See Through Carbon is a carbon reporting ecosystem designed to redress Carbon Accounting 1.0’s inherent flaws of being Inaccurate, Costly, Opaque and Proprietary, by being Accurate, Free, Open and Transparent.
Why do these matter, and how is See Through Carbon going about creating this ecosystem?
Accurate
How See Through Carbon will always be based on the best available science and practice.
Businesses know their financial fate depends on vigilant monitoring of:
- Internal health: via balance sheets, cash flows, risk assessments, risk/reward analysis etc.
- External environments: tweaked tax codes, novel accounting interpretations, recent court judgements etc.
In both cases, the output metric is expressed in fiat currencies like dollars, euros, yen etc.
To gain advantage, businesses test these rules to their limits, but their room for manœuvre is necessarily quite narrow, or the financial system would rapidly collapse.
With so many internal variables to attend to, business leaders place a high value on not having to worry about external factors, favouring:
- Predictability of regulatory direction
- Stability of supply chains, partners and collaborators
- Consistency in the application of well-understood processes, rules and methodologies.
Carbon reporting is challenging because its internal and external systems are currently immature, crude, vague and inconsistent. Hence the need for greater accuracy.
Financial vs carbon reporting
For business leaders struggling for fluency in carbon reporting, financial accounting literacy can be a helpful short-cut.
Like Spanish speakers learning Italian, the two languages largely overlap in vocabulary and basic grammar: ‘carbon liabilities’, ‘carbon credits’, ‘carbon trading’ etc.
Financial and carbon reporting, however, do not currently share the same rigorous, universally-accepted framework of rules, methodologies and protocols.
Some terms, like ‘liability’ or ‘offsetting’, mean different things. These are like linguistic ‘faux amis’ (‘false friend’ shared words that look the same, but have different meanings, like ‘raisin’ or ‘prune’ in French and English).
There are also radically different concepts, like the notion of assigning a ‘fair’ proportion of your supply chain’s carbon footprint to your own. These are as obviously different as ‘raisin’ and ‘葡萄干’.
Carbon reporting: Brave New World and Wild West
For businesses facing short deadlines to comply with new carbon reporting regulations, the Mandatory Era is both Brave New World and Wild West.
At first glance, the carbon accounting playbook seems straightforwardly familiar.
- Unit: substitute a new metric (tonnes of CO2e) for dollars, euros etc.
- Methodology: check the regulator’s rule book
- Consultants: pay specialists consultant for compliance advice, if you can afford it
- Auditors: pay third-parties to check your submission to mitigate the risk of regulatory audit.
Unfortunately, compared to its financial sibling, carbon accounting is primitive, uncertain and unfamiliar. Much more ‘葡萄干’ than ‘raisin’.
1. Unit
30 years of carbon offsetting voluntary schemes have muddied the waters by normalising treating a tonne of CO2e as if it were a tradeable fiat currency, rather than an actual tonne of physical matter. Carbon ‘markets’ are still valued using monetary denominations as proxies for real-world atmospheric physics impact, prompting headlines like ‘Banking on Green: Wall Street’s Race to Power to a $1 Trillion Carbon Market’. Carbon reduction solutions expressed in dollars sound reassuringly familiar, but make as much sense as hiring French interpreters for a Chinese business meeting ‘because they speak languages’.
2. Methodology
Even the most detailed of the new Mandatory Era regulations, like the Corporate Sustainability Reporting Directive (CSRD) and other parts of the EU’s Green Deal legislation, are frustratingly unspecific about methodologies. The CSRD learly states the destination, but for businesses seeking predictability, stability and consistency, is frustratingly vague about the means of transport and route.
3. Consultants
There’s never been a wider choice of carbon accounting consultancies. Like all new legislation, carbon reporting’s new regulatory environment has spawned a host of symbiotic entities — carbon consultancies, carbon accountants, carbon auditors — offering their services. They share the same fundamental problems of:
- Data: poor quality, low-volume, paywalled data on which to train AI solutions
- Methodologies: There are many ways to calculate carbon footprints, but everyone’s guessing which one to apply to your particular business or sector.
