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Atmospheric Economy: Towards the Next Generation of Carbon Accounting

Matan Rudis
11 min readDec 20, 2023


We all tend to get carried away with thoughts during the last few weeks of the year, trying to summarize what happened, or was accomplished, since January, and what’s waiting ahead of us, next year. 2023 taught me that predictions and forecasts are, at best, guesses, and that resolutions and promises are, at best, a heartfelt intention, nothing more. So this year, to save me from tears, I decided to write a piece about what I think should be the future of carbon accounting, a combination of observations, predictions and some visionary thinking.

Setting the scene

After stemming from legacy environmental management systems (EMS), carbon accounting (hereby, CA) has been around for almost a decade now. VCs invested over $1bn in hundreds of CA solutions, while software giants like Microsoft, Salesforce and SAP released their own CA products and features. The CA software category lives along a (still) flourishing service market, dominated by the Big 4, strategic consulting firms, and specialty consultancies. Having built a modest CA myself, and observed a good few dozens of CA software, I can say pretty confidently now that there isn’t a big difference — there’s a lot of the same. It isn’t a matter of mediocrity or lack of creativity, but an issue of the market’s maturity and the ability of customers to challenge software vendors. Currently, they seem to be drinking straight from the fire hose. Even without going too deep into the various reasons and consequences of this unity, we should imagine some future developments in the ecosystem.

Vertical SaaS

The oldest trick in the SaaS marketing book is to start looking into verticals when you feel the blue ocean became red. We already see specialty CA solutions for specific industries like CarbonChain for supply chains, GreenPixie for cloud computing, or LegacyCO2 for real estate. The rationale behind vertical solutions is to focus the value proposition, identify a clearer buyer, develop special integrations and account for specific regulation beyond the overarching frameworks. I think vertical CA makes a lot of sense, like vertical payment fintech or vertical CRM, for example, would, and it is only reasonable that vertical-ity will remain an advantage as the regulation becomes more specific for each sector and region. Some of the vendors will remain independent, others will merge into broader enterprises, get acquihired, or play their role in the natural selection ritual.

Thinking inside the carbon box

Some CA platforms are focused only on GHG emissions, while other cover other nature & sustainability aspects (more or less along the lines of the UN SDGs), or broader ESG aspects like DEI, governance and anti-corruption policies. I think the future of CA lies in the areas that are measurable and quantifiable with clear metrics. You can count tons of CO2e, or cbm of water consumed, and even waste generated up and downstream, but you don’t get the same value from checking the box on “we employ x% latinos and y% LGBTQIA2S+”. Not that it’s not imporant! It’s just completely different and incomparable in the data you use and the outcomes you expect. Carbon became the pinnacle of sustainable management not only because of its crucial importance, but also thanks to the ease of quantification. If we want to account for other important aspects like biodiversity and AFOLU with CA tools, we should have simple metrics. Can we quantify 1 ton of biodiversity? Not yet — that’s something to work towards.


CA is a process that could work well for each organization individually, and fail completely when they attempt to collaborate. We take each other’s science with a pinch of salt, and we never want to share more than we have to. Whenever we share information, it comes in million formats — excel files, pdf’d reports, emails, data sheets; and different levels of accuracy, validity and completeness. Asking for, or providing on-demand GHG-related data comes at an incredible price of time and friction. The damage it causes is huge — most organizations over-calculate emissions because they’re technically incapable of collecting primary data, and they just rely on assumptions and averages. It simply doesn’t work and doesn’t scale. We’ve reached a point that we need some standard to streamline carbon data between organizations in a transactional way. CA vendors will not build this interoperable layer because they’re too busy selling software and services to their customers, and building an exchange seems like pure altruism, although it isn’t — it’s one of the best ways defense your position in the market (“the infrastructure moat”). Perhaps nonprofit initiatives like the recently founded Carbon Accounting Alliance, or the well established WBCSD, will build it, although those organizations usually provide standards and guidance, not tools and products. I think large software vendors like MSFT are, again, in the best position to put together this exchange.

Thinking of such an inter-CA protocol is quite exciting, if you’re a CA nerd. It’s a multi-dimensional, multi-layered task of defining data points, metrics, formulas, rules and work flows, that could be parallel to those we know in the payments industry, or aviation booking systems. The protocol must also address the inherent tension between transparency and business secrecy.

