Case study: Carbon accounting & MRV — a sector comparison with benchmark KPIs

In February 2024, the global carbon accounting software market reached €16.98 billion, with projections indicating growth to €61.43 billion by 2029—a compound annual growth rate of 29.33% that reflects the unprecedented regulatory pressure facing EU corporations. The Corporate Sustainability Reporting Directive (CSRD) now mandates comprehensive carbon disclosure for approximately 50,000 European companies, with initial compliance costs ranging from €287,000 to €430,000 for large enterprises and recurring annual expenditures of €320,000 to €740,000. Yet despite this capital influx, measurement, reporting, and verification (MRV) systems remain fragmented across sectors, with Scope 3 emissions—representing 70–90% of most companies' carbon footprints—still exhibiting uncertainty ranges of ±40% in lifecycle assessment (LCA) calculations. For EU investors evaluating climate tech opportunities, understanding the unit economics, adoption blockers, and technological infrastructure differences across sectors has become essential for identifying which MRV platforms will capture sustainable competitive advantage versus those facing margin compression as the market matures.

Why It Matters

Carbon accounting has evolved from a voluntary sustainability exercise into a regulated compliance function with material financial implications. The EU's CSRD, which entered force in January 2024, requires machine-readable digital sustainability reports aligned with the European Sustainability Reporting Standards (ESRS), encompassing over 1,100 potential data points across environmental, social, and governance dimensions. For carbon specifically, ESRS E1 mandates disclosure of Scope 1, 2, and 3 greenhouse gas emissions, transition plans aligned with 1.5°C pathways, and quantified financial impacts of climate risks.

The compliance cost burden varies dramatically by sector and company size. According to EFRAG's impact assessment, large listed companies face initial setup costs averaging €430,000, while annual recurring costs for assurance and reporting reach €740,000 for entities with complex value chains. A 2024 Novata survey found that 29% of companies expect total annual CSRD compliance costs between €100,000 and €250,000, with 22% anticipating expenditures exceeding €250,000. One large multinational disclosed spending $18 million on carbon emissions data automation alone, with projections of $50–60 million total investment over the compliance rollout period.

The investment case for carbon accounting infrastructure extends beyond regulatory arbitrage. The voluntary carbon credit market reached €15 billion in 2024, with high-integrity credits commanding 78% price premiums over lower-rated alternatives. Digital MRV platforms that provide satellite verification and real-time monitoring are projected to handle 90% of voluntary carbon market transactions by 2027. For investors, the convergence of mandatory compliance reporting and voluntary market verification creates a platform opportunity where standardised climate APIs and integrated data architectures can achieve network effects across both regulatory and commercial carbon accounting use cases.

Sector-specific dynamics further complicate the investment landscape. Energy and utilities companies account for 27.2% of carbon accounting software spending, reflecting their direct emissions intensity and regulatory scrutiny. However, the construction sector exhibits the fastest growth trajectory at 31.5% CAGR, driven by emerging embodied carbon regulations in EU member states. Financial institutions face unique challenges, as their financed emissions (Scope 3 Category 15) require aggregating carbon data across thousands of portfolio companies—many of which lack robust measurement capabilities themselves.

Key Concepts

Measurement, Reporting, and Verification (MRV): The systematic framework for quantifying greenhouse gas emissions, disclosing results to stakeholders, and independently validating accuracy. Traditional MRV relied on annual inventories compiled from activity data (fuel consumption, electricity bills, procurement records) multiplied by emission factors from databases like the GHG Protocol or IPCC. Digital MRV (dMRV) platforms now integrate IoT sensors, satellite imagery, and machine learning algorithms to provide continuous monitoring with reduced manual data collection. The transition from periodic to real-time MRV fundamentally changes the unit economics of carbon accounting—replacing labour-intensive spreadsheet compilation (€50–100 per data point) with automated ingestion (€0.50–5 per data point) while simultaneously improving measurement accuracy from ±30% to ±10% uncertainty ranges for Scope 1 and 2 emissions.

