Carbon Responsible is a rather unique carbon accounting and management company, as it was established in 2012. This provides it a unique perspective with over ten years of experience in an industry that some might think has only emerged recently.
We spoke with COO Matthew Paver about the company’s journey so far and how its experience has shaped the approach to clients that range from financial companies to football clubs, all of which want to measure and reduce their carbon emissions.
This interview has been edited for clarity and brevity
Can you tell us more about what Carbon Responsible does?
The company exists to help clients navigate the complex landscape of carbon emissions reporting and to minimize their risk when it comes to disclosing their emissions, setting publicly facing targets, and aligning to sector frameworks.
Our approach is centered around extracting the most useful data that already exists within a client’s data capability and that enables them to make decisions. Our tools are right sized towards what we see within the marketplace as the most productive use of client’s time, when it comes to emissions data. Those are based off of materiality of emissions, access to existing data streams and ability for operators within a company who have responsibility for reporting emissions to access things readily.
Why do clients contact you? Is it more about disclosure needs or to reduce emissions?
I would say that the clients that we attract want to do both. They recognize that they have to do something or that they want to do something. But they also know they want to do it right.
Carbon emissions accounting and reporting is obviously the catchment area of companies that are being required to report. Their number is increasing and the number that are doing it voluntarily is also increasing.
In our experience companies often approach us and say, “we know we need to do something, but we don’t know where to start.” That’s the perfect opportunity for us because we can agree that at the end of the project they want a report on their emissions and want to use it to do something specific. That can be for disclosure, to satisfy regulatory compliance, set targets or become SBTi compliant (based on the Science Based Targets initiative).
A lot of people that get driven into our business, maybe have already measured but they’ve done it with a carbon accounting platform that is typical on the market space and is a fine tool for most instances. But it ends up just being data submission, receiving a report and then the providers go away. There’s no advisory work, no upskilling of the client in terms of their data capability. And there’s very little verification of that data that comes out.
We are our clients’ measurement partner, we don’t try to sell them anything else outside of the work of measuring their emissions, telling them what they are, and then advising them on ways they can change that. A lot of times you’ll see carbon accounting companies that want to sell carbon offsets or carbon credits.
To what extent does Carbon Responsible work together with clients?
We don’t just operate as a system that accepts data and spits out the report. Initial client engagements always involve more advice and answering questions. We do take them up the maturity curve and get them to be more equipped as an organization.
This seems to be what clients want, as 85% of our business is repeat business. But I would say that for new clients it involves a lot of back and forth about the quality of data sources, streamlining data, getting things accounted for properly, understanding where things are not applicable, or that data just doesn’t exist and how we overcome that.
We always walk our new clients through their results so that they understand what they’re seeing in our report, how they can use that and how given the exercise we just went through this first year, they can make year two easier. Generally, the level of help we have to give our clients decreases significantly in the second year.
Are there specific regions you are focused on?
We can measure emissions anywhere on the globe if there are sufficient conversion factors for that. It gets difficult in geographies that don’t necessarily always have that, but you know, Western Europe, North America and parts of Asia are somewhat easy to produce reporting for.
What types of clients are you targeting at the moment?
I would say our typical client type breaks down into two categories. Most of the work we do is either on the corporate side for large organizations that are FTSE listed here in the UK. They either have the regulatory compliance perspective or have some other driver that they need to report on.
The other place we actually see quite a bit of business is from financial services. Particularly investment managers and private equity firms, because of the level of scrutiny and rigor on those organizations to report emissions. The need to quantify emissions for ESG labeling of their portfolio is pretty high.
A lot of private equity firms come to Carbon Responsible with a portfolio of companies, and ask us to directly measure the emissions of their portfolio holdings, and then calculate their emissions based off the equity percentages that they have.
That then has a benefit for those organizations, which are oftentimes held by private equity. If there’s a strategic direction that the firm is trying to push that company toward, they can use our services and reporting to drive that strategic change through. We have a number of private equity firms that have such holdings here in the UK, and then those portfolio companies use our reports in their outward marketing.
There are a lot of new companies in your area, with new companies entering the market every week it seems. What are your thoughts about this?
Obviously, it’s a growth area. Like I said the catchment area for companies that fall into carbon emissions reporting is just getting bigger and bigger. [In terms of market demand] there is plenty to go around.
