Theory of Change: How Trace is helping SMEs reach net zero

‍In the Theory of Change series, we break down Giant Leap’s impact thesis for each investment: how we think they’re blazing trails in tackling our most pressing problems. Check out our Starter Guide to Theory of Change for more context.

Trace is an Australian startup offering a carbon footprint assessment, management and reduction tool for small and medium enterprises (SMEs). 

With the need for climate action being more urgent than ever, achieving our net zero commitments will require economy-wide emissions reductions. Trace is on a mission to embed reduction practices into tens of thousands of businesses, creating the potential for millions of tonnes of avoided emissions. 

Founded in 2020 by Cat Long and Joanna Auburn, they’ve been on a high growth trajectory and have already facilitated the offset of over 42,000 tonnes of CO2 equivalent emissions. 

Here’s the breakdown of Giant Leap’s impact thesis for our investment in Trace. 

The urgency of climate action 

According to an October 2022 UN Climate Change report released ahead of COP27, national governments’ current net zero pledges put the world on track for global warming of 2.5 degrees celsius by the close of the century. The UN Intergovernmental Panel on Climate Change (IPCC) indicates that greenhouse gas emissions must decline by 45% by 2030 in order to limit global warming to 1.5 degrees celsius, meaning we are nowhere near on track for the pace of emissions reduction needed to avoid catastrophic warming. 

As countries are already emitting more CO2 equivalent emissions than can be feasibly drawn down, achieving net zero will depend heavily on reducing avoidable emissions. John Doerr, author of Speed and Scale: An Action Plan for Solving our Climate Crisis, estimates that we will need to avoid 59 billion tonnes of CO2 emissions by 2050, compared to offsetting 11 billion tonnes through carbon offsets and conservation of nature.

Relevantly, the IPCC estimates that 40 - 70% of emissions reductions are achievable through technology and policies like carbon pricing that facilitate behavioural change for businesses and populations. This is where solutions like Trace come in. 

Making decarbonisation accessible 

There can be no net zero economy without SMEs transitioning to net zero aligned processes and operations. 98% of businesses in Australia are SMEs, emitting approximately 146.5 million tonnes of Australia’s annual carbon emissions. If SMEs change their emissions practices, they can have an outsized impact on reducing Australia’s carbon footprint. 

Decarbonisation is now front and centre in the public psyche, illustrated by the fact that 60% of employees want their employers to take action on the climate crisis. Policy and consumer pressure has triggered half of the world’s 2000 largest companies to set science-based emissions reduction commitments, putting the carbon offsets market on track to grow from $1 billion to $70 billion by 2030. However, one third of these companies are already set to miss their commitments due to a lack of skills, leadership, and policy support.

Trace is filling an essential gap in SMEs and enterprises’ ability to deliver on these net zero commitments, including through its specialisation in employee engagement. Trace provides an accessible solution, helping employees to upskill and initiate direct and indirect emissions reduction initiatives, and by providing high quality carbon offsets for unavoidable emissions. 

Keeping people committed and engaged 

A key issue in SMEs’ path to emissions reduction is keeping employees engaged and giving them agency in the process. Trace has found that 25% of SMEs’ emissions are generated directly by staff and can be 100% influenced by them. As such, mass engagement and behavioural change is essential. 

Trace enables this by providing staff engagement collateral and employee access to the company dashboard so that every employee has visibility over the company’s climate commitment. Trace also provides employee education and enablement tools so that employees can be engaged and empowered within their employer’s climate action. 

Giant Leap’s impact thesis

Giant Leap's Theory of Change for our investment in Trace

If Giant Leap supports Trace with values-aligned capital, then Trace will be able to provide carbon assessment and reduction services to help more companies achieve their net zero targets and ultimately contribute to reaching net zero by 2050. Further, Trace’s focus on employee engagement and education will contribute to the behavioural change needed to reduce emissions en masse. 

Impact metrics 

• CO2e emissions per full time equivalent (FTE) employee
• Absolute tonnes of CO2e emissions reduced 
• Tonnes of CO2e emissions offset 
• Trees planted by Trace customers (in addition to emissions offset)