Groom Energy Solutions recently released the fifth edition of its Enterprise Cabon Accounting (ECA) report, first published in 2008. The research confirms the increased adoption of ECA software, but concludes that the market is rapidly maturing, resulting in slower growth and falling selling prices.
According to Groom, the last 24 months saw more than 600 large corporations make software purchases to aid in their sustainability tracking and reporting, including American Airlines, Adidas, Microsoft and Volkswagen Group. Outside of the US technology adoption is also increasing among Asian and South American companies.
Now, though, many corporate buyers have already implemented solutions and know the various vendors and products. These companies expect basic Scope 1 and 2 carbon tracking, water and waste modules, and a reporting dashboard, in an easy-to-use, proven system. More advanced users also expect support for supply chain surveys, energy management, EHS modules and integration with ERP systems.
The main purchase drivers have remained much the same in the last few years. In order, they are:
1. Requests from top customers for annual environmental data, including programmes like the Walmart Supplier Assessment Programme.
2. A desire to enhance company image and increase brand loyalty.
3. Cost savings from improved energy management.
According to the report, the evolution of the ECA market has driven vendor consolidation and a shift in feature priorities. The largest vendors are broadening their offerings through acquisition while venture capital investment for new players has dropped significantly. The report names CarbonSystems, CA Technologies, Credit360, Enablon, and PE International as the top 2013 ECA market leaders, based on the number of customer deployments, technology features, sales momentum, market vision and financial stability.
Review: I commented on one of these reports from Groom a couple of years ago, with the words “But this is a market not that far from maturity. Features and functions are pretty much known and innovation is slowing. I would expect significant consolidation to start by the end of this year, with the lucky start-ups finding a big-name buyer”. And so it has come to pass.
You need to be a bit careful about what’s being discussed here, though. This is the Enterprise market for carbon accounting software – I’m not sure what Groom’s exact definition of ‘enterprise’ is, but it’s larger companies. That’s a finite market, and bear in mind that much of the ECA functionality has been incorporated in existing enterprise solutions, such as ERP or finance packages. So what this report is saying is that the market for specialist solutions for large companies has matured and sales are slowing.
That’s no surprise. Larger companies are more susceptible to the pressure from customers and image issues. Smaller companies will be more reluctant to take action until pressure builds. They will also be looking for cheaper solutions, hence the reported drop in software prices. Future business will come from these smaller companies, but adoption will be slow and patchy and revenue per customer will be lower. It’s a very different prospect and enterprise suppliers will need to adapt. There’s still a significant opportunity for suppliers attuned to the small business market, but it’s a long-term game.