Scope 3 Emissions and Value Chain Accounting: Indirect emissions occurring throughout a company's upstream and downstream value chain, typically representing 70–90% of total corporate carbon footprints but exhibiting the highest measurement uncertainty. CSRD requires Scope 3 disclosure across 15 categories defined by the GHG Protocol, from purchased goods and services to end-of-life treatment of sold products. The fundamental challenge is data availability: primary supplier emissions data remains scarce, forcing reliance on spend-based estimation using industry-average emission factors. A €1 million procurement category might generate calculated emissions ranging from 500 to 2,000 tCO₂e depending on emission factor selection—a fourfold uncertainty that undermines the credibility of net-zero transition plans and carbon reduction claims.

Life Cycle Assessment (LCA) Integration: The methodology for quantifying environmental impacts across a product's entire life cycle, from raw material extraction through manufacturing, distribution, use, and disposal. LCA provides the scientific foundation for product carbon footprints, environmental product declarations (EPDs), and circular economy metrics. Integration with corporate carbon accounting requires reconciling process-based LCA (detailed material and energy flow modelling) with financial accounting structures (cost centres, general ledger categories, supplier master data). Leading platforms now offer hybrid approaches where LCA databases (ecoinvent, GaBi, IMPACT World+) are dynamically linked to enterprise resource planning systems, enabling automatic carbon footprint updates when procurement patterns or manufacturing processes change.

Climate APIs and Digital Twin Infrastructure: Application programming interfaces enabling standardised data exchange between carbon accounting platforms, enterprise systems, emissions registries, and verification bodies. Climate APIs are emerging as the integration layer for sustainability data architectures, with providers like Climatiq, Sinai Technologies, and Emitwise offering emission factor databases, calculation engines, and registry connectivity through RESTful interfaces. Digital twins extend this infrastructure by creating virtual replicas of physical assets, supply chains, or portfolios that simulate carbon impacts under various operational and climate scenarios. For transition planning, digital twins enable stress-testing of decarbonisation pathways, modelling the emissions implications of supplier switches, technology investments, or demand shifts before committing capital.

What's Working and What Isn't

What's Working

Cloud-Native Platform Consolidation: The carbon accounting software market has consolidated around cloud-native platforms that achieve economies of scale through shared emission factor databases, standardised calculation methodologies, and multi-tenant infrastructure. Cloud solutions captured 74.8% of 2024 market revenue, growing at 28.9% CAGR as enterprises migrate from spreadsheet-based approaches and on-premise legacy systems. Leaders like Watershed (€164 million raised, €1.8 billion valuation) and Persefoni (€179 million raised) have demonstrated that platform economics can support gross margins exceeding 70% once customer acquisition costs amortise across multi-year SaaS contracts.

AI-Powered Emission Factor Matching: Machine learning algorithms now automatically match transactional data to appropriate emission factors, reducing the manual effort previously required for carbon accounting. Persefoni's smart emission factor matching achieves 85% automation rates for common expense categories, while Watershed's database of 500,000+ emission factors enables granular supplier-level calculations. These capabilities shift the bottleneck from data processing to data quality—specifically, obtaining primary emissions data from suppliers rather than relying on industry-average proxies.

Regulatory Alignment and Audit-Ready Reporting: Platforms have invested heavily in regulatory mapping, ensuring that single data collection processes satisfy multiple disclosure requirements (CSRD, SEC climate rules, CDP questionnaires, science-based targets). Audit trail functionality, version control, and assurance-ready documentation have become table stakes as limited assurance requirements under CSRD drive demand for accountant-grade controls. The market is responding: TÜV SÜD acquired FRST Corp in March 2024, while Workiva acquired Sustain.Life in June 2024, signalling convergence between sustainability software and financial audit infrastructure.

