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2010 AMR Research, Inc.Sustainability Strategies | February 2010 1

SuStainability StrategieS

Nine Sustainability Trends To Watch Out Forby Hiranya Fernando

No. 1Mandatory carbon reporting will spursotware development

o say that sustainability initiatives will gain momen-tum not because o corporate social responsibility(CSR) or compliance but because corporations nallyunderstand the nancial value is so last decade. Yes,companies are committing to sustainability initiatives,and yes, theyre doing it because it makes businesssense. But the more interesting question is howtheyllseek to implement their sustainability initiatives in

practice within their operations.

We think companies will increasingly look to Ior help. On January 1, 2010, the EnvironmentalProtection Agencys (EPA) mandatory carbon report-ing rule kicked in, which applies to all businessesthat produce 25,000 metric tons or more per year ogreenhouse gas (GHG) emissions. Te 13,000-plusaected acilities will now have to report emissionsevery January. Tis will no doubt spur the developmento a slew o carbon planning, reporting, and auditingsotware. Its likely the carbon reporting unctionality

will be integrated into ERP and nancial applications.

No. 2SEC guidance on climate riskdisclosure might increase transparency, butits not a game changer

On January 27, 2010, the Securities and ExchangeCommission (SEC) provided guidance on includingrisks associated with climate change within corporate

lings. Te SEC urges companies to disclose to inves-tors where climate change impacts are a material riskto nancial health. Climate risk can come in dier-ent orms: physical damage (or example, a bank witha portolio o properties in costal areas that could beaected by rising sea levels) or regulations (or example,a carbon-intensive business that may suer decreasedrevenue or increased operational costs as a result o newlaws limiting CO2).

Most large U.S. companies already publicly report theirCO2 emissions to bodies like the Carbon DisclosureProject (CDP), with most already reporting under theEPA mandatory reporting rule as o January, 1, 2010,i theyre high-emitters. Tereore, simply includingthis inormation in SEC lings may not be a giantleap orward. What might be more challenging are thedisclosures relating to uture CO2-limiting regulationsand how they might aect a companys nancial health(or more inormation on this, see SEC, Sustainability,and Financial Accounting: Climate Change Hits theBalance Sheet).

No. 3Smart mobility will take o

Driven by sustainability initiatives and new emis-sions regulations, practically every carmaker has plansto launch a plug-in hybrid or electric car sometimebetween 2010 and 2013. Many have concept cars thatare becoming production models, with target launchesor the Chevy Volt and the Nissan EV-02 in 2010.

At the end o last year, AMR Research shared our sustainability outlook or 2010 as part o a discussion withthe Sustainability Peer Forum. We highlighted broad themes such as increased regulations and reporting,green jobs growth, and the prolieration o eco-labels. Six weeks into the new year, here are some more specicpredictions and trends worth paying attention to in 2010.

February 2010

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2010 AMR Research, Inc.2 Sustainability Strategies | February 2010

But the big news isnt that mainstream carmakers areproducing electric carsthat scoop broke in 2009 (theall-electric cars big debut on the mainstream scene wasat the Frankurt Auto Show last all). Instead, its thatclean cars appear to be part o a broader shit to smart

mobility (or, better yet, well all give up our cars andstart taking the bus).

Smart mobility means dierent things to dierentpeople, but essentially its dened as sophisticated traveldemand management and transportation inrastructureas well as eco-urban systems that support high levels onon-motorized travel, reduced vehicle trips, and shorteraverage trip lengths. Watch out or an interesting con-uence o the new energy model and the sustainabledesign o urban systems.

No. 4Green buildings, especially retrotand renovation, will be a big growth sector

According to a report rom McGraw-HillConstruction, green building currently accounts or5% to 9% o the retrot and renovation market, whichequates to $2B to $4B. By 2014, this share is projectedto grow to 20% to 30%, making it a $10B to $15Bmarket or major retrot projects. Consider LEEDproject registrations or 2010. Most are or greeningexisting buildings as opposed to building new ones.

Te desire to reduce carbon emissions by going greenwill also lead more government agencies at the stateand ederal levels to require making their buildingsmore energy, waste, and water efcient. Vendors likeAutodesk, which create 3D design sotware thatacilitates sustainable building practices, will do well.In act, Autodesk recently partnered with the U.S.Green Building Council with a goal o integrating itstechnology with the LEED rating system. Good designsotware means superior design, which in turn meansoptimal use o resources and decreased waste, both in

the building retrot and renovation process as well asthe end use.

No. 5The United States will nally passlegislation limiting CO2 emissions, though itmay be very weak

Te House passed historic energy and climate change

legislation six months ago, but the Senate bill is arrom the 60 votes needed to assure passage, with sup-porters struggling to produce a package o measuresthat can win bipartisan backing. Cap and trade hasalways been the cornerstone o the proposed climate

legislation, but given the current conditions, it may ormay not be part o the ultimate deal. Senate eorts ata compromise could include new incentives or oil andgas development, accelerated construction o nuclearplants, and new unding or research on carbon captureand storage (clean coal).

Either way, President Obama thought it sufcientlycritical to raise the issue in his State o the Unionaddress, where he urged Congress to enact comprehen-sive energy and climate change legislation he said willcreate jobs, cut oil imports, and reduce carbon emis-

sions. Meanwhile, the EPAs nding that CO2 endan-gers human health on top o the threat o executiveaction in the absence o legislation should put addi-tional pressure on the Senate.

No. 6Clean technology will continue itsupward trajectory, with some consolidation

Global venture capital and private equity in the clean-tech sector has gone rom $0.9B, to $4B, to $8.5B overthe six years since the asset category was identied and

dened in 2002. In the recession o 2009, it ell backto $5.6B.

Predictions are that clean-tech investment in 2010 willrecover and exceed 2009 numbers. However, analystsalso predict there will be some shakeout in sectors andgeographies where theres been over-investment inrecent years. For example, solar equipment manuactur-ers in China will go through some consolidation, eventhough the overall Chinese renewable energy market isexpected to grow. Te top clean-tech sectors, i we areto go by 2009 numbers, are solar, transportation (e.g.,

electric vehicles, advanced batteries, uel cells), andenergy efciency.

No. 7Resource constraints beyond carbonwill gain attention

Although carbon dioxide is the biggest challengebecause o climate change and the imperative to move

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