I make no allusions to the fact that transitioning from being a software engineer, to being a founder has been difficult. Selling and getting in front of people for example, has been extra difficult, I ask myself a million questions when I’m approaching a person or organisation in order to attempt to sell them the service and solutions we offer. I have stated to members of these organisations that the service we offer is to “enable Carbon Transparency”, and one of the questions I’ve found I’ve been asking of myself is “What do I mean by Carbon Transparency and why would organisations care about it?”
If you perform a google search for “Carbon Transparency”, you’ll find “About 118,000,000 results” or a bit over 100 million results.
If you search for “Financial Transparency” then you’ll find “About 1,020,000,000 results” or a fraction over 1 billion results.
However, if you perform the search “What is Carbon Transparency?”, whilst you get results, you don’t get any sort of definitive answer to sink your teeth into.
This is the question that we intend to answer in this blog post.
Leaning on other forms of Transparency
Luckily for us, it’s not just Carbon Transparency that has had this adolescent crisis of meaning, as we can see from a paper in 2008, which states:
“We first observe that transparency is not well-defined in a financial reporting context. Extrapolating from the ways transparency is used in other contexts, we define financial reporting transparency as the extent to which financial reports reveal an entity's underlying economics in a way that is readily understandable by those using the financial reports.”
So if we were to do as the author states and “extrapolate from the ways transparency is used in other contexts”, perhaps we would arrive at this response to our question of “What is Carbon Transparency?”?
“Carbon Transparency is the extent to which carbon reporting reveals an entity’s underlying carbon footprint in a way that is readily understandable by those using the associated reports”
Now I’m not sure about you, but this to me, seems a bit wordy, and also, not very useful.
So if we skip forward a bit, to say, 2024, we find a much clearer description of financial transparency.
Denise Probert defines Financial Transparency as follows:
“Financial transparency refers to the extent to which a company provides clear, accurate, and accessible information about its financial performance, operations, and financial position. It involves openly disclosing relevant financial data to stakeholders, including investors, employees, customers, and regulatory bodies. This transparency can be achieved through various means, such as financial statements, reports, and disclosures.”
This seems like a much more descriptive and overall useful description of Financial Transparency, and what happens when we extrapolate this to our own use case of Carbon Transparency, in a fairly crude and 1:1 way?
“Carbon Transparency refers to the extent to which a company provides clear, accurate, and accessible information about its emissions performance, operations, and emissions position. It involves openly disclosing relevant emissions data to stakeholders, including investors, employees, customers, and regulatory bodies. This transparency can be achieved through various means, such as emissions statements, reports, and disclosures.”
This sounds like a much, much clearer potential definition of Carbon Transparency and we’re going to use this as a mental base for the rest of this article, developing a much cleaner definition along the way.
Proverbial Transparent Apples and Oranges
Now I can already hear some of the contrarian gears turning in your heads, you’re saying to yourself, “But Louis, there are so many differences between Carbon Transparency and Financial Transparency, this just sounds like a straw man, you wouldn’t be trying to pull the wool over my eyes would you?”
And to that I would reply: “Well, of course not!”
But of course, there are differences, so let's tackle those.
Unit of Measurement
The primary difference is the unit of measurement underneath it all, as well as its historical treatment.
For carbon/emissions (which from here on out, I will be using interchangeably), we have always accepted it as an unaccounted-for-externality in Product Life Cycles, akin to if up to this point in human history, we had all the money in the world, but everytime we developed, designed, produced and sold a product, we simply ignored how much money all that cost, resulting in the production of those tiny little umbrellas that go in the cocktails from your favourite tiki-themed bar, but they cost $3000 each.
Now I know you’re upset, “Louis, who would pay $3000 for one of those great little mini cocktail umbrellas, that make me feel like I’m not in the middle of winter when I’m sitting at my favourite bar, wishing for my next holiday?”
That would be the exact point, who would pay that? Because dollars to donuts, and as clear an anecdotal statement that this is, you can guarantee that in the vast world of global e-commerce, $3000 cocktail umbrellas do exist, they just cost us in emissions, not money.
System Level Thinking
Another rather large difference to account for is at a system level.
Whilst the economy is impacted by various actions performed with money, the primary unit underlying Financial Transparency. There is no exact comparison in terms of scale of impact, for what happens when we ignore the externalities that we brought to light in our ridiculous cocktail umbrella example.
In the case of Carbon Transparency, when the externality is ignored we get Climate Change, an effect so pernicious that it will affect every single person on the planet.
Unfortunately, some groups, particularly those least responsible for Climate Change, will be affected more than others, but everyone is affected in some way, and if action isn’t taken, things will get worse.
Open technology focused development model
The open development model of carbon transparency via the PACT Pathfinder Network has provided a unique foundational data model for organisations to quantify Carbon Transparency. This enables the transparency of one product to have a larger impact on the carbon transparency of another organisation’s product or carbon footprint due to the downstream/upstream relation of products.
Problems with defining Carbon Transparency
There’s also a number of issues in actually defining Carbon Transparency, many of these drill into the differences we previously outlined.
Understanding emissions
As we mentioned in our previous section on the differences between Carbon Transparency and Financial Transparency, the primary unit of Carbon Transparency, emissions, continues to provide issues for the fair definition of Carbon Transparency, and emissions are not quite there yet in terms of being well and commonly understood in the minds of many, with confusion existing around the use of various units such as PPM and CO2e.
