Key Impact Points
- Watershed’s Growth in Carbon Management: The $1.8 billion startup is making waves by helping corporations like FedEx, General Mills, and Walmart manage and track their carbon emissions.
- Mandatory ESG Reporting Boosts Demand: The rise of mandatory ESG reporting, such as the EU’s Corporate Sustainability Reporting Directive (CSRD), is driving companies to adopt solutions like Watershed’s.
- Granular Scope 3 Emissions Data: Watershed is revolutionizing carbon tracking by providing granular data on supplier emissions, enabling companies to prioritize decarbonization efforts effectively.
Overview
Watershed, a five-year-old carbon management software startup valued at $1.8 billion, is rapidly expanding its presence in the corporate world by partnering with companies like FedEx, General Mills, and Walmart. With the increasing need for credible carbon tracking solutions, Watershed has secured contracts with hundreds of companies, offering a unique capability to track and manage supply chain data.
The company’s goal is to help clients reduce a half-gigaton of greenhouse gas emissions by 2030, a mission that resonates strongly with businesses as they navigate the complexities of sustainability reporting and decarbonization.
The Power of Data in Carbon Management
Watershed’s software currently tracks emissions equivalent to nearly 2% of the world’s carbon footprint, doubling its previous disclosure of emissions tracked. By offering this level of data transparency, Watershed is setting a high bar for carbon tracking in the corporate world.
Taylor Francis, co-founder of Watershed, highlighted the rapid growth in the company’s data tracking capabilities during an interview: “That number has grown very quickly, and it has grown much faster than we expected.”
A major factor driving this growth is the increasing pressure from mandatory ESG reporting regulations, such as the European Union’s Corporate Sustainability Reporting Directive (CSRD), which mandates disclosures starting in 2025 for the 2024 financial year. These regulations are encouraging companies to seek out software solutions that can deliver auditable, timely, and accurate data.
Navigating the ESG Landscape
Despite political backlash against ESG investing, the demand for carbon management software has only intensified. Francis noted that the “ratio of talk to action” has shifted significantly, with companies now taking concrete steps toward sustainability rather than just making pledges.
The importance of accurate and granular data cannot be overstated. Companies are gravitating towards tools that provide in-depth insights into supplier emissions, particularly in the context of Scope 3 emissions, which cover indirect emissions across the supply chain.
Alessandra Leggieri, an analyst at Verdantix, explained: “Firms want to make sure they have investor-grade data that is auditable, accessible, timely, and accurate.”
Companies are increasingly prioritizing solutions that can integrate smoothly with their existing enterprise resource planning and supply chain management systems, ensuring that the data they collect is not only accurate but also comprehensive.
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Securing Credibility in Carbon Tracking
Watershed has designed its software to withstand the scrutiny of audits and regulatory reviews, incorporating 150 safeguards to prevent common errors. According to Francis, 100% of Watershed’s clients have passed audits of their carbon accounting statements, a critical validation for companies seeking to ensure their sustainability claims hold up under examination.
Taylor Francis emphasized the importance of reliable data in this process: “We see that the vast majority of carbon footprints that are done the traditional way have some sort of material misstatement.”
Watershed’s clients rely on its robust data infrastructure to ensure that their sustainability efforts meet the stringent demands of new regulations while also making meaningful progress in emissions reduction.
Tackling Scope 3 Emissions with Granular Data
One of Watershed’s standout features is its ability to deliver granular data on Scope 3 emissions, which are typically the most difficult to measure and manage. This capability is particularly useful for corporations looking to reduce emissions across their supply chain.
In 2023, Watershed acquired VitalMetrics, a global emissions database, to enhance its ability to track and reduce supplier emissions. For example, Canva, a leading graphic design platform, used Watershed’s data to identify high-emission suppliers. Watershed helped negotiate a virtual power purchase agreement that allowed Canva’s suppliers to source power from new community solar projects, reducing emissions across the supply chain.
Taylor Francis explained: “We’re ultimately getting to a place where your Scope 3 is granular… Part two is to make action easy for your suppliers.”
This detailed approach to emissions tracking enables corporations to make informed decisions about which decarbonization projects to prioritize, ensuring that their efforts are both effective and measurable.
Looking Ahead: What’s Next for Watershed?
As mandatory ESG reporting rules continue to evolve, demand for comprehensive carbon management solutions like Watershed’s is expected to grow. More deals are in the pipeline, according to Francis, though he declined to elaborate on specifics.
With its ability to deliver investor-grade data, withstand audits, and provide granular emissions tracking, Watershed is well-positioned to continue leading the market in carbon management software.
Be sure to catch the full interview with Watershed’s Taylor Francis, and stay tuned for the next episode of Climate Pioneers, which will feature insights from Whole Foods Market on their climate-smart agriculture and pollinator protection initiatives.
