Following a busy 2022 for climate-related rule-making, the SEC announced their 2023 agenda to start the new year. Both the Climate Change Disclosure and the Enhanced Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and Governance Investment Practices rules are reaching the final rule-making stages, and ESG persists as a prioritized focus.

ECV summarized the Climate Change Disclosure rule almost a year ago, but what ever happened after that? Commentary poured in from all ends of the US until June 2022. Harvard Law published a report summarizing the feedback from the proposed rule. The most contested topics were 1) the legal authority of the SEC, 2) Scope 3 emissions disclosure requirements, and 3) materiality thresholds. Discussion covering the rule proved to be extremely polarizing, as different parties stated their case and attempted to influence the final rule, pushing the indication date to 2023.

Spring is fast approaching, and the highly anticipated climate change disclosure rule is top of mind for executives across the country. Although Scope 3 emission requirements are still unclear, carbon accounting and emissions reductions will surely be a requirement for publicly traded companies. Though seemingly daunting, plenty of software, consultants and experts remain available and equipped to prepare companies for climate-related disclosures.

A Market Positioned for Massive Growth

As regulatory tailwinds come down on the Carbon Accounting industry, the market is expected to grow by $9.61B from 2021 to 2026, up from a current $7.8B valuation. The rapidly evolving regulatory agenda in North America, coupled with substantial efforts by the United States government to reduce GHG emissions, will be driving the investment and maturation of the industry. As current tools and technologies are unprepared for more robust regulation, start-ups exhibiting expertise in sector-specific emissions management are well positioned to capture market share and create extraordinary enterprise value.

There’s no shortage of resources for emissions & ESG accounting software. The industry becomes more saturated nearly every quarter. We anticipate that more generic players will begin to specialize in industry-specific reporting, or scope-specific reporting, as disclosure requirements become more challenging for companies to measure, track, and intervene. For utility companies and those who own power generating assets, we can see them leveraging GHG emissions focused technology in conjunction with enterprise-based ESG transformation software for complete visibility and insights to all company wide sustainability efforts.

The need for specialization is even more important for heavy-emitting sectors, such as Industrials, Energy, Manufacturing, and Supply Chain Management, the accounting process can be extremely challenging based on complex operations, all the more reason we cannot miss with generic reporting. Although different software can be better suited for different industries, this article will focus on a selection of companies tailored for carbon accounting in Oil and Gas operations.

Highwood Emissions Management, a strategic advisory firm for emissions management, ESG compliance, and regulatory reporting for the Oil and Gas industry, just announced the launch of their new software, the Emissions Management Toolkit (EMT). The Saas product automates much of Highwood’s consulting offerings, making emissions management accessible for any organization, at any stage in their emissions management program. Modules include:

1. Emissions Inventory Management
2. Emissions Reduction Pathways equipped with cost models and marginal abatement cost curves
3. LDAR-Sim complete with oil and gas facilities, weather conditions, and simulated emissions
4. Measurement and Reconciliation tools

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Emission Critical is implementing an industry-specific approach to trace product carbon footprints, analyze abatement opportunities, and streamline climate disclosures for the Oil and Gas industry. The product is equipped with various modules to create LCAs for carbon-intensive products using operational data. Modules include:

1. Carbon accounting at the product level
2. Carbon footprinting across the value chain
3. Geospatial data acquisition from a range of ground and aerial sensors
4. Inventory planning and sustainability reporting

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CarbonChain offers automated supply chain carbon accounting for companies, commodity traders, financiers, and logistics firms in the heaviest emitting sectors: from metals and mining to manufacturing. CarbonChain uses two unique metrics to estimate the carbon intensity of international shipping:

1. Energy Efficiency Operational Indicator (EEOI): CO2 emissions per actual cargo tonne miles or passenger miles (sum of the product of payload and the corresponding distance traveled), in gCO2/tonne/nautical mile
2. Annual Efficiency Ratio (AER): CO2 emissions per unit of nominal transport work (product of a ship’s capacity and total distance traveled), in gCO2/dwt/nautical mile; GHG emissions for a given ship are calculated to indicate “CO2 emissions per transport work”.

Getting Ahead of Requirements

By implementing carbon accounting, businesses can identify their sources of emissions and develop strategies to reduce them, which can help reduce operational costs and improve their reputation with customers, investors and stakeholders. Regulation will soon require companies to disclose their carbon emissions and the transparency and accuracy of carbon accounting will become more important than ever before.

Carbon accounting solutions differ in the sectors and markets that their tools can serve and where their expertise lies. Carbon intensive sectors should focus on sector-specific accounting tools, to ensure they have the most accurate depiction of their carbon emissions inventory. Working with emissions management tools developed by industry experts will improve the likelihood of reaching deep decarbonization because it creates a more reliable, actionable baseline to then start decarbonization planning on top of.

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