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Green BI To The Rescue

by William Laurent, William Laurent, Inc.Monday, June 22, 2009

The proponents of green business intelligence (Green BI) are growing.  From the beginning of this year, I have witnessed a profound increase in the number of technology and environmental knowledge leaders who are addressing the need for companies to better examine their green agendas.  In the coming decade, we will see a critical mass reached where Green BI will be seen as a necessity for strategically enabling and enhancing the sustainability objectives of corporations worldwide.  Given the current regulatory environment, a key functional feature of Green BI will revolve around the effective tracking of C02 emissions.  

What is critical is that companies understand that gaining better insight into their carbon footprint provides a host of opportunities to manage and control risk.  New markets in emissions trading (many times referred to as “cap trading”) are flourishing, as companies are able to buy or sell credits based on their mandatory emissions limit.  For countries participating in the Kyoto Protocol, greenhouse gas emissions trading is a mandatory task and will play an increasingly important role in corporate strategies.  As of 2007, the market for trading C02 credits was more than $60 billion dollars; this figure is almost double the amount of the total trading market from the year before.  It is a foregone conclusion that the total trade volume and liquidity of this market promises to increase exponentially in the years ahead.  A robust Green BI program will support all issues and opportunities related to carbon emissions, with a special emphasis on cap trading leading the way to competitive advantage.

Emissions cap trading enables companies whose carbon emissions fall below a set allowance to sell C02 “credits” to other companies who are in danger of surpassing their emissions limits.  For every ton of carbon released into the environment, a company can purchase credits which certify that the same of amount of greenhouse gas was removed from the atmosphere via renewable energy initiatives (executed by another party) like mass tree planting and forest replenishment.  More specifically, each credit a company purchases will be directly offset by another company, which will remove the equivalent of one metric ton of carbon from the ecosystem.

While the United States has not signed onto the Kyoto Accord - and a thorough country-wide cap on carbon dioxide footprint has not been enacted at this time - many large conglomerates (from IBM to the automobile manufacturers) have agreed to proactively take steps to cap and trade their emissions.  The long-term reality, however, is that Congress will pass legislation that mandates C02 caps at a time in the future.  In fact, this year various proposed bills have started to gain momentum in both the House and Senate at the committee level.  Meanwhile, the carbon-cap market serves as a stop-gap measure for organizations to fine-tune their sustainability agendas and emissions strategy, so as to be better prepared for inevitable new environmental legislation and greenhouse gas regulations.  From the perspective of many market analysts and environmental scientists, carbon credits are a bargain at their current prices.  It is widely assumed that their value will rise in the future as the market becomes more mature and legislation becomes more onerous. 

Green BI will aid companies in better structuring the purchases and sales of their carbon credits on the Chicago Climate Exchange.  As carbon credits start to take the form of complex derivative financial instruments, dashboard-enabled BI will have to merge with detailed financial/statistical analysis so that companies can determine advantageous positions on associated price spreads and manage carbon credit risk and volatility accordingly.  In the recent past, many companies have been falsely or erroneously touting themselves as “carbon neutral” entities.  The real problem is that the Federal Trade Commission has not set forth clear guidelines and standards on what true carbon-neutrality is.  Once these standards have been codified, the importance of Green BI will accelerate once again as corporations scramble to produce empirical and conclusive data which backs up their sustainability initiatives and bragging rights.  As experts in BI, we now find ourselves in a position where we can truly drive green innovation and make a positive difference to the environment and the corporate bottom line.

About the Author

William Laurent is one of the world's leading experts in information strategy and governance. For 20 years, he has advised numerous businesses and governments on technology strategy, performance management, and best practices´┐Żacross all market sectors. William currently runs an independent consulting company that bears his name. In addition, he frequently teaches classes, publishes books and magazine articles, and lectures on various technology and business topics worldwide. As Senior Contributing Author for Dashboard Insight, he would enjoy your comments at wlaurent@williamlaurent.com

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