Interview With Taylor Francis, Co-Founder Of Watershed, A Carbon Accounting Software Company

We started Watershed on this mission to put as big of a dent in the climate crisis as we possibly could. The one good thing about the climate crisis is that it is a math problem — it is easy to judge your impact based on if you are bending that global curve of how much carbon the world emits every year. We set a goal for ourselves to try to build a company that at scale can get to 500 million tonnes of CO2 reduced or removed per year. One percent of the world’s emissions.

We started Watershed’s software to help companies measure, reduce, and report their carbon emissions. Our big focus is giving companies the tools they need to actually bend their carbon graph down. It’s not enough, in our view, to just help companies report the graph. We want to help companies buy clean power, fund carbon removal, and engage their suppliers so that less carbon goes in the atmosphere every year.

With our origin story, there’s kind of two converging stories. One story is that Avi, Christian, and I have all been very passionate about climate change for our whole lives. For me, that goes back to middle school and seeing Al Gore’s movie, The Inconvenient Truth, and actually spending all of high school going around giving talks about climate change at schools, libraries, and community centers.

You were in the Al Gore Climate Reality program?

Yes, I was one of the first people who was a part of that program when I was 13. I spent all of high school giving a local version of the Inconvenient Truth slideshow.

Then, Avi, Christian, and I worked together at Stripe, the payments technology company. I joined Stripe when it was relatively early; it’s now a six-thousand person company worth a hundred billion dollars. We got to walk that journey with Stripe. It’s at Stripe that we learned that companies are really the ones with leverage. If you want to bend that global carbon graph, the way to do it is to enable organizations, businesses, companies with supply chains, offices, employees, and customers to reduce their emissions. We had a kind of first-hand experience doing that at Stripe. Christian launched Stripe’s carbon removal program and got really excited about the potential impact of companies doing climate work well. But, we were also just shocked at how inadequate the status quo was to the scale of the climate challenge.

That was when we decided to start Watershed, to basically build the toolset that companies need to actually reduce their emissions in a meaningful way. All hopefully laddering up to getting 500 million tonnes of CO2 impact every year.

If you say companies, do you have certain companies in mind? 

We think about companies across the whole economy, and our hope is that Watershed will become the software layer and marketplace that enables companies in every geography and industry to have an impact on climate change. We’re just getting started, but even today we work with companies in the US, Canada, and Europe, with suppliers all around the world — companies in food, like sweetgreen, companies in technology like Stripe and Shopify, companies in electronics, like Square, logistics like Doordash, and hospitality like Airbnb. What they all have in common is this desire to go a step beyond just paying lip service to climate, by publishing a CSR report once a year, and actually taking real action to redesign their business to be a zero carbon business.

The first companies you’re working with are global tech companies?

We work with a lot of tech companies that have a lot of leverage, both with their customers and with their suppliers. We’re also working with companies in apparel, like Everlane, in food, like sweetgreen and Imperfect Foods. It really runs the whole gamut. We’re trying to build a set of tools that eventually any company could use to redesign their business with an eye on carbon.

When did the first customer use Watershed?

It was early 2020 when the first customer started using Watershed, and we announced the company in February of 2021.

If you could go back to the founding, is there anything you’d do differently today — as inspiration to other aspiring founders?

I have two thoughts on that. One, it’s impossible to move fast enough, as a founder and on climate change. As a founder, I think speed is critical for startups to succeed. On climate change, we are working against a clock that is counting down really fast. The things I wish we’d done differently are all about moving faster.

My big piece of advice to other climate founders and founders generally is to focus on finding a customer who will pay you for something. That is the holy grail moment in starting a company. It’s about that moment that a company says yes, this is worth something to us, and we’re willing to part with resources to make it happen.

The thing that’s been really inspiring about building this company is just seeing how mainstream the motivation to act on climate has gone within companies. This is not some kind of afterthought from PR teams, this is CFOs and executive teams who are considering action on climate to be a huge imperative for them as a business.

You’re saying, move early, move as fast as you can, and have a product.

Solving a need. Exactly.

In terms of the accuracy of information you deliver with Watershed — because I assume you know — you have inputs and then you do calculations there which help companies to estimate footprints and what they could do about it. How happy are you with the current accuracy of it, and how problematic do you think it is? Because it seemed like that was always something that held back software solutions: people were afraid every company is different and had a lot of input, and then the accuracy is different because every factor is different, and so on. How do you think about this problem and how did you solve it?

Great question. We think about it in terms of helping companies measure their emissions, reduce emissions, and reporting. For measurement and reporting, data is really at the core. We spend a lot of time thinking about carbon data and how to make it better for companies.

