Carbon Accounting Startup Landscape (Part 2)

Amid the growing landscape of climate-focused start-ups, the carbon accounting segment is particularly vibrant.

A number of start-ups are launching software platforms designed to streamline, digitize and automate the carbon measurement process.

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To fuel the growth there’s no shortage of VC and angel funding hoping to cash in on these goals. For example in Europe money has poured into European carbon tracking start-ups as seen on the chart on the right  

Many players are emerging, but differentiation remains fairly low. However VC believe that the start-ups that will stand out will be those that:

• Fully automate data collection and use AI algorithms to recommend the best emission reduction plans,
• Create strong product stickiness by delivering an above-average UX,
• Focus on a specific, highly regulated industry to ensure broad adoption and strong ROI,
• Develop comprehensive tools with bundled offers from data collection and monitoring to reducing/offsetting options,
• Leverage a strong network of assessment or offsetting partners to increase value and create strong network effects.
• Ability to forecast the financial impact of action taken to reduce emissions

Furthermore, in recent years, three sectors have stood out as the fastest-growing sources of CO2 emissions: industrial processes have increased by 174%, transportation by 71% and manufacturing and construction by 55% which means start-ups and solutions which will focus on these industries will have a better chance of winning.

Ultimately, these solutions which conduct speedy carbon assessment (which relies on estimates) need to replace human expert climate consultants and understanding how much natural capital and social capital is being created and destroyed

The future of carbon accounting for SaaS companies will be in great User Experience

McKinsey found a strong correlation between high MDI (McKinsey Design Index) scores and superior business performance. While start-ups have made a great start, none of the big companies have truly cracked this and opportunity remains for a big player to re-imagine this at a bigger scale

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