Sustainability is becoming an increasingly important part of operations for start-ups and scale-ups. Regulation, consumer pressure, and investor scrutiny are some of the key drivers motivating companies to improve their environmental impact.
A cornerstone of this sustainability agenda is carbon accounting. However, it is a subject that is often poorly understood within a start-up context.
We therefore brought together our portfolio in April to consider how venture-backed businesses can think about measuring and reducing their carbon footprint. We were joined by Blair Spowart, co-founder of Seedling, a specialist carbon footprinting platform.
1. What is a carbon footprint and why should you think about it?
A carbon footprint is a calculation of the greenhouse gases (GHGs) emitted by an organisation. These will typically be produced across your operations, supply chain, and value chain.
GHG emissions are expressed as carbon dioxide equivalent (CO2e), meaning the number of metric tons of CO2 emissions with the same global warming potential as one metric ton of another greenhouse gas.
Understanding your carbon footprint is becoming an increasingly important issue for businesses of all sizes. Aside from the need to contribute to tackling the climate crisis, there are specific commercial considerations now impacting start-ups. These are:
◽ Regulation: Many start-ups — particularly those with supply chains and operations in Europe — are entering the scope of environmental regulation, either directly or via their interaction with corporate customers. This means you are increasingly likely to need to provide data on your carbon footprint.
◽ Investors: Financial markets are similarly being impacted by greater scrutiny and regulation of their environmental impact, leading venture capital investors to work with start-ups to provide data on emissions.
◽ Customers and employees: Your customers — both business and consumer — and your team are likely to place an increasing amount of focus on your organisation’s approach to sustainability, meaning that getting a handle on your emissions can help win business, and recruit and retain well.
2. What are ‘scopes’ of emissions?
When measuring your carbon footprint, you will typically break down your analysis of emissions into three ‘scopes’. These scopes — set out in the Greenhouse Gas Protocol — analyse different aspects of your business and operations.
Scope 1 considers your direct emissions as an organisation, while Scope 2 and Scope 3 consider your indirect emissions. Each scope will then specifically analyse:
- Scope 1: emissions from sources that you directly own or operate — this could include heating and energy produced on-site (such as a gas boiler in a manufacturing plant) as well as fuels burned by any fleet you may own.
- Scope 2: emissions that are generated indirectly from sources that provide you with energy — for example, electricity or heating you purchase for sites.
- Scope 3: emissions that are not directly produced by your company nor the result of assets or activities controlled by you, therefore looking at emissions produced across your value chain and supply chain — this tends to be 80% of your emissions.
3. How do start-ups measure their carbon footprint?
Options available for start-ups range from self-serve tools available online that will give you a quick and broad estimate of your carbon footprint (read on for links to some of these free tools). Most are free, while larger accounting platforms such as Sage offer a cheap and simple solution.
Spending a little more money, there is a growing market for carbon accounting platforms — we’ve begun working with Seedling — and these will typically cost several thousand pounds for an initial measurement with further ongoing costs. You will need to input some of your own data, supported by climate specialists in their teams.
For companies with particularly complex operations or supply chains, a range of specialist consultants and technical providers can support. These provide a lot of hands-on support and analysis, but they can be expensive — many will charge into the tens of thousands of pounds.
4. What is used to measure a carbon footprint?
Depending on the solution or provider that you are using to calculate your carbon footprint, a varying amount of data will be required.
At its most basic, you will need information on what is spent by your company — this can either be inputted manually or extracted automatically from your accounting system. This will give a quick and simple analysis of how money spent (on suppliers, expenses, etc.) translates into emissions produced.
To provide a more detailed analysis, platforms will then ask for as much data on activity as you can provide — this could include energy usage, miles travelled by specific modes of transport, third-party logistics, or technology providers.
5. Where can you find more information?
The SME Climate Hub is a good starting point for any early-stage company. It offers a range of resources including a free carbon calculator. Carbonfootprint.com also provides a free online calculator, while Carbon Trust offers a useful resource library.
Paid-for platforms that we have seen used across our portfolio include Greenly, Plan A, Planet Mark, and Sweep. There are plenty more, though, so do your homework as they will provide different solutions, functionality, and price points.
We’re also happy to help where we can, so get in touch if you’d like to learn more about our work in ESG and sustainability, or our investments in climatetech.
