Is it carbon accounting we need, or carbon optimization?

Axios recently published an article claiming that “the emissions-data arms race is on”, pointing to the rapid growth and potential consolidation of carbon accounting software and services, driven by pressure from current and anticipated ESG reporting regulations. While carbon accounting and reporting is certainly a real need, I have to wonder whether this framing misses the real opportunity with emissions footprint data. Specifically, I wonder:

Is the focus on carbon reporting blinding us to where footprint data can really shine — in leading us to the low-hanging fruit for carbon emissions reduction?

I think this is a real risk. The carbon accounting platforms that are getting attention today (like Watershed, Persefoni, Sweep, CarbonChain, Gravity, Sinai, and seemingly dozens of others) appear to be going after the reporting use case, prioritizing comprehensive, BI-like reporting, built on relatively coarse-grained data with emissions estimated from financial spend models, aggregate usage information mapped through industry-average emission factors, and/or manually-collected point-in-time data. These are the right product choices to solve for regulatory reporting, and for sure fill a real market need.

But what you don’t get in this approach is data that points the way to action — data that points to how organizations could change their operations to directly reduce carbon emissions. Now, of course there is some optimization potential from coarse-grained regulatory-focused reporting. Certainly it enables the blunt instrument of carbon offsets to mitigate existing emissions. But by focusing on comprehensiveness over fine-grained actionability, a lot of low-hanging fruit is left by the wayside.

And there is low-hanging fruit to be found. Scope 2 emissions can be optimized by shifting process steps around to maximize energy usage during times when the carbon intensity of grid energy is lower. Scope 1 emissions can be chipped away at by identifying and improving specific process steps, making different transportation choices, shifting fuel mixes. Scope 3 emissions can be optimized by extending work across the value chain, starting with supplier choice and extending to supplier partnerships to “green” inputs at the source. Many of these optimizations can even provide cost savings, or can be done cost-neutrally (and reduce the need for expensive high-quality offsets).

We need carbon accounting that is not just for reporting, but provides actionable guidance that leads organizations to these optimizations. This kind of accounting will look different: it needs to be much more fine-grained, able to work with detailed longitudinal footprint data at the granularity of the individual processes, inputs, industrial machines, transport vehicles, etc., where actions can be taken to address low-hanging fruit. It needs to understand the local processes and the context of the larger value chain so it can identify realistic actions.

And as a tradeoff, it will likely be less comprehensive than today’s accounting solutions, but that’s ok — we need tools that get organizations started taking action on this low-hanging fruit, helping them go into their factory floors, loading docks, and supplier networks to make tangible changes that reduce emissions. This is how we make concrete, immediate progress on emissions reduction while the broader macroeconomic forces of ESG regulation and offsets gradually work their broader effects.

Let me know what you think — I’d love to hear your thoughts, whether you agree or disagree with this perspective! Comment here or find me at abbrown at gmail.com.