Startups promise to track emissions — how well is unclear
Fewer than one-third of U.S. companies publicly reported their carbon emissions last year, according to Bain & Company partner Debra McCoy. The scramble now for better reporting — or simply reporting at all — is going to fuel climate deal volume for a long time to come.
Why it's the BFD: Absent a standardized approach, companies will seek to become the "Good Housekeeping" of emissions reporting, and investors and carbon accounting firms will spend big to get it right — or make it seem that they are.
- The broad array of carbon accounting approaches underscores a central challenge: how investors and execs (and folks like us) can possibly figure out which schemes are most accurate.
- "Reduction isn’t the issue, in the sense that we have the technology. The issue is standardizing a way to measure, track, report emissions," Franco Ciulla, managing director at the consulting firm L.E.K, tells Axios.
The big picture: The SEC's proposed climate-risk disclosure rule purports to set at least a baseline for tracking and reporting emissions.
- But companies will still have enormous wiggle room for exactly how they'll track emissions — especially more indirect Scope 3 emissions along the value chain.
- Across 510 pages, the proposed rule is long on the "what" — but comparatively shorter on the "how."
By the numbers: Research firm Verdantix says public companies will spend $6.7 billion in just the next three years to comply with the proposed rules.
- The number of companies looking for help to track Scope 1, 2 and 3 emissions "has surged," says FTI Consulting senior managing director Ken Ditzel.
- Energy Impact Partners is seeing the same: "Our own team is now seeing perhaps five [companies] a month or more, up from one or two a year two years ago," chief impact officer Peter Foxpenner tells Axios.
What they're saying: "I imagine there are two types of firms this week: Those with real portfolios of new clean energy and climate investment opportunities who welcome more certainty in disclosures and are eagerly poring through the details," says Franz Hochstrasser, CEO of Raise Green. "And some at major financial institutions who will now have to spend the week figuring out just how many financial products in their portfolio will not be able to stand up to such disclosures. I suspect there is going to be a lot of the latter."
💭 Our thought bubble: We are inundated with pitches and press releases from B2B firms trumpeting their approach to tracking emissions. FTI's Ditzel offered three questions to consider in reviewing a company's emissions report or a carbon-accounting firm's pitch:
- Does the firm follow a standard like the Greenhouse Gas Protocol?
- How does it verify its results?
- Do the results make sense relative to peers?