Carbon Offsetting in the Shipping Industry | Episode 18

Hey, everybody. It's Patrick Escolas with another Banyan Tire Tracks Podcast. I have with me here Hayden Pirkle from Patch.IO. How you doing today, Hayden?

Doing great. First time in Cleveland, we've got lovely weather out here. Happy to be here. 

It won't last. But if you don't like the weather, just wait 10 minutes. It'll change anyways. No, but thanks for coming and talking to me today. Now, first, I got to ask. Patch.IO, how much do you pay to get rid of the dotcom and get the cool IO on there? What's –

Hey, man. We're trying. We're working on it. We're working on it. 

Yes. Hey, it's better [inaudible 00:00:45]. So first off, let me start with saying what do you do at Patch? Then why don't you to tell me a bit who is Patch. 

Cool. Yes, absolutely. So I head up the Account Management Solutions Engineering Team at Patch. In that role, we're really focused on helping our customers integrate our software. So we're really focused on activation. Then we think about how we can help them grow together by creating more value for them throughout the sort of the duration of the relationship. 

So you're working with the different clients or customers that way?

Exactly, exactly. 

Okay. Kind of getting it to work best for them per se. 

Exactly. So me and my team, we've been deeply working with the Banyan folks, the Banyan product team on building out the integration that you guys will be talking about later today. 

Yes. That sounds great. So with Patch.IO itself, carbon footprint, where did the whole thing start? Why is this something that's a business for you guys? Give me kind of a – I know we don't have all day. But at the same time, give me a quick elevator pitch there. 

Yes. I think sustainability, climate in particular, is this very, very top-of-mind thing for businesses of all types these days, and so –

This is one that's always debated in my head. Is that just out of the good of our heart? Is that for looking for the future? Or is there business advantages to that?

I think it's a mix of both, right? So I think working in the climate space, participating in the voluntary carbon markets is really, really mission-critical for helping to mitigate the very real impacts of climate change. But I think a really important thesis for us here at Patch is how can we help you kind of participate in climate action or use climate action to actually drive really important business objectives. So things like customer acquisition because your customers are also thinking about climate. So you can use these integrated climate action tools to open up new revenue streams. 

Go out and win more business. 

Go win new business. Satisfy investors and other stakeholders that you may be working with. 

Okay. So Banyan, we're – I mean, we used to be bread and butter LTL. Obviously, now, we do full truckload parcel local carrier. Within the logistics industry, they always like to say that LTL specifically is kind of green because you're making sure that any trip out, you're loading up your truck to come back. So there's not an empty load there. What is that industry responsible in carbon footprint right now? How big is that? Is it the biggest? Like what does that look like?

Yes. I think the latest numbers that I've seen is that the freight industry across all freight types is something like 8 to 10 percent of global emissions. 

Just the entire thing. 

As humans, we emit something on the order of like 50 billion tons of carbon annually. 

That's not just when we have chili or anything. 

That's not just when we have chili. That's exactly right. Then I think in terms of on-the-road freight, that’s something like 50% of that 8 or 10 percent is sort of derived from on-the-road freight. The reason for that is, one, we're seeing like a big increase in things like e-commerce. So there's a lot more things like last-mile delivery, for example. But then, also, it's just the carbon intensity of on-the-road freight is way different than some other types of freight. So I think I saw recently that on-the-road freight is on the order of a 100 times more carbon-intensive than cargo that's shipped via cargo ships, which is where the bulk of freight is delivered. 

Got you. That's really interesting. When you talked about e-commerce, during like, obviously, the COVID time, when e-commerce popped up and logistics was kind of crazy, is that a time where we saw carbon emissions go up or go down?

I'm not actually quite sure what happened. Globally, emissions went down, and that was largely because other things –

Everybody locked in their house and stopped driving. 

Yes. We weren't going anywhere. We weren’t taking flights anywhere. Nobody went on vacation for two years. But at the same time, I was never an Amazon user until COVID hit. Then I started kind of getting alarmed by the fact that I had a mountain of cardboard boxes in my kitchen every week of all the new stuff that I just had to have while I was locked in my home. 

They got you good. They got you good. 

Bezos got me good. 

