From 2020 to 2021, 37% more companies across the globe reported their climate impact and risks. Those companies represent 64% of global market capitalization. In 2022, countries like the U.S. and EU, are likely to update their regulatory standards to turn voluntary disclosures into mandatory disclosures for thousands of corporations. In a world with more carbon disclosure regulations, the ability to accurately understand a company’s carbon footprint becomes much more critical. Carbon accounting services address the complex and time-consuming process of measuring carbon emissions across a company’s operations, energy consumption, and suppliers.

Persefoni is a carbon accounting SaaS platform helping companies and investors measure carbon to comply with increasing pressure from stakeholders and government regulators to disclose carbon emissions. Persefoni seeks to become a carbon Enterprise Resource Planning (ERP) platform similar to Oracle or other ERP platforms creating the plumbing for all the data in the company. The company connects or supplies all the relevant data sources needed to measure emissions in real-time and is auditable to meet stakeholder and regulatory standards for emissions disclosure. Persefoni focuses on providing the disclosure standards that asset managers and investors use to track their portfolios’ footprints.

Persefoni is an Arizona-based startup co-founded by Kentaro Kawamori, Jason Offerman, and Kim Stroh in 2020. The founding team met at Chesapeake Energy, an oil and gas production company. Kawamori was the Chief Digital Officer (CDO), Offerman was the Director of Technology Platforms, and Stroh was a Data Science and Advanced Analytics manager.

As Chesapeake’s CDO, upper management kept turning to Kawamori to find out how they could report emissions to the investors and clients asking for it. After trying to complete the challenging task of filling data gaps and calculating emissions, Kawamori discovered a pain point worth solving. Repeated requests from investors and clients also signaled the market opportunity. He left Chesapeake to form Persefoni in order to help companies do what he couldn’t do by himself at Chesapeake. Jason Offerman (COO of Persefoni) spent 16 years at Chesapeake Energy running IT projects, including ~3 years directing ERP implementation. Kim Stroh, the company’s Chief Digital and & Information Officer, managed digital product and science projects at Chesapeake.

Persefoni’s platform is a “Climate Management & Accounting Platform” (CMAP) automating manual calculations of company carbon footprints. It provides a transparent platform for viewing carbon footprints, which is challenging to do without integrated software. For instance, a dairy farm might need to capture and calculate various figures such as the fuel efficiency of their fleet of trucks, the emissions of the electricity they use, and how much methane 1,000 cows produce.

In addition to gathering all the data from disparate sources, companies must also be experts in environmental sciences and regulations dictating how to translate all the data into a carbon footprint. Many companies can’t gather all the necessary information about their carbon footprints and instead pay 3rd party consultants an average of ~$500,000 to estimate it.

Persefoni enables customers to more effectively aggregate their various datasets to calculate their carbon footprint, display carbon sources, and generate reports. Carbon accounting software can estimate a carbon footprint across three different kinds of emissions: Scope 1, Scope 2, and Scope 3.

Source: Green Business Bureau

Calculating the overall carbon footprint for a company across each scope requires multiple data sources and understanding how they translate into carbon impact. Persefoni’s platform provides three key value propositions enabling customers to confidently communicate their carbon impact and strategy to stakeholders and regulators:

1. Identifying, aggregating, and filling in data where companies have gaps

2. Using data to calculate emissions for auditing and abiding by industry standards

3. Generating reports and dashboards to provide carbon footprint insights

Source: Contrary Research

Data Aggregation

Data aggregation is a crucial pain point for companies because many don’t know what data sources are worth gathering. Even if they do know, sometimes data is not available. Even if a company is capable of gathering their own critical information, their logistics vendors may not be, which creates a blind spot for the company.

Persefoni fills the information gap by identifying critical data to gather and filling in any data gaps with industry averages. For instance, Persefoni can use industry averages for logistics companies if a vendor does not use physical sensors to create accurate estimates.

Using industry standards to create data estimates is the starting point for companies looking to estimate their carbon footprints. As Persefoni matures, the breadth and depth of its data will allow for more accurate carbon estimates. Persefoni introduced the second iteration of its product, Persefoni CMAP 2.0, in October 2022, which enables customers to track, automate, and streamline the process of requesting emissions data from suppliers through the platform, resulting in a more comprehensive understanding of an organization's carbon footprint.

Persefoni’s platform is a plug-and-play software that can be implemented quickly and bypasses the status quo of hiring specialist consultant firms to calculate a footprint. However tying together the correct datasets may require weeks of upfront architecture support in cases where the client has messy data.

Calculating Emissions

Several carbon reporting frameworks exist to help facilitate common standards between companies. Persefoni’s software complies with Greenhouse Gas protocol accounting (GHG) and Partnership for Carbon Accounting Financials (PCAF) standards.

Most sustainability reporting frameworks, the common ones being TCFD, SASB, and GRI, rely on the GHG as a standard methodology for carbon accounting. The corporation methodology covers topics such as what greenhouse gases need to be measured or what percentage of joint ventures should account for in a company’s footprint. Roughly ~90% of Fortune 500 companies use a version of the GHG Protocol for their reporting.

