From Carbon Confusion to Climate Clarity: The New World of Carbon Accounting and Reporting

Many companies have been working hard to raise their environmental, sustainability, and governance (ESG) standards. Carbon footprint accounting has served as the starting point for many organizations because it seems reasonably straightforward and there are many options for reducing or offsetting carbon emissions. Yet, the lack of clear standards, a plethora of competing methodologies, changing regulations, and challenges with data collection have made carbon accounting much more fraught than one might hope.

“Both public and private companies are doing carbon accounting. Generally, it has to do with some stakeholder pressure,” says Kentaro Kawamori, CEO and cofounder of Persefoni, a software company focused on carbon footprint measurement and reduction. “The need to do this has exploded over the last 24 months, with pressure from the voting population to push leaders across governmental and corporate entities to be better stewards of the environment and reduce their climate impact.”

But the increased demand for carbon accounting has led to confusion around terminology, methodology, and standardization. And while some agreed standards have emerged, variations on these accounting methodologies have added layers of complexity. Small accounting policy differences can have a big impact on the final numbers. Navigating the sea of options can prove challenging, both for lack of experience and the challenge of obtaining better and more accurate data.

“There's this sort of built-in incentive to use better data and to be more transparent because the better data you use, the lower your carbon footprint is going to show,” Kentaro says.

The desire for more visibility doesn’t just come from consumers and regulators anymore. “ESG and carbon footprint reporting for financial reporting and investor relations is becoming much more commonplace now,” Kentaro says. Over time, not only have more companies begun to measure, disclose, and manage their carbon footprint, but more have developed an increased awareness around the interconnection of Net Promoter Score, carbon footprint accounting, and financial outcomes. Ultimately, better data and increased transparency can create better ESG, NPS, and financial outcomes.

In this episode, Kentaro and I discuss how companies now measure carbon footprints to provide investors and customers with accurate data that can help them navigate the journey toward greater sustainability.

In the following excerpt, we discuss how to deliver value to customers and investors alike.

Rob: To what extent do you feel a tension between the need to satisfy your investors and the need to deliver more value to your customers?

Kentaro: It’s a constant tension and a rope that should be as tight as possible. By nature, their interests are massively diverse. There's a huge amount of overlap and interest, but at the end of the day, the customer's only priority is to get the service to which they have been promised and on which they have expended money on.

Any investor's fiduciary duty is to return capital to their investors. It's this constant mix of quantifiable and unquantifiable mix of ROI, risk vectors, and micro and macro vectors. That's hard. That rope is tight all the time. Only in extreme cases where products or services are smashing record-breaking successes is that tension a little bit looser at times.

Our job—and my job specifically as CEO—is both fiduciary and to the customer. And I have to be the translator of finding a middle ground for both.

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