Our approach to that has been to help companies trace carbon all the way down their supply chain. Traditionally, companies ignored emissions from their suppliers and their customers, and looked in a tunnel vision way at the carbon that came from their office, from business travel, and from commuting, which is generally only 10 or 20% of the total carbon impact of a business.

We built this whole carbon data engine under the hood at Watershed that X-rays a company’s supply chain and looks at who they are buying from and where those goods are traveling to try to figure out carbon emissions as granularly as possible.

My big thought on the accuracy of carbon data is that we should be asking a different question. We should be asking the question: What is it going to take to deliver carbon data to companies that enables them to take the right action? What is the kind of approach to carbon data oriented around actionability?

I think a good example of that is around the supply chain. Traditionally, companies would measure their supplier emissions by roughly estimating the total spend in a category, roughly estimating the carbon emissions of each dollar spent in that category, and then having that be their footprint. The problem with that is that that doesn’t actually motivate you to take the right action. It doesn’t motivate you to change suppliers or change materials or redesign your product. We’re really asking the question: How can we get companies’ data that’s granular enough to actually enable them to take the right step to reduce emissions? This isn’t just a measurement game — it’s an action and reduction game.

The data has to be topical enough that people can do something with it?

Yes, exactly.

That seems like a much better question to ask than looking retrospectively. If you look into the future, where do you hope Watershed is in 3 to 5 years? 

We work backwards from the goal of putting as big of a dent in climate change as we can. If we’re trying to get to five hundred million tonnes of CO2 reduced or removed by Watershed customers every year fast, we don’t have any time to waste. We’ve only got a decade to turn the tide on the carbon problem. We’re obsessed with scaling Watershed as fast as we can to as many companies as we can in as many geographies and sectors as we can, with a laser focus on enabling companies to take the right type of climate action. That’s focused on reductions, not offsets, that prioritizes permanent carbon removal and that engages suppliers. Three to five years from now, I hope we’re preventing half a gigaton of carbon from going to the atmosphere every year.

What else would you be doing if you weren’t a co-founder at Watershed?

We’re at a moment where the imperative is to work on the climate crisis. The question I would ask myself is, “What’s the other way to have a lot of impact on climate change?”

And any thoughts?

I think policy is the other lever. I think businesses and policy are the two levers that matter. We’re excited about Watershed and we’re excited about what our customers are doing because businesses control so much of the carbon in the economy. Policy, the rules, regulation, politics: that matters in a big way, and we’re seeing that right now with the climate bill embedded in the Infrastructure Bill in the Senate in the United States, with COP26 around the corner.

The rules of the road determine how companies determine what investments make sense. Smart policy is such a key lever in the climate fight. If I weren’t working on this I’d be trying to contribute to that in some way.

That might be even more difficult than what you’re working on right now. 

I think we need both. We cannot solve this problem without both.

How do you think of cost at Watershed? Cost for people paying for Watershed, but also costs that Watershed can help customers to avoid in the future. What’s your sort of cost vision?

The companies we talk to are living in the future, knowing that a cost on carbon is going to manifest somehow. Whether that’s explicitly in carbon taxes or implicitly because of regulation and expectations from investors and so forth kind of create a de facto cost on carbon. Companies know that that’s where the puck is headed. They view Watershed not as a charity investment but as a deep investment in safeguarding their business for the future, because they know that in a world where carbon has a cost attached to it, getting ahead of the curve on managing that cost by measuring and reducing carbon across the whole supply chain is going to future-proof them for a decarbonized world.

The other big kind of motivation we’re seeing is coming from the investment community. CFOs are the ones driving climate action at a lot of Watershed customers. CFOs know that Black Rock, the SEC, and regulators in the UK and Europe expect carbon to be reported with as much rigor as financial results, because carbon is going to be a key driver of financial results in the future. That’s the other big tidal wave that’s propelling a lot of this work.

So would you say that Black Rock is sort of like the government? That if Black Rock puts in a theoretical carbon tax, we’re halfway there?

What I would say is that we are seeing these converging waves of government regulation, government disclosure requirements, investor expectations, employee expectations, customer expectations, that are all combining into this new imperative for companies to bake climate into corporate governance. That’s the bottom line here — climate governance is going mainstream for companies around the world. It’s a step beyond just climate disclosure. Climate governance isn’t just reporting your number, it includes having a team, board level targets, and accountability for actually driving those numbers in the right direction.

These converging waves are making governance an imperative for basically every company.

I really like calling it climate governance. If you think about cleantech and climate, what do you think are the most overlooked opportunities?