Competitors like Watershed, Sinai, and Salesforce use GHG in their accounting software. Persefoni also uses GHG to serve corporate clients. However, GHG gives limited guidance for Scope 3 emissions required by asset managers to calculate the companies they own or finance. Instead, PCAF made a different methodology to solve the gap in calculating Scope 3 financed emissions.

PCAF is a methodology developed in Europe and supported by over 250 financial institutions, such as Bank of America, Citi, and Deutsche Bank. The methodology accounts for “financed emissions” of companies that banks and asset managers have given capital to. It utilizes information like car mortgages and project financing to estimate how much a bank or investor is enabling emissions.

Persefoni is the only carbon accounting software to utilize PCAF methodologies. As of August 2022, none of their main competitors publicly claim to use the PCAF methodology. The company’s emissions calculations also strive to be “audit-ready” to comply with regulatory changes.

Reports & Insights

After setting up the Persefoni platform, companies have a dashboard to identify emissions drivers and decarbonization opportunities. Persefoni also offers companies climate trajectory modeling and benchmarking services to supplement their action plan to reduce carbon.

Persefoni stated they have little interest in moving into the market for carbon offsets because it creates mixed incentives. Instead, they partner with Patch, a leading carbon offsets marketplace, so customers can easily port their emission footprint data to match it with offset purchases.

Customer

Persefoni targets two types of customers:

1. Financial institutions, including banks, investors, and asset managers

2. Prominent corporate c-suite members with a focus on the CFO

Both groups face increasing regulatory and stakeholder pressure to disclose their environmental impact, driving the market growth for carbon accounting services.

Investor Pressure

The Climate Disclosure Project (CDP), a non-profit offering a global repository of institutional disclosures, reported a 37% increase in companies disclosing their carbon footprint in 2021 compared to 2020. However, investors representing over $130 trillion—including global titans such as Blackrock and Amundi—are calling for 10,000 more companies to disclose their carbon footprint.

Investors also pledge to be more accountable by making their financed emissions public. Between February 2021 to January 2022, the number of institutions supporting PCAF standards doubled to 200, with representative AUM growing from $20 trillion to $60 trillion.

Increasing investor support for common standards is a positive sign for the overall interest in carbon accounting, but disclosure methods remain voluntary as of August 2022. Among PCAF signatories, only a third also disclosed their footprint. According to a CDP audit, roughly 35% of corporate disclosures in 2021 were deemed credible, and only 1% disclosed all key data points. Without more regulation and audits, purchasing external accounting software is not essential to meet voluntary disclosure standards.

Regulatory Pressure

In non-U.S. markets like Japan and Europe, carbon disclosures are increasing regulation. Before 2021, publicly listed EU companies with a balance sheet over €20 million or turnover higher than €40 million reported how sustainability issues may affect “the company, society, and the environment.” However, there was no auditing.

In 2021, the EU updated “Corporate Sustainability Reporting Directive” (CSRD) standards to expand the number of companies to small and medium public companies, increasing the potential companies from 2,000 to 5,000. The standards would also include more auditing and increase the rigor of their calculations.

In the U.S., carbon disclosure is still voluntary as of May 2022, but new SEC rules proposed in March would impose similar carbon disclosure rules on the largest US corporations. US companies must disclose their carbon impact by the 2022 fiscal year if the laws pass.

By 2023, government carbon disclosure regulations may require approximately 4,000 companies in Japan, 5,000 in Europe, and 3,000 in the U.S, (the main regions Persefoni operates in) to disclose carbon metrics annually. Raising companies’ compliance requirements through carbon disclosure regulations will turn carbon accounting software from a nice-to-have to a must-have.

According to a Deloitte survey, 300 executives of companies with a revenue of $500 million, all companies were invested in ESG reporting, but 92% were concerned, and 48% were very concerned about having adequate technology to facilitate ESG disclosure requirements.

Market Size

According to Deloitte, 99% of public companies plan to invest in tools and technology for ESG reporting throughout 2023. Hiring consulting firms is common for companies lacking internal capabilities for emission calculations. The average cost of hiring consulting firms for carbon emission estimation is ~$500,000. And that’s often just for a one-time estimate even though ongoing reporting will require continued expense.

Carbon accounting software solutions cost between $50-150,000/year. At the end of 2022, the global market of carbon accounting software was valued at ~$11.7 billion but 2023 projections show the market is on track to reach $46 billion by 2028.

PCAF methodologies also make Persefoni’s software suitable for asset managers and investors. The 2020 Fortune 1000 lists companies falling under SEC carbon disclosure regulations. It includes 15% of the financial companies making up the Fortune 1000 (roughly a ~$140 million-$1 billion market). Asset managers may also begin to require their portfolio of companies to leverage a tool like Persefoni.

Persefoni does not have notable competition focusing on PCAF-enabled services for asset managers. However, the general carbon accounting software market attracts several startups and ERP competitors. The most notable is Watershed.

Watershed

Watershed is a software carbon accounting company competing with Persefoni for corporate accounts. Watershed’s customer list implies they have closer relationships with SF-based corporations than Persefoni.