Satellite-Based Verification for Nature-Based Solutions: Digital MRV platforms incorporating satellite imagery have achieved breakthrough accuracy for forestry, agriculture, and land use carbon credits. LiDAR-based biomass estimation, hyperspectral vegetation health monitoring, and change detection algorithms enable continuous verification that reduces site visit requirements while increasing measurement frequency from annual to monthly cadences. Projects with robust satellite MRV systems command significant price premiums: nature-based removal credits rose 71% in 2025 to €14–24 per tonne, with high-integrity verification driving the spread.

What Isn't Working

Scope 3 Data Collection from SME Suppliers: Despite platform investments in supplier engagement tools, obtaining primary emissions data from small and medium enterprise suppliers remains the critical adoption blocker. Large enterprises report that fewer than 20% of their suppliers can provide verified carbon data, forcing continued reliance on spend-based estimation with its inherent inaccuracies. The chicken-and-egg problem persists: SMEs lack incentive to invest in carbon accounting until customers mandate it, while customers cannot improve Scope 3 accuracy without supplier data. Proposed solutions—supplier financing tied to carbon disclosure, industry data-sharing consortia, free tier carbon tools—have achieved limited scale.

Interoperability Across Carbon Registries and Standards: The voluntary carbon market operates across multiple standards bodies (Verra, Gold Standard, American Carbon Registry, Climate Action Reserve) with incompatible registry systems, methodologies, and verification protocols. Corporate buyers must navigate fragmented infrastructure to purchase credits, retire them against inventory, and demonstrate additionality. Climate APIs partially address this fragmentation, but the absence of universal data standards means significant custom integration work for each registry connection. The ICVCM Core Carbon Principles represent progress toward quality harmonisation, but technical interoperability lags behind policy alignment.

Unit Economics for Mid-Market Enterprises: Carbon accounting platforms exhibit unfavourable unit economics for companies with €50–200 million revenue and moderate supply chain complexity. Enterprise platforms price at €50,000–200,000 annually, exceeding the compliance budget for mid-market firms, while SME tools lack the functionality required for CSRD's materiality assessment and limited assurance requirements. This market gap has attracted venture capital—Greenly, Normative, and Plan A target this segment—but customer acquisition costs remain elevated due to fragmented purchasing and limited sustainability team capacity.

Real-Time Financial Integration: While carbon accounting platforms connect to ERP systems for transactional data, the integration typically operates in batch mode with multi-day latency. Real-time carbon impact visibility—enabling procurement decisions to incorporate emissions data alongside price and quality—remains aspirational for most deployments. The technical barriers are surmountable (APIs exist, data models are compatible), but organisational resistance to adding carbon metrics into operational workflows slows adoption beyond compliance-driven annual reporting.

Key Players

Established Leaders

SAP Sustainability Control Tower — The enterprise resource planning giant's integrated sustainability suite, combining carbon accounting with existing financial, supply chain, and procurement modules. SAP's installed base of 400,000+ customers provides distribution advantage, though purpose-built competitors often demonstrate superior usability and faster innovation cycles. Strong in manufacturing and process industries where SAP already manages operational data.

Salesforce Net Zero Cloud — CRM leader's sustainability offering leveraging the Salesforce platform's extensibility and AppExchange ecosystem. Particularly effective for companies already invested in Salesforce infrastructure, with native integration to sales, service, and partner management data. Acquired Slack's sustainability partnerships to extend collaboration capabilities.

IBM Envizi — Environmental intelligence suite acquired by IBM in 2022, combining carbon accounting with broader ESG data management, regulatory reporting, and sustainability performance analytics. Positions within IBM's consulting and technology services ecosystem, targeting large enterprises requiring integration with legacy IT infrastructure.

Sphera — Operating risk management platform with deep industrial sector expertise, particularly in chemicals, energy, and manufacturing. Strong LCA capabilities through GaBi database acquisition, enabling product carbon footprint calculations integrated with process safety and environmental compliance workflows.

Emerging Startups

Watershed (San Francisco) — The most valuable climate software company globally at €1.8 billion valuation following €100 million Series C in February 2024. Counts BlackRock, Walmart, Spotify, and four of the top six US banks among customers. Differentiates on net-zero pathway planning and carbon removal marketplace integration, with database of 500,000+ emission factors.

