Icebreaker One is leading a programme of work with B4NZ (Bankers for Net Zero, the UK chapter of the UN Net-Zero Banking Alliance and working alongside GFANZ). We are exploring options that could illustrate the potential for rapidly scalable, low-effort, low-friction sustainability reporting.
Stay informed, get updates and invitations via our mailing list
The challenge
Our financial institutions are investing and managing $trillions towards a lower carbon future. As regulatory and net zero policies increase, today is the simplest things are going to be. We must address the scalability of verifiable reporting, provenance around methodologies, and assurance around the inputs from the real economy.
Key data that inform how this is done include carbon reporting, or Greenhouse Gas (GHG) Reporting, which indicates and tries to quantify the emissions from organisations. They are split into three categories (scope 1, 2 and 3) which relate to (1) direct emission, (2) purchased energy, and (3) supply chain.
Today, creating these reports is hard, expensive, and has material error margins (they rely on high-level models). Due to both its cost, and the larger impact of larger organisations, it is often just those enterprises that engage in reporting: it is onerous for small and medium businesses (SMEs). However, most of the footprint of any organisation is in its supply chain (Scope 3), so enterprise businesses need access to SME data.
It is hard to create trusted, verifiable and comparable reporting. It is even harder to enable this at the scale needed. The outcome is that enterprises have to make approximations, and the confidence of the financial community is not as strong as it should be. This is slowing down our journey to a net zero future.
The opportunity
However, there exists a new opportunity to help automate this process, to remove complexity and costs, and increase the flow of actionable information.
We can address two sides of the challenge.
The first is related to the real economy: to make it easy for SMEs to compute their own footprints. For them to do this, the most important data they need relates to Scope 2: specifically energy consumption and, ideally, the carbon intensity of that energy consumption at the time of use.
The second is related to the financial economy: to make it easy for all SMEs to share their reporting with all of their customers who need it. This will also make enterprise Scope 3 calculations more reliable, help improve accuracy and, critically, help those enterprises work out where they need to focus.
There are two new opportunities.
- enable SMEs to generate their own reports via automated access to their energy consumption data. To do this, they need to get their energy bills in a digital format that is standardised across the industry.
- enable banks and enterprises to access and assure the Scope 2 emissions from their SME suppliers, without the supplier having to generate a report at all.
You will, at this stage, almost certainly be thinking that there must be issues with confidentiality, privacy, or even trade secrets. This is correct.
At one level, the problem statement is about how to better share potentially sensitive commercial data.
The good news is that we have a way of achieving this that is already being used across the entire banking sector: Open Banking.
With Open Banking, an SME can consent to sharing their bank statements with a third party (e.g. an online accounting service). Using the Open Banking Standard, they can give this consent with just a few clicks. Using it also means they are protected: liability, data rights, and modes of redress are all covered. This has built huge trust across a complex financial system and is now being used by dozens of countries, thousands of organisations, and millions of people. Open Banking is also projected to be a $150B market by 2032 and is in development across over 80 countries.
The even better news is that we have been developing Open Energy, to enable data sharing in similar ways, as part of the UK’s energy digitalisation strategy (it has been co-funded through an open, competitive process with UKRI, BEIS and industry).
Making Open Banking work at scale has required a strong ‘push’ either from industry collective action or via regulation (e.g. the FCA mandates it via regulation in the UK and every country has had some form of political push).
This B4NZ initiative aims to address the core challenges highlighted herein, build a pragmatic, workable solution, and to provide potential instruments that could be applied by industry, policymakers, or regulators.
At the moment global initiatives are pushing towards delivering a lower carbon future. They cannot yet prove that we will actually hit net zero. We need to improve access to data at scale, to improve its quality, reliability and assurance.
Stay informed, get updates and invitations via our mailing list
Additional context — Why Scope 2 for SMEs?
The challenge for most SMEs is that they can’t afford the time, cost or logistics of fully measuring their Scope 1. Scope 3 is just as hard for them as large businesses.
As a starting point, automating Scope 2 reporting and enabling it to be accessed by others (in their Scope 3 assessments) will improve the quality and assurability of the reporting data.
Critically, the ability to see the change in Scope 2 over time will give a far clearer picture of who is improving effectiveness. If we can create the ‘rails’ for this information, reporting could be done annually, quarterly, monthly… or at higher resolution. This has huge value to both procurement managers in the customer chain, and to financial managers (e.g. banks, asset managers) in determining the impact of their investments over time.
In treating Scope 2 as the starting point, we aim to demonstrate that such data flows are both possible, scalable and lead to impact: any measure of energy consumption, and its carbon intensity at the time of use, are fundamental to our net zero future. Further, we believe that this is possible in months, not years and once the rails are in place for data flow, the data payload can be expanded to other impact metrics.
There will be challenges. Addressing the carbon intensity of the energy at the time of use and, for carbon accounting, an intensity metric (e.g. Scope 2 / revenue) for a reporting period needs to be defined. Doing so will enable customers to assess what they are responsible for, when, and begin their own net-zero journey.
There are opportunities to use smart meter data and to address the domestic ecosystem. However, we need to start with one example that can ‘build the rails’ for the data to flow. To this end we have a sequenced roadmap. We aim to start with billing information, kWh usage, then its carbon intensity at the time of use, and then increase the time resolution. The end point will depend on the user needs (in this case, what represents materiality to the banks).
If you would like to join us to help deliver this to the market, and scale it globally, please get in touch: partners@icebreakerone.org