Ryan Grant Little: 0:38

Hello and welcome to another Climate Tech Podcast Conversations with the people trying to save us from ourselves. In this episode, i caught up with my friend Yasha Tarani, co-founder of Climate Choice. I reached Yasha in Berlin to talk about the importance of targeting scope 3 emissions, that is, carbon that's produced from a company's supply chain, to hear about the state of play for large companies that want to go to net zero and why he thinks people pushing for this kind of change within companies are heroes. I'm Ryan Grant Little. Thanks for joining, Yasha. it's great to see you again. Welcome to the podcast.

Yasha Tarani: 1:12

Great to see you, Ryan. Super happy to be here.

Ryan Grant Little: 1:14

So I've known you for I don't know what is it seven years or something like that And we were co-conspirators on the Entrepreneurs Pledge, which was about fellow founders, mostly in the Berlin area, committing to putting some of the money we make from exits to work into impact investing. And back then you were a software as a service guy. you're your first, or at least when I met you, you were working on a reservations platform, but these days you're a software guy with a particular affinity and 100% devotion to the space of climate. So can you take us back a little bit, tell us about how you got started and then bring us up to speed about climate choice?

Yasha Tarani: 2:03

Yeah, thanks a lot for inviting me, having me on the podcast. I'm really excited to be here. As you mentioned, I mean, when we met seven, eight years ago exactly, I was working on Resmule, which was a software as a service company for restaurants, And I basically have been an entrepreneur my whole life, my whole professional life, and back then I first learned about the topic of climate change, I think, through people like you and other ones that I had discussions about, And I realized, OK, wow, this is really really big problem. And back then I thought, OK, it's great to help restaurants getting in more customers, but what impact do we have as a company, as a startup company? I mean, we spend money, we make business decisions every day. And, yeah, I basically thought back then OK, what can we do as a general company that is not in the climate tech or in the impact field?

Yasha Tarani: 3:08

And one of the first things that came back then to my mind was OK, why don't we just start spending our money more wisely? So, finding more sustainable coffee providers as easy as that, right? Or it's not as easy as that, I guess. And then, how can we save energy? Can we switch to renewable energy providers? Do we find green hoster. So very pragmatic and simple things. However, that was a tough experience because you realized, OK, wow, you cannot find these solutions and you cannot compare these solutions and understand on what their impact is actually on climate. And that really sparked the first idea or the understanding of the problem and thinking about OK, wow, if businesses spend so much money and on so many things, even more like consumers, how do they make climate choices Basically and on a daily basis? And that kind of got me started on thinking about the problem.

Ryan Grant Little: 4:19

Ok, so initially, you were looking at this I think this was at a time when you were taking a break you were kind of traveling around and trying to think of some cool ideas, and you were looking at this from a consumer perspective, first of all, how people can make better choices And then you kind of level that up to thinking OK, me as a consumer, i'm spending far less than the average company, and if I'm dealing with these problems, companies are also around sourcing.

Yasha Tarani: 4:47

Yeah, actually, yes, kind of like, but it was actually while I was at my previous company when this came actually apparent in the context of business decisions. However, you're exactly right. As consumers, we know like e-commerce shops that solely try to select brands that are more sustainable in their production. So, exactly, i was looking for a solution like that. I was looking for a place where we can find these sustainable products, but in a business context. But yeah, you're also right. After I left the company in 2016 and started to work on a little bit on consulting and advisory and things like that, and got more into the topic of climate, i worked with a couple companies at Climate Kick.

Ryan Grant Little: 5:37

That's the climate kick is sort of the EU part of money working on climate change solutions.

Yasha Tarani: 5:42

Yeah, exactly And started to work with startups there and realized, OK, well, there's so many great ideas and so many alternatives and these need to be known by businesses And things kind of like fell like pieces of puzzle came together, like the experience that I made a couple years ago at my previous company. And then they're seeing these business solutions and innovations And then also thinking more about how can we empower businesses to make those climate conscious choices.

