For those who have followed the rise of the environment, social, and governance (ESG) movement, they are seeing it become ingrained in the financial community, as well as in boardrooms and among managements. The most significant recent development was the U.S. Securities and Exchange Commission’s (SEC) proposed plan for increased disclosure of the “E” contribution of companies and the associated risk to the company’s financial condition. The SEC plan says publicly reporting companies must detail their Scope 1, 2, and 3 carbon emissions during the next three years. The SEC’s move is probably the most significant ESG development.

As a reminder, Scope 1 includes direct carbon emissions generated from sources that a corporation owns or controls, i.e., manufacturing and process emissions, onsite fuel use, and emissions from company vehicles. Scope 2 emissions are indirect emissions from the use of energy that your organization buys, such as electricity, heating and cooling, and steam for power or production processes. Scope 3 emissions include those from your suppliers, as well as your customers, which are not otherwise captured in the other categories. For most companies, Scope 3 emissions will be the largest portion of their carbon footprint, sometimes representing as much as 90% of total emissions.

The Corporate Value Chain (Scope 3) Standard and accompanying calculation guidance document were developed by the GHG Protocol to help businesses calculate their indirect emissions in 15 different Scope 3 categories and is likely the default reporting standard that companies will adopt. Scope 1 and 2 standards are straight forward. To better appreciate the range of Scope 3 emissions now needing to be enumerated, let us look at those that might arise from the production of a shirt. The emissions from producing the raw material such as cotton, and turning it into cloth, along with the shirt’s manufacture, packaging, distribution, and delivery must all be accounted. If your employees commute to work by car or public transportation, or fly to visit customers and suppliers, those are Scope 3 emissions. During the life of the shirt, the emissions associated with the washing and drying of it, as well as how the shirt is disposed of or recycled will generate indirect emissions that must be captured in Scope 3 accounting.

Are you feeling overwhelmed with the challenge your corporation faces in meeting the disclosure requirements? Many companies are. Often assessments of Scope 1 and 2 emissions are compiled using manual spreadsheets, since there are few automated accounting systems available. The scale of this new disclosure requirement, including having the estimates attested to by outside evaluators, creates a new financial reporting workload with legal implications.

A major effort is underway within the financial and accounting professions to automate emissions accounting, classifying them into their correct Scope category, and maintaining the data such that it can be easily audited, to comply with these new disclosure standards. All these efforts are designed to help managements develop sustainability goals and plot strategies to meet them as part of ESG initiatives. The former cottage industry of carbon emissions accounting is being pushed to become professional almost overnight. This will become another expense and disruption corporations must consider and manage in their business planning.

For this Company Spotlight, we interviewed Persefoni’s Chief Sustainability Officer (Tim Mohin) about the company’s Climate Management & Accounting Platform (CMAP). Persefoni’s Software-as-a-Service (SaaS) solutions enable enterprises and financial institutions to meet stakeholder and regulatory climate disclosure requirements with the highest degrees of trust, transparency, and ease. For more information on Persefoni, please visit persefoni.com.

Background: After leading corporate sustainability efforts at companies such as Intel, Apple, and AMD, as well as serving as Chief Executive of the Global Reporting Initiative (GRI – the largest standard for environmental, social, and governance (ESG) reporting), Tim Mohin joined Persefoni months after it was founded. Mohin was……..…..READ MORE

Centurion, a portfolio company of SCF Partners, is a global leader in the supply of critical services to the oil & gas, infrastructure, power, environmental, and renewable energy industries, with a strong local presence in key energy markets like the US, Canada, UK & Europe, Caspian, Middle East, Asia, and Australia. Trido Energy Services is a leading provider of sustainable and innovative solar-powered production equipment and end-to-end carbon credit management solutions to the energy industry. The acquisition of Trido Energy Services represents the first-ever acquisition of a renewable energy technology company by Centurion.

Related Press Release: Centurion Acquires Provider of Solar-Powered Equipment

Crusoe Energy Systems (Crusoe) is a pioneer of clean computing infrastructure that reduces both the costs and the environmental impact of the world's expanding digital economy. By unlocking stranded sources of energy to power crypto, cloud, and data centers, Crusoe is creating a future for compute-intensive innovation that reduces emissions rather than adds to them. The new capital will be used to deploy large-scale Bitcoin mining and cloud computing infrastructure, propel the expansion of Digital Flare Mitigation® within the United States and internationally, and accelerate the launch of CrusoeCloud™, Crusoe's High-Performance Computing cloud.

Divergent Technologies (Divergent) is the developer of the world's first end-to-end digital production system, which is aimed to revolutionize industrial-scale manufacturing. Divergent seeks to make the vehicle manufacturing process more efficient and less wasteful using additive manufacturing, colloquially known as 3D printing. The new financing will enable Divergent to industrialize its fully-integrated platform, combining generative design, additive manufacturing, and automated assembly, expand operations, and meet the growing demand among automotive OEMs for design and production of vehicle structures leveraging the company's proprietary digital production technology.

Related Press Release: Divergent Technologies Announces $160 Million Series C Funding

Headquartered in Houston, ComboCurve is a scalable energy tech company that provides decision-makers the ability to value assets, de-risk decisions, and save time through an intuitive cloud-based collaborative platform. The capital will allow ComboCurve to accelerate core product enhancements while expanding into other workflows, including forecasting of greenhouse gas emissions, scheduling, and modeling renewable energy sources.

Sentinel Capital Partners is a private equity firm specializing in buying and building midmarket businesses in the United States and Canada in partnership with management. SPL is a market leader in the testing, inspection, and certification services for the energy and environmental markets. SPL serves a global customer base of more than 1,700 from 22 strategic locations and offers end-to-end testing, measurement, and reporting solutions that analyze hundreds of thousands of samples annually for the physical and chemical composition of hydrocarbons, lubricants, and wastewater. Besides testing and services, SPL offers unique digital services, including production allocation, flow assurance, and data management.

Related Press Release: Sentinel Capital Partners Acquires SPL

Energy Technology Musings

At the Heart of ESG is Definition and Accuracy