No. So what is the – obviously, like we talked about, there's the importance of the knowledge for it. But what do you do to – because, obviously, Patch does both tracking, and that's great for just knowing where it is. What do you do with that knowledge once you have that of like, “Okay, we have a quarter worth of shipments. Here's what carbon footprint our trucks are responsible for.” Or if I'm a shipper, our shipments. What do I do now? What is my thought process then?

Yes, absolutely. So I think it may be helpful to actually take a quick step back and sort of outline how we think about sort of the climate action journey, which has generally four primary components. The first is measurement, which is what you were talking about with the tracking piece, right? So that's carbon accounting, which could be helping a business understand their holistic carbon footprint across all of their operations. Or it could be footprint measurement of a particular activity such as sending a specific shipment from A to B, credit card transaction for a purchase that's made. You can footprint a whole lot of activities. So that's the first step. 

Up next and arguably most important is actually reduction. So it's really critical that we take that –

So once you have the data, look at where you can cut it. 

Right. So does that mean we're going to start using renewable energy within our offices? Does that mean we're going to start electrify our fleet? Things like that where you're actually just reducing the amount of carbon that you emit into the atmosphere in the first place. What we always say at Patch is the best ton of carbon is the carbon that was never emitted in the first place. 

Right. It's easier to prevent in the first place than have to figure out and clean it up after the –

Keep it in the bottle. That's exactly right. 

Okay. That’s great. 

But the reality is that it's very, very difficult. We're never getting emissions down to zero. There's always going to be unbeatable emissions. 

Well, we'll still all be around, right?

I hope so. I hope so. That’s where the third piece of sort of the climate action puzzle comes into play. This is where we play the most prominent role which is around compensation or removal. So we enable businesses to access a wide range of carbon reduction and carbon removal projects. By projects, these are generally for-profit businesses that are doing the hard work on the ground of reducing or removing the carbon that's put out there. So that could be anything from reforesting a forest. So those trees are, of course, eating the CO2 and storing that within the wood itself. Or now, we're seeing sort of a spike in what we call human-engineered or tech-based removal technologies. So that's –

What does that look like, an example of that?

The best example, kind of the easiest one to understand, I think, is something like direct air carbon capture, which are these almost giant –

You have someone going out in a net. 

No, no, no. But they are basically like giant industrial vacuums that ingest air, induce a chemical reaction, which isolates the carbon, which can then be sequestered by, let's say, pumping it back into the ground where it came from, where theoretically it should stay forever. 

That's awesome. 

So we play around in the footprint measurements space, which is what we're supporting with Banyan. So we're helping Banyan customers measure the footprint of their shipments. 

Just like when I do Google Flights, and I see exactly what that footprint is. 

That’s exactly it. 

Now, when I get a shipment or I have to move somebody for something, it's going to tell me exactly what that footprint is. Yes. 

The footprint of this load from A to B equals X. Then we allow them to participate in the compensation piece, that removal piece. So they can then buy a carbon credit, which a carbon credit represents a metric ton of carbon that's either been avoided, reduced, or removed from the atmosphere through some of those sort of means that I just mentioned before. You buy these carbon credits, which is a revenue source for those projects, what they sell basically. 

Got it. Yes. That makes sense. 

Then you can use that, those carbon credits, to effectively compensate for that footprint. So for example, if – I'm going to use very, very round numbers here because I have a medium –

Good, good. Do not make me do math, please. 

Let's say a shipment from A to B was a metric ton. You then buy a metric ton carbon credit. 

To offset that. 

Then you now offset or compensate it for that footprint. 

Got you. Okay. So within that, would I then say I'm carbon-neutral for – if I operate like that over, I could put that under my resume or my company's logo and header like, “We’re a carbon-neutral shipper or something.”?

Yes, yes. So there's a whole bunch of sort of sustainability claim types out there, carbon-neutrality being one of them. Another one that you'll hear quite frequently is net-zero, which is a slightly more robust, slightly more difficult to attain claim type. But, yes, exactly what you said. So if you – if a shipment from A to B was a metric ton, you bought a carbon credit which represents that metric ton. You've now offset that. You could then say that that shipment is carbon-neutral. Businesses can be carbon-neutral. Flights can be carbon-neutral. