Why free basic carbon accounting is the right thing to do
About a year and a half ago I was playing with the idea of building a carbon accounting platform. That wasn’t a very bright or genuine idea, as there are already hundreds of solutions out there — from those provided by software giants like Microsoft, SAP and Oracle, to the new-wave solutions like Watershed, Sweep and Persefoni, to niche platforms designed for certain verticals (shipping, food, hospitality to name just a few) or business use-cases (supply chains, compliance).
After examining the existing offering in the market I realized there are two ways to approach this market: either you take a different market position than others, or a different product strategy.
Thinking about a different position in the market, my idea was to build a connectivity layer between carbon accounting platforms so organizations can communicate product-level emission data in one protocol. The process of exchanging this type of data between organizations or up and down value chains comes with a constant degradation of the data, as it is extracted from a dynamic system into a static format (Excel, PDF) and then transmitted through email. Another option I was considering, and we eventually ended up implementing partially, is to build inter-connectivity between organizations around a “dynamic life cycle analysis”: imagine that each party involved in the production of canned tomato sauce will sync their inputs to one framework, so you can see granular data for the contribution of the farmer, packaging supplier, shipper, producer and so on, and, you could track the changes in the carbon intensity to a batch level. Those two approaches didn’t relate to a bad enough pain and didn’t get too warm reactions.
Choosing a different product strategy was another story. That meant that instead of selling 5–6 digit ACVs into enterprises, we would go for a PLG motion with a basic value proposition, and convert the users to a more valuable product — either by allowing access to additional features, or adding more support, or selling other services on top of carbon accounting. That fitted very well with our purpose to help companies decarbonize, not just measure and report, and to our understanding that carbon accounting could be a gate to offer much more valuable financial services and products.
Most of the reactions I got were shock. Is it free? Forever? How come you don’t charge for it? It must be too simple to work well… So, here’s my answer.
As of late 2023, most of the organizations that will have to report and act on their emissions by law by 2030 haven’t yet filed a single report, or are now nibbling their way through the first cycle. They are not ready to do it by themselves and most of them hire consultants. The consultants — most of them, not all of them — aren’t software entrepreneurs or computer experts, they work with Excels and emails. We’re now working to loop in consultants to our user ecosystem, and I’ll write about in in more detail in a few weeks.
Another thing nobody tells you is that you can build good-enough carbon accounting that would be fine for most of the organizations and the companies in 2024–2028, without turning it into a SaaS monster. In the end of the day we all refer to the same emission factors and must do so, otherwise our measurement will not be acceptable. We chose Climatiq as an aggregative API into emission factors and so far, we’re happy with what we get.
Last point, and perhaps it’s a sad one, based on dozens of conversations with sustainability managers in companies across regions and sectors: the pace of decarbonization is determined by regulation and by competition. There’s a good reason for that: you can’t expect one to make an anti-profitable decision if there’s no regulation or competition to force them, and still for most businesses it’s more “economic” to keep business as usual. So expecting the common SME to commit to a carbon accounting platform for 20, 50 or 100k USD a year doesn’t prove to be logical at the moment.
Having said all that, there’s a much more important argument about why basic carbon accounting should be given for free: it will pay back. Measurement and compliance are just a springboard towards decarbonization. What generates real business is when a company chooses to install PV and heat pumps, or replace its truck fleet, or change their packaging to save emissions. Each decarbonization decision would generate business to thousands of businesses and their suppliers, much beyond what a carbon accounting platform can ever earn. Moreover, governmental incentives like those included in the IRA, or the European Green Deal, encourage businesses to move as fast as they can to climate action, to buy stuff, not to sit on their hands and count grams of carbon dioxide.
I hope this answered the question for the revenue-driven readers. But what about impact and social equity? Well here’s another argument: free basic carbon accounting would allow millions to participate in the booming climate economy, while not having accessible means to measure emissions will keep them below the threshold. When Muhammad Yunus started Grameen Bank, he lowered the entry bar to small businesses and households to take loans even if they had no collateral to provide, and by doing that, he included them in the economy that was previously out of their reach. Same story here: let businesses measure and identify where they can decarbonize, and you’ll take them two steps closer to gaining access to “climate money” and other competitive advantages.
I’d like to wrap it up with a few invitations:
- Any business is more than welcome to sign up to Vert today and use it for free to measure emissions and produce reports. Enjoy, no need to thank us.
- Sustainability consultants who are open to save hundreds of hours and chaos and work with their clients on Vert — please shoot me a message, I’ll be happy to show you what we’ve got for this use case.
- Entrepreneurs who think their products could serve companies that seek to reduce emissions — we’ll be happy to hear about that too and inform our users how your technology can help them address their emission hotspots.
We don’t have time to waste, let’s go.
