When we think of carbon-emitting industries, fashion is rarely the first thought. Yet the fashion industry is polluting more than aviation and shipping combined.is polluting more than aviation and shipping combined. Fashion, apparel, and textiles account not only for an annual $1,900B spend globally but also ~10% of all greenhouse gas (GHG) emissions.
According to research from McKinsey, ~70% of such emissions are emitted upstream, or from the production of items, and “under the current trajectory, the fashion industry misses the 1.5°C pathway (the actions and emissions reductions required to limit global temperature rise to 1.5°C above pre-industrial levels, as set out in the Paris Agreement) by a (not so) cool 50%.
On top of this, the production of garments can have devastating effects on local communities and ecosystems. Researchers at Columbia University suggest that producing one pair of jeans can consume 7.5-10k liters of water (the amount one person could drink in a lifetime) and cotton production “requires pesticides and insecticides, which pollute the soil; runoff from fertilized cotton fields carries the excess nutrients to water bodies, causing eutrophication and algal blooms.”
For these reasons, fashion and apparel supply chains are coming under increasing scrutiny, both from a social standpoint and a regulatory one. As such, not only are fashion brands subject to standards such as the Non-Financial Reporting Directive & Corporate Sustainability Reporting Directive (applying to companies selling in the EU), but on both sides of the Atlantic, fashion and apparel companies are increasingly hit by industry-specific regulation.
Take, for example, the:
- NY State Fashion Act: “Fashion businesses with a footprint in New York and global revenues exceeding $100 million must disclose detailed information about their environmental and social due diligence policies...including setting and disclosing progress against absolute carbon emissions (with a breakdown across all scopes of production).”
- EU Digital Product Passport: “Information about the product’s origins, material composition, supply chain, sustainability, and recyclability.”
Outside of this, there is a clear economic imperative. Customer loyalty is also at stake: Carbon Trust, a sustainability consultancy firm, estimates that 45% of shoppers would be prepared to stop buying their favorite brands if they refused to commit to measuring their product carbon footprint and that 56% of people would be more loyal to a brand if they could see at a glance that it was taking steps to reduce its carbon footprint.
From tedious data collection and reporting processes, to Carbonfact
With Headline, we have invested in the fashion and retail industry for over a decade (Sonos, Farfetch, The RealReal, Anine Bing, etc.). While we remain steadfast in our continuous support of the market, it’s our job to recognize its ever-evolving nature.
As such, over the past few years, we have come to realize there is a natural tension at play: fashion, apparel, and textiles have one of the highest levels of emissions per dollar spent compared to any other segment, yet they lack adequate tooling to equip them on their decarbonization journey.
Over the last 18 months, we have been closely following the regulation that has been coming online, mandating firms to begin reporting their carbon emissions (with increasing levels of granularity). We began trying to break down the impact of regulation into different sectors as well as digging deeper into sectoral carbon emissions across the continent.
Enter Carbonfact, which is already used by 150+ global apparel and footwear brands including Columbia, New Balance, and Carhartt, and that we believe will be the leading solution to help brands embark on and manage this transition to becoming climate-conscious businesses.
Venturing Out: from VC to Founder
We first met co-founder Marc Laurent ten years ago when he launched Pre-Seed and Seed VC firm Kerala Ventures, one of France’s most successful. After backing Pre-Seed companies from the likes of Doctolib and Malt, Marc felt the urge to go back to the entrepreneurial drawing board, with the drive to build something that would help shape a better world in which his children and grandchildren could live.
In the process, Marc met Martin Daniel (formerly of Airbnb) and Romain Champourlier (formerly CTO of JobTeaser), to build what is Carbonfact today.
When Marc explained us what he wanted to build long term with Carbonfact, we knew something was there. Carbonfact is now a sleek platform helping fashion and apparel brands manage their Scope 1, 2, and 3 emissions.
Carbonfact, whose power users are typically Sustainability Managers and IT teams automates a tedious data collection and reporting process, addressing the industry's challenge of collecting accurate and primary data from multiple tiers of the supply chain.
Its software connects to the company’s IT systems and cleans and analyzes the data to then identify gaps and anomalies. By employing machine learning, it systematically fills in any missing details and provides reliable footprint calculations, even when data is incomplete.
On the live platform, brands can identify emission-intensive manufacturing processes, build reduction plans, and export automatically created reports for annual carbon disclosure, aligning with multiple frameworks and ensuring compliance with new laws and standards.
Our Core Beliefs:
Today, we join Carbonfact’s $15M Series A with existing investor Alven and the participation of Y Combinator to continue driving their mission to decarbonize fashion.
Ultimately, our investment came down to conviction in three core beliefs:
- In an environment of increasingly specialized vertical regulation, Carbonfact shines as, in the words of its customers, being able to deliver “the granularity that we need in an increasingly complex supply chain.” This is in stark contrast to other horizontal (and more superficial) platforms currently on the market.
- We continually heard from customers that the platform delivers incredible value (often >2x time spend!) by not only helping brands comply with regulatory requirements & demonstrate commitment to sustainability but also:
a) Hearing from customers that “Carbonfact’s simulation tool enables us to start tinkering with both the product design and my production so that we can continue to innovate in an efficient and sustainable way”
b) Seeing how Carbonfact helped companies access cheaper financing. Companies are able to access more attractive borrowing rates and subsidies by being able to provide lenders with in-depth GHG reporting across their portfolio - We think there are clear opportunities for Carbonfact to move deeper into fashion brands’ “sustainability stack” (e.g., automation of EU CSRD reporting, digital passport management), and over time, we see the current product as an effective wedge into moving longer-term into traceability tooling as well as into other adjacent verticals (e.g., soft furnishings).
Marc, Martin, Romain - let’s decarbonize fashion big time!