Going 'Green' Gets a Metric

• Posted: Tuesday, June 17, 2008
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• Author: pradhana
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• Filed under: Business Analysis, Going Green

By Madan Sheina, Principal Analyst at Ovum

Talk is cheap. 'Greenwashing' - the practice of hyping up eco-friendly products and business practices - is now becoming commonplace. But proving your eco-friendliness and the size of your carbon footprint is another matter. Help seems to have arrived, albeit from an unlikely source. SAS Institute is best known for hard analytic number crunching rather than leafy rainforests and the ozone layer. Nevertheless the business intelligence (BI) software giant is the first vendor of its kind to deliver analytic software that provides a quantifiable metric to prove your greenness, called SAS Sustainability Management. But is this just opportunistic marketing or can the software really deliver quantifiable benefits?

Measuring, let alone analyzing, your environmental impact is a complex issue that cuts across many business operations. That's because 'green' metrics intersect across business operations and throw up new and unusual data dimensions and measures - such as greenhouse gas emissions, resource utilization, ethical sourcing and regulatory compliance - that have hitherto been outside the domain of traditional BI analysis. It's far from clear how all this data can be structured into an OLAP cube or predictive model for analyzing environmental performance.

That's why SAS's application leans heavily on a performance methodology laid out by the Global Reporting Initiative, which presents a set of metrics that's already used by over 1,500 businesses to measure the impact of their operations across three indicators - environmental, social and economic. What SAS has effectively done with Sustainability Management is to layer its SAS Enterprise BI platform on top of these metrics, using its analytic and predictive capabilities to validate green strategies and forecast improvement scenarios. For example, companies could use SAS's software to track the level of CO2 emissions their facilities produce, analyze the impact of changes to their business operations, and prioritize their energies on various energy-reducing initiatives. And when linked to other SAS applications like activity and risk management applications companies can model the impact that changes to CO2 emissions would have on costs and profitability or forecasting the risk of penalties for environmental violations.

Sceptics might well call this opportunistic marketing. Ask any company and they'll probably direct you to a webpage on their corporate responsibility. But SAS has never been a normal IT firm - for starters, it's remained private despite its billion dollar sales. And thanks to the efforts of CEO James Goodnight, SAS has always had a soft philanthropic streak that's run throughout the firm's history and is now extending to environmental issues. That said, SAS is still in the business of making money from its software, which in turn is intended to make customers money. It remains debatable whether the latter goal of optimizing business performance, which usually relates to throughput or output efficiency if you're a manufacturing firm, for example, can ever be reconciled with sound environmental practices. But SAS is certainly up for trying to strike a balance - through analytics, of course.

However, selling Sustainability Management won't be easy in today's tough business climate where the focus is economic rather than environmental. Companies are more interested in analyzing revenue opportunities and customer profitability than CO2 emissions. But forward-looking companies might still want to take an interest for a couple of reasons. First, the green efforts can save you money in terms of low risk and quick returns, without adding to costs. Second, we anticipate stricter environmental guidelines and penalties to be put in place. And finally there's also the prospect of investors more closely scrutinizing the green footprints of their portfolio firms.

So while the market for such software might not be there right now, the green movement continues to gain steam. Stricter environmental controls and regulations for companies, plus the threat of stiffer financial penalties for violation, will make going green a competitive differentiator. That is stretching the disciplines of corporate performance management and risk management to areas that haven't been considered before. More importantly, it also separates the green doers from the idle talkers. /PR

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