A base layer for industrial decarbonization

Hi there,

Hope you’re havin’ a good week so far.

As we introduced last week, Glassdome is our Presenting Partner for the month of April. For this deep dive, which will run over two parts, we’ll introduce you to Glassdome’s business, how it intersects with the manufacturing renaissance accelerating in the West, why that matters, and how to work with Glassdome to your benefit where it makes sense.

Here’s the structure for what we’ll explore in today’s deep dive:

1. A manufacturing renaissance 

   • Western countries are trying to catalyze a manufacturing renaissance

   • To support said renaissance, many are also introducing regulations to protect domestic companies from and encourage them against overseas competition

   • Sustainability is a crucial lever used in said regulations

2. The new regulations require a lot more from manufacturers than previously 

   • For one, the regulations themselves can be quite complex 

   • They also require some manufacturers to source primary data from factories and suppliers as opposed to applying industry averages

   • Neither is necessarily the realm of traditional carbon accounting

3. Points one and two above create a need for a new ‘base layer’ that supports manufacturers as they navigate regulation, prioritize sustainability, and decarbonize

   • Stakeholders along the manufacturing value chain and across jurisdictions need help navigating new regulations and sourcing high-fidelity data to comply

   • There are additional opportunities to use this data to decarbonize manufacturing beyond what’s required

   • Glassdome is building software for stakeholders to navigate all of the above, creating the needed base layer 

A manufacturing renaissance

The carbon accounting software landscape is vast. It's one of the niches within climate tech that's sprawled the most over the past few years. Typically, I don't care that much about each iterative carbon accounting startup. Sorry! There are hundreds. I'm sure many of them will be successful, and I wish them well. Sure, there should be a variety of companies and products in this space, especially ones tailored to specific industries. Frankly, though, the space feels crowded; it feels like for every company working on emissions reductions, there's also a carbon accounting software company. I'm not sure the TAMs at play can support this many businesses.  

From the outside looking in, Glassdome might seem like another carbon accounting company. They make software. And one of their specialties is product carbon footprint calculations. That said, they specialize in supporting manufacturing and industrial companies, including several major battery manufacturers in Korea, in ways that are a far cry from most competitors' work.

Stepping back briefly, industry and manufacturing are part of civilization's bedrock. Software and the digital economy are exciting and have rewarded many founders and venture investors over the past decade. Still, without physical infrastructure, commodities, and material inputs like cement, steel, and tons of other manufactured hardware, society would collapse in hours.

In the past, the cost and performance of manufactured and industrial products mattered most. Largely, that still holds. That said, sustainability increasingly matters to a growing share of manufacturing and industrial stakeholders across jurisdictions. Here, sustainability subsumes both climate objectives, such as the emissions footprint of a product, as well as other factors, like safety, labor practices used in production, and where inputs to any product come from. 

Sustainability is starting to matter not purely (or even primarily) for voluntary reasons. We’ve written about this a lot, but there’s a manufacturing boom happening in the U.S. Many countries really want to shore up the industrial and manufacturing bases they previously mortgaged to China. We’re seeing this in Europe and the U.S., especially in battery manufacturing.

This is a great thing! That said, if I’m in the U.S. or the EU, and I’m trying to rebuild a manufacturing base and compete on sustainability metrics that my competitors in China don’t care about, my task is doubly tricky. I have to support my domestic industry from several sources of pressure. As a result, regulators and legislators are designing new policies to protect domestic manufacturing industries as they try to spread their wings. 

And sustainability is often the lever new regulations focus on to encourage domestic industries and protect them from China. It’s not exclusively a nice-to-have, nor solely motivated by a desire to drive broader environmental and climate goals. Sustainability is the wedge that non-Chinese manufacturers are best positioned to differentiate themselves on.

The regulations, they’re coming. And they’re far from simple

When we start to look at the regulations that will impact manufacturers and industrial companies and that lay a groundwork for the importance of Glassdome's work, we might think, for instance, of domestic battery content requirements in the U.S. for batteries to qualify for incentives from the Inflation Reduction Act. The EU is getting even more aggressive. Whether for batteries or products like steel, cement, fertilizers, aluminum, and more, the EU is at the forefront of regulating and placing emissions-based controls on imported products with its EU Battery Regulation and Carbon Border Adjustment Mechanism (CBAM).

These regulations matter for companies in geographies everywhere. Companies in places like South Korea or Japan, which are home to large battery manufacturers, will have to navigate new regulations to export batteries to Europe. Policies like the EU's Battery Regulations may well also metastasize to other jurisdictions globally. Eventually, we may reach a point where, whether it's batteries or other products, there are carbon footprint-based import controls and regulations on many products moving cross-border. 

The fact that these regulations are coming down the pike is a significant impetus for Glassdome's business. Years ago, Glassdome identified that major Korean battery manufacturers were eyeing new EU regulations and starting to get worried. While they had good in-house solutions covering their Scope 1 and 2 emissions, acquiring and managing suppliers' data to understand their Scope 3 emissions—as EU regulations would require—was a consistent challenge and one that would benefit from support from a neutral third party.