Ryan Grant Little: 6:21

So you started seeing through groups like Climate Kick different ideas and they started gelling with some of the thoughts you had previously as someone who ran a business And then that gave you kind of the customer perspective of you remember needing this type of service, and so then, this is how Climate Choice came about. Can you tell us a little bit about that? So who is it solving the problem for? It sounds like it's solving a sourcing problem, like a green sourcing problem. Who is it for? Tell us a little bit about it.

Yasha Tarani: 6:51

Yeah, i mean, actually we started exactly with the thought of we're building kind of like the Amazon, like the B2B Amazon for only green suppliers and green products, to kind of like source them Right.

Yasha Tarani: 7:05

That's exactly how we imagined it in the beginning, but what we're actually ended up doing, or what we're doing now, is actually really enabling companies to compare their supplier base based on climate management practices and data.

Yasha Tarani: 7:22

What we learned is actually the issue is that a lot of large global enterprises they cannot just, or they also don't want to change their existing supplier base necessarily, but they need to implement change in the supplier base and they need to understand on where do the suppliers stand at this point of time and how can they help them to provide them, first of all, better data, but also how can they help them to change, because supplier relations are mostly grown over years. Maybe there's only one supplier or two suppliers that can provide specific products and services. The problem we started to understand is much more complex, as we thought initially, and that's what we're basically doing now. The problem that we're solving is basically we work with procurement teams and sustainability teams in large organizations to help them to understand their current supplier base by gathering data and also then feedbacking information to the suppliers so they can learn from the process and understand what they can do to become better in their climate management and comply more with upcoming regulations but also the data needs of their corporate partners.

Ryan Grant Little: 8:46

Okay, so it sounds a lot less transactional than a marketplace like Amazon as well, and, crucially, it doesn't have just products, but you're also talking about services. I mean, if I think about large companies and greening their procurement, i'm not just thinking about computer equipment or photocopier paper, but also their electricity providers and their gas providers and all these kinds of things.

Yasha Tarani: 9:10

Exactly. I mean, it's massive. It's like there let's think about steel providers or massive industries, or massive products that companies buy and that really drive their emissions. So it's really about understanding yes, ideally on the product level. How do products compare? However, at this point of time that data is barely available. So it's a lot about understanding. On a company level, first of all, do they manage the topic of climate? Is that a company that has a plan on how to decarbonize, because ultimately that will also affect the products? but this is a major issue in the whole scope-free topic, decarbonization topic. That product level data is not yet available. It's very expensive to calculate and it's only starting to become more available.

Ryan Grant Little: 10:10

Can you quickly unpack scope one, scope two and scope three and just tell us what those terms are?

Yasha Tarani: 10:15

Sure. So in carbon accounting you differentiate between scope one, two and three, like you say. Scope one is basically the emissions that come from your own company's operations. Scope two are the emissions that derive from energy, and then scope three is the upstream and downstream emissions from the value chain. So basically you not only look at your direct emissions, but scope three is really about the indirect emissions, because a lot of emissions are actually being emitted in the beginning, in the production phase, right, and then companies buy these products.

Yasha Tarani: 10:53

Because we're now in this globalized world, like everyone does its part. We're very, very efficient in terms of having specialized companies only doing a small part of the value chain and do that very efficient and for a good price most of the times. But that's where the emissions are stuck. So that is a big, big, big issue. And then also, of course, usage of products, so the downstream part of the value chain. So what happens after the product leaves your door? So what are actually the users of the products are emitting through downstream, kind of like life cycle part? So that's in a nutshell what scope one, two and three emissions are about.

Ryan Grant Little: 11:42

Emissions, emissions gonna emit Exactly. Okay. So scope three is basically from the supply chain, And that's where you're focusing. Why do big companies care if their supply chains are green or not?

Yasha Tarani: 11:55

In the end, it's about a lot of stakeholders demanding these informations, right So they want to understand on how companies are managing their climate emissions. Let's maybe start with who are the stakeholders, right So? regulators, i mean. In Europe, there's the CSRD on the horizon, which has a big part about like that What's that Tell us about that. So the new directive to report on social but also environmental topics as part of a bigger set of or, like it's, the main part of bigger regulatory changes for achieving our 1.5 degree goal in the European Union.

