability data often isolated in “silos” in different departments, but often the staff in these areas have never even met each other. Verisae’s  integrated asset, energy and environment platform is designed to break down these barriers and encourage staff interaction.  

Another bonus is that business software that provides a centralised database of energy and emission data with high-level analytical and reporting tools can encourage and enable board-level engagement. This is vital to driving overall environmental performance.

Most vendors now pitch tools directly at corporate executives, bypassing the energy management or IT departments. As Simon Wheeldon of CloudApps says, software is helping to bring carbon management “out of the basement and into the boardroom”.

Engaging stakeholders

Getting all stakeholders on board is vital for organisations wanting to tackle their impacts effectively. With this in mind, several vendors have developed tools to encourage stakeholder involvement.

Credit 360, for example, is introducing an “initiative tracking” version of its software to allow employees to make suggestions for environmental improvements. Its software is also used by the Produce World group to enable real-time online reporting of sustainability data and progress towards targets, visible to all stakeholders on its website.

Simon Wheeldon of CloudApps believes engagement is crucial to the reduction process, allowing organisations to extend their sphere of influence to employees, partners, suppliers and customers. In the CloudApps approach, engagement is the fourth of a six-stage “carbon journey”: measure, comply, compare, engage, reduce, monetise. The engagement stage allows stakeholders to contribute ideas, via a blog and questionnaires, and vote for improvements.

Ronan Kerouedan of CarbonHub agrees that a successful strategy needs to involve as many stakeholders as possible at the site level. The CarbonHub approach allows employees to define separate reduction plans for each site, thus trying to push ownership of the strategy down to the end-user level. CarbonHub uses networking tools not just to allow the sharing of ideas and best practice, but equally importantly to engage employees in the reduction process.

On the other hand, Moira Clark of retailer John Lewis has reservations about the potential of software to promote employee engagement. John Lewis manages its comprehensive sustainability programme through an informal system of spreadsheets and governance group meetings, with the help of an energy management system. Employee commitment and engagement are already high, which she attributes to the employees’ co-ownership of the company.

Although the firm struggles somewhat with the volume of data involved in tracking its increasing array of sustainability indicators, and the complexity of new environment department (DEFRA) and CRC reporting requirements, she is concerned that commercial software might lose the current system’s flexibility and user-friendliness.

“You need the right approach to engage people,” she says, and she does not want an automated system to diminish employee ownership of the process, or for users to lose interest if data entry becomes a “drag” or targets are seen as too rigid.

This experience is echoed in the CDP report Making advances in carbon management, in which businesses reported that they wanted to automate their processes but found many commercial tools too complex or inflexible for their needs.

Reaching the supply chain

Once organisations have a grip on their direct impacts (for example scope 1 and 2 emissions in the case of carbon), the logical next step is to look at the supply chain and at the product use and end-of-life stages.

Although energy-intensive sectors might find that their direct impacts dominate, for other organisations such as retail, construction or manufacturing the impacts of the goods they buy or sell can be at least as important. In some sectors, product end-use can also be significant. For this reason, retailer Marks & Spencer is experimenting with initiatives such as encouraging customers to wash clothes at lower temperatures.

One approach is to issue questionnaires to suppliers, though this can be time-consuming and the data returned may be incomplete. Some vendors are developing automated supply chain modules that allow questionnaires to be issued and responses collated automatically, saving time when thousands of suppliers are involved.

CarbonHub uses its networking facilities to facilitate supply chain analysis. Other tools, such as CarbonView, allow suppliers to input data directly into the company’s carbon management software. However, Greenstone’s Matthew de Villiers believes meaningful analysis requires suppliers to implement better data-gathering systems. More stringent company reporting requirements are needed, he says, and then supply chain analysis will be “a breeze”.

