The B2B Sustainability Startup Landscape —navigating through the carbon accounting startup jungle
Do you feel you are getting lost in the carbon accounting startup jungle? You are definitely not the only one: with startups suddenly sprouting from the ground, it is difficult to keep track and differentiate the solutions on the market. This article is here to help.
Following up on our introductory article about the European B2B sustainability startup landscape, which we have published jointly with UVC Partners and Digital+ Partners, and our first deep dive on supply chain transparency, we are now taking a deeper look into carbon accounting, an emerging industry to drive the emissions reduction agenda for governments, institutions, and especially corporations. But — what is carbon accounting and why is it so important now?
Carbon accounting refers to the systematic counting, tracking, monitoring, and reporting of direct and indirect CO2, emitted through an organization’s or individual’s activities.
Companies, specifically, are under heavy pressure to reduce emissions and generate opportunities from genuine commitment towards climate protection. However, many struggle heavily with the implementation of their strategies, especially with the first step, simply determining the amount of CO2 they are emitting. Although corporate carbon accounting has been done for decades, the complexities are still enormous, especially regarding calculating emissions occurring in the supply chain or through product usage.
With regulatory, consumer, and general stakeholder pressure rising, the demand is extremely high for pragmatic, scientifically correct, software-based carbon accounting solutions. Numerous startups have taken on the challenge, offering solutions to calculate, track, and report on a company’s carbon footprint. However, with so many solutions out there, it is tough to understand the difference, the advantages and disadvantages of the many offerings, e.g. regarding calculation methods, the database behind it, industry expertise, and, most of all, the scope.
Here are some key aspects to look out for when choosing your carbon accounting provider:
Objective: The underlying objective which links all startup solutions is to help organizations to get closer to a net-zero economy while also delivering economic value. Providing the necessary data to measure and monitor emissions is at the center of all offerings. Some startups take their offer a step further with a more holistic approach to ESG reporting, e.g., Envoria.
Most tools also offer support in managing these emissions and set internal goals: These SaaS solutions can include the identification of opportunities to reduce emissions, tools to implement sustainability initiatives, automatic generation of reports, a performance forecast, and even engaging stakeholders, like Cozero or Plan A offer. As another approach, some startups, e.g., Bloom, provide services to offset remaining emissions which cannot be avoided (yet).
Calculation method & data strategy: Currently, startups mainly work with database solutions acquired from various available studies and public indices which apply life cycle assessments through the application of conversion factors for, e.g., location and electricity mix. In the future, the ability to use Artificial Intelligence to process this data and make it more accurate for specific use cases, and the possibility to automate the collection of primary data will be crucial.
Further, there are two approaches to calculating a footprint: The first is top-down, for example used by Klima.Metrix, based on rough averages, which is faster and easier, but, of course, also less accurate. The second one is bottom-up, for example used by the startup Carbmee, which is slower and requires more integration into existing IT systems and often manual data input, but which is more accurate to identify true reduction potentials.
Industry Focus: While most startups offer their solutions for a broad range of industries, others focus either on specific industry sectors or areas, e.g., Vayuu on e-commerce, CarbonMinds on the chemical industry, and CarbonChain on extractive industries.
Scope: As gaining full emissions transparency will be important to reach net zero, another decisive factor for success is the extent to which the solution includes scope 1, scope 2, and scope 3 emissions. Carbon accounting systems need to account for emissions based on the three scopes introduced by The Greenhouse Gas Protocol (GHG Protocol).
While scope 1 includes all direct emissions, i.e. those generated in a company’s own facilities, scope 2 refers to all emissions through purchased energy (e.g. electricity, heating). Scope 3 includes indirect emissions (e.g. outsourced activities, supply chain emissions, emissions from product usage). As they are directly controlled by the company, scope 1 and scope 2 emissions are much easier to calculate than scope 3.
If you are a company that manufactures goods, Scope 3 emissions account for >80% of all GHG emissions due to the emissions along the supply chain. Thus, measuring scope 3 emissions is crucial to be able to identify the real levers for CO2 reduction and opportunities, e.g. for energy efficiency and cost reduction, among others. Some startups claim they can cover Scope 1–3, e.g., Sweep, while others specifically focus on Scope 3, e.g., Carbmee, Circulartree, or Worldwatchers.
Calculating Scope 3 is currently the most difficult and complex task since the information needed to accurately calculate the CO2 is not available within the company, but needs to be gathered from suppliers. The solutions usually use a mixed approach between LCA-based approximations and supplier-specific data.
Our conclusion
Navigating through the carbon accounting jungle is very complex, as many startups are still figuring out their product-market fit. As such, it is important to keep in mind what objective you want to achieve: Do you want to calculate, reduce, or offset your emissions? Do you strive for a holistic solution? Is there a solution tailored to your industry? What is the best approach for you to calculate, or approximate, as a first step, your Scope 3 emissions?
Our advice to everyone seeking a trustworthy and value-adding solution is:
- Talk to these startups and tell them clearly what you need.
- Don’t expect a perfect solution — most likely they won’t have a final product yet. Startups can only improve their products by working closely with their customers and learning to understand their demands.
- Go for the solution where you trust the people behind it most with understanding your needs and executing on them best.
- Choose a startup that knows your industry best — there are big advantages in becoming an expert in one industry as value chains are so fundamentally different from industry to industry.
- Question the startup thoroughly on the database being used to ensure correct calculations, and on what their current capabilities really are versus the vision they aspire to be able to offer.
- Start with Scope 1 and 2, which are easiest, but start working on understanding Scope 3 as soon as possible as well to quickly grasp the challenges and complexities you will face in the coming years to fully calculate Scope 3 emissions.
Last but not least, carbon accounting is a fast-evolving industry, but an important one to get into rather sooner than later. This will give you the chance to learn from each other and eventually, improve together.
Questions, comments, feedback? Find me on LinkedIn or shoot me a message at miki@techfounders.com.
Authors: Miki Yokoyama and Maureen Habermann
