Carbon Emission Calculation Is Hard and Expensive, but Tech Firms Think They Have a Solution

After spending nearly half a year, every year, gathering and calculating carbon emissions data on spread sheets, Salesforce.com's climate team was fed up. So in 2017 they built an app to crunch the numbers - and now they sell it for $4,000 (roughly Rs. 3 lakh) a month.

As global companies prepare pledges to help stop climate change, one of the first problems they face is quantifying their emissions. The second is understanding if their solutions work.

That need is fuelling a boom in carbon accounting software by big companies like Salesforce and startups as well, along with some skepticism of parts of the process.

Microsoft is previewing a tool for calculating emissions called Microsoft Cloud for Sustainability, aiming to make it available by mid-2022.

On Thursday, Arizona-based carbon accounting startup Persefoni said it raised over $100 million (roughly Rs. 750 crore), the biggest venture capital funding round so far in the field.

That takes total fundraising this year to nearly $300 million (roughly Rs. 2,250 crore), six times the total for 2020 and over 21 times the funds raised in 2019, according to a Reuters review of data from PitchBook and Climate Tech VC.

Carbon accounting is complex, especially when including emissions beyond a company's direct control, such as suppliers and use of products, which many companies are trying to do. How does, for example, an automaker account for the steel it buys and the miles driven by its customers? Some in the accounting business call these indirect emissions, often the bulk of a firm's emissions, the “Pandora's box” of carbon accounting.

“You have a massive problem in our world of companies that are creating their own methodologies and then black-boxing them. Those are not auditable. In the worst cases, they're helping companies greenwash,” said Kentaro Kawamori, CEO of Persefoni, which uses a system called the Greenhouse Gas Protocol to compute numbers that get added up into total emissions.

Some argue the accounting is not always worth the effort and skews the focus.

Science Based Targets initiative, a non-profit that helps companies set emissions goals, does not push small companies to produce the emissions beyond the company's direct control, for example, even as it creates a "net zero" program with a strong focus on indirect emissions.

Snocap, a new climate tech venture capital firm, does not think startups should be asked to measure their environmental impact, especially if their technology is designed to change an industry fundamentally, such as making lab-grown meat.

Taylor Francis, a co-founder of Watershed, a carbon accounting software startup created as fintech firm Stripe tracked its own emission data, hopes customers will use the tool to make decisions about suppliers and emissions.

“If this whole space becomes just about disclosure and publishing a sustainability report once a year, I think that will fall short of what we need to actually beat climate change," he said.

© Thomson Reuters 2021