Carbon Accounting Needs Good Data

The world is moving toward carbon disclosure. Where will the data come from?

Pardon the pun, but carbon accounting platforms like Watershed are having a moment.

With sweeping requirements on the way from the SEC and elsewhere, carbon disclosure just entered the big leagues. Not surprisingly, the market for carbon reporting software has seen a massive influx of cash.

Ndustrial congratulates Watershed on its $70M Series B and its French competitor Sweep on its $73M raise. Fellow Clean Energy Ventures portfolio company Cleartrace is gaining traction as well, as is the local company that does our third-party carbon footprinting, Green Places. Platforms like these will help the world’s public companies rise to the challenge of ubiquitous carbon reporting.

Yet, a big question remains: where will all the data come from?

Currently, even the biggest companies typically rely on teams of analysts manually compiling massive spreadsheets, just for establishing their Scope 2 greenhouse gas emissions inventory (i.e. electricity usage). This has worked well enough for annual sustainability reports, but will it scale for quarterly statements?

One of the proposed SEC rules would require not just emissions reporting, but emissions intensity. That means emissions data – normally handled by a company’s sustainability department – must be reconciled with production data, which is housed in entirely separate, legacy systems.

Perhaps the most daunting rule addresses Scope 3 reporting, which covers a company’s emissions throughout its supply chain. That means companies will need to share data with each other, and any gaps or inaccuracies in the data will compound as multiple entities report it in different ways.

And here’s the kicker: climate disclosures will be subject to audit. This is a monumental change from voluntary reporting.

What to do?

No longer can companies rely on spreadsheets. It’s too cumbersome and too error prone. Automated data collection and analysis is a must.

Sounds simple, but it can be very difficult in practice.

First of all, large enterprises get utility bills from many different electric providers across many different regions and even countries. Bills come in at different times in different ways, with little standardization. And that’s just electric utilities.

There is a better way, which actually delivers on the promises of Industry 4.0 digitization – but it requires a different way of thinking. It requires not only software, but also real-time integration with meters and other legacy systems. That’s not a core competency of IT departments, much less sustainability departments.

It then requires aggregation and normalization of disparate data sets. That’s yet another skill set, typically found in data science teams that may sit under IT or may be siloed in a company’s innovation arm (if at all). Even where resources are available, it’s a tedious and time-consuming process.

What’s needed is a purpose-built partner that brings legacy system integration, data aggregation, and software under one roof. And everything needs to be on an open platform that facilitates data sharing across organizations.

If companies can feed real-time data into carbon accounting and offset platforms in a standard and trusted way, it will indeed be a watershed moment.