Smells Like Green Spirit #3 - Softwares at the Service of Environmental Stewardship

Sustainable business practises, also dubbed 'Green Business' is an umbrella term for a wide variety of practices that shift companies from financial performance to environmental stewardship. The externalities induced from companies activities have historically been overlooked. Carbon emissions, water pollution, air pollution, waste disposal do not inflict a direct impact on a company's performance - that is albeit unless the pollution created is so high, lawsuits are incurred, and damages have to be paid.

However, pressure is rising on companies to minimise damaging impacts on the environment, people and society. Consumers are increasingly aware of the impacts that the products they buy may have on the environment. As a result, sustainably-branded products are increasingly outcompeting products seen as unsustainable. For example, in 2018, Unilever's Sustainable Living Brands grew 69% faster than the rest of the business, compared to 46% in 2017. Further, employees themselves are putting more pressure on companies to increase their sustainability. Amazon employees, for instance, signed a letter in 2019 to CEO Jeff Bezos and the company's board of directors, asking for broad action to fight climate change. Investors are also increasingly attentive to companies' non-financial performance: the Climate Action 100+, a group of 320 investors that manage more than $33 trillion in assets are now demanding companies adhere to the Paris targets.

Enter Environmental Softwares. Long fallen under the umbrella of EHS products (products that aim to allow companies to comply with regulations on Environment, Health and Safety), environmental softwares have become a market of their own. Instead of being regarded as a subcategory of social and worker rights regulations that companies must abide with, environmental stewardship is increasingly being seen as an essential feature of any business if it wants to survive and thrive in the shifting market conditions.

There are now three main categories of environmental softwares: compliance software, performance softwares and transformative softwares.

Environmental compliance softwares deliver on what is written on the tin: they collect, compile and monitor the information on the legally regulated processes and report the environmental performance against legal standards, thereby ensuring the company is compliant with the national legislation. These softwares currently the largest share of the environmental software market as the philosophy behind these products have mainly been the aim to allow companies to ensure the environmental externalities created through their activities would not be internalised through eventual lawsuits resulting from a breach of legislation. However, the mindset around corporate environmental stewardship has been shifting over the past decade. As a result, several environmental softwares go beyond the simple compliance aspect and actively pursue increases in environmental performance.

Environmental performance softwares usually include the minimum legal requirements in their analysis of a company's environmental impacts. However, these products go beyond ensuring legal compliance and actively make recommendations to the company's decision-makers on the environmental impacts of their activity, be it in terms of air pollution, carbon emissions, water pollution or even waste generation and disposal. These softwares adapt to a company's model and processes and offer advice on how to increase environmental efficiency, which in most cases also results in increased financial performance. For example, in the case of most companies, the most significant source of emissions is the energy efficiency of their offices - excluding the agricultural, manufacturing and logistics sectors. Increasing energy efficiency usually results in cutting costs associated with energy expenditure and thereby increasing a company's profits over time.

However, some products go even further and allow companies to transform their processes and even their models to actively integrate environmental stewardship at the heart of companies' strategies. Softwares such as thinkstep's GaBi are aimed at transforming the way a company designs and builds its product by including a full life-cycle analysis and encouraging them to think about the end-of-life impacts of their decisions. As a result, companies transform the way they design and manufacture products and limit their environmental impacts to a minimum.

The market for environmental softwares is expected to continue growing, especially as environmental policy around the world becomes increasingly stringent on companies. However, as this growth will be driven by policy, the question remains: will those new products be strictly geared towards compliance to increasing environmental regulations, or will the transformative moto of sustainability and circularity make its way into the heart of companies' strategy?

Only time will tell. Until then, stay safe, live well, live Green!

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