Going Carbon Neutral in 2021: Our Journey to Doe Mountain

At G2 Venture Partners, we invest in exceptional teams applying emerging technologies to traditional industries, sustainably. Protecting our one planet is critically important to our firm, and to each of our team members.

While our main contribution to sustainability will always be supporting our portfolio companies in building the next generation of climate-technology, we want our own operations to be clean and green as well. We recognize a sustainable future will require not only new technology, but also behavior change, and we aspire to lead by example. In 2020 we audited our processes and made tweaks, such as reducing use of disposable plastics and high-emission food products. We found that by far the biggest lever was travel and challenged ourselves to encourage each portfolio company to hold at least one board meeting per year remotely. That goal was of course exceeded many-fold, no thanks to us. We are very interested in the future of work and how to carry forward some beneficial practices developed over the past two years (more on that in the future, please reach out if you are building something in that space or want to discuss).

Through this process of calculating our carbon footprint, we, like many businesses, realized that inevitably, our operations will continue to emit some amount of carbon in the near-term. So, we have decided to offset these emissions each year by purchasing carbon credits. We recognize that this does not absolve us of any guilt and is not the same as truly running emission-free operations but we do believe that a vibrant market for carbon credits with abundant demand will move global emissions towards a better path.

We know we are not the only ones making this commitment. Thousands of companies of all sizes and across all industries have released environmental goals of all flavors in recent years. We believe these collective commitments create a tremendous opportunity and are actively looking to invest in this space. This blog post is focused on our journey as a customer rather than our broader investment thesis — we will share more of those thoughts in a future post (please reach out if you are building something for the carbon markets).

Carbon Accounting

Before we could offset our emissions, we needed to quantify them. The first step was determining the scope. We decided that everything related to the internal operations of our firm would be in scope. This includes everything that happens within our office (e.g., utilities, food) and everything done by our employees linked to work (e.g., commute, travel). We did not include the operations of our portfolio companies, Limited Partners, or service providers. We realize the box we drew is not perfect, but it is our attempt to approximate Scope 1 and Scope 2 (but not Scope 3) emissions.

Ideally, we would be able to wave a magic wand and generate a number for these emissions (for us and our portfolio companies). This is of course not yet possible, so we evaluated numerous technology solutions for carbon accounting. Many are taking clever approaches with tremendous potential, but we did not find one that achieved both the simplicity and accuracy we were hoping for. Additionally, every price quote we received was at least five figures, with some going up to six figures. This was an order of magnitude more than we were willing to pay, as it would likely have required us to pay more to calculate our emissions than to offset them. So, for 2021, we decided to calculate emissions on our own, but see tremendous promise for automation in the near future. We also understand that the manual approach we took is unrealistic for companies with more complex operations.

Our goal for this calculation was not to generate the most accurate answer possible, but rather to land on a number we were highly confident was greater than our actual carbon emissions. We take our commitment to be carbon neutral seriously and would prefer to over-contribute by over-buying credits than to be stingy.

Our first calculation was top-down. The EPA’s estimate of greenhouse gas emissions in the US average to ~20T per person per year. One provider we spoke with had recently completed carbon accounting projects for several professional services firms similar to ours and concluded they averaged ~11T per employee per year. We felt this was consistent with the EPA estimate as not all of a person’s emissions are attributable to work. We currently have 13 full-time employees with periodic interns, for a maximum of 15 employees at a time. Using the EPA’s full 20T number and assuming 15 employees all year, we get to 300T for the year. We realize, however, that our team likely emits more than the average American as emissions generally increase with income, especially given our travel habits, so we decided to check this initial conclusion with a bottom-up calculation.