Public disclosures

CDP has become the go-to framework for reporting, alongside TCFD. “My supplier shared with me their CDP”, I often hear from users, “but I’m not sure what part of it refers to me”. That’s the catch. CDP is an excellent tool for investors, asset managers and stakeholders to make sustainability-informed decisions on a single company, but its value is limited when used to communicate Scope 3 emissions. All this to say, that even if all your suppliers file a CDP disclosure, it doesn’t mean they’re doing well, nor does it indicate how much CO2e they passed down to you.

The other caveat of CDP is that it’s not as relevant to SMBs as it is for public corporates. SMBs “enjoy” a lower level of public scrutiny and are used to keep their business for themselves, not to wear their performance metrics on their sleeves.

I expect CDP to become an annual ritual, where the CA spits out the metrics and then executives and consultants discuss them, update their progress and adjust their goals. If you’re counting on CDP to be your ESG rating service, I think you’re betting on the wrong horse.

Self signage SBTi

Another part of CA is decarbonization / net-zero road maps. This is where the professional services squads of the CA vendors are called to the battlefield, to support the modelling of different future scenarios. I expect this part to start looking more like a self-served and dynamic product.

Confirming the scientific validity of a company’s net-zero plan is still a manual audit, done by yet another nonprofit, SBTi. SBTi’s methodology is open sourced. I think we’re mature enough to open the SBTi bottleneck, distribute the process, and still retain a similar level of confirmation. CAs would play a central role here as the immediate, trusted partner for climate and sustainability.

Allocation and life cycle analysis (LCA)

As I already mentioned, there’s a difficulty in attributing and allocating emissions between organizations. Let’s explain why. Imagine a supplier who sells 50 different types of products to a 100 customers. This supplier can perform a life cycle analysis (LCA) for each product, and have a pretty accurate CO2e value to share. However, LCA is an expensive and time consuming process, that usually is “dead-at-delivery” due to the changes that occured from the moment the data for the LCA was collected until it’s published. The other option is to calculate the total emissions of the business, and divide them by a financial unit like revenue or weight. This approach summons another set of challenges: there could be two identical pieces but one is branded, hence more expensive, and the other is unbranded. If we use revenue as a denominator, we will allocate more emissions to more expensive goods, but it might be scientifically wrong. Of even a more extreme scenario: the revenues aren’t distributed evenly throughout the year, but the emission baseline doesn’t change in complete accordance. When that happens, a customer who placed an order on a busy month would inherit more emissions compared to a customer who ordered exactly the same at the peak season. The list of challenges goes on and on, and might deserve a separate post one day.

So what’s in it for CAs? Bearing in mind that the majority of any company’s emissions occur in its value chain, the need to allocate to others, and consume post-allocation emission stakes, is critical. As a matter of fact, it’s the only way to account for the progress of decarbonization. CAs will have to find a way to solve it. I think the key element to get allocation right is to fuse CA with operational systems — ERP, BMS, PMS, VMS and other x-MSs.

Another interesting angle to follow is LCA capabilities and solutions. As of today, most CAs miss this important capability, relying on emission factors (EF), which could be general or specific, depending on their scientific modelling focus. To offer LCAs, CAs will either build their own models, or integrate well-known tools like SimaPro and One Click LCA, streamline the LCA data into CA, and facilitate the collection of inputs from the various parties involved in the production of the examined good.

Data brokerage

We just touched on data and models, and I’d like to expand this point also to data brokerage and intelligence. The R&D effort of virtually any CA software splits across the platform and infrastructure (like any SaaS), integrations and data pipelines, and models used to calculate emissions and predict future scenarios. All the models I know take the classic open-source databases like Exiobase, DEFRA, and EPA as a baseline, and then enrich them and enhance their precision by fusing other datasets and algorithms. The fact that the same process is done in parallel by about a hundred different CA vendors makes no sense: what advantage can you have if you and your competitors are looking at the same data through the same lens? Not only that — the ability of each vendor to improve their model depends on what they experience with their customers, and that’s limited.

I expect to see a new sort of player emerging in the CA scene — data and intelligence brokers. Unlike ESG rating agencies who sell finalized company scores, the role of those players will be selling raw data and/or white-labeled models to CAs, probably as APIs. Climatiq has done a great job aggregating open-source databases under one API, and my fellow Tom Carpenter is working on mapping and enriching carbon/sustainability data with Mycelium, while DitchCarbon. Buying data from specialty vendors will reduce the R&D burn rate of CAs and let them focus more on delivering a delightful user experience.