Specifically, last year, the EU passed new legislation to harmonize oversight on the sustainability of batteries. The legislation stipulates that all stakeholders along the value chain must understand the carbon footprint of batteries as well as to set recycled content targets for metal elements like cobalt, lithium, and nickel. These requirements will apply starting next year. Companies that want to export products like batteries to Europe will soon need to understand the emissions intensity of their products and be mindful of them. As a result, as the West (ideally) undergoes a manufacturing renaissance, one that accounts for more than just price and performance, industry and manufacturing require a new 'base layer.'

A base layer for a new industrial age

To restate the challenge, battery manufacturers like SK, one of Glassdome’s primary clients, need help navigating regulatory changes because they can be mind-numbingly complex. Take, for instance, the consideration set that goes into determining the 'system boundaries' around product carbon footprint calculations for the EU battery regulations. See below. Absent guidance, how would you navigate it? Does that look like something you want to parse alone?

That’s pillar one of what Glassdome does. They create software to make it easy for manufacturing companies to calculate product carbon footprint, not just on a one-off basis, but iteratively, every year, and in compliant fashion with complex, new regulations. 

Beyond parsing complexity, however, Glassdome also helps stakeholders along the manufacturing and industrial value chain access entirely new data. Many of the regulations we’ve discussed require that manufacturers access new primary data from suppliers of raw materials or battery components, as opposed to applying an average for, say, nickel used in batteries that lives somewhere in a spreadsheet in a cell titled "Nickel - Indonesia - CO2 average - 2016." This can be even more challenging for manufacturers than navigating product carbon footprint calculations themselves. 

For battery manufacturers and many other manufacturing companies, supplier data is king to any direct measure of product emissions intensity or carbon footprint. While for a steel manufacturer, a lot of emissions are tied up in the actual manufacturing process, for batteries, the choice of input materials, where those materials come from, and chemical composition are more salient. All of this depends on supplier data. 

Other carbon accounting companies provide analyses that are primarily spend-based or activity-based. They collect data, like utility bills, travel records, or procurement data, and then translate it into emissions calculations via a healthy dose of assumptions and comparisons to what the norm is at other comparable businesses and operations. This is where we get into Glassdome's deeper differentiation. Glassdome works directly with manufacturers' complex, global supply chain partners and does the (literal) dirty work of stepping into manufacturing environments and factory floors:

Said differently, Glassdome is getting really good at gathering data accurately from manufacturing suppliers at low cost and quickly in situations where other competitors wouldn't even know where to start. That's a huge moat in and of itself.

Here's Josh with another way of distilling Glassdome's differentiation:

Further, when Glassdome uses new primary source data to calculate product carbon footprint, it isn't just higher fidelity, it's more useful for driving decarbonization decisions. Glassdome has seen that newly acquired manufacturing data can vary considerably from the averages that would otherwise have been applied, which is essential because, for some companies, it means the emissions of their products are higher than they would have thought otherwise, indicating they may need to think more critically about how to reduce those emissions. 

As TJ Yoon, Product Manager at Glassdome, notes:

It’s also worth noting that PCF is also a relatively niche metric right now. There aren’t that many companies in the world catering to manufacturing companies that have regulatory-driven needs to understand it. Most of the other solutions out there live in Excel templates, where companies have to enter and source their data themselves. Siemens does have a PCF solution, but it’s tailored for companies using Siemens. 

To summarize, Glassdome does 3 things for manufacturing and industrial partners:

1. Help them calculate product carbon footprint specific to complex, new regulations

2. Help them source data from suppliers they’ve never had to access before

3. Drive more informed decarbonization decisions based on better PCF calculations

The combination of the above three points makes Glassdome integral to the confluence of trends we opened with, namely a) the reshoring and investment in domestic manufacturing accelerating in the West, b) an additional emphasis on making manufacturing and industry more sustainable, c) the satisfaction of the policy measures designed to support said sustainability.

If you're working at a manufacturing or industrial and are in a place to get a first look at Glassdome's system or want to take meaningful steps towards sustainability actions – ranging from initial estimations to detailed analyses that will survive the test of regulators – get in touch with Glassdome by responding to this email or porting to their site via the button below. ++ the same holds for any of you who want to understand upcoming regulations highlighted today.

JOBS @ GLASSDOME

Glassdome is looking for the best life cycle assessment practitioners. If you have deep experience in product carbon footprints, they’re willing to make joining their team well worth your while as they onboard as much intelligence onto their platform as possible. See Glassdome’s Product Carbon Footprint Specialist here or respond to this email. 

If your skillset isn’t in product carbon footprint or life cycle assessments but you’re compelled by Glassdome’s business, product, and vision, feel free to respond to this email, too.

More to come next week on Glassdome’s differentiation, where they’re headed in the future, and more perspective on why it all matters. Stay tuned.

Thanks,

Nick