For our bottom-up calculation, we quantified emissions from 4 sources:

• Travel — A one-way cross-country business class flight is ~1T of carbon. Each person on our team averages one round-trip per month in steady state, for a total of 15*12*2 legs = ~720T. This is an overestimate for 2021, more reflective of travel in a normal year.
• Commute — If 15 people each drive to and from the office 250 days a year, with an average 50-mile round-trip, plus an additional 50% for driving to meetings, we drive < 300,000 miles, which would require <13,000 gallons of gas at 22MPG average fuel efficiency (in reality, many on our team drive electric vehicles, but we do not take credit for that as the grid is not yet decarbonized). This converts to ~120T. (EPA).
• Food — The average American diet results in 2.5T of carbon per year (USDA). If we attribute half of that to work, for 15 people, that’s a total of <20T.
• Office — Building emissions are ~2kg of carbon per square feet per year (California Air Resources Board). Our ~4000 square feet office would result in <10T.

These numbers add to ~870 tons of carbon per year. While most of our business is virtual, we do consume some physical materials (mostly IT) not included here. We generally trust the sources we cited but realize some are slightly out of date. To account for these potential discrepancies and anything we may have overlooked, we rounded up and decided to purchase 1000T worth of credits in 2021. This averages to 66T per employee, >3x US per capita emissions, giving us confidence that it is an overestimate, but also supporting our hypothesis that we create more emissions than the average American.

Carbon Offsets

Once we got to this 1000T number, we were finally ready to purchase offsets. We did not limit ourselves to projects that actively removed carbon from the atmosphere, and concluded that avoidance offsets were justifiable as long as they met the following criteria:

• Real and measurable — quantifiable under a reputable methodology, independently verified or from a reliable developer
• Permanent — either non-reversible, or with a mechanism to compensate for potential reversals
• Unique and traceable — tracked in a public registry and not double counted
• Additional with no leakage — the sale of the carbon credits caused a deviation from the status quo, and did not simply result in damage being shifted to an alternate location

Much of this was difficult to validate and we do not yet feel there is any single source of truth, but we are actively tracking several promising businesses that could bring clarity to this market.

While we’ve talked to several marketplaces for carbon credits that we think could be great businesses, we decided to buy directly from a project developer to reduce transaction costs, and so we could most easily get answers to all of our questions (as you might expect, we had many questions). Some other criteria we were looking for included:

• Ability to buy in a small quantity — for many developers 1000T is a tiny bite-size
• Ability to buy with limited advanced notice — we only embarked on this project over the summer and wanted credits fully retired before the end of the year
• One developer with multiple projects to choose from, so we could support one that resonated with our team
• Projects in the US, since this is where most of our emissions are generated

Doe Mountain

Ultimately, we decided to work with Bluesource, and purchased credits from the Doe Mountain project in Tennessee, developed in partnership with The Nature Conservancy. This is an improved forest management project under the American Carbon Registry standard, which is a non-profit that oversees the registration and verification of carbon offset projects, one of several well-respected standards that currently exist in the US. In addition to carbon offsets, the Doe Mountain project provides recreation opportunities and economic growth for the region, while protecting habitats for 40 rare, threatened, and endangered plant and animal species. Thanks to our friends at The Nature Conservancy, who provided the photos below of Doe Mountain.

This year we purchased 1000T of credits, to offset our operations in 2021 (likely with extra that we have mentally attributed to earlier years). We considered purchasing substantially more credits to offset emissions from future years, as we strongly believe prices will increase as demand will grow faster than supply. We believe this is good for the world as once the low-hanging-fruit is all picked, higher prices will allow more types of projects to become profitable, unlocking a whole universe of options. But despite all our research this year, we are not yet confident which methodology is most valid, which database will be the most accepted source of truth, or which type of offset is most valuable to the world. What we are sure about is that tons of smart people are working on this problem, more people realize each day it’s a critical issue to prioritize, and the industry is making rapid progress. So, we will re-evaluate the market next year when calculating and offsetting our emissions. We are confident the ecosystem will continue to improve, and we will be able to make a better (although perhaps more expensive) decision next year than we can today.

Until then, we welcome feedback or questions on any of this, as well as introductions. We hope our journey can be helpful to anyone going through a similar process or building in this space.