Ryan Grant Little: 12:46

If I remember correctly, that affects about 50,000 companies across Europe that will now be required to report on emissions and other environmental and social standards.

Yasha Tarani: 12:58

And this does not only affect these 50,000 companies in the EU, but there's also a study that says it also will affect 10,000 other companies outside of the EU because they have subsidies that are probably companies or maybe traded on a European market, or also then the companies that are in the value chain. They're affected. So basically, it's really affecting everyone, i would say, that is doing business with the EU or in the EU. So that is a very big topic currently And yes, ryan.

Ryan Grant Little: 13:39

And is the directive around transparency? Is the directive just around reporting, and then we'll see how the chips fall, and then there will be some competitive pressures from stakeholders to do better once this is all out on the table. Or is this also about behavior change for the companies? Are there requirements for emissions as well that come with this, or is that a later step?

Yasha Tarani: 14:03

No, exactly. So currently there's the CFRDs. Like there was just a big update last week. We actually also currently have a public feedback period, i think in the next four weeks, on the current kind of like requirements. And yes, climate is a big part, so it's not only about emission disclosures, so scope one, two and three emissions, it's also about transition plans. It's also about understanding on how companies plan to move to a low carbon economy, basically, and to reduce their emissions. And then there's and this is not only relevant for companies, right, it's also the whole financial sector. There's the EU taxonomy that wants to understand actually business activities and connection to climate change, medication and adaptation.

Ryan Grant Little: 15:00

Taxonomy is a fancy word for setting the terms for something.

Yasha Tarani: 15:05

Yeah, exactly, so, yeah, so there's a lot of regulatory change happening in the US. The SEC has published a proposal that is in discussion. Then there's, on a more global level, the ISSB, the International Standards Setting Board, which is part of the IFRS. that is working on, you know, like also, you know aligning, you know, global standards with the CSRD standards and so on. So there's a lot of stuff happening in the regulatory landscape all over the world. And then there's also the financial industry that, of course, then needs to report as well, right, they want to, and this is kind of like also, you know scope three emissions. for an investor, the scope three emissions are actually, you know also, their investments, right, so they will need to report on that and they will need to inform you know, like, their investors, and investors are more and more, you know, thinking about this right, like how, what is my money invested, you know, in a place that destroys the earth or like that somehow contributes to, you know, our climate targets. So there's yeah.

Ryan Grant Little: 16:14

And hopefully there are more and more investors seeing the light on that, though I'm not always sure. But so some of the companies that you're working with you're generally working with large corporates. That's kind of your target And we see a lot of these companies coming up with, or have kind of crossed the threshold of, setting net zero goals for 2040 or this type of thing, and then now a lot of them are in the space of trying to find ways to implement that right. Yeah, when they, you know it was hard enough for them to get these commitments through the board and then everybody kind of took a break and then the pandemic happened, all these things. And now I mean, what I'm seeing is a lot of these companies struggling right now to find ways to actually implement that or look at what that actually means. So are you playing a role in that? Are you enabling that Exactly?

Yasha Tarani: 17:03

I mean like we always differentiate. We're not doing carbon accounting. That's typically done by consultancies, that's typically done by you know like there's a lot of you know carbon accounting companies that are doing software around this to calculate the emissions, typically using average emission factors, right? So you, for example, use your spent data as a company and then you look at the emission factor and I always say this is like calculating with an average price. So you know like everything looks the same.

Ryan Grant Little: 17:31

Yeah, so that's better than nothing, but not totally accurate, exactly.

Yasha Tarani: 17:35

It helps you to understand, like the hotspots, where should I focus on. But then you need supplier-specific information and that's where we come in. So then we help you know to understand where the suppliers currently stand. We always say like we help them understand their climate, maturity and you know, map the supplier structure and then deriving you know insights and roadmaps to support you know suppliers or work with suppliers on decarbonization and also track you know progress. So we are actually really focused on this part, on implementing change in your supply base and getting the necessary data. Yeah.