Persefoni (Tempe, Arizona) — Leading compliance-focused platform with €179 million total funding. Launched free Persefoni Pro tier in March 2024, achieving 6,000+ organic signups. PersefoniGPT provides AI-powered carbon accounting assistance. Strong regulatory mapping for CSRD, SEC, and international disclosure frameworks.

Sweep (Montpellier, France) — European-headquartered platform emphasising CSRD alignment and EU regulatory expertise. Strong in supplier engagement workflows and Scope 3 data collection. Benefits from proximity to EU policymakers and regulatory development processes.

Normative (Stockholm, Sweden) — Nordic platform backed by Google's sustainability investments, targeting automated carbon accounting for mid-market enterprises. Strong data science capabilities for emission factor optimisation and uncertainty quantification.

Key Investors & Funders

TPG Rise — Growth equity fund focused on climate and social impact, leading Persefoni's Series C financing. Portfolio spans carbon accounting (Persefoni), carbon removal (44.01), and broader climate tech infrastructure.

Greenoaks Capital — Led Watershed's €100 million Series C at €1.8 billion valuation. Deep expertise in enterprise software scaling, with portfolio including Hopin, Stripe, and other platform businesses achieving network effects.

Prelude Ventures — Early-stage climate tech investor participating in carbon accounting rounds across Persefoni and competitive platforms. Focus on science-based climate solutions with venture-scale return potential.

European Investment Bank Climate Finance — Significant debt and equity financing for EU-based climate tech companies, including carbon accounting platforms serving CSRD compliance market. Provides patient capital aligned with EU Green Deal industrial policy objectives.

Examples

1. Volkswagen Group Carbon Footprint Digitalisation — Enterprise-Scale Implementation

Volkswagen Group, Europe's largest automotive manufacturer, initiated a comprehensive carbon accounting transformation in 2023 to address CSRD requirements across its 120+ production facilities and multi-tier supply chain spanning 40,000+ suppliers. The implementation scope encompassed Scope 1 emissions from manufacturing operations (paint shops, foundries, assembly), Scope 2 emissions from electricity and heat procurement, and Scope 3 emissions from purchased goods (steel, aluminium, batteries, plastics), logistics, and vehicle use phases.

The project deployed a federated data architecture connecting SAP's Sustainability Control Tower to local plant systems via standardised climate APIs. Initial capital expenditure reached €12 million for platform licensing, integration development, and data quality remediation. Annual operating costs stabilised at €3.2 million, including platform subscriptions, verification services, and internal sustainability team headcount. The unit economics proved compelling: cost per data point fell from €85 (manual collection and spreadsheet compilation) to €4.20 (automated API ingestion with validation rules).

Key lessons emerged around supplier data collection. Of Volkswagen's Tier 1 suppliers, only 35% could provide verified emissions data meeting audit-ready documentation standards. The company implemented a supplier capacity building programme, offering free access to carbon accounting tools and training for strategic suppliers representing 80% of procurement spend. After 18 months, supplier data availability improved to 62%, reducing Scope 3 uncertainty from ±45% to ±28%. The remaining gap required continued reliance on emission factor databases, with LCA-based product footprints providing more granular estimates than spend-based proxies.

2. Ørsted Offshore Wind Portfolio — Sector-Specific LCA Integration

Ørsted, the Danish renewable energy company, faced a counterintuitive carbon accounting challenge: demonstrating that offshore wind generation, despite significant upstream emissions from steel, concrete, and installation vessels, delivers net-negative lifetime carbon impact. The company implemented an integrated LCA-carbon accounting platform to generate project-level and portfolio-level emissions profiles supporting green bond issuance, power purchase agreement negotiations, and regulatory disclosures.

The platform integrated ecoinvent process data with project-specific engineering parameters: foundation type (monopile, jacket, floating), turbine capacity, water depth, and distance to shore. Digital twin models simulated construction, operation, and decommissioning phases, enabling scenario analysis for technology choices and supply chain configurations. The system calculated that Ørsted's offshore wind portfolio achieved lifecycle emissions of 12 gCO₂e/kWh—compared to 820 gCO₂e/kWh for coal and 490 gCO₂e/kWh for natural gas—providing quantified evidence for carbon avoidance claims.

