Initiative Climat International (iCI), together with ERM, launch today a new guidance document to help software companies account for their indirect or “value chain” greenhouse gas (GHG) emissions, referred to as Scope 3 emissions. The standard represents a practical application of the GHG Protocol designed to support ESG professionals at private markets firms and software companies.
The guidance is based on the GHG Protocol Corporate Value Chain (Scope 3) Standard and aligned to the Science Based Targets initiative (SBTi) accounting requirements for setting targets. The intent is to go beyond just carbon accounting by identifying challenges, resources, and tips that are specific to the software sector and can help a software company identify, report, and ultimately reduce its Scope 3 GHG emissions.
The guidance covers the following areas:
- Establish a governance structure for GHG accounting and reporting;
- Scope 3 carbon accounting including a heat map and recommendation of material categories;
- Setting targets aligned with science and overview of commitments already made by partners in the industry;
- Disclosure requirements and reporting trends;
- Carbon reduction initiatives and practical examples from SMEs to multinational software companies; and
- Discussion points for investors to engage with management teams and for software companies to engage with suppliers and partners.
The iCI informed the new guidance through their Carbon Footprint Working Group, co-chaired by Hg, a leading investor in European and transatlantic software and services businesses and Montagu, a leading European private equity firm.
Andrea Siaw, Hg and Kim Woehl, Montagu (co-chairs): “We are pleased to launch this guidance document to equip software companies with best practice accounting principles for value chain (Scope 3) emissions. Addressing the unique characteristics of Scope 3 emissions on a sector-specific level is key to driving meaningful action, focusing on what the material risks and opportunities are. We hope that this supports companies in improving both the quality and completeness of GHG emissions reporting as well as encouraging actions for reduction and setting targets aligned with science.”
Alison Drury, Global Industry Leader for Technology at ERM, comments: “We are delighted to have partnered with iCI to produce and launch this guidance that will help the software sector take action on its Scope 3 emissions. The sector’s emissions are increasingly under the spotlight and Scope 3 emission inventories are quickly becoming a necessity for all businesses as regulation, for example in the EU, UK and the US, begins to bite. The application of this standard will enable a more consistent and streamlined approach to the calculation and disclosure of emissions and will support private equity firms as they seek to understand and drive down emissions across their portfolios.”
Peter Dunbar, Head of Private Equity at the Principles for Responsible Investment (PRI), comments: “With most of a software company’s carbon footprint generally being of an indirect nature, it is critical that investors and portfolio companies in this sector focus on the measurement and management of Scope 3 emissions. This guidance will help bring much needed sector-specific advice, based on existing protocols and standards, to private markets investors and their portfolio companies.”
Peter Ellsworth, Senior Director at Ceres, comments: “Not only does the technology sector now have excellent guidance to help manage, calculate and report its Scope 3 emissions, which can constitute a disproportionate share of overall GHG emissions, but this framework, with its 6-Step process and use of case studies, offers companies regardless of sector an understandable game plan for measuring and reducing their Scope 3 emissions.”
About the Initiative Climat International (iCI)
iCI is a global, practitioner-led community of private equity firms and investors that seek to better understand and manage the risks associated with climate change.
iCI’s members share a commitment to reduce carbon emissions of private equity-backed companies and secure sustainable investment performance by recognising and incorporating the materiality of climate risk. In practice, this implies a commitment to effectively analyse and manage climate-related financial risk and GHG emissions within their private equity portfolios, in line with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). Members commit to sharing knowledge, experience and best practice, working together to develop resources that will help standardise practices across the industry.
Over 250 member firms with collectively USD4.3 trillion of assets under management (as of July 2023) have joined the iCI. The initiative is formally endorsed by the PRI, is a Supporting Partner of The Investor Agenda, and enjoys fruitful partnerships with CDP and Ceres, and private equity and venture capital associations BVCA and France Invest.
About iCI Carbon Footprint Working Group
The iCI Carbon Footprint Working Group has been proud to partner with expert consultancy ERM to develop this guidance. We thank the broader network of iCI members for their consultation, Hg for their kind sponsorship of the design, and the various stakeholders that were interviewed during the research on this guide.
iCI Working Group members:
- Andrea Siaw, Hg (Co-Chair)
- Kim Woehl, Montagu (Co-Chair)
- Brooke Latham, Blisce
- Cornelia Gomez and Giacomo Molteni, General Atlantic
- Euan Long, Permira
- Fran Heckman and Aga Siemiginowska, Oakley Capital
- Ivo Dimov, ICG
- Marco Bartholdy, CVC
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