4. Auditors
3 is multiplied, for the same reasons. How can any 3rd-party ‘guarantee’ your carbon reporting is compliant, when everyone has a different answer on which methodologies to apply? Businesses pay a premium for reassuring words like ‘certified’, ‘accredited’, ‘approved’, ‘licensed’ etc., but carbon accounting is at too early a stage for any such claims to be meaningfully reassuring to businesses wanting to 100% mitigate the risk of non-compliance in the event of a regulatory audit.
But what about carbon offsetting?
Carbon offsetting schemes created during carbon accounting’s Age of Voluntary are of little help to businesses seeking compliance with Mandatory Era regulation.
Designed for PR purposes, carbon offsetting schemes are as ill-suited to the Scope 3 reporting now mandated as toy tricycles are for the Tour de France.
Focusing on the ‘asset’ side of the carbon balance sheet, and only counting Scope 1 and 2 liabilities (i.e. direct and indirect emissions ‘on your premises’) are examples of financial accounting being a ‘false friend’.
‘Offsetting’ has normalised the notion that a business can declare itself to be ‘carbon neutral’. New regulation requires businesses to include all their Scope 3 carbon liabilities (broadly speaking, all the emissions outside your own factory/office that wouldn’t have been emitted if your business did not exist). The idea that any large business can be ‘net-zero’ is exposed as a fantasy, defying common sense and the laws of physics. Business’s recent embrace of AI, with its power-hungry data centres, only makes such claims more fantastic.
How can my carbon reporting be accurate?
Shrewd business leaders soon discover there are many different ‘interpretations’ of current legislation. The regulators are too busy wrestling control of the supertanker to specify the precise coordinates of the path businesses should take.
With everybody guessing to some degree or other, business leaders must choose which consultants to trust and which methodologies to use to acquire the data demanded by Mandatory Era legislation.
Carbon reduction is predicated on accurate measurement of the current baseline from which to reduce emissions, so this problem can’t be postponed.
Basic questions, like ‘how should I calculate my particular business’s carbon footprint?’, should not be answered by head-scratching, shrugs, or ‘piece-of-string’/‘on the one hand…’ evasions. If everyone’s guessing, it’s important to bet on the best available guess.
In an imperfect world, with a carbon reporting industry in its infancy, ‘best available’ means:
- as accurate as current technology, science, analysis and circumstances permit
- using transparent methodologies available for public scrutiny, so they can be updated and improved dynamically, and not blindly trust proprietary IP concealed in black boxes
- If regulators specify a particular set of conversion factors to use for calculations, to use them
- If regulators don’t specify such conversion factors, to use the best available, as judged by a panel of expert carbon accounting specialists.
Which is exactly what See Through Carbon does.
Free
Why See Through Carbon can only work if it’s free at the point of use.
Commercial carbon reporting’s limitations
In order to comply with regulations, businesses want and need clarity, specificity and accuracy. Those that can afford to, outsource specialist consultants. Those who can’t have to somehow manage in-house, making do with free, publicly-available resources.
When it comes to the Mandatory Era of carbon reporting, the main obstacles facing carbon accounting 1.0 are:
- Incomplete data: Scope 3 requires accurate calculation of supply chain carbon footprints, but SMEs can’t afford to pay consultants fees and even the biggest business can’t pay them for them.
- Unclear methodologies: consultants can’t claim to ‘know’ how to deliver compliance, because the legislation leaves so much room for interpretation, and it’s not in their commercial interest to directly seek clarity from the regulator, as they’d be bound to follow whatever the response was. Like attorneys, consultants never want to ask the judge to rule on a case they’re trying to argue.
Both problems are intractable, so long as they are mediated by paywalls, proprietary IP, fees and other commercial imperatives.
In other words, by money.
