For a lot of companies, Scope 3 emissions make up the bulk of their carbon footprint, but are time-consuming and expensive for them to track. As more regulation mandating Scope 3 reporting is passed, however, it is crucial for them to do so. That’s where Avarni comes into the frame. The Sydney-based startup helps companies measure carbon emissions, identify hotspots in their supply chains and strategize how to hit net-zero targets.
Avarni announced today it has raised $2.5 million AUD (about $1.64 million USD) in an extension round from returning investor Main Sequence and new backers Sprint Ventures and AfterWork Ventures. This follows a $3 million funding round in November 2022 and brings Avarni’s total raised so far to $6.1 million.
Avarni’s target clients are large enterprise organizations with public SBTI (Science Based Target initiative) or net-zero targets. Clients come from sectors like professional services, engineering, pharmaceuticals, hospitality, energy and manufacturing, and include Schneider Electric, Jacobs, KPMG Australia and Morrison Hershfield. Other customers come from the public sector, including City of London Corporation. Avarni says it has analyzed more than $1.58 trillion worth of data across 311,000 suppliers in hundreds of industries, and identified more than 487 million tonnes of carbon dioxide.
Scope 3 emissions come from sources within an organization’s value chain that it doesn’t own and can make up 65% to 95% of its carbon impact, according to PwC. More laws requiring companies to report their Scope 3 emissions are being passed, including a recent Senate bill in California that is expected to influence regulations around the world. In Australia, the government plans to introduce mandatory climate reporting for companies and financial institutions next year, including Scope 1, 2 and 3 emissions.
Avarni co-founder and co-CEO Misha Cajic told TechCrunch that getting accurate and comprehensive data on indirect emissions can be challenging for companies because of limited transparency and data from their suppliers and other partners. Furthermore, Scope 3 emissions have to be collected from upstream and downstream sources, requiring a lot of communication, collaboration and, in some cases, incentives.
Avarni co-founders Anuj Paudel and Misha Cajic. Image Credits: Avarni
Avarni’s platform makes the process more simple by looking at the percentage of a company’s supply chain that has already set SBTI-validated targets. It does this by doing a first pass on procurement spend data, identifying which suppliers contribute the most to their supply chain emissions. Then organizations can use Avarni to send suppliers customized questionnaires and free access to the platform to gather their procurement spend and activity data. Avarni uses spend and activity data provided by suppliers to calculate supplier-specific emissions factors, which results in more accurate calculations and insights. Avarni also includes forecasting and initiative planning tools to model future emissions based on different business scenarios, and can give users actionable steps to take based on emissions data from their suppliers.
Cajic says Avarni has seen an increase in new clients from the United States as businesses work to make sure they have processes and systems in place before reporting requirements come into effect.
“We spent some time in the U.S. over September, and our key takeaway was the speed of mobilization and willingness of companies to work directly with their suppliers to decarbonize,” he said. “We anticipated it would take longer for companies to operationalize supply chain activity, but U.S. companies are looking to move quickly to engage their supply chain, having recognized decarbonization as an important challenge to overcome.”
In Australia, Cajic expects demand for Avarni to grow as new decarbonization regulations go into effect for some companies and financial institutions by July 2024. He notes that only 22% of the ASX200, or around 43 companies, have some form of Scope 3 emissions target and strategy. Indeed, 110 companies are reporting their Scope 3 emissions, but still need to implement a strategy that will reduce their emissions footprint.
Avarni’s direct competitors include larger ESG platforms and carbon accounting platforms, but Cajic says those are limited because they only perform carbon footprint calculations based on procurement spend data. Avarni’s differentiator is its ability to let organizations invite suppliers to add and manage their emissions data in Avarni for free. This in turn enables Avarni to calculate a supplier-specific emission factor, generate more accurate calculations and help stakeholders in a value chain collaborate.
In a statement, Main Sequence investment manager Alezeia Brown said, “In the race towards net zero, accurately measuring emissions — especially Scope 3 — remains a major challenge. Companies rely on third-party data or unverified numbers from suppliers, leaving them with imprecise carbon accounting. Avarni is pioneering new ways to tackle this problem head-on. In the urgent journey to net zero, Avarni’s technology will allow organizations to plan and reduce impacts across their entire supply chain like never before.”