Robotic Automations

French startup Carbonfact believes that the best carbon accounting solutions will focus on one vertical. That’s why the company has decided to provide a carbon management and reporting tool for the fashion industry exclusively.

And Carbonfact recently raised a $15 million funding round led by Alven, the French VC firm that led Carbonfact’s seed round in 2022 already. Other investors in the round include Headline and a follow-on investment from Y Combinator.

Big companies in the fashion industry (and other industries) need to come up with a carbon accounting strategy as regulation is changing in Europe and the U.S. with the EU’s Corporate Sustainability Reporting Directive (CSRD), California’s Climate Corporate Data Accountability Act and the NY Fashion Act.

That’s why there has been a boom in carbon accounting platforms. The biggest ones like Watershed, Persefoni, Sweep or Greenly have an industry-agnostic approach. They help you track your carbon emissions and create reports in a more or less automated way.

Just like Carbon Maps focuses exclusively on the food industry, Carbonfact is focusing on the fashion industry so that its product can be more granular and more specific.

“For these industries – food is a very good example, fashion is a very good example – you need to be accurate in your calculations and you need industry-specific tools to model virtual products and improve your product offering in the future,” Carbonfact co-founder and CEO Marc Laurent told me.

Carbon data at a product level

In more practical details, Carbonfact retrieves your existing data from your ERP and other internal systems. It then calculates the footprints for each product using a lifecycle assessment engine that is specifically designed for clothing items.

“[Clients] also have data in what they call PLM [Product Lifecycle Management software ] — that’s the software in which they put all the product data. This is where you’ll find the product recipe sheets. And they sometimes have data in traceability platforms, such as Retraced, Trustrace, Fairly Made in France, etc. And finally, they sometimes have data in Excel files,” Laurent said.

After centralizing and normalizing all data in a single platform, as the fashion industry relies on a cascade of suppliers, Carbonfact wants to help you calculate your scopes 1, 2 and 3 emissions — scope 3 emissions in particular encompass indirect emissions from third-party suppliers.

The startup first gives you a broad idea of your main emission hotspots with an uncertainty range. It then helps you prioritize data collection with your suppliers to refine your data and improve your carbon reporting.

After that, Carbonfact can become your carbon footprint dashboard. You can generate broad reports and drill down at an SKU-based level to see the environmental cost of each product. The platform can then be used to run what-if scenarios to see if you should change a material, move to a new country of manufacturing or change your transport methods.

While many companies will focus first on CO2-equivalent metrics, Carbonfact can also be used to track other metrics, such as water consumption, French eco-labels and other environmental indicators — in the carbon accounting industry, they call these indicators the Product Environmental Footprint Category Rules, or PEFCR for short.

And Carbonfact has already onboarded over 150 apparel and footwear brands, including New Balance, Columbia, Carhartt and Allbirds. “We track 100% of their subsidiaries, 100% of their suppliers, 100% of their products,” Laurent said.

Each client pays tens of thousands of dollars per year to use Carbonfact. With a little back-of-the-envelope calculation, if we consider that a client pays around $20,000 per year on average, it means that the French startup already generates at least $3 million in annual recurring revenue.

It’s clear that sustainability management software is a growing segment in the world of enterprise software. But it’s also a young sector. So it’s going to be interesting to see if several industry-specific platforms can become large companies or if there will be some consolidation down the road.