Entrepreneurs

Carbon Accounting – Why It’s More Than A Tick Box Exercise

Had things gone according to plan, world leaders, diplomats, captains of industry and environmentalists would be assembling in Glasgow this week to take part in the COP26 conference on climate change, an event that was seen as crucial in building momentum behind the global imperative to reduce carbon emissions. 

But we’ll all have to wait to find out whether policymakers manage to agree on anything substantive. Thanks to the pandemic, COP26 has been pushed back to 2021, leaving a gaping hole in the calendar and perhaps also a feeling that the climate crisis has been put on the back burner, if only temporarily.  

But even if COP26 isn’t going ahead as plans, this week will see the organisers of London Climate Action Week (LCAW) attempting to put the issue of global warming centre stage while highlighting at least some of the solutions that may speed the transition to a low or zero carbon world. 

One of the key events is the virtual launch of a carbon accounting standard for the financial services industry, part of a larger, and global move, to standardize the way that organisations report their emissions.

Measuring Impact

As government initiatives, regulation and pressure from consumers press businesses to account for their carbon output, reporting standards are essential. But something else needs to be considered. How does a large organisation – perhaps with complex supply chains – even measure its carbon footprint with any degree of accuracy? It’s a major challenge.  

So can technology play a role in facilitating accurate reporting? Mauro Cozzi thinks so. He is co founder – along with Ben Peddie and Eduardo Gomez – of Emitwise, a U.K. based tech startup that deploys artificial intelligence to help companies monitor, measure and ultimately report on their carbon footprints. Appropriately, I spoke to him just ahead of this London Climate Action Week to discuss how carbon accounting can help address climate change issues and whether solutions provided by a startup company can make a difference. 

Doing X To Achieve Y

Perhaps surprisingly, Cozzi doesn’t think that regulation is necessarily the driver that will encourage businesses to cut emissions. Emitwise was founded on the premise that businesses will act to cut emissions, if the technology can demonstrate that good carbon governance equates to higher profits.  

“What we’re setting out to show is that if you do X you can achieve Y and also make money,” Cozzi says. “And what we provide is a platform that allows organisations to make continuous improvements.  

There is an easy to identify relationship between carbon output and the bottom line. Put simply, the less energy a company uses, the lower its own costs. Added to that is the fact a business might also reduce its costs further by focusing its purchasing power on suppliers who are also energy efficient. 

“There are also revenue growth opportunities,” adds Cozzi. “Consumers are increasingly buying from sustainable companies.”

Greenwash? 

Those arguments have been aired frequently, but even when businesses apparently buy into the carbon-reduction agenda, there is always a suspicion that claims made in annual reports can’t always be taken at face value. For instance, a business might claim to be operating sustainably and even using that as part of its marketing, without really knowing or reporting on its total carbon impact. Equally, a business may be committed to reducing energy costs while struggling to fully understand the full extent of its energy usage.

Thus, in Cozzi’s view, effective measurement and reporting is essential.  

The starting point for the Emitwise platform is data from all the available sources, including information on aspects of the business such as travel and workers’ commutes. Much of this can be gleaned from standard accounting data and enterprise resource management systems. The tricky part is making sense of it all. The Emitwise platform crunches and analyses the data. 

The aim is to produce something actionable. Cozzi sees three opportunities. First and foremost, the system can produce comprehensive reports quickly. In addition, however, it brings information to the surface. “You can identify impact opportunities,” he says. For instance, we have made it easier to identify hotspots for emissions.”  

The data also enables planning. “Companies can look at the data and use it to set targets for carbon reduction,” he says.   

All of which sounds straightforward, but there are real challenges, not least in terms of understanding supply chains. If a company is to have a holistic view of its carbon impact, suppliers have to be feeding into the system too. Clearly, it won’t necessarily be a simple matter to bring every third party company on board. This is something Cozzi acknowledges and he suggests a step-by-step approach.  

“We recommend starting with key suppliers, – you look to get priority data. There will probably only be a handful of these. For the rest of the supply chain you use modelling.”   

But here’s the question. Emitwise’s founders are committed to running an impact-driven company, but will organisations buy their vision – or indeed, purchase services from a startup rather than relying on existing, internal systems?  What are the drivers? 

“Regulation is driving procurement at the moment,  but existing regulation is not having an impact,” he says. Thus Emitwise focusing its sell in the concept that carbon reduction boosts the bottom line.    

It’s early days for Emitwise. To date, it can name two customers, – namely Spendesk and Seed – – but the company has just raised $3.4 million in a round led by former Uber CEO Ryan Graves to help bring its vision to the market.   

Carbon accounting is set to be a bigger issue in the coming months and A.I. is bound to play a greater role in helping organisations provide accurate reports. But there is a bigger picture. The race to create a net-zero carbon world has created huge opportunities for innovative startups and investment is pouring in. Here in the UK, VC investment in net-zero carbon companies rose 20 per cent to £336 million between 2018 and 2019, according to figures published by Tech Nation. Some of the activity is around analysis and reporting, but startups in the U.K. are also working on a broad range of solutions to help businesses reduce their carbon footprints. Investment growth seems likely to continue, but what remains to be seen is whether solutions developed by small innovative businesses will have a major impact on a big problem.

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