In 2009, China took its first step toward addressing climate change when it pledged to reduceits carbon emissions by 40–50% at the Copenhagen Climate Change Conference. To help achieve that target set for 2005–2020, national enterprises were told to lead the way by reducing their carbon emissions. They also had to adopt carbon calculation, disclosure and management mechanisms. The problem was, nobody quite knew how to do it.
Inspired by China’s Copenhagen pledge and the opportunities that it presented, software engineer Yan Luhui founded Carbonstop in 2011 to help Chinese businesses calculate and reduce their carbon footprint.
“We were the first company to do so in China,” Yan, CEO of the Beijing-based startup, said in an interview via online call. At that time, “China was virgin territory where most people might have felt the importance of environmental protection, but few were making it a business.”
Carbonstop’s Carbon Accounting and Management Platform (CAMP) lets enterprises quantify, analyze, predict and manage their carbon emissions based on international standards, including the Greenhouse Gas Protocol. CAMP was, according to Yan, the first of its kind in China. Currently in its fourth generation, the SaaS provides tailored carbon management services to Carbonstop’s business clients, which now number over 1,000, including e-commerce giants Alibaba and JD.com, China Airport Construction Group and Microsoft China.
Facing growing environmental concerns, China has recently been rolling out stricter guidelines to limit carbon emissions. With several regional pilot emissions trading programs underway since 2013, the Chinese government began to build a national carbon trading market in 2017, with the aim of completing the buildup by the end of 2020.
“The government has certified over 10,000 state companies to join the carbon trading market,” said Yan. Those companies are required to disclose their carbon emissions and are obliged to pay if they emit more carbon than allowed. They mainly operate in industries with high carbon emissions resulting from annual energy use exceeding 10,000 tons of standard coal, such as petrochemical, construction, steel and electricity.
Pressure from international companies
Yan had worked as a software engineer since 2009 at the British carbon management company Best Foot Forward, one of the pioneers in the field. There, he found it intriguing to turn an environmental issue into a quantifiable project by which individual or organizational carbon footprints could be calculated. With a few of his former colleagues at Best Foot Forward, Yan developed the CAMP software.
One of their major clients is the China Airport Construction Group, which uses Carbonstop to manage carbon emissions at the 200 airports it operates nationwide, calculating emissions in categories including all facilities, ground transportation, take-offs and air conditioning. The heavy-polluting aviation industry is another sector that faces heavy scrutiny over its carbon emissions. Aircrafts are also required to meet international and domestic standards on emissions. Carbonstop also helps the Group find possible areas to reduce emissions, provided solutions and generated reports for each airport.
Apart from companies in other industries with high carbon footprint such as power, steel, glass, ceramics and cement, Carbonstop’s clients also include government bodies, carbon trade companies and industrial parks. It has also helped the UN Environment Programme, Alibaba and JD.com manage their carbon emissions through quantifying their carbon footprint and consultancy services.
Government pressure aside, more Chinese companies also find themselves having to meet stricter environmental requirements from international partners, who prefer to work with sustainable businesses. According to Yan, brands such as L’Oreal and Walmart demand that their global suppliers disclose carbon emission information.
Internet giants leading the way
Carbonstop signed a five-year contract with Alibaba’s logistics subsidiary Cainiao in 2016 to calculate its carbon footprint and figure out ways to reduce the giant e-retailer’s carbon print. Their partnership has led to a series of environmentally friendly measures such as recyclable paper boxes, packaging without tape, e-receipts and delivery via electrical cars.
“In China, big companies such as Alibaba have already taken action and done a substantial job in carbon management,” said Yan. “At Alibaba, logistics contribute the largest portion of its carbon emissions.” Every year, on November 11, when its annual Singles Day, or Double 11, shopping festival takes place, Alibaba’s carbon footprint can make up 30–50% of the entire country’s emissions.
By the end of 2020, Cainiao is projected to reduce its carbon footprint by a total of 3.62m tons. “The actions of companies such as Alibaba and JD.com with huge user bases will have an impact on hundreds of millions of people in society,” said Yan.
Such B2B business forms the bulk of Carbonstop’s revenue. The company became profitable two years after its launch and is expected to double its annual revenue to RMB 20m this year despite the impact of Covid-19 on businesses and the economy.
Not just a CSR event
Carbonstop is one of the few companies that work with Ant Forest, a social responsibility campaign launched by Alibaba’s online payments platform, Alipay, to reward people for their low-carbon activities. It helps build the algorithms to record and calculate carbon footprints for individuals’ activities, from paying electricity bills online to taking a bus. Users can donate their carbon credits to plant trees via Ant Forest. By this May, Ant Forest had invested RMB 10bn to plant over 200m trees nationwide, producing carbon savings of 12m tons.
Yan said a platform like Ant Forest can give people an idea of how the low-carbon lifestyle works and how their daily choices can make a difference to our environment. “We need more people than enterprises to engage in carbon management activities.” Carbonstop plans to participate in more projects that can make a big impact and raise awareness among the public.
Carbonstop has also worked with other tech giants on similar CSR projects, including Baidu’s Xiaodu farm, JD.com’s Green Bill and Microsoft’s low-carbon program to encourage consumers to opt for low-carbon activities in their daily life.
For businesses, a low-carbon project is not just a CSR event. According to Yan said, such a project "can become an impeller for their business.” Many people choose to use Alipay in daily life to get a green energy credit from Ant Forest so that they can plant trees. Alipay user numbers are boosted by the program and so is user loyalty to the brand.
“Such projects will be sustainable and dynamic when the companies figure out the right model that can also benefit their business,” he said.
Although the general public is becoming familiar with the concept of carbon footprint and management, it’s still far from enough, he added. “That’s also the reason why we want to engage with and make an impact on a wider range of people.”
In many cases Yan has encountered, enterprises allocate limited resources, either cash or human, to carbon management as they still pay only limited attention to such issues.
It’s therefore crucial to raise public awareness of carbon issues, he said, because public opinion can influence enterprises’ carbon emission policies. The public can "give enterprises a nudge" by paying more attention to carbon management.
Sustainable public-private collaboration
Indeed carbon reduction is becoming more pressing than ever in the world’s second-largest economy, which is also the world’s largest emitter of carbon dioxide (CO2) – accounting for nearly 30% of global emissions. President Xi Jinping’s pledge in September to make China carbon neutral by 2060 gives Carbonstop an opportunity to expand its business.
The company is planning to complete a Series A funding round before its 10th anniversary in March 2021 to expand into consumer market, helping the country’s 1.4bn citizens manage their carbon emissions.
More social campaigns to promote a low-carbon lifestyle – once solely the work philanthropic or corporate initiatives – by local governments will also help.
“Drive one day less every week” is a non-profit, low-carbon campaign on which Carbonstop has worked with Beijing’s municipal government to encourage car owners to drive less. Carbonstop has helped design its carbon calculation algorithms and program.
Through an official WeChat account, car owners can register and then skip driving for days for rewards. The government then gives each car owner RMB 0.5 for the one day of each week they choose not to drive. Only last year, over 100,000 car owners participated in the event and saved 40,000 tons of carbon emissions, according to Yan.
“It’s impossible for the government to subsidize the campaign for years,” Yan said. A total of 40,000 tons of carbon reduction has been sold to a state-owned enterprise at RMB 40 per ton to balance its high carbon emissions. The campaign earned RMB 1.6m in income, which compensated the cost of rewarding drivers.
“It means the enterprise paid for the car owners who participated. It’s a positive influence for society.”
