What Gets Measured Gets Improved
And Why We Invested in CarbonChain
As our world seems to -literally and figuratively- catch on fire, one of the few silver linings I see is an increasing willingness across all sectors of society to confront our climate challenge. While this may not mean consensus on the severity of the problem or how to tackle it, it means we have a unique opportunity to channel more resources in the right direction to increase the odds of better outcomes.
At Starlight, we are firm believers that capitalism can be harnessed as a force for good, and in fact, perhaps no other system has led to such positive increase in humankind’s standard of living. And yet, capitalism with the wrong guardrails and metrics can incentivize very bad outcomes.
The invisible hand of capitalism works to allocate resources most efficiently. What if we could measure carbon emissions as easily as we measure financial results, and incorporate those numbers into the metrics investors, managers and entrepreneurs consider when allocating resources? This is what our most recent investment, CarbonChain, seeks to do.
CarbonChain offers an easy to use SaaS solution that gives clear, accurate and detailed metrics for the entire supply chain, enabling companies to understand the climate impact of their procurement decisions. This allows businesses to evaluate economic and climate trade-offs as they seek to meet increasingly aggressive and public goals to curb their emissions. CarbonChain provides third-party validated, granular and easy to access information to companies that want to take real action to achieve their lofty goals, and gives them a reliable way to quantify their progress.
The CarbonChain team realized the importance and necessity of a tool like theirs after working at logistics and supply chain powerhouse Amazon, and working with large corporations in high-emissions industries such as mining and oil & gas. One of the founders worked previously at the consulting firm BCG (where I also began my career), which has for decades espoused the key mantra “what gets measured gets improved”. It seems crazy that even today, emissions estimates are very generic and often unreliable or outdated. A detailed deep dive is often prohibitively expensive and time-consuming, and is typically not set up in a repeatable fashion that allows for scenario planning and better decisions over time.
At Starlight Ventures, we believe in focusing first on solutions with maximum impact and minimum cost. Process improvements at scale, quantifiably ranked by highest benefit to lowest cost ratio, fit the bill. CarbonChain is the missing link that fits into our (individuals and businesses) collective desires to do our part to tackle climate challenges in a constructive way. It enables every supplier, shipper and producer to understand their impact on the system, benchmark against others to strive to improve, and understand the societal cost of their emissions that is as of yet not captured in the direct economic costs to the emitter. Their data is already granular and best-in-class in many of the most polluting industries — including, shipping, mining and oil & gas -, and expanding into other major sectors of the economy. This is critical as anyone who works with data understands the principle of “garbage in, garbage out”. CarbonChain’s aggregated, verified data is an important moat, one that will grow over time as they further expand the dataset and encourage more — especially smaller, local- suppliers to provide verified data in exchange for plugging into a large marketplace and obtaining benchmarking information about their own operations.
Early traction is very encouraging. Even with initial versions of their product, the response to the demo is astounding given how much better than existing solutions their offering is. And they are aided by the smart policies of European governments, which enable financial institutions to offer improved trade financing terms if companies can show they’re financing greener supplies/suppliers, as determined by this independent and verified calculation. Given the hundreds of billions of dollars of trade financing issued annually, this presents an enormous opportunity to accelerate the flywheel of company growth and global emissions reductions.
The long-term vision is to enable more participants to step onto a global platform that incorporates emissions into the supply chain optimization equation. A level, transparent playing field that allows emissions to become an easy-to-use variable in the signaling system that constitutes efficient markets, pointed towards achieving the goals our society deems worthy.
We are excited to be a small part of this journey, and hope this leads to a world where emissions tracking and optimization is as easy, expected and understood as financial statements are today, and therefore as fundamental to driving our economy.