Implementation costs totalled €2.8 million over 18 months, with €1.2 million for LCA platform licensing, €0.9 million for integration with existing asset management systems, and €0.7 million for methodology development and assurance readiness. The business case justified investment through three value drivers: €15 million savings in green bond verification costs over five years through automated documentation; 8% premium on power purchase agreements explicitly citing lifecycle carbon transparency; and accelerated permitting approval in jurisdictions where embodied carbon disclosures became mandatory.

3. Unilever Supplier Emissions Programme — Value Chain Transformation

Unilever's Scope 3 emissions programme illustrates both the potential and limitations of supplier engagement at scale. With 60,000+ suppliers across commodities (palm oil, soy, dairy, packaging) representing 70% of the company's total carbon footprint, Unilever implemented a tiered data collection strategy combining automated spend-based estimation, supplier surveys, and direct emissions monitoring for strategic partners.

The technology stack integrated Watershed for corporate carbon consolidation with commodity-specific platforms: Starling satellite monitoring for deforestation-linked emissions in palm oil supply chains, and SAP Ariba for supplier self-reported data collection. Climate APIs enabled data flow between systems, though reconciliation challenges persisted when methodological inconsistencies produced conflicting emissions estimates for identical suppliers.

Programme investment reached €8.5 million over three years, including platform costs (€3.2 million), supplier training and engagement (€2.8 million), and verification services (€2.5 million). Results demonstrated measurable improvement: supplier data coverage increased from 15% to 48% of Scope 3 emissions; measurement uncertainty declined from ±50% to ±32%; and verified emissions reductions of 1.2 MtCO₂e were achieved through supplier switching and process improvements.

The unit economics revealed critical thresholds. Suppliers representing >€1 million annual procurement justified individual engagement and primary data collection. Suppliers in the €100,000–1 million range benefited from sector-specific data collection consortia (e.g., dairy emissions collaborative). Suppliers <€100,000 remained on spend-based estimation due to unfavourable cost-benefit ratios for granular measurement.

Action Checklist

• Assess CSRD applicability and timeline: Determine which CSRD wave applies (FY2024 for ex-NFRD companies, FY2025 for large companies, FY2026 for listed SMEs) and map corresponding data collection requirements against current capabilities.

• Benchmark Scope 3 materiality and measurement maturity: Identify which of the 15 Scope 3 categories contribute >5% of total emissions and evaluate current data quality (spend-based estimation vs. primary supplier data) against target uncertainty levels for credible transition planning.

• Evaluate build-versus-buy platform economics: Compare enterprise platform costs (€50,000–200,000 annually for mid-to-large companies) against internal development, considering total cost of ownership including integration, maintenance, regulatory updates, and assurance readiness.

• Prioritise supplier engagement by emissions concentration: Map procurement spend against emission factor intensity to identify the 100–200 suppliers representing 80% of Scope 3 emissions; develop tiered data collection strategies appropriate to supplier sophistication and strategic importance.

• Integrate climate APIs into existing data architecture: Evaluate interoperability requirements between carbon accounting platforms, ERP systems, procurement tools, and financial consolidation to minimise manual data handling and enable real-time emissions visibility.

• Establish digital twin capabilities for transition scenario modelling: Develop simulation infrastructure enabling quantified analysis of decarbonisation pathways, including supplier switching costs, technology investment requirements, and emissions trajectory implications of strategic decisions.

FAQ

Q: What are the realistic unit economics for carbon accounting implementation across different company sizes?