Small & Medium businesses

There’s a handful of CA vendors who say they offer solutions for SMBs. CA is a market driven by regulation, and as the regulation targets large enterprises more than smaller players, we expect a slower adoption rate until CA becomes mandatory like having proper bookkeeping or statutory accounting. The other challenge in offering CA to SMBs is the bad combination of their low budgets or willing to pay, the lack of executive ownership on sustainability and climate issues, and the high friction and dedicated attention it takes to integrate a CA properly into a business and make it work smoothly. At Vert, we decided to cut off integrations, but we “pay” in higher friction. Some vendors enable only out-of-the-box integrations, but take a risk that the system won’t work as expected due to lack of visibility.

I see two ways out. The first is that the popular ERP vendors will conquer the SMB market, by adding CA features to their existing solutions, leveraging the data that’s already there. The other option is that banks will step into this market. Banks? Yes. Banks are highly regulated, and most of them are committed to climate disclosures and pledges like PCAF. The absolute majority of their emissions are associated with their clients and what they’ve done with the credit and financing the bank provided, so they need the data, and they’re also in a good position to collect it through their digital applications. This is not just an assumption but a real scenario I’ve heard from more than one large bank in the past few months, so I think that a CA platform designed for integration with banks’ customer-facing applications is relevant, timely and in good position to win the SMB market.

Consulting & professional services

In 2023, many organizations automatically hire the consulting firms they know and trust to help them with sustainability strategy, regulation and reporting. The main benefit of choosing this approach is that you get a customized solution and you don’t really have to develop any sustainability capacity in-house. The downside is the endless paperwork and friction it involves, and the high cost of each engagement. I don’t expect consultants to vanish from the CA scene at all, but I think there should be a better synergy between consultants and software, and CA vendors should look at consultants as “managed service providers” (MSPs), both in the interfaces developed for them, and in the business model they work in. Consultants are in the best position to sell a CA software into any organization.

Binding CA with a clear financial value

CA is still something you do because you have to. It’s seen as a cost center, not a revenue driver. This value proposition and sales motion has a limited potential, and we should find other ways the CA process can add clear value in the only way all businesses understand — $.

Luckily, we’re living in exciting times that the economic system is gradually changing and decarbonization becomes more rewarding. CAs could be extra successful if they’re able to lead their users to those metrics and provide them intelligence and advice to unlock additional financial value, by suggesting improvements that would save money, and/or enabling access to financial benefits.

Carbon accounting for the global south

The last, but perhaps most important point in this essay, is that CA will prosper and work only if it includes the global south — that part of the world we source our goods from but we don’t really count as a part of our economy. There is an astonishingly huge potential there, too. There’s no specailty CA serving the Indian, Pakistani or Chinese market, as far as I know, but there are dozens serving the different states in the German federation. The absence of those solutions blocks developing countries from playing more actively in the new climatic economy, slowing down the global effort to reach net-zero, and deepening inequality and inequity. This must be fixed.

Who’ll take us there?

There’s a lot to build here if we want to take carbon accounting and other sustainability/climate software to the next level, and even more so if we want CA to become a solid pillar of the economic system. The synergetic nature of the problem requires an unprecedented effort to build not only tools for the rich enterprises of the world, but also an infrastructure that enables connectivity and mutual relations. I imagine the current state of this market as if the cordless phone was invented before the telegraph wires.

The first wave of CA solutions was built mostly with VC money, hoping to capture a whole new SaaS market. I think a lot of them have lowered their expectations from this market ever since, mainly due to the fact that CA SaaS doesn’t deliver the automation and completeness it promised to, or any significantly high ARR. As one climate investor told me a while ago, “everyone around me took a bet on CA and some are already looking to build the next generation with what they’ve learnt”. However I expect investors to stay away for a while from backing innovative or complementary tools until the dust settles — rightfully so considering other climate-related causes that also deserve financial care. That means that it’s time for the existing players in the CA ecosystem to contribute to their “commons”, just like the aviation companies built SITA back in the days facsimile was a novel technology, or the way banks built SWIFT. The ability to work together towards solutions that benefit everyone, and making room for specialty solutions as mentioned above, will provide the ultimate answer to the question whether CAs are also driven by “climate action values”, or they’re just racing to sell another SaaS.

Wishing us all a happy new year — can’t wait to see what we build in 2024!

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Matan Rudis

Climate action, minus the hot air. Climate strategy & more at | Kayaks | Israeli in New York | Twitter: @MatanRudis