The things that I would be cautious of in a buzzy new market are companies that make it seem like emissions reporting and tackling your sustainability challenges are so easy. The companies that become more durable are the ones that have their clients’ best interests in mind for the long term. What that means is being honest with them about how complicated the journey can be to reducing your emissions and calculating them in the first place.
Where do you think the industry is headed?
I think broadly, as an industry, we all agree that emissions reporting, in its future state will be a SaaS (Software as a Service) platform that is akin to financial reporting.
From our experience, clients don’t get a lot of value out of something like that today, because the data tends to be quite static. A company that signs up for a dashboard can upload its 2021 data but has to wait for 2022 data to do something with it, which is not useful.
Sample image from the Carbon Responsible platform. Source: Carbon Responsible
Clients come to Carbon Responsible when they have gone through that and say, “we’d rather just have a report and get some good advice.” And that’s what we do.
That being said, we have developed a tech platform, we have a database, we have an internal dashboard, we do believe that the market is moving in that direction, and it will get there eventually.
But as I said, we exist to serve our clients and to assuage their anxiety about carbon emissions report and make this an easy process today. We’re not trying to sell them a solution five years from now, we’re helping our clients in the present moment.
What are your thoughts on the recent criticism of carbon offsets?
It’s a complicated thing, like anything that exists within this space. I think that demand vastly outstripped supply pretty rapidly. In order to keep up a lot of things got off the ground and were marketed, that maybe wouldn’t have been if standards were standardized.
I think it’s a bit of a pity because I know there are a number of organizations who go above and beyond Verra standards and do really good work. And I completely believe that the projects that are supported by carbon offsets and carbon credits are necessary for the planet to tackle climate change. But we all just have to do a better job accounting for it, and being able to verify the benefit of it if we’re actually going to use it as a medium of exchange, which is going to confer some global benefit.
What standards does Carbon Responsible use?
We follow the Greenhouse Gas Protocol in terms of the reporting we generate because many of our clients are aligned to so many sector frameworks, and that’s the common denominator between a lot of them. Here in the UK, we use Defra conversion factors and where a geography has their own conversion factors, we’ll use those.
One of the little nuances that exists in the UK [regarding] the energy grid is that it’s a bit more difficult to get the precise conversion factors and the associated emissions with them because of the variability of the mix of the grid at any time. In the US the data for electricity generators is a lot better when it comes to attributability purposes.
How do you go about measuring Scope 3 emissions?
Scope 3 is really hard but it is an area that we have expertise in. When I talk about taking clients up the maturity curve of reporting, I’m almost exclusively talking about scope 3.
There are 15 categories of scope 3, both upstream and downstream. I think what’s most important for clients to do in an initial perspective is (1) to understand what those categories are, and (2) understand how existing data streams can be applied to those. And then over time, close gaps in those so that you can begin to report on more and more categories within scope 3.
What I always say to clients is, do not get overwhelmed by the 15 categories of scope 3. People are not expecting you to report on all 15 immediately. If you can take care of the most material parts of your scope 3 emissions in your first year, that’s a huge win. And for a lot of big companies that is mostly centered around business travel, or employee commute.
Adding another level of complexity are supply chain emissions and to what extent you can easily access emissions from your suppliers.
In that instance, we will ask clients what their top 20 suppliers are by spend. It follows logically that if you spend the most money with them, they’re going to be the biggest partner emission sources for scope 3. We reach out to them on your behalf to understand the maturity of emissions reporting that exists within those organizations. Some large companies have publicly available emissions and we can go and self-serve that now.
Can you give me an example of a client of yours that has physical locations and how they would go about reducing their emissions?
An example of that is Arsenal Football Club, which has quite a large physical stadium. Working with their procurement and sustainability teams, we have helped them identify the data sources associated with their scopes 1 and 2 and bits of scope 3 emissions. These include things like team travel, business travel, and then fan travel to the stadium itself.
For business like this, that have a really large physical structure, the thing that might help you the most is installing a building management solution (BMS). You can typically expect to save in the first year between 10 and 20% of emissions just by knowing what you don’t know about things like electricity consumption and heating water. There’s an additional 10%, you can achieve by fine tuning, installing heat pumps, changing to double glazing, and other things about the built environment.
What we like about using a BMS, is that you can measure the change over time, and then you can actually directly see the result of your efforts. There’s also a huge operational savings benefit to understand your carbon and reducing it. The embedded cost of carbon here in the UK varies between £1,100-1,500 ($1,330-1,814) a ton. If you can save 100 tons of CO2, you’re saving your business significant money.