Sounds like there’s hope for the planet yet.
Almost half of employees and consumers believe it’s important for companies to disclose their environmental impact and climate-related risks, PwC’s 2024 Trust Survey shows (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 reckons such honesty is at a premium.
“Being frank and being truly transparent about your business—what it is doing, 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 Ventures. “Especially in a world increasingly full of misinformation and noise.”
Eclipse walks the talk.
The firm, which manages about $4 billion, sits at the intersection of digital transformation and heavy industry—think transportation, manufacturing, and logistics and supply chain. With such industries accounting for roughly 75% of global greenhouse gas emissions, it invests in companies using technology to reduce that pollution.
Over the past several years, more institutional investors have been asking Eclipse about its portfolio’s carbon dioxide footprint. Madigan-Curtis and her colleagues figured the positive climate impact could be significant over time.
“But when we went about trying to find a [system] to measure that—just how much carbon would be avoided or mitigated by leveraging modern technology in these industries—we couldn’t find one,” she tells me from Nevada.
So Eclipse built its own. With analytics firm Rho Impact, it developed the Eclipse Carbon Optimization (ECO) framework, which calculates a new venture’s climate impact potential. Eclipse then applied ECO to 13 portfolio companies representing a cross-section of heavy industry.
The bottom line, published in a 2023 report: By 2050, those companies could shrink annual carbon dioxide emissions by 172 million metric tons, or about 4% of total U.S. C02 output today. That’s equal to the yearly emissions of 22 million homes.
“We found it really impactful to have that kind of standard,” Madigan-Curtis says of ECO. Besides helping Eclipse’s companies convey their carbon impact to potential customers, it’s been well received by other VC folks interested in using such a framework.
Madigan-Curtis also sees a way forward for any business that wants to build trust in its climate reporting. In her view, many companies could do better.
“If you look at, for example, Amazon or Google’s reporting around their carbon footprints, there’s a lot to be potentially disappointed by,” says Madigan-Curtis, who previously worked at Apple and connected operations provider Samsara.
Many carbon reduction goals and statements take offsets into account, she notes. “It’s fairly well-known that carbon offsets are not the most reliable.”
True enough. One study found that more than 90% of rain-forest carbon offsets approved by the world’s top certifier are probably “phantom credits” that could worsen global warming.
Eclipse prefers the rigor of carbon “insets,” Madigan-Curtis explains. For businesses, that includes doing things that are carbon-reductive, such as upgrading HVAC systems and investing in new tech that cuts energy consumption.
“These are the types of actions we like to measure,” Madigan-Curtis says. “This is why we’re promoting this framework, versus the more high-level ‘Set a goal, and then use carbon offsets to get there if you’re coming up short.’”
To be fair, Google has changed course. As it shifts away from buying carbon offsets in bulk, the tech giant is aiming for net-zero emissions by 2030.
Madigan-Curtis sees big upside in trading offsets for insets.
“Consumers, investors, and employees are smart, and a lot of people care about climate and the way that companies behave around climate,” she says. With that in mind, Madigan-Curtis thinks there’s plenty of room for businesses to lead by doing “real work” to decarbonize and measuring and reporting the impact.
Those that do “will be the ones that, over time, get more investment, have happier customers, and have greater employee stickiness,” she predicts. “Because people are smart, and they really do look under the hood.”
Ideally, that vehicle is electric.
Nick Rockel
nick.rockel@consultant.fortune.com
