Companies in the clean tech industry are garnering more attention these days, especially from CPA firms that see the sector as having big potential for growth.
For Chicago-based BDO, serving the clean tech industry is nothing new. The firm has been working with clients within the channel, which includes alternative energy producers, for several years. What is new, however, is that over the last year the firm created a firm-wide clean tech initiative to focus more on developments in the field. "We have teams in various offices across the country that have heavy client bases in areas that could be defined as clean tech," said Lee Duran, an assurance partner in BDO's San Diego office.
In March, BDO released its 2010 Technology Outlook Survey that polled 100 chief financial officers at technology companies about clean tech. Two thirds, or 66 percent, said that they were interested in clean technology. Forty-three percent of CFOs surveyed reported that they produce clean tech products or services, and 46 percent use products or services from clean technology vendors.
Duran stressed that companies that offer clean tech services or products need the traditional services of a CPA firm. And because of new incentives, such as tax credits, unique accounting and reporting issues for joint ventures that support wind or solar projects, and different aspects of revenue recognition and long-term contracting, the area now represents a hotbed of engagement possibilities.
Scott Appel, local leader of the alternative energy practice and partner-in-charge of the Irvine, Calif., office of Hein & Associates, agreed: "We're providing traditional audit and tax services, but if you think about the nature of a lot of these businesses, there's a great focus on capital formation. There's a lot of capital-raising going on, and traditionally, accounting firms are involved in providing service around those types of transactions."
WHERE THE GREEN IS
Despite the financial gloom of the past two years, there has been a flurry of venture capital investments in clean technologies.
According to preliminary data released in January by the Cleantech Group, a facilitator of clean technologies, and Big Four firm Deloitte, venture investments in the clean tech arena totaled $5.6 billion for 2009. Wind energy - the sector most heavily invested in by U.S. utilities - continued to be a significant investment area in 2009. Global Fortune 500 companies, as well as energy and consumer and industrial product companies, made large investments in clean tech as well.
Aside from facilitating deals between clean tech companies and venture capitalists, CPAs can assist businesses in monitoring and reporting their carbon emissions.
This will be big business in the near term, despite uncertain regulation, according to a January report released by energy and sustainability consulting concerns Groom Energy Solutions and Pure Strategies: "As investors, customers, employees, communities and governments insist on more accurate carbon emission data, organizations are beginning to track carbon emissions as rigorously as they track revenue and expenses."
Lee Barken, CPA and IT practice leader at Haskell & White in San Diego, said that CPAs are in an ideal position to help with carbon measurement, reporting and verification. "The real opportunity for CPA firms is to get engaged in the discussion on carbon," he said. "The moment you put a price on carbon - via cap and trade or a carbon tax - you have an asset or liability on the balance sheet. CPAs will certainly have a role in both measuring carbon and also the internal controls surrounding those systems."
Steve Starbuck agreed. As the newly appointed leader of the Americas climate change and sustainability services practice for Ernst & Young, he said that the first step CPAs can offer clients is education. He said that as accountants, auditors and business advisors, CPAs should first help clients prepare for emissions management by developing a thorough understanding of the various state, regional and federal programs that prescribe greenhouse gas reporting requirements.
Then, Starbuck said, it's all about working with clients around compliance, risk identification and process improvement.
In addition, Starbuck said that CPAs can help companies develop processes and controls in three key areas - measuring, monitoring and reporting greenhouse gas emissions. This is getting increasingly important given the Securities and Exchange Commission's recent interpretive guidance on climate change disclosures, and because, "There is pressure coming from investors, insurers, regulators and other stakeholders for enhanced reporting on greenhouse gas emissions and related risks," Starbuck explained.
With the emergence of clean tech products and services comes the assumption that those companies have a stake in the well-being of the environment. However, this is not necessarily true all the time. "There is the concept of 'greenwashing,' where companies have exaggerated claims about being green," Duran said. "I don't think the key focus is any longer just business folk that happen to be environmentalist trying to do good for the world. I think a lot of the people who get into this have this interest, but at the end of the day, it really is a business and all these guys are seeing opportunities in niches."
BDO's Duran said that his firm's increased focus on clean tech came from international client demand - specifically Germany, where a lot of his alternative energy clients are based. "They started looking at the U.S., especially with the new administration, and said, 'Wow, this is a great market to invest in,' so just in the past year, we have picked up, through foreign investment in the U.S., a significant amount of clients across the country." As a result, the firm has identified people in every firm region to head up a team with at least a core skill set in each office to address the needs of clean tech clients. "Our focus over the next year is to ensure companies understand the different accounting and reporting issues, the type of credits and our services available to meet them," he said, adding that BDO will get involved in other clean tech initiatives across the country.
Hein's Appel said that despite the economic downturn and seeing his more traditional energy clients take a tumble, his firm still anticipates that the clean tech area will continue to grow: "I don't think this issue is going away."
For more on opportunities in clean tech, see our Q&A with Haskell & White's Lee Barken in the expanded version of this article at AccountingToday.com, and for more on CPA firms' green initiatives, see our Practice Resources section.