The reason that we have a good understanding of Financial Transparency is because money is a common unit of measurement that we have significant experience with, we understand it at a visceral level, it is a part of the fabric of daily life.
Emissions do not currently have the same benefit, but there is significant positive progress being made around turning carbon into a well understood unit, with carbon pricing being studied and implemented across various markets, the practicalities of Carbon Pricing are becoming more understood, and the size of the markets are increasing dramatically.
Life’s not that binary
It is natural to look at a term such as “Carbon Transparency” and immediately view it through a binary lens, however, we recommend against this categorisation and assert that Carbon Transparency should instead be viewed from a gradient perspective and furthermore, we suggest thinking of Carbon Transparency in line with the concept of optical transparency, where the scale moves from Transparent, to Translucent and then Opaque. By conceptualising Carbon Transparency in a gradient manner, we mentally frame the transition as a progressive journey, instead of a yes or no problem. Organisations will always be on a path to further clarity, whilst also existing at different levels of transparency. ZeroTwentyFifty believes that developing a common vocabulary and framework for considering transparency, will enable more streamlined conversations, reframing the entire process as a journey, instead of a binary question of “Are we transparent or not?”. The reality of decarbonisation is one of hideous complexity and inevitably it will always be a journey to transparency as new systems come online, as products are designed and redesigned, and as the sustainability position and experience levels of institutions improve.
The Purpose of Carbon Transparency
The purpose of Carbon Transparency is to enable the ability to answer questions, it is ultimately a facilitator of insight generation. Furthermore, it is the act of being able to surface data and respond to legitimate enquiry from supply chain actors, employees, legislators, organisations, auditors and other stakeholders, at the relevant level of granularity required by that party.
But much like the Pathfinder Framework currently covering a cradle-to-gate LCA approach, Carbon Transparency stops short of the change implementation right now. In the future, as the business community becomes more Carbon Transparent, the shift will enable the ability for organisations to weigh product and design options against another based on the results of PCF and LCA results, emissions reduction hotswaps will result in total embodied emissions being driven down. For organisations that are proactive in their approach to Carbon Transparency, it will create a competitive advantage within their business, providing unique business conditions denied to organisations that cannot provide answers. ZeroTwentyFifty believe that if a PCF is not available before a product is picked, especially given the oft-touted claim that up to “80% of environmental impacts can be avoided during the design phase”, organisations will simply be better served by procuring from organisations that surface Carbon Transparency via initiatives like PACT Pathfinder, due to the clear benefits of improving Primary Data Share of their own product life cycles.
Transparency in Product Carbon Footprinting will mean an increase in Primary Data Share (PDS) at a metric level, and as a result, Carbon Transparency in a product will enable quantitative grading via a direct numerical figure. 100% PDS could, for example, mean that at a product level, your product is Carbon Transparent (this would obviously depend on data quality as indicated by framework metrics such as Quantitative Data Quality Indicators, a topic we will be covering in future articles). By then incorporating measures of data quality via the integrity measures and data quality indicators of the GHG Protocol and the more refined DQIs included in the pathfinder framework, we allow for Carbon Transparency to become directly measurable.
This is ultimately the power of the Pathfinder Network, it allows for data to be exchanged between Supply Chain Actors as to start to directly quantify what it means for an organisation to be Carbon Transparent, it is a fundamental benefit of the framework.
Historical Context and Importance of Carbon Transparency
The importance of the shift to greater measures of Carbon Transparency cannot be understated given the recent developments in legislation and reporting standards with the SASB (Sustainable Accounting Standards Board) merging with the IFRS (International Financial Reporting Standards), to create the ISSB (International Sustainability Standards Board) in order to “develop a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs” in a series of announcements ranging from 2021 to 2022.
Alongside this, organisations like the World Economic Forum, are all in agreement about the importance of Carbon Transparency.
And finally, with legislation like CBAM on the way, issues like Carbon Leakage are being handled for and enforced, so without a good strategy and direction towards implementing Carbon Transparency, organisations will either be penalised or locked out of markets, and given the size of the European market for the primary products affected by the legislation, such as: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen, all products whose production is carbon intensive and at most significant risk of carbon leakage. Without organisations striving for Carbon Transparency within their own entities and supply chains, inadequately preparing for these legislative changes and making the correct amount of progress towards greater transparency, will start to have financial impacts for those who do not embrace Carbon Transparency and the changes, whilst simultaneously creating massive opportunities for those organisations that commit to carbon transparency and make the necessary changes.
On top of all of this, we can also see interest in Carbon Transparency rising in search activity.
Conclusion
Carbon Transparency is the degree of visibility into a product life cycle that an organisation can have, on a gradient scale. Moving away from static/binary notions is, in the opinion of ZeroTwentyFifty, the first step in the fight against climate change and rearranging the data access patterns of organisations. The second step is utilising the Carbon Transparency built within an organisation, to start answering more critical questions about the life cycle of their products and services, in order to affect meaningful climate impact and more aggressively drive total greenhouse gas emissions down.
What we mean when we say that we enable Carbon Transparency, is that we provide the ability to have open discussion about the issues that you and your organisation are seeing when it comes to their greenhouse gas emissions and how they are able to access, analyse, process and surface data that relates in any way to Carbon Transparency issues within the organisation. If the issue exists along the lifecycle of a product, then we have an interest in providing assistance to organisations.
Is your organisation looking to delve into the creation of greater Carbon Transparency? Feel free to reach out today and book an obligation free consultation with one of our technical advisors, we excel at finding simple solutions to complex problems.
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