Maurice:

Hello everybody, and welcome to another edition of C&F talks where we have interviews with speakers at some of our upcoming events. Today, I'm going to be speaking to Taylor Francis who's the Co-founder of Watershed. And Taylor's going to be speaking at the Climate Change and Natural Capital Leaders Summit which is taking place as part of City Week, at the Guildhall in London on the 20th of May.

Taylor, welcome.

I'm so excited to be here and excited to come to City Week in May.

It's very good to have you with us and also to have you speaking at City Week. Let's turn to our first question, Taylor.

Maurice:

Can you please tell us a bit about your personal journey and how you came to co-found Watershed?

So, Watershed's mission is to accelerate the climate economy. We build software to help companies measure and report and reduce their carbon emissions both for companies, for financial institutions, and we think that if we do that right we can help businesses be a lot more successful. And we can put a big dent in solving climate change because they're the ones with the leverage on how much carbon ends up in the atmosphere every day.

And I got started on this personally when I was in high school. I saw the Al Gore: An Inconvenient Truth movie and got very motivated around doing something to solve climate change. And then my co-founders and I all worked at Stripe, a financial technology company, together. And we, actually my co-founder Christian, helped us set up Stripe's climate program and that was really an eye-opening journey in realising, number one, how impactful companies can be. Stripe is now mobilizing almost a billion dollars towards carbon removal. But also, number two, how woefully underserved they were on reinventing their business for a low-carbon economy.

And so, we built Watershed to basically be world-class enterprise software that helps companies really get ready for the new climate economy.

Yeah, fantastic. Interesting journey.

Maurice:

And in terms of measuring carbon emissions, what are the main challenges, that you refer to, that companies face?

Well, you know, carbon is a complex thing to measure across the business, right? It's not something that you can see. It's not like measuring revenue or costs where there's only one unit of measure. The challenge with measuring carbon and all sustainability indicators is that you're trying to go from very messy internal data about your operations, your business, your energy use, your suppliers, your investments, and then translate that into an accurate and actionable measure of how much carbon is in your supply chain, is in your portfolio.

And our big thesis on that is that it requires a lot of, kind of messy, dealing with messy operational data, and then a lot of science Because knowing how much carbon goes into every product your business makes, or buys, or invests in, there's a lot of nuance to that to get that right.

Yeah, no, I can see that. It must be a huge challenge, certainly to achieve a degree of accuracy.

Maurice:

But of course, considerable progress has been made in terms of emissions reporting, the two new ISSB standards, which the government here is about to implement, I think, during the course of this year, and the EU Corporate Sustainability Reporting Directive. How prepared, realistically, do you think companies are for the introduction of these? And what steps should they be taking now, if they are behind the curve?

Well, you're right that it's a big deal.

We today, in 2024, are in the first year in which sustainability and climate reporting has really gone from voluntary to regulated around the world. And people will report on that at various times, depending on the jurisdiction. But we are living in a totally new world when it comes to sustainability data.

How prepared are companies? I think companies have a lot of work to do. I think that it's a new level of rigour that's going to be applied to sustainability reporting. Our recommendation to companies is to just get started now, get started with measuring carbon, waste, water, all these indicators. Because the level of assurance and review and audit is pretty significant. And you want to get a head start on having time to do that right.

Presumably, your software picks up on the ISSB standards and the European regulations and so on, and provides a ready-made solution to complying with those regulations.

Yeah. I mean, our thesis is that companies need sustainability reporting that their CFO can stand behind, really raising sustainability to the level of regular financial data. And then they need actual decarbonisation. And those two things go hand in hand when you, kind of, set up the right data infrastructure for operationalising sustainability.

Yeah. I suppose one of the other issues when it comes to measurement, there's been comments in the press recently about various carbon credits that have been claimed, I think it's by Shell over the last week, that there's been comments in the press about that.

Maurice:

What is the viability, do you think, of carbon credits going forward as a mechanism for offsetting emissions? And do you think that the voluntary carbon markets will be able to re-establish their credibility? And how much of a role are they likely to have in the transition to net zero?

Voluntary carbon markets are crucial.

And the way I think about this is, primary focus is on reducing carbon emissions. But even as we decarbonise industry as fast as we possibly can, we know there's going to be some residual amount of carbon that needs to be removed by 2050. And we need to scale up the carbon removal industry across engineered approaches, natural solutions, by many, many, many orders of magnitude.

And the voluntary carbon markets are going to be the force of purchasing demand capital that makes that climate solution possible. And then you look to emerging markets where carbon reductions are going to require extra financial support and carbon markets are a big piece of making that possible. So, we need voluntary carbon markets and they are broken today, completely broken. Because there's a lack of consistency and standards, trust and quality.

And so, to me, it's an enormous priority to fix that fast and to have a functioning voluntary carbon market, which requires standards that all players have agreed on and requires a rising bar of quality of these projects. And I know that there's some amazing folks who are going to be at City Week, who've been architects of a lot of the work to make that happen.

Yeah, yeah, that's right. So, Annette Nazareth will be there and a number of others. So, I think it's a work in progress, but hopefully coming towards its conclusion in terms of restoring the credibility of VCS.

Maurice:

Finally, reporting on emissions in supply chains, so-called scope three emissions, appears to be one of the toughest aspects of the new reporting regimes. What advice do you give companies about that?

I think it's a lot more tractable than people fear. I mean, we power scope three supply chain reporting for some of the most sprawling, complicated supply chains in the world,. In food and consumer goods and aviation and manufacturing. And it requires a pragmatic approach. It requires a sensible approach. It requires starting with the data you have, using high quality X-ray of the carbon in different supply chains. But it's ultimately very tractable.

And I actually think it's going to be really good that more carbon data gets out into the ecosystem from a lot of these reporting regimes, because that's going to be the raw material that enables everyone to have a more accurate picture of the carbon in their supply chain.

Yeah, yeah. Accuracy, I think, is the name of the game, isn't it? Actually achieving that.

But of course, we're going to be discussing all of these issues in more detail, at the Climate Change and Natural Capital Leaders Summit, Guildhall, London, as part of City Week on the 20th May. I very much hope that our viewers will be able to attend in person. Further details at www.cityweekuk.com.

Taylor, thank you so much for sharing those views with us. We're very much looking forward to seeing you at the event.

I'm looking forward to it too.

Thank you.