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Radical Decarbonization in the Age of AI
- 5 days ago
- 11 min read
How Regulation, Transparency, and Artificial Intelligence Are Revolutionizing Carbon Accounting and Accelerating the Race to Net Zero - Thought Leadership by #SustXGlobal50 Awardee Kristina Wyatt, United States
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Summary
In this thought leadership article, "Radical Decarbonization in the Age of AI" by Kristina Wyatt, Chief Sustainability Officer, Persefoni, United States, and a recipient of The SustainabilityX® Magazine Global 50 Women In Sustainability Awards™ 2024 explores the sweeping convergence of climate regulation, carbon accounting standards, and artificial intelligence. From the evolution of the GHG Protocol to the global wave of mandatory disclosures under the SEC, CSRD, ISSB, and California laws, she highlights how we’ve entered a new era of "carbon enlightenment." Wyatt examines how AI-driven tools like Persefoni are democratizing carbon data, enabling unprecedented transparency across value chains, and channeling over $1 trillion in climate capital more efficiently. With urgency and optimism, she makes the case that radical decarbonization is no longer theoretical — it’s underway, powered by policy, capital, and exponential technologies.
These are unusual times. The rate of technological change is dizzying. If we were to measure generations by quantum leaps in technological innovations, we would have a different generation every two to three years.
Indeed, my children are 20 and 21. When they were young, the most sophisticated digital devices they had were Leapfrogs – plastic devices with rudimentary screens and sounds into which you would insert a small cassette-like cartridge to play simple games. When we traveled long distances, we strapped backpacks on them loaded with the ultimate luxury – personal portable DVD players.
Fast forward to their high school years. By that point, the iPhone was in every teen’s hands. Their social lives played out on Instagram. This change has taken place in the span of less than ten years. Now, of course, Tik Tok has supplanted Instagram and Chat GPT is taking off. This is all to say that the pace of technological change has been extremely rapid.
The pace of change is also dramatically altering how we account for the carbon emissions associated with the various things we purchase and use. We are currently undergoing a transformation in our understanding of the carbon impacts of the various activities in which we engage every day and the things we purchase. In a sense, we are in a period of carbon enlightenment.
This enlightenment is manifesting in a couple of ways. First, the effects of climate change are increasingly apparent all around us with year-over-year record temperatures, increasing storm intensity, frequent and large-scale wildfires, dramatic flooding, and other physical impacts that make climate change impossible to ignore. The economic impacts are also increasingly apparent. Consumers are considering the climate impacts of the products they purchase, as evidenced in one example by the transformation of the automotive industry away from internal combustion engine vehicles and toward electric vehicles. We see similar phenomena playing out in the demand for sustainable investment vehicles, in young employees’ decisions as to where to work, and in the proliferation of climate laws, regulations and policies around the world.
The other area of enlightenment is in the transparency we are building around how companies’ activities contribute to climate change. We’re in a period of rapid growth in the transparency as to companies’ emissions.
To take a step back, make no mistake, we have been at this for quite some time. It is just now that we have the technology and regulatory alignment necessary to drive the transparency that is necessary to move us to a more sustainable world.
The GHG Protocol was formed in 1998 when the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) recognized the need for an international standard for corporate GHG accounting and reporting. Up until that time, there was no common language for talking about – and comparing – the greenhouse gas emissions associated with companies’ emissions. One can equate this to the barter system. Before we had currency to normalize the value of goods in a common unit of measure, it was difficult to assess whether the value of my five sheep were equivalent to your ten bales of hay. Money solved that. The GHG Protocol did the same thing for carbon emissions. It provided a framework by which to measure the GHG emissions associated with a company’s activities and talk about those impacts in a common language.
The mechanism the GHG Protocol used to define how we measure and compare the carbon impacts of different activities is the application of emission factors. These factors enable a company to translate units of particular activities – like burning fuel for its operations or transporting goods – into a common unit of measure. That unit is carbon dioxide equivalent or CO2e.
How does all of this work in practice? Companies must take the activities in which they are engaged and multiply those activities by the appropriate emission factors for such activities. Because the carbon intensity of activities can vary widely by geographic region and products produced, there are emission factor sets that are geared quite granularly to the specific activities and geographies. As an example, operating a building in Beijing will have different emissions per kilowatt-hour of energy consumed than a similar building operating in Los Angeles because of differences in the energy mix of power provided by these utilities. Similarly, the emission factors associated with the production of cattle are quite different than those for the production of corn. Some of the inputs are similar, such as the land use, but other factors, such as the methane from the cows, is quite different.
Once the appropriate emission factors are applied, the GHG Protocol requires tracking of the six constituent gasses identified by the Kyoto Protocol (Carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride). Because each of these gasses has a different potency, or “global warming potential,” the emission factors applied normalize for the greenhouse gas impact. The GHG Protocol translates these disparate activities and the different greenhouse gasses produced by those activities into the common unit of measure, Carbon Dioxide Equivalent. A company’s emissions from its various activities roll up into what are commonly known as scope 1 emissions – the emissions from the company’s own operations, scope 2 emissions – from the generation of power that the company purchases, and scope 3 emissions – the emissions in the company’s value chain, both upstream and downstream.
While the GHG Protocol has been in existence for more than 25 years, consistent reporting is just now emerging. Following the Paris Climate Agreement in 2015, there was a surge in investor interest in obtaining emissions and other sustainability data from companies. This led to a period of increasing demand for data. However, the reporting landscape was fragmented and dominated by a proliferation of voluntary standards, which created confusion and burden for companies without concomitant benefit to investors. In fact, in the absence of regulatory oversight, selective cherry picking of sustainability data presented a challenge for investors attempting to compare companies and opened the door to the risk of greenwashing.
All of that changed rapidly beginning in 2021. At that time, US President Biden made it a top priority of his administration to address climate change through an “all of government” approach. Included within this was an effort by the US Securities and Exchange Commission to craft rules to define the climate risk disclosures public companies must provide. That effort resulted in rules that the SEC issued in March of 2024 that defined the path of travel for companies and require public companies to disclose their climate-related financial risks and, for certain larger companies, their scopes 1 and 2 emissions.
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At the same time as the US Securities and Exchange Commission was developing its climate disclosure rules, the European Union was developing its own directive and standards under the Corporate Sustainability Reporting Directive (CSRD), which also requires disclosure of companies’ GHG emissions (and many other sustainability topics). The CSRD applies to a broad range of companies – estimated at 50,000 – located both within and outside Europe. It requires the disclosure and verification of companies’ scopes 1, 2, and 3 emissions.
Simultaneously, the global accounting standard setter, the International Financial Reporting Standards Foundation (IFRS Foundation) was also establishing the International Sustainability Standards (ISSB). The mission of the ISSB is to build standards for sustainability reporting to establish a global baseline to harmonize sustainability reporting around the world. At present, more than 20 countries, representing more than 50% of global GDP are in the process of incorporating the ISSB standards into their regulatory structures. The ISSB standards, like the CSRD, require disclosure of scopes 1, 2, and 3 GHG emission.
Not to be left out, California has taken the initiative and adopted laws, CA SB 253 and SB 261, that require GHG emissions reporting and climate risk disclosures. This is important for purposes of aligning the US with the rest of the world particularly since the SEC rule does not go as far as the EU or ISSB in its disclosure requirements. California picks up the slack and aligns with the rest of the world by requiring the disclosure of scopes 1, 2, and 3 emissions.
It is clear that we have rapidly moved from a fragmented disclosure landscape – characterized by some as an “alphabet soup” of voluntary standards to a significantly harmonized regulatory environment centered on the GHG protocol. This is good progress and a critical step as we move toward greater transparency and reliability of climate data.
This transparency and reliability will help investors to better understand the risks they face with certain investments. It will also facilitate the flow of capital to climate solutions.
During this same period, we have also witnessed the rapid growth of artificial intelligence in all business processes. Climate change is no exception. We are now at the start of a digital revolution in carbon accounting.
Carbon accounting software systems are making it vastly simpler for companies to calculate their GHG emissions and to report audited GHG emissions data with confidence. The processes involved in applying the GHG protocol to a company’s activities historically have been performed on spreadsheets with the help of consultants. Vast swaths of a company’s activities had to be tracked on spreadsheets and efforts made to identify and apply appropriate emission factors to derive the carbon impact of those activities. Then, the emissions had to be manually rolled up to a company’s scope 1, 2, and 3 emissions.
This landscape has changed and now software tools provide a mechanism for matching appropriate emission factors to activities, and provide a system of record, documenting the transactions that contribute to the company’s GHG profile. Data gaps can be identified and filled using AI and data anomalies can be detected and flagged through AI.
The next quantum leap in data transparency is just beginning to take place in the form of the network effects that take hold as companies share data up and down their value chains. Persefoni Pro, a free software tool, is one example of a digital catalyst that will enable these network effects to take hold and grow exponentially. The result will be granular, actionable carbon data throughout the economy that will enable companies to decarbonize more quickly and cost-effectively, and capital to flow to those companies that are taking action.
This transparency and movement of capital will propel innovation that drives the transition to a lower carbon economy. There are huge amounts of capital committed to the transition to a low carbon economy. Estimates as of 2023 put the number north of $1 trillion with the trajectory trending upward. In addition to this private capital, the Inflation Reduction Act (IRA) in the United States allocates nearly $400 billion in federal funds toward the clean energy transition. The greater transparency required of companies and the greater reliability of the data brought by technology tools will help to ensure that these funds go toward actual decarbonization programs. Moreover, companies’ progress toward their decarbonization goals will be more easily tracked and verified.
The final critical driver that will catalyze the transition to a low carbon economy is the application of technology – and AI in particular – to derive solutions that enable the transition. Some of the ways in which AI is already propelling the transition to a lower carbon economy are through energy and process optimization, industrial design innovations, transportation planning to optimize energy consumption, carbon removal technologies, and innovations around materials, food, and fuels. The potential for technology to drive the transition to a lower carbon economy is significant and we are only now seeing the tip of the iceberg.
Climate change is an emergency that requires a rapid transition to a lower carbon economy. Fortunately, we are in a period of rapid technological innovation that hold the potential to drive that transition. In the last three years, we have witnessed dramatic advances that lay the foundation for the transition to a lower carbon economy. First, we have witnessed the move from a voluntary, fragmented reporting environment to a harmonized, regulated one. Second, the emergence of software and AI technology is dramatically facilitating reporting and enhancing the reliability and transparency of reporting. Third, the movement of large swaths of capital is essential to the transition. Finally, technology is rapidly advancing that will unlock solutions that will drive the transition. The pace of change is swift – as it must be given the critical urgency to mitigate climate change as fast and as effectively as possible to avert the worst outcomes and preserve a world that is livable.
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The SustainabilityX® Magazine is an award-winning, digital, female-founded, and female-led non-profit initiative bringing the environment and economy together for a sustainable future through dialogue, and now transforming the environment and economy for a sustainable future through the power of women's leadership. Founded on May 8, 2016, and inspired by the United Nations' Sustainable Development Goals by Canada's Top 30 Under 30 in Sustainability Leadership awardee, Supriya Verma, the digital media initiative focuses on approaching the world's most pressing challenges with a holistic, integrated, systems-based perspective as opposed to the traditional and ineffective siloed approach with a single lens on interdisciplinary topics like climate and energy. This initiative ultimately seeks to explore how to effectively bring the environment and economy together through intellectual, insightful dialogue and thought-provoking discussion amongst individuals across sectors taking an interdisciplinary and integrated approach to untangling the intricate web of sustainability while championing women's leadership in sustainability.
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