What this venture capital firm can teach other companies about truly decarbonizing the economy

Sounds like there is still hope for the planet.

Nearly half of employees and consumers believe it is important that companies disclose their impact on the environment and climate-related risks, says PwC. This is evident from the 2024 confidence survey (PwC is a sponsor of this newsletter). When it comes to building trust in an age when people have so many ways to share information, Aidan Madigan-Curtis thinks such honesty is paramount.

“Being honest and transparent about your business – what it is is do what it is not doing, what it stands for and everything in between – is more important than ever,” says the partner at venture capital firm Eclipse Companies. “Especially in a world increasingly full of misinformation and noise.”

Eclipse does the talking.

The company, which manages approximately $4 billion, is at the intersection of digital transformation and heavy industry, such as transportation, manufacturing, logistics and supply chain. What such industries are responsible for about 75% of global greenhouse gas emissions, it invests in companies that use technology to reduce pollution.

In recent years, more and more institutional investors have asked Eclipse about the carbon footprint of its portfolio. Madigan-Curtis and her colleagues thought the positive impact on the climate could be significant over time.

“But when we tried to find a (system) to measure that – how much carbon would be avoided or reduced by using modern technology in these industries – we couldn’t find one,” she tells me from Nevada.

So Eclipse built one itself. With analysis company Rho impactit developed the Eclipse Carbon Optimization (ECO) framework, which calculates the climate impact potential of a new business. Eclipse then applied ECO to 13 portfolio companies representing a cross-section of heavy industry.

The bottom line, published in a Report 2023By 2050, these companies could reduce annual CO2 emissions by 172 million metric tons, or about 4% of total U.S. CO2 emissions exit today. That is equal to the annual emissions of 22 million households.

“We thought it was very impressive to have such a standard,” Madigan-Curtis says of ECO. In addition to helping Eclipse’s companies communicate their carbon impact to potential customers, it is also being well received by other VC folks interested in using such a framework.

Madigan-Curtis also sees a path forward for any company looking to build trust in its climate reporting. According to her, many companies could do better.

“For example, if you look at Amazon or Google’s reporting on their carbon footprint, there’s a lot you could potentially be disappointed with,” said Madigan-Curtis, who previously worked at Apple and a connected operations provider. Samsara.

Many carbon reduction targets and statements take offsets into account, she notes. “That is quite well known carbon offsets are not the most reliable.”

True enough. One study found that more than 90% of rainforest carbon offsets approved by the world’s top certifier are likely to be “phantom credits” that could worsen global warming.

Eclipse prefers the rigor of carbon inserts, Madigan-Curtis explains. For companies, this also means doing things that reduce carbon emissions, such as upgrading HVAC systems and investing in new technology that reduces energy consumption.

“These are the types of actions we like to measure,” says Madigan-Curtis. “This is why we promote this framework, rather than the higher-level ‘Set a goal and then use carbon offsets to get there if you fall short.’”

It’s fair to say that Google has changed course. Like it shifts away By purchasing carbon offsets in bulk, the tech giant is aiming for net-zero emissions by 2030.

Madigan-Curtis sees big benefits in trading offsets for insets.

“Consumers, investors and employees are smart, and many people care about the climate and how companies act on climate,” she says. With that in mind, Madigan-Curtis thinks there is plenty of room for companies to lead by doing “real work” to decarbonize and measure and report the impact.

Those that do “will be the ones who, over time, get more investment, have happier customers and have greater retention among their employees,” she predicts. “Because people are smart and really look under the hood.”

Ideally, that vehicle is electric.

Nick Rockel
[email protected]

This story originally ran Fortune.com