Closing The Climate Gap.
A convergence of forces creates a tectonic shift.
In 1975 the 10-year turnover of Fortune 500 companies was 20%. In 2014, it was 50%, and over the next 5 years, I’d bet the farm on that number going higher. It took Amazon 8 years to break into the Fortune 500, and it took Sears about 10 years to fall off the list entirely. Today CFOs face the biggest threat to their company’s future. Take a look at Larry Fink’sFink’s letter to investors. The tectonic shift is a perfect storm of investment shifting to companies that can show a plan toward NetZero emissions. The gap Fortune 500’s face today is a three-part problem to becoming a NetZero company. Collect, measure, and publicly deliver those numbers in real-time. Only then can a CFO make data-driven decisions to achieve NetZero.
Captain Planet might be a math teacher.
Carbon accounting is not math for charity points. It’s a deep investment for safeguarding a company’s future. Today carbon has a cost attached to it, and the obvious play is to start managing that cost, getting ahead of the curve, and begin the methodical process of measuring CO2 emissions across your whole supply chain, coming in at a range of scope 1, scope 2, and scope 3.
Climate change has always been a scientific problem to measure. The sense of urgency only began to go mainstream with Al Gore’s 2006 documentary Inconvenient Truth. The notion of climate change and the idea that big businesses could use software to incite change was uncertain until then. Swiping an analogy from the film, Inconvenient Truth, the average citizen is like the frog slowly boiling. For many, there was no incentive to enact change at scale. The idea has even been challenging to pin down because tracking scope emissions and sharing everyone’s contribution in near real-time was near impossible.
That’s changing as we speak, and Carbon accounting software is the underlying index powering potential network effects. Companies can now track emissions in near real-time, empowering every operator to make data-driven decisions about their business and quantify the impact of almost any decision, purchase, or strategy. The executive suite has a direct window and opportunity to closer relationships with individual suppliers. Data surfaced around carbon emissions is the fastest path to reduce and get to NetZero by 2050. Using software to measure and visualize adequately empowers every business to take responsibility.
The road to hell can pivot toward utopia on a dime.
Ten years ago, it would have taken dozens of consultants several years to even scope that kind of project. Today, companies are building world-leading climate programs on modern data infrastructure in a matter of months.
As we see climate governance go mainstream, Companies like Persefoni, Pledge, Plan-A, and Watershed are accelerating every Fortune 500 forward toward the future. It’s making them stronger and more secure on all sides. Everything from brand loyalty, more investment, and better business models. What else am I missing? Probably a fair amount of upside because we are still in the early innings. I’m curious about how well business operators know their supply chains today to understand how carbon accounting could empower them to build a closer relationship with supply chain operators. Creating a more holistic picture of your business or a Customer 360, as Uncle Marc might say, is an incentive for big companies to level up how they run, build, and participate in our economy. I’m excited about the enormous opportunity software is chasing because it means every business can start taking significant actions toward doing better.
If you join one of these companies, it’s an entirely new market opportunity. Other than the typical “increasing revenue” behind your mission, there is a second, more looming urgency. By helping companies build climate programs, you’re probably coming in on the ground level of what will be a long-lasting storied initiative for every company. Historically reserved for branding, all climate programs are accelerating to a must-have rather than a nice-to-have for CFOs. Only now, the rules have changed, and every business will analyze its complete carbon footprint or fall from the rankings. Must-haves aside, what’s compelling about Perconifi, Plan-A, and Watershed; they all seem to flip our climate conversation into something of a math problem — turning what might otherwise be a debate or “feel-good initiative” into a quantifiable impact on bottom-line revenue.
Consumers don’t believe your hogwash yearly PDF reports, nor will the SEC.
Most companies don’t have the data or market power to meaningfully reduce emissions on their own. The result is a flurry of glossy sustainability reports, but not enough changes that keep carbon out of the air.
More companies like Shopify discover the power behind carbon accounting platforms, i.e., the ability to generate instant, automatic reports, run elaborate reduction scenarios, and get immediate answers based on accurate data. A wave of adoption will inevitably follow. I can’t imagine the velocity of adoption when network effects kick in as early adopters of carbon accounting startups begin to work with their suppliers and teams to factor carbon into dozens of everyday decisions on everything from business travel strategies to the carbon impact of logistics. Being early gives Watershed, Persefoni, Plan-A, and Salesforce the unique ability to be a brand that signals trust in the market. As climate programs become a typical business function, I see the most critical mission in helping companies report actual numbers versus vanity numbers. Startups in the carbon accounting space care about guiding customers toward what the data says is most impactful, not just what program sounds good.
Feel free to drop me a line to get in touch. Carbon accounting faces various headwinds right now. Two that I think about a lot are communication and integration. How do we explain this to people, what’s our point of view to a business leader, what’s the elevator pitch? I’m writing about a complex space where SaaS and Science start to converge. For every narrative or new term we share — what are the main takeaways, and how do we spark interest? Carbon accounting doesn’t physically remove the CO2 once a company can finally connect the dots to measure all of its C02 emissions, so step one is to acknowledge and see your contribution to the problem as a company. Supply chain integration falls into the builder’s bucket, and there is a pretty big gap between every company’s IT capacity and emerging digital pressures across the value chain.
If you want to avoid hours of Google search, I’m working on a database of climate tech startups, reading, podcasts, and venture firms making big bets in this space. Stay tuned!
