Sustainability/Climate Tech/Analysis/

Startups are grappling with the cost of carbon footprinting

Life cycle assessments and impact consultants are notoriously expensive. Under pressure from customers, employees and competitors, startups are looking for alternatives.

By Sarah Drumm

Credit: Hessam Lavi, founder of Climatiq

Pressure is mounting on startups to start measuring and managing their carbon footprints. While this may be great for the planet, doing a big audit of a company’s carbon footprint can be expensive and time consuming.

Climate consultants are often tight-lipped about how much their services cost, but it’s estimated that the average ‘life cycle assessment’ — considered the ‘gold standard’ method of measuring a company or products’ environmental footprint — can cost a whopping $10k per product or service. 

Then there’s the time it takes — up to six months may be needed to pore over the data and figure out the greenhouse gas emissions a company is responsible for. Once the dense report explaining these findings has been delivered, more consulting is needed to figure out what to actually do with it.

For a company that’s at the early stages of revenue generation — or still relying on investors for its runway — these costs are unfeasibly high. Instead, alternative solutions are being sought out.

DIY carbon footprints

Alex Narracott, the cofounder of adventure travel startup Much Better Adventures (MBA), has spent the past year grappling with this problem. 

As a founding member of Tourism Declares a Climate Emergency, a community of environmentally minded travel companies, Narracott wanted to find a way to measure MBA’s carbon footprint that could be easily replicated by his peers.

“Most of the systems that exist to help with measurement don’t apply [to what we’re doing],” Narracott says. “There’s a few specific services that are set up for the travel industry. But they’re either incredibly costly, or clunky and unusable.”

In the end, MBA gave climate consultancy C Level a tight brief to create a measurement methodology. In addition, it also gave them a spreadsheet detailing what needed to be measured — from office electricity usage to the food served on the average trip — and which could calculate the carbon footprint of each of those things. In February 2021, it made this toolkit available online, free of charge. 

“Being honest here, there’s also a branding element to it.”

Narracott says the exercise cost MBA “under £10k”, and it was worth it to help reduce the cost for others. “Being honest here, there’s also a branding element to it. We’re positioning ourselves as a leader in the sustainability and tourism industry, and that’s what leaders should be doing.”

In April, US sustainable shoe startup Allbirds also published its life cycle assessment spreadsheet for others to use.

Smart SaaS solutions

Not all startups feel comfortable relying on a DIY approach to carbon footprinting, and have instead turned to software providers that can kit them out with as close to a ‘plug and play’ solution for emissions tracking as possible.

With a swell of companies now looking to achieve net zero emissions, VC cash has been pouring into startups that provide such carbon accounting software. In the past three months, more than $19m has been raised by carbon tracking startups, including a $7.8m raise by Sylvera, which vets carbon offsetting solutions, and Plan A’s $3m round with investors including France’s Demeter and Japan’s SoftBank. In April, French startup Sweep launched its carbon-tracking software following a $5m funding round with big-ticket VCs including 2050, Marie Ekeland’s new fund, and La Famiglia also participating.

In the past three months, more than $19m has been raised by carbon tracking startups.

Adam Scheuring, the founder of Norwegian climate data platform Variable, says the issue that small businesses face when it comes to carbon footprint analysis isn’t just figuring out what that headline CO₂ emissions figure is — but what they should actually do about that number. 

“A couple of years ago, the big four consultancies would come in and charge hundreds of thousands of euros to companies to do the assessment manually, and then issue a 50-page PDF report that’s not really actionable.” 

The dashboards that the carbon accounting startups provide, however, give businesses a real-time snapshot of what’s going on in the company. The impact of any changes — such as switching to a more environmentally conscious logistics provider, or changing energy suppliers — can be seen right away on the dashboard.

The SaaS companies take their measurements in different ways. Variable for example charges $149 per month for its ‘standard’ plan, which allows businesses to scrape their financial data and figure out what their money is being spent on, and the carbon emissions associated with that spending. 

Carbon Cloud, which works with food companies and charges €250 per month, aggregates data across a company’s entire supply chain to provide an estimate for each product sold. Its dashboard lets companies tinker with the numbers to model the environmental impact of, say, entering a new market or launching a new product.

In Berlin, Climatiq is about to launch a closed beta to test its open source database, which provides companies with free access to the information needed to calculate their carbon footprints. 

Its plan is to launch a freemium API later this year, which will allow companies to build their own dashboards on top of the database.

“It makes sense for us to make it available for the majority of businesses that just want to get something done quickly and as close to €0 as possible,” the company’s cofounder Hessam Lavi says. “Then those big companies — which are the big polluters — I think it’s fair that they will pay a higher price. They can afford it.”

Plan A, meanwhile, provides a more hands-off approach, with an in-house team of scientists that can help companies gather the relevant data and then do the calculations for them.

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The price accuracy tradeoff

But while a templated spreadsheet or climate SaaS provider might be cheaper, startups choosing this path will make a tradeoff when it comes to the accuracy of their measurements, as averages and proxies will often be relied on where there are gaps in the data.

“The stage where we are at in the industry is that you can achieve a super high level of accuracy or a very low level of accuracy,” Plan A’s Jordanova says, adding that the service her company provides is far closer to a life cycle assessment than some of the other software solutions on the market, and therefore come with a higher price tag.

She says that measurement is only worth it if accuracy can be assured — something which will improve as the SaaS startups scale — and that time spent on inaccurate measurements can be a distraction from simply taking action.

Startups also need to take responsibility for making sure they are putting decent data into whatever spreadsheet or software solution they decide to use. “The quality of the analysis depends on the quality of the input data,” Variable’s Scheuring says.

Much Better Adventures’ Narracott agrees that his spreadsheet is “not 100% accurate”, but he argues that “it’s enough of a framework to make informed decisions on where your priorities should lie for reduction — which we think is more important than spending hundreds of thousands going from 80% to 95% [accuracy] to probably make the same decisions.”

Sarah Drumm covers sustainability at Sifted, and heads up our new sustainability-focused newsletter Sustain. You can sign up here. She tweets from @sarah_drumm

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