Commercial carbon consultants, standards or accountants can’t provide their services for free. Nor can they risk seeking clarity from the regulators, in case the answer they give produces the ‘wrong’ result. Doing so would leave them hostages to fortune, and put them at a competitive disadvantage compared to rivals who didn’t, but can persuade clients their guess is a good bet.
Free-to-use ecosystem’s advantages
Ecosystems have no such obstacles.
Non-commercial, free-to-use services, for example, can confidently request and publish clarification from regulators, if there’s any doubt about which one is most appropriate/compliant.
Commercial carbon databases or standards literally can’t afford to provide all their services for free. Without charging for access to their data, or protecting their IP, they’d cease to exist.
Ecosystems, by contrast, must be free to use, and publicly accessible. Their purpose is to provide clear, consistent information and data, enabling commercial entities to improve their services, and policy-makers and businesses to discover faster routes to emissions reduction. Ideally, an ecosystem would provides:
- Best available data: a database that provides high quality, accurate, consistently taxonomised, granular data.
- Methodologies: A website that clearly defines the methodologies used, cites their sources, explains their rationale, quotes from relevant regulations they’re meant to comply with, makes them available for scrutiny, and has a panel of experts to update them whenever better research becomes available.
This is only possible if these services are provided at no cost to the user.
Independence, integrity and trust
Money always raises the question of cui bono? Who benefits?
When it comes to commercial entities, the answer is always whoever’s paying for it. Following the money isn’t always easy, but you can be confident that if you find the funder, you’ll find the beneficiary.
If there’s no money to follow, or the funding is so transparent and string-free there’s nothing to investigate. Having nothing to hide provides businesses with their best guarantor of reliability.
Money means control, and control means bias. The more independent an ecosystem is from commercial or government influence, the greater its value to businesses seeking compliance.
Which is exactly what See Through Carbon is building. By being free to use, and making the data publicly available, it creates an ecosystem in which:
- commercial consultants and auditors can thrive by delivering compliant solutions to their clients
- regulators, researchers and policy-makers can mine a comprehensive public database for insights into speeding up carbon drawdown.
As See Through Carbon’s strapline has it, If you can’t buy integrity, why should you be able to sell it?
For details on how See Through Carbon itself is funded, see Funding.
Open
Why See Through Carbon can only accelerate carbon drawdown if its data is public.
Good data to fuel carbon drawdown
Whatever the destination, in the digital age, the fastest route requires data. Carbon drawdown is no exception.
Large volumes of high quality data fuel the Digital Age, in the same way that coal, oil and gas fuelled the Industrial Revolution.
The most powerful datasets are:
- Big: the bigger and more comprehensive the dataset, the better. In the case of carbon reporting, it should cover:
- Diverse in scale: a wide range of entity sizes, from individuals to multinationals
- Diverse in scope: a broad variety of sectors, as farming, textiles, construction and healthcare all present different calculation challenges, supply chains, and conversion factors.
- Diverse in locale: AI-driven comparison of the carbon footprints of similar sectors in different countries, for example, might reveal patterns and opportunities that have eluded human analysis.
- High quality: volume alone is not enough. The data must be comprehensively taxonomised, consistently tagged, and coherently ordered.
Above all, a database is of greatest use to all parties if it’s:
- Public: freely available online, at no cost
Commercial carbon accounting standards, adapted to the Age of Voluntary, have accumulated large databases to support the trillion-dollar carbon trading industry, but three critical characteristics make them virtually useless for Mandatory Era reporting:
- Access: they’re hidden behind paywalls, only accessible to those with money. Data-hungry analysts can’t even see the buffets on offer, let alone start feeding.
- Diverse in number: there are too many databases to provide a sound foundation. Data analysts find themselves like football fans having to choose between different paywalled broadcasters offering different matches.
- Diverse in methodology: even if they were all collated at no cost, they all use different methodologies. Data analysts have to sort not just apples and oranges, but chalk, cheese, goats, sheep, wheat and chaff.