The Centre for Sustainability Accounting (CENSA) at the University of York pioneers a different approach. Instead of gathering data directly from suppliers, its Triple Bottom Line software, TBL2, uses purchase data from company financial accounts together with environmentally extended national input-output tables, which give environmental costs per pound spent in each industrial subsector, to estimate supply chain impacts.

So for example the annual cost of paper bought by the company would be multiplied by the average greenhouse gas emissions per pound spent on paper in the UK to estimate the company’s climate change impacts from paper use. This approach is quick and easy, and covers the entire supply chain with no gaps. If the company switches to a more carbon-efficient paper supplier, the national average figure for carbon per pound spent can be replaced with a specific figure.

CENSA has used this technique for some interesting scoping studies that show the importance of the supply chain. For example, one study showed that more than half of the NHS’s carbon emissions were associated with procurement.

For organisations with a good control of their impacts, the importance of the supply chain is even higher. An analysis of environmental group WWF’s operations showed a staggering 97% of its carbon footprint and 95% of its wider ecological footprint were outside its direct operations or energy use.

This reflects not only the relatively limited direct impacts of office-based operations but also WWF’s strong in-house energy management, including the use of renewable energy. The organisation’s energy use was 68% less than the charity sector average and its broad ecological footprint was 82% less. The study emphasised that to reduce its impacts further, WWF would need to engage with suppliers and partner organisations.

There are limitations to the input-output table approach, however. Best Foot Forward argues that the use of purchase costs (money spent on paper) rather than purchase quantities (tonnes of paper purchased) can lead to inaccuracies in cases where similar products have different costs or different impacts, such as recycled and non-recycled paper.

A more accurate, though more expensive, approach is to use detailed cradle-to-grave life-cycle analysis based on the physical quantity of goods bought rather than the cost. Best Foot Forward is trialling software to streamline this process, producing accurate product footprints at lower cost.

Enhanced credibility

Software vendors can be scathing about the quality of environmental or carbon data submitted to voluntary reporting schemes such as the CDP, which one characterised as being typically “extrapolated from two weeks of taxi bills by a student in a cupboard”. That is set to change, however, with the onset of mandatory reporting and financial penalties for non-compliance.
Simon Goldsmith of CarbonOps sees auditable evidence packs such as those required by the CRC as a key customer need. He points out that automated data collection from utility meters provides a highly auditable and reliable basis for carbon accounting.

Credibility is equally important for voluntary reporting to strengthen the company brand in a market increasingly suspicious of ‘greenwash’.
The CDP has started issuing accreditation to selected software suppliers (Credit360 is the first UK company to be accredited) and the GRI has recently issued its first accreditation to PE International.

A surprising spin-off is that software can also provide more credibility internally by helping energy and environmental managers present the business case for improvements to their bosses.

Managers at Alliance Boots, for example, used Credit360 to build a business case for changing from disposable to reusable packaging, a move that saved the company £1m.

Handling complexity

For many businesses, a key benefit of software tools is that they can handle the increasingly complex and rigorous reporting requirements under legislation such as the CRC.

Companies such as Balfour Beatty Workplace, which is at the early stage of monitoring its emissions, and John Lewis, which already has a comprehensive in-house system, are finding that the new requirements are pushing them to look for professional software that will help ensure compliance and keep them up to date with changing emission factors or reporting requirements.

Retailer Kingfisher handles a high degree of complexity using its own bespoke software, developed over the past five years, for collating data from nine operating companies, each reporting on 166 criteria towards seven sustainability goals.

Kingfisher uses this system to produce detailed twice-yearly corporate responsibility updates, which enable investors to view data for each operating company and allow these companies to track their own performance against that of the group as a whole. Individual subsidiaries, such as do-it-yourself retailer B&Q, tend to use energy management software to help report their data.

Like other users, Kingfisher has looked at commercial software tools, particularly with the CRC’s complex reporting requirements in mind. But corporate responsibility manager Becky Coffin emphasises that any new system would have to be dynamic to allow changes in company structure or sustainability goals to be incorporated instantly.