Ryan Grant Little: 18:16

And what kind of resistance do you hear? So what are the main objections for not doing this from big companies?

Yasha Tarani: 18:23

The issue is, what I most often hear, to be honest, is I just have to call this morning like I would love to do this, but you know like in our industry it's hard currently. We don't have, you know, budgets. You know tight. You know I'm trying to get this done and this and so sustainability reporting was a marketing exercise, i think, in the past. Right, and now you know like, especially climate data is becoming financial, relevant information. There is a whole shift for, like you know, companies to prepare for that And we're just in the process of that. That's happening. So the resources and budgets are not necessarily there yet, but we can see, you know like, a big shift happening And lots of corporates are telling us. You know like we have sustainability managers in every department. Right Before, there was a team, you know like, in a massive company, maybe with 10 sustainability managers, maybe concerned with writing a report, but now it's really about, okay, you know like, we need this everywhere.

Ryan Grant Little: 19:25

And so it used to be. it used to be. we don't use plastic straws in the cafeteria anymore and some nice pictures to go with it, and now investors are looking at this and looking at the future risk and discounting that today for things that won't be valuable anymore because of climate change, so so-called stranded assets and this type of thing. So it's actually the finance department looking at this now, and not just not only consumers looking for feel-good stories.

Yasha Tarani: 19:51

Exactly, and that's a big change And that also makes it also complicated, right. There's lots of stakeholders involved. So typically, if we, you know, speak with companies there, so first of all sustainability department or climate experts are involved. of course, that's the first. you know, typically the first conversations that we have, and then it's about getting the procurement department in, right. So there's the CPO, then typically, you know, coming in and asking like very pragmatic process questions, right. So there's, you know, like this other stakeholder, and then sometimes then there's then you know, like finance or investor relations coming in as well. So it's really, you know, this is really another thing. I mean, like it's for me it's very new, right, but before I work with restaurants, it's mostly about you know, like You're talking to the owner.

Yasha Tarani: 20:38

Exactly, i'm talking to the owner making you know, convincing him to work with software. Now it's about you know, like so many more, you know complex, you know interests and, yeah, kind of like relations that are, of course, with any innovation topic right Like this is not exclusive to climate, but it's like with any innovation topic, right Like corporates are not necessarily often, you know, prepared for change and rather work on exploiting. you know existing business models, rather than you know are set up for constant change. So that's, i think, like a general challenge. I think No kidding.

Ryan Grant Little: 22:15

So OK, so if I'm the CEO of ACME Co, a multi-billion dollar widget manufacturer, and you're telling me that I should become a customer of climate choice, my I'm going to push back and say we don't have demand from this from our stakeholders. I don't have budget for this. This is a distraction from our core business. Give me the case for why I need to do this now. What will happen if I don't do this?

Yasha Tarani: 22:43

So, basically, most of the companies actually are coming to us. When they set climate targets, they understood their hotspots, they understand. Okay, we have a problem there and we need to work with our suppliers and we need to get this information. So typically, that's where we start the conversations and the suppliers basically then start working with us, because their customers also then demand the information. So they need to understand, or they need to by one, to also understand and what they can do to improve. So I think that's a good mechanism to drive change.

Yasha Tarani: 23:23

However, in the case of what you're describing, if there's someone that is not convinced yet, i think it's basically about will you be in business in 10 years or not? I mean the whole world. It's not about measuring your missions and reporting these. It's about change, right, it's about change of business models. It's about the transition, like the finance world always be transition to low carbon economy. So think about do you want to be in business in 10 years or not, and do you want to see like I would make the argument do you want to see how your competitors are doing? right, and we can provide you with some benchmarks and insights in comparison, right, and this information, then, of course is interesting to understand and motivate and send incentives to think a little bit more about the topic.

