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  • 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.

With unprecedented heat waves, flooding and drought roiling communities throughout the world this summer, we're all increasingly feeling the impact

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