Months of speculation will finally come to an end on Wednesday, when the Securities and Exchange Commission votes on its much-debated climate disclosure rule.
If adopted, the rule would require companies to disclose their greenhouse gas emissions, a requirement that is already a requirement in other economies, including the European Union and China. The offering would help inform investors about any risks related to the climate or energy transition faced by listed companies.
As more consumers and regulators pressure companies to track and disclose their carbon footprints, a flood of startups has emerged that specialize in tackling the problem. And depending on how far the SEC takes the proposed climate disclosure rule, many of these startups will benefit.
Companies report greenhouse gas emissions using three categories, so-called Scope 1, 2, and 3 emissions. Scope 1 emissions are those that result directly from the company's operations, such as burning coal for heat a blast furnace in a steel mill. Scope 2 emissions come from purchased energy such as electricity, natural gas or steam. Scope 3 emissions are everything else and typically result from pollution produced along the supply chain.
Scope 3 issuances are the broadest category, and if the SEC were to require their reporting, the effects would extend far beyond publicly traded companies. Many companies, including Walmart, ExxonMobil, Gap and BlackRock, have publicly expressed opposition to any Scope 3 reporting, and the requirement is unlikely to appear in the final draft. Reuters reported. Others, including Amazon, Ralph Lauren and Chevron, are on record supporting Scope 3 disclosures.
If the SEC's final draft eliminates any Scope 3 disclosure requirements, the remaining Scope 1 and 2 emissions would represent a smaller, but still significant, portion of U.S. carbon pollution. They would also encourage companies to strengthen their current reporting processes, pushing many to seek outside help. Here are some places you could go.
Five new companies
There are dozens of companies doing carbon measurement, tracking, reporting and verification. This sample illustrates the variety of early and late-stage companies, serving a variety of organizations, from large enterprises to startups.
Arcadia
Climate tech Unicorn Arcadia has spent years collecting data on electricity-related emissions from homes, businesses, and utilities, and in 2022 announced a partnership with Salesforce to integrate its Data Connector product into the SaaS giant's Net Zero Cloud offering. The product works with 9,500 utilities and energy providers in 52 countries, allowing companies to automate tracking of their Scope 2 emissions and produce auditable reports. Given its focus on Scope 2, Arcadia is well positioned to benefit from the SEC's new rules.
Arcadia has raised more than $575 million and is valued at $1.5 billion after cash, according to PitchBook. Expect it to be one of the first climate tech companies to go public when the IPO window opens.
Basin
Another climate tech unicorn, Basin manages emissions across the board with a focus on financial institutions, consumer goods companies and companies that want to control their Scope 3 footprint. The company has raised $210 million at a post-money valuation of $1.7 billion, according to PitchBook, the type of valuation at which investors could push for an initial public offering. The company has attracted some notable investors, including Sequoia, Kleiner Perkins and Lowercarbon.
Planet FWD
Planet FWD was founded to sell organic, carbon-neutral crackers. When founder Julia Collins began to delve into the carbon footprint of her company, she realized that the real challenge was not in developing the product, but in finding ways to measure, reduce and offset related emissions. So she did what many founders do: she pivoted.
The result was a carbon assessment platform tailored to the needs of consumer goods companies, especially those that sell food products. The company raised a $10 million Series A in 2022 and is valued at $40 million after cash, according to PitchBook.
carbon chain
carbon chain It stands out for its detailed approach. The startup, which raised a $10 million Series A last year, has spent the last few years amassing data that it says covers 80% of global emissions. How did he get it? Working on the ground to gather information and talking to companies in industries that are among the most polluting in the world.
The founders used to work on oil and gas projects and are familiar with industries that others may not have. The startup works with lenders and insurers to help secure discounted rates for their customers. Financial institutions have agreed because data shows that low-carbon assets tend to have lower operating costs.
Fold
Corporate spending was a hot investment for a time, attracting billions in capital, but as the sector matured, specialization was almost certain to emerge. Get into Fold, a corporate spending startup that focuses not only on tracking expenses, but also carbon emissions. Last year it raised a $2.5 million seed round. Bend launched with a subscription-based API that businesses could leverage to speed up their carbon accounting process, but quickly pivoted to a corporate expense card with carbon accounting included for free. It's a smart twist that should help businesses large and small control their footprints.
driving forces
It's not just regulatory activity that is driving the emergence of startups: as ai has matured, startups have been able to leverage the technology to provide more accurate reporting of Scope 3 emissions, which often suffer from gaps. of data and are the most difficult to estimate. As companies refine their ai approaches, Scope 3 estimates will only improve, perhaps softening some of the opposition to mandatory reporting at that scale. Some companies have already fully adopted Scope 3 reporting, using transparency as a selling point.
Even if governments change course and reduce requirements, some degree of carbon accounting is likely to be embedded in developed economies in the coming years, if not already. The question is not whether companies will have to report, but how much they will have to report.
For startups that simplify that process, questions and uncertainty can only lead to more opportunities.