Even if 1 and 2 were solved by all existing closed commercial databases making themselves open, 3 might present an intractable problem, too chaotic for even the most advanced AI to make sense of.
The optimal option is therefore to build an open database from scratch, making the best quality data freely available, i.e. an ecosystem like the one See Through Carbon is piloting.
Open data providing the shortest route
This open element is what defines an ecosystem. See Through Carbon’s carbon reporting ecosystem enables all the key species/entities/stakeholders with an interest in speeding up carbon drawdown to thrive:
- A business submitting reports to comply with Mandatory Era regulation
- A consultancy delivering compliant services for a client
- A regulator enforcing or monitoring compliance with environmental legislation
- A researcher or think-tank mapping the shortest route to carbon drawdown
- A government making evidence-based policy to meet climate goals.
Transparent
The importance of process
Open access to the right data is necessary to speed up carbon drawdown, but not enough on its own.
To make sense of the data, humans and robots need to know as precisely as possible not just the provenance and quality of the data, which can be addressed by rigorous auditing, but the process by which it was generated.
This problem is well illustrated by AI ‘hallucinations’. Ask a Large Language Model like ChatGPT to write a legal argument, and it can instantaneously generate a perfectly spelled, meticulously structured document, including an impressive array of footnotes citing case law. Its ‘hallucinations’ are only revealed when a human tries to look up one of the cases cited, only to discover the AI has entirely fabricated it. If the legal foundations are imaginary, how much credence should anyone give the argument they support?
In the case of AI, the problem is hard to fix because ChatGPT’s programmers themselves have no detailed idea how the hallucinations were generated. They can explain the broad parameters, and take educated guesses at the chain of events that might be to blame, but even the robot’s engineers can’t untangle the step-by-step process by which their creation arrived at its convincing-sounding fantasy.
The case of carbon reporting data is both simpler and more intractable. The good news is that the processes, or methodologies, by which carbon footprint data are calculated, are possible for humans to understand, and well understood.
The bad news is that they’re concealed in proprietary black boxes, invisible to inspection because they contain the IP on which the commercial standard depends to deliver shareholder value.
Commercial standards’ drawback
Even if proprietary databases, in an unprecedented act of charity or compelled by governments, were to remove their methodologies for public inspection, the problem of accurate carbon reporting would not be solved.
Thirty years of Age of Voluntary self-regulation have left Mandatory Era compliance with a very poor data legacy.
Setting vague, fuzzy, loose goals, arbitrated by money and focused on the flimsy notion of ‘offsetting’, left data accumulation to market forces. This required the commercial doing the calculation to treat their methodologies as proprietary IP, under lock and key inside their black boxes, along with the data they generated.
The broad explanations publicised on their websites may have been convincing enough for clients to have trusted them, but the devil is always in the detail. Without knowing precisely, step-by-step, how every number was generated, the data is impossible to verify.
In the Mandatory Era, such black boxes are impractical. To enforce their carbon reporting regulations, governments must audit reported data. So long as the methodology IP is proprietary and hidden, it will require either the client, or the government, to compel the commercial keyholder to open up the black box for inspection.
This is impractical and expensive for both auditor and auditee.
Transparent standard’s advantage
By contrast, an ecosystem depends on transparency. Transparency defines ecosystems like Linus, Wikipedia or the UN’s Sustainable Development Goals. Ecosystems can’t work of everyone has to pay for entry.
Everything See Through Carbon does is based on the principle of radical transparency.
- Its database is accessible by anyone with an internet connection.
- All the carbon-related data provided by the participating entity is transparent by default.
- Any additional data, or clarifications sought be See Through Carbon’s own quality control/spot-checking is logged and reported.
- See Through Carbon’s Trustees and expert advisory board publish their rationale for using each methodology.
- These methodologies are published and available for public scrutiny and comment.
- Public scrutiny effectively outsources quality control, like Source and History tabs for Wikipedia articles.
- If Trustees agree with critiques ‚suggested improvements or new research, they can dynamically improve the published methodologies, recording their rationale for further scrutiny.