With unprecedented heat waves, flooding and drought roiling communities throughout the world this summer, we're all increasingly feeling the impact
of climate change. And as governments and companies look at how they can recover sustainably from the coronavirus pandemic, many are confronting
their own role in perpetuating the fossil fuel economy.
The only solution for climate change at this stage is defined by reduction of emissions.
From late 2019 to September 2020, the number of net-zero emissions commitments from governments and businesses grew exponentially. Cities and
regions with net-zero targets now have a combined carbon footprint of over 6.5 gigatons of emissions per year. And companies with net-zero goals have
a combined revenue of over $11.4 trillion. But historically, actually tracking emissions has been complicated, due in large part to a lack of
mandatory reporting requirements and standardized metrics.
Most companies who measured their footprint back then did this with Excel sheets. I started to wonder why aren't we using the best technology that we
have in place in order to tackle the climate crisis? Because the carbon footprint is one of the most important KPIs of humanity of the century.
That's where companies like Plan A and Planetly come in. Both are Berlin-based startups that make software that helps companies monitor,
report and reduce their carbon emissions.
Carbon accounting is going to become part of the decision-making process of any company. And as it has been missing for so many decades, we now need to
compensate.
New apps like Klima also allow individuals to purchase carbon offsets to eliminate their own footprint, hopefully buying the world more time to make
the drastic emissions cuts that we truly need.
Of course, we need a systems change, we need our institutions to change. But also, the system at the end of the day is made up of individuals. So in
that sense, I think system change and individual change is not something that is mutually exclusive, but something that can be mutually reinforcing.
Towards the end of 2019, there were about 500 companies targeting net-zero emissions. But amidst the pandemic, that number ballooned to over 1,500 and
now includes commitments by the likes of Apple, BP, Ford, Walmart and FedEx. When companies like these set net-zero goals, it could mean that
they're reducing their direct and indirect use of fossil fuels. Or it could mean that they're operating as usual, and offsetting their emissions by
funding environmental projects like tree planting or solar installations, which remove or prevent emissions elsewhere. The catch is that there's lots
of poorly vetted offset projects that are not nearly as effective as they claim to be. And we can only really solve the climate crisis by fully
decarbonizing. But weaning ourselves completely off of fossil fuels is a decades-long process. So while reduction is always best, achieving net-zero
today pretty much always involves some amount of offsetting,
We definitely encourage users to take the carbon offsetting just as a starting point. As long as we are still burning fossil fuels, we haven't
solved the problem yet.
Another challenge with these corporate pledges is that there's not a great way to measure progress, because how companies actually go about
calculating their carbon footprint is all over the place. In the U.S., corporate sustainability reporting remains largely voluntary. There are no
audit requirements. And for those that do opt to track emissions, many exclude their indirect emissions, which often make up the bulk of a
company's footprint.
The scope three emissions can be up to 70 to 90% of your whole emissions. You need to look into your supply chain, you need to check your suppliers,
what their carbon footprint is. You need to look into your logistics, into your external services that you're buying.
For example, nearly all of Apple's emissions are scope three, coming from the company's largely China-based manufacturing centers and the use of
their products, that is, charging an iPhone or browsing the internet. And if a bank were to loan money to an oil company, the subsequent drilling
activity would count towards the bank's scope three emissions. That makes things complicated, because even if a company wants to disclose their scope
three emissions, if their supplier or investee doesn't report emissions data, the original company can't accurately calculate their footprint
either.
Data availability is one of the biggest challenges related to carbon accounting. And we estimate that this is going to be true for another five
to 10 years.
But in Europe, where the majority of Plan A's customers are based, companies do face stricter standards. Currently, public companies with at
least 500 employees are required to produce sustainability reports. That's about 11,600 companies. And a recently adopted proposal, the Corporate
Sustainability Reporting Directive, will expand the number of companies that must report to about 49,000, while also requiring more detailed
disclosures and the inclusion of forward-looking information, like emissions targets. Audits will be mandatory.
Previously, you could choose whatever standards you liked as a company. Now, there is a decision that the standards should be mandated and should
be standards that are prepared by EFRAG, the European Financial Reporting Advisory Group.
It is going to become a standard for everyone to have to start measuring their climate risk, their carbon accounting, their ESG performance, as we
are moving towards a world where there's an analysis of this environmental layer of our economy that has been missing historically.
Many experts agree with Jordanova's assessment, as the carbon management systems market is set to boom. Valued at 10.9 billion in 2020, it's
projected to grow to 19.8 billion by 2026. Plan A and Planetly are far from the only players in this space. Other emissions tracking software companies
include U.S.-based Watershed and Persefoni and UK-based Emitwise. Generally they work like this. First companies enter emissions data for a number of
different categories. For Planetly, these categories are building emissions, customer activities, employee activities and procurement.
If you want to collect information about your building emissions, you can choose between your air conditioning, electricity, heating and waste. And
what you would do is you click on one certain activity, I chose electricity now. And here is the possibility to enter your data in this data entry
field.
Users can also upload utility bills to the platform. After the data entry stage, companies can view a breakdown of their emissions and track them
over time. Jordanova shows us how that would look using Plan A.
This particular example is related to a company in the financial field. So what you can see here is not only the typical electricity, heating,
employee commute, business travel office supplies, virtual events and so on. But you can also see investments, suppliers, waste consumption, and
office waste.
Users can see how they compare to other companies in their industry and get a deep look into their scope three emissions, which in this example would
include all of the financial institution's investments. Then, Plan A allows companies to set reduction targets and deadlines. Jordanova says that what
sets Plan A apart is her large team of technical and scientific experts, who can help fill in the data gaps with well-informed estimates.
We're the only company you can find on the market that really has a quarter of our team climate data scientists, climate modeling lifecycle analysts,
as well as sustainability experts, which really gives us this as the starting point of every single feature development that we have on the
product.
As for Planetly, Alex says the software is unparalleled when it comes to automation and ease of use. Currently, 150 companies use it. And Alex
expects this number to increase not just because of reporting requirements, but because investors, consumers and employees are demanding it.
Employees who want to stay longer in the company when the company is taking climate action. So this is really important in a world where talent is
scarce.
Investors are changing their preference as they're starting to understand that natural disasters and a lot of challenges to the way supply chains
happen is essentially part of our reality today, and it's not anymore something that we're predicting for the future.
Plan A, Planetly and a host of other apps such as Klima, also give companies or individuals the opportunity to offset their emissions.
Historically, that's been a controversial solution due to the abundance of low quality offsets and difficulty verifying which ones are truly
effective. While advocates say that verification has improved in recent years, others also worried that offsets give polluters permission to
continue with business as usual, when what the world really needs is systems level change for deep decarbonisation. Gilles founded Klima, a
carbon offset app for individuals, knowing full well that offsets were not the answer to climate change. But in the short term, he believes that
highly vetted offset projects have a big role to play
The way that you can compare it with, let's say you and me are sitting in a boat and the boat has a hole in it. Now our number one task right now is to
seal that hole. But while you are maybe scrambling for materials and trying to improvise to seal the hole, I might as well start scooping water out.
And this is not the solution, the solution is to fix the hole. But meanwhile, scooping out the water might present a difference between
staying afloat or not
Klima's interface is simple. When a user signs up, they're immediately asked a series of quick lifestyle questions to determine their carbon
footprint.
So this is everything from obviously how many flights you take per year. If you use a car for your daily commute. What your diet looks like.
Uses are then told how many tons of CO2 they emit per year, and how this compares to regional and national averages. They're given a choice of three
offset projects to support and can subsequently track how much they're offsetting per month or year. A reduce tab reveals how certain lifestyle
changes would impact their footprint.
We have launched Klima in December last year. We are now 5,000 users and those 5,000 users have already taken out 20,000 tonnes of CO2 equivalents
out of the atmosphere.
Plan A and Planetly also offer corporate offsets through reforestation efforts, organic waste-to-energy initiatives, renewable energy projects and
disseminating clean cookstoves and water filters that prevent wood burning
The way we approach the topic is that we work directly with the project developers, which means that we know the people on the ground. And we
actually have different ways in which we can check what has been the impact historically of the project, what is the team behind the project.
Plan A has also started working with carbon capture companies that pull carbon dioxide directly out of the air, and is planning to offer this as
another way for clients to get to net zero. Ultimately though, Gilles, Jordanova and Alex agree that reduction is the only long term solution.
We need to reduce our emissions, we can't just like offset and then continue with business as usual. We need to measure accurately and then
reduce emissions.
Jordanova imagines that as carbon management platforms like Plan A become ubiquitous, they're going to integrate with financial accounting platforms,
making all of this data visible to users through a single tool,
We are essentially becoming a data processing company. And it's not only about our software, but really about us allowing this environmental layer
of analysis to be visible at any kind of platform.
Eventually you should connect both reportings, financial and sustainability reporting, and that this becomes what you could call corporate reporting.
That's a longer term plan.
The whole point, experts say, is that we're moving towards a world where sustainability data and financial data are inextricably entwined.
In today's reality, climate risk is actually financial risk. So for those that don't embrace this today, they would be having challenges in preparing
themselves for the future, which would mean maybe challenges to their bottom line, but also challenges to their employee retention as well as
their customer engagement.
So I honestly think that we're currently going through the biggest transformation after let's say the digitalization. So in the future there
will only be sustainable companies. So there's no alternative to scaling fast, I would say.