Watershed offers consulting and support to identify Scope 3 supply chain and logistic metrics unique to a company, creating company-specific calculations for carbon accounting. In contrast, Persefoni generally applies industry averages and standards in their accounting metrics when client data is missing. For example, Persefoni’s software could apply industry averages for retail trucking to find the Scope 3 emissions of an e-commerce client if they did not completely capture any of that data in their systems. Once the client did capture specific data, they could plug it into the Persefoni platform. On the other hand, Watershed may offer more bespoke consulting to guide data discovery based on the company’s actual logistics. Instead of directly providing services for carbon accounting like Watershed, Persefoni instead partners with service firms like CGI and Bain. Both Watershed and Persefoni help clients create carbon emission strategies, including finding offset markets.

Watershed has yet to offer more broad ERP integrations or utility systems to input data needed to operationalize GHG accounting methodologies. As of June 2022, Persefoni appears to be better suited to support regulatory disclosure compliance. At the same time, Watershed is better for companies seeking to reduce their footprint or become net-zero.

Enterprise Competitors

Other competitors include enterprises already managing enterprise data. ERP and data compliance companies see carbon accounting as a natural extension of their suite of services. For example, Salesforce and OneTrust, a data security and compliance company, offer carbon accounting services on their platforms. A Forrester report on Sustainability Management Software rated OneTrust and Salesforce as robust offerings due to data management and emission assessments.

Source: Forrester’s Q1 2022 report on sustainability management software

Carbon-accounting specific datasets, like the data Persefoni has gathered, can give them an advantage over their competition. Industry emissions averages extend beyond the typical internal datasets of Salesforce and OneTrust. For example, companies must have industry-specific datasets to understand Scope 3 emissions.

Persefoni is a SaaS business with one-year to multi-year contracts. Persefoni’s headcount points to a partnership-heavy sales model. As of June 2022, there are twice as many business development employees as sales employees. The number of customer success and support employees is also higher than Sales.

Persefoni partnered with Bain & Company, an investor in their Series B round. Bain & Company is a leading management consulting firm for private equity (PE) deals advising over 50% of $500+ million buyouts since 2000, holding strong influence over private equity firms. That partnership could lead to more contracts with PE firms for carbon accounting services.

Persefoni’s customers include four of the top 10 largest PE firms and four of the top 20 banks. Persefoni corporate customers span 17 sectors beyond its core asset managers/financial services. According to reports published in March 2023, Persefoni has computed over 8.6 gigatons of CO2 emissions for its clients.

Source: Persefoni

PCAF Adoption

Persefoni has made a bet on the continued adoption of the PCAF standard. PCAF has gained steam with investors and banks in 2021. They are becoming adopted into other standards and regulations.

In 2021, the European Banking Authority, SEC, and the International Sustainability Standards board all referenced PCAF. The Task Force on Climate-Related Financial Disclosures (TCFD) also adopted PCAF for financed emissions.

TCFD is a GHG Protocol standard supported by 1,700 governments and organizations. The U.S., U.K., and Canada are driving further PCAF adoption. They are looking to adopt TCFD as the GHG protocol standard for carbon disclosures. If TCFD/PCAF standards become mandatory, Persefoni’s value proposition increases dramatically.

Partnerships

Persefoni can partner with private and public organizations to accelerate the reduction of carbon emissions. In July 2022, Persefoni partnered with The Carnrite Group, a management consultancy company serving energy, industrial, and private equity firms.

The partnership focuses on developing support for emission reductions through creating a Footprint Data Services solution. Persefoni is increasing the accessibility of its platform by combining it with the sustainability advisory practice and carbon data collection of firms like The Carnrite Group.

The CEO of The Carnrite Group made the following comments on their partnership with Persefoni:

Developing future partnerships with organizations to increase access, adoption, and available data to Persefoni’s carbon accounting software will further cement its position as a market leader and is a key opportunity for the company’s long-term success.

Politicization of Carbon Standards

Emission reporting can harm or benefit businesses depending on the political climate. While high standards are certain in Japan and Europe, the SEC’s proposal is not. The U.S. stance on climate is highly polarized, creating an unpredictable regulatory environment.

Recession

Macro-economic threats make policymakers shy away from enacting stricter carbon disclosure standards. Recessions and energy geopolitics disincentivize politicians to make economic trade-offs for the environment. In the U.S., consumers shift focus away from environmental agendas during recessions. While climate interest in 2022 looks broader than the cleantech movement in the mid-2000s, governments could still be unwilling to adopt rigorous carbon accounting.

Persefoni became the most well-funded CMAP when it raised a $101 million Series B in Oct 2021. The round, led by TPG and Prelude, increased the company’s total funding to $114 million. For comparison, in February 2022, Watershed had a $1 billion valuation after raising $70 million.

Persefoni’s leading carbon accounting software automates PCAF compliance for asset managers. The company’s market is growing demand for carbon disclosures and compliance. Regulation and compliance will likely remain Persefoni’s primary source of growth. Persefoni’s focus on serving financial institutions makes them unique in their market and has contributed to their reputation around specific use cases.