What do software giant Microsoft, beverage queen PepsiCo, footwear upstart Allbirds and paint and coatings bigwig AkzoNobel have in common?
All four companies are among the roughly 2,000 businesses that use some form of internal carbon pricing, both as a hedge against future climate risk and a mechanism for investing in solutions such as climate tech to help mitigate global temperature increases.
According to a CDP case study, Netherlands-based AkzoNobel, for example, uses a "social cost of carbon" figure of $160 per metric ton as part of its environmental profit and loss statement, which measures the economic impact of its environmental footprint. It also uses a "shadow price" of $59 per metric ton to account for the potential impact of materials it purchases from suppliers. That’s the price it might be responsible for paying in the future, should some sort of carbon tax or fee become mandatory as part of government regulations. (These are prices it was using in 2017, so they could be different now, but you get the idea.)
As reported in the CDP case study, AkzoNobel also uses the pricing to calculate scenarios measuring the internal rate of return (IRR) for investments. "If the IRR [with a carbon price] falls below the rate we expect, the business is required to carry out ‘carbon value re-engineering’: They need to come up with a better plan that reduces carbon," AkzoNobel's former corporate sustainability director Andre Veneman told CDP.
So how does a company come up with the carbon price that’s right for its unique business model? As I’ve reported previously, the world of enterprise software is flooded with entrepreneurs developing carbon accounting software tools. Each venture has some unique take: Some specialize in energy information, such as ClearTrace, which counts Brookfield Renewable and JPMorgan Chase as early adopters. Others, such as Sweep, are linked with carbon offset projects. Still others, such as U.K. developer Emitwise (which has raised about $6.6 million in seed funding) talk up its ability to track and report emissions in real time. Some, such as Watershed, allied with a who’s-who of digital businesses from AirBnB to DoorDash, are focused less on accounting and more on enabling climate strategy. (Disclosure: GreenBiz Group is working with Watershed to understand its own carbon footprint.)
Accounting is just the starting point. What we do is look to the future and model the costs of achieving those pathways.
Sinai Technologies differentiates itself from other carbon accounting startups by focusing on helping companies calculate internal carbon pricing. The San Francisco-based company, co-founded by Brazilian-born entrepreneur Maria Fujihara and early Uber techie Alain Rodriguez, closed a $10 million seed funding round led by Obvious Ventures along with Ajax Strategies, Valo Ventures, High Alpha and Climactic. That’s on top of the $4 million it raised previously.
Perhaps even more impressive, however, are some of its early clients, which include steel company ArcelorMittal, Siemens, Bayer and JBS. Sinai is working with these corporations to help them create financial benchmarks — its focus is on industries that are highly carbon-intensive, such as industrial processes, manufacturing and buildings, which is where Fujihara spent the first decade of her career as part of the Green Building Council in Brazil.
The software is sold in a series of modules that can be used to build emissions inventories, through interfaces with widely used enterprise software tools, such as those sold by SAP and Oracle. When I spoke with Fujihara earlier this week, she told me the company charges by the number of "assets" being considered, such as a building, manufacturing facility or vehicle fleet. There’s no limit to the number of individuals that can use the software, as Sinai encourages cross-company collaboration. "If a company really wants to transition, the sustainability team needs to lead the way, but others need to be integrated in the process," she said.
The new funding will go toward helping the company scale its development and sales resources, and to launch its next module, one focused on gathering information from corporate value chains. (Look for a launch leading into COP26.) She also described the software’s mechanism for helping determine carbon pricing as a game-changer.
"Accounting is just the starting point. What we do is look to the future and model the costs of achieving those pathways," Fujihara said.
Considering that CDP figures there has been a tenfold increase in companies using a carbon price over the past five years, it looks as if Sinai and its sistren has plenty of potential target customers.