1. The Pace of Growth is Fast… And Accelerating
In 2021 we saw pressing investor demand for green investments, consumers shifting spending to sustainable products, and a boom in green financing. This is a huge level of interest and growth, but there is a new accelerant as well: In 2021, the answer to “What’s in it for me?” has become clear to most businesses. Carbon emissions reporting leads to higher stock valuations, higher brand value, cheaper financing and happier employees. The flywheel of change has sped up and we expect to see more of the same in 2022.2. Businesses Will Continue to Ask for Lower Emissions Targets
When do corporations ask for more regulatory burden and more reporting? Never.
Yet, at the recent global climate conference – COP26 – we saw corporate and investor groups representing more than $143 trillion in assets ask policy makers to take a stronger stand on emissions reductions. Why? There is money to be made from reporting and reducing carbon emissions. Our prediction for 2022 is that businesses will continue to ask for emission reduction targets, particularly as they see how emissions reductions can be monetized.
3. Year 1 Was Easy. Year 2 is Demanding
Today, businesses are scrambling to assemble emissions data and declaring first-round victories when the report is done. But this is quickly followed by the realization that guess-estimates don’t work in Year 2. Year-over-year comparable data, followed by emissions reductions is required. The race is on for rigorous emissions data that integrates into other risk management activities, and can be used to prioritize emission reduction projects. “You can’t manage what you can’t measure” goes the saying, and we look for companies to upgrade their entire emissions data flows so they can gain control and manage emissions to corporate goals.4. Risk Reduction with Finance-Grade Emissions Data
Carbon reporting and emissions reductions have emerged as a C-suite issue. Current emissions data systems – which rely on semi-automated workflows and lots of bespoke judgements – just won’t fly. Modern data pipelines that leverage AI with transparency are faster, better and cheaper, and the data processing rigor required by the CFO is built in. Poor quality emissions data is now a corporate liability and a career risk. On the other hand, finance-grade emissions data leads to cheaper capital, higher valuations and stronger brands. 2022 will be the year that rigor enters the carbon emissions data world.5. The Business of Carbon is Just Business.
2021 saw the rise of carbon accounting software, “financed emissions” software and more. Carbon data is new and novel. But think ahead and imagine: Vendor bids for emission reductions are evaluated on cost, speed and level of reduction; Make or buy decisions are extended to reducing emissions in-house or buying a stack of carbon credits; Reporting emissions is integrated with other financial disclosures in every 10-K. In 2022 the business of emissions will be on its way to becoming just another dimension of everyday business.
But everyday is quite valuable. Just as economic growth and innovation in the last century was powered by cheap access to oil and our daily use of petroleum products, the next wave of wealth creation will come from innovative products and services that deliver and monetize carbon emissions reductions as part of everyday business activities.
We’ve got big data, AI and modern digital technologies to put the wind at our back. We’ve got a planet, children and grandchildren depending on us. 2022 will be a big year for the business of carbon.
Happy 2022!