A: Unit economics vary dramatically by scale and complexity. Large enterprises (€1+ billion revenue) typically invest €300,000–500,000 for initial platform implementation plus €150,000–400,000 annually for licensing, integration maintenance, and verification services. This translates to €0.50–5 per emissions data point when automated collection is achieved. Mid-market companies (€50–200 million revenue) face less favourable economics: platform costs of €30,000–80,000 annually represent higher revenue percentages, while Scope 3 complexity often matches larger peers. SMEs (<€50 million) can leverage free-tier offerings (Persefoni Pro, Normative starter) but typically require €10,000–30,000 for configuration and support. The critical economic threshold is data collection automation: manual processes cost €50–100 per data point, making comprehensive carbon accounting prohibitively expensive without technology investment.

Q: How should EU investors evaluate carbon accounting platform differentiation as the market matures?

A: Platform differentiation is shifting from feature completeness to three durable competitive advantages. First, emission factor database quality and coverage: platforms with 500,000+ factors and regular updates (Watershed, Persefoni) achieve higher automation rates and lower customer effort. Second, regulatory expertise and update velocity: platforms with dedicated policy teams can incorporate new requirements (CSRD evolution, SEC rules, ISSB standards) faster than resource-constrained competitors. Third, network effects from supplier data sharing: platforms where supplier emissions profiles are reusable across customer deployments create data advantages that compound with scale. Investors should probe customer churn rates, net revenue retention, and Scope 3 data coverage trends as leading indicators of sustainable differentiation.

Q: What adoption blockers remain for comprehensive Scope 3 carbon accounting, and when might they resolve?

A: Three structural blockers persist. First, SME supplier capacity: smaller suppliers lack resources for carbon accounting, and platform economics don't support free or subsidised offerings at scale. Resolution may come through industry consortia pooling sector-specific emission factors (emerging in automotive, apparel, food) or regulatory mandates pushing disclosure requirements down supply chains. Second, data standardisation: incompatible formats across ERP systems, procurement platforms, and carbon registries require custom integration for each connection. XBRL taxonomies for sustainability reporting and emerging climate API standards may address this by 2026–2027. Third, auditor capacity: limited assurance requirements under CSRD require accountant involvement, but sustainability assurance expertise remains scarce. Auditor training programmes and technology-enabled assurance workflows should alleviate this bottleneck by 2027–2028.

Q: How do digital twins and climate APIs change the investment thesis for carbon accounting platforms?

A: Digital twins and climate APIs transform carbon accounting from backward-looking compliance reporting into forward-looking decision support infrastructure. Digital twins enable scenario modelling that quantifies the emissions implications of strategic choices—supplier switches, facility investments, product portfolio changes—before committing capital. Climate APIs enable real-time carbon visibility integrated into operational workflows, moving beyond annual reporting toward continuous optimisation. For investors, this evolution expands the addressable market from sustainability teams (€10–50k annual platform spend) to procurement, operations, and finance functions (€100–500k potential spend). Platforms achieving this integration capture higher revenue per customer while increasing switching costs through operational embedding. The risk is execution: digital twin accuracy depends on data quality that many companies haven't yet achieved.

Sources

• European Commission. (2024). "Corporate Sustainability Reporting Directive (CSRD): Impact Assessment and Implementation Guidance." Brussels: European Commission.

• EFRAG. (2024). "Cost-Benefit Analysis of European Sustainability Reporting Standards." European Financial Reporting Advisory Group Technical Report.

• Watershed. (2024). "Corporate Climate Action: 2024 Benchmark Report." San Francisco: Watershed Climate.

• Persefoni. (2024). "State of Carbon Accounting: Enterprise Survey Results." Tempe, AZ: Persefoni AI.

• Novata. (2024). "CSRD Compliance Costs Survey: Findings from 500 European Companies." New York: Novata Inc.

• Sylvera. (2025). "Carbon Market Trends: Quality, Pricing, and the Future of Carbon Credits." London: Sylvera.

• GHG Protocol. (2024). "Corporate Value Chain (Scope 3) Accounting and Reporting Standard: Technical Guidance Update." World Resources Institute.

• ICVCM. (2024). "Core Carbon Principles: Assessment Framework for High-Integrity Carbon Credits." Integrity Council for the Voluntary Carbon Market.