Ryan Grant Little: 24:12

It's interesting because large corporates, they generally don't want to be the first unless there's really good marketing reasons behind it, but they definitely don't want to be the last right.

Ryan Grant Little: 24:20

So if you start riding this wave and if they've all started setting up, it's great that you've got all this inbound demand basically for this, and people have already drunk the Kool-Aid on that. They need to do this, and then it's more about trying to figure out how to do this And another conversation I had with the climate tech investor, nadina Sanchez-Montañez. She talked about how we tend to overemphasize carbon when there are so many types of pollution that we should be concerned about. Are you just looking at carbon? Are you looking at waste, plastic or other aspects, or does it all come back to a carbon number?

Yasha Tarani: 24:56

I mean we basically created a set of data points and information gathering points so that you understand basically the environmental management, like do they have waste management, water management, etc. So we look a lot on we understand climate as a whole, let's put it that way. However, i understand also the question that a lot of people say, okay, this is always about carbon sustainability, so much more, so fully, of course, into that, but it's very you know like the thing is on why we're doing it. The way we're doing it and why we're so focused on the topic of climate and environment is because you know this is like the same for any industry and any company. Whereas sustainability you typically start with a materiality analysis, you know, like what's interesting to your stakeholders and what's relevant for your business, And then you pick the topics that are relevant and that might be something totally different, you know like, in one industry versus the other. So it's very hard to compare this. And also, you know create a set of you know data points And if you look at the you know like reporting frameworks I mean GRI, like global reporting initiative I think they have around 700 indicators that you could report on And that's why we look on climate, and then also climate sorry at carbon, sorry.

Yasha Tarani: 26:19

And then carbon, you know, like, also is a good measurement because it's basically an improved currency. Right, there's, you can. All the other greenhouse gases are typically then, you know, translated to carbon, and also, you can, most of the topics are basically translated into carbon. There's a global, accepted, you know, accounting system, which is the greenhouse gas protocol, and it's much more, you know, standardized and accepted, and then on the product level, there's also, like lots more happening on what are the standards that exist. So it's, i think, that the world is, has accepted this kind of like accounting standard, and that's why it's also something that we really, really think can drive change.

Ryan Grant Little: 27:06

And but yeah, we're looking at other environmental topics as well because it's I guess it's crucial that we have kind of a framework for pricing carbon versus, you know, pricing waste plastic or these types of things, or bio biodiversity. I mean, we can look at things like that that are so crucial to climate change but are so hard to capture in any kind of meaningful way when investors or other types of stakeholders are involved Exactly.

Ryan Grant Little: 27:33

So what are you optimistic about? What do you when you have these conversations? I mean, i'm already happy to hear that you have companies coming to you And hopefully it's because they're sincere about change and not just because of reporting requirements. but what are you excited about when you have these conversations with these big companies?

Yasha Tarani: 27:51

And I mean like I'm basically in a bubble so I have to also take that into account, but so definitely biased around that. But, like in general, i just see, you know, like climate is mainstream. It's not about when we first talked about it, right? I don't know which year it was Like it was not that mainstream, yet right Now everybody's talking about it. It's on news every day. I mean, look at New York at the moment, new York City at the moment right, i mean I was traveling through climate change as well, like when I did a sabbatical, right, the bushfires, you know, like more than 50 degrees Celsius at 5 am in the morning, and in India and Delhi It's, i mean it's crazy, right.

Yasha Tarani: 28:28

So it's not anymore. you know something that is a niche topic, right. So I'm optimistic about that that this has happened. I'm optimistic about that. you know like more and more investors are understanding that there's a financial risk, right, if companies don't manage that, not only from you know, like this, this, you know, or like production facilities being affected by a flood, but also because of, you know, business models not working long term, long term anymore.

Yasha Tarani: 28:57

So this makes me optimistic, i guess, and also what makes me optimistic is the regulatory environment that is changing, although, of course, you know like we should have much more lobbying. you know, like there was, like this one podcast I listened to listen to, that Corpett's should actually use their lobbying structures to lobby for climate regulations instead of trying to protect their existing business models. But, yeah, the regulatory environment is changing. We have targets, climate is mainstream. it makes me optimistic And I think, like a lot of you know, what makes me especially optimistic is kind of like our, like our generation, i guess, because you know, at that time I see more and more people you know that we speak to. you know, like our generation, that now, okay, who's having the energy to fight for the climateaky becomes like gets into management departments and gets more decision-making power and really cares about that right. So we can see a lot of people are taking the series wanna drive it in their organizations. That makes me really, really optimistic.

Ryan Grant Little: 29:54

Yeah, so you're a millennial, I'm an elder millennial, just after Generation X, and yeah, what we're also seeing right now is the largest transfer of private wealth in history from baby boomers to millennials And that's having some impacts already on how assets are being invested right, and so hopefully we'll see some more change happen there. And for me, i'm always looking towards the pension funds And I think, like pension fund managers could be the heroes of the story in a lot of ways and that could make for the most boring comic book series potentially ever. But they could be the superheroes in climate because all of finance kind of looks to them as the North Star as to what the trends are. So if we start to see some of that but, yeah, great to see that this is already happening quite a bit at the corporate level and that I'm glad to hear that customers are coming to you.

Yasha Tarani: 30:52

Exactly no. And then, like I mean like, just to add on what you just said, right, Like investors should look at this as, like the biggest business opportunity that is kind of like in front of us. Right, Like, where can you, you know, like have more business opportunity if not in climate? or like in, you know, low carbon product services, et cetera that drive down emission reduction? And I mean like we're seeing this. I mean you and me were more and more, I think, in the startup world. Right, Like I cannot count how many climate funds, like venture capital funds, were started in the last two years. I cannot count.

Ryan Grant Little: 31:25

Especially in your city of Berlin. There's a lot happening there.

Yasha Tarani: 31:28

Yeah, but also the US, right. So like yeah, anyways, no, definitely that makes me optimistic.

Ryan Grant Little: 31:34

Yasha, who is your personal hero.

Yasha Tarani: 31:36

Yeah, i mean you sent me that question right before. I have to say that I kind of like, okay, i have to think a little bit about it. It's the hardest of these questions. Yeah, definitely. So I mean, like my hero and like I went away, i came up to this. I think, like anyone in any organization that is taking risks to drive change, i think, like you know, you don't need to be an Elon Musk.

Yasha Tarani: 31:56

You know like to actually do stuff right Hopefully not Exactly So you know, but like I'm just yeah, so you know what I mean So the actually your impact can be even larger if you change the organization that you're working in, right, like we had Dr Jonathan Foley from Project Drawdown speaking at our annual conference and he said every job is a climate job, right, and I think, like that's what we should think about. Like how can we drive change where we are in our roles? because it's about incremental, you know, step by step, bringing that into organizations. And I think, like you know, the people that are really my heroes are, as anyone that is driving this forward in organizations. And yeah, i'm glad that I'm, that I have the opportunity to work with so many you know people and speak to so many people that are really, you know, serious about this and care about it.

Ryan Grant Little: 32:45

That's a very diplomatic answer that will go over well also in some of your marketing materials to the change makers internal to these large corporations.

Yasha Tarani: 32:53

So I'm glad you're testing out some of your messaging here on the podcast.

Ryan Grant Little: 32:58

It's multi-purpose podcast. Yeah so great to see you, so great to talk to you. Thank you so much.

Yasha Tarani: 33:04

Thanks a lot, ryan, for having me. It was great. It was great fun and, yeah, hopefully we see us in person soon again Thanks.

Ryan Grant Little: 33:19

Thanks for listening to another Climate Tech podcast. Please take five seconds to send this episode link to a colleague or friend who you think might be interested. Reach out to me anytime at hello at climatetechpodcom. As you can probably tell, this episode was produced, edited, directed, stage managed, boom operated and everything else by me. Subscribe to hear many more conversations still to come with the world's real climate tech heroes.