Axios Pro Exclusive Content

The emissions-data arms race is on

Oct 12, 2022
Illustration of a calculator with colorful buttons that make up the squares of the Microsoft logo

Illustration: Natalie Peeples/Axios

Microsoft is the latest company to enter the ring to be the one emissions data software provider to rule them all.

Why it matters: The proposed SEC disclosure rules represent one of the biggest business opportunities in decades, and everyone from the Big Four to Big Tech wants in.

The latest: Microsoft is rolling emissions tracking software and a carbon credit network into its 365 enterprise software, the tech giant said Wednesday.

State of play: Startups, the Big Four and now legacy tech companies are all competing for what could amount to a billion-dollar market in carbon accounting and emissions tracking after the proposed SEC disclosure rules take effect.

  • Carbon accounting is the first new market created by federal policies since the financial disclosure rules created in the wake of the 2008 recession.
  • There are two sources of revenue companies are hoping to cash in on — the recurring revenue associated with tracking software, and the long-term audit contracts associated with the SEC-required disclosure reports.

Zoom out: Sweep, another carbon accounting software company, is a prime example of where the carbon accounting field splinters.

  • It has remained a well-funded private company, but would not rule out an IPO or exit down the road as the market becomes increasingly competitive and better capitalized businesses like Microsoft and Salesforce double down on offering similar services, Sweep CEO Rachel Delacour tells Axios.
  • Investors haven't shied away from backing the company even with other groups eyeing the space. Many point to the sheer size of the carbon accounting market — primarily every SEC-regulated business, not to mention those abroad with other regulations — as reason for several profitable businesses to exist.

Yes, but: Delacour says she sees the carbon accounting business following a similar track to business intelligence software in the early 2010s.

  • While an entire generation of software startups received funding during that time, just a handful went on to become standalone, successful businesses.
  • The others were either acquired or went out of business entirely as they struggled to scale with incumbents like Microsoft.

The bottom line: The arms race for carbon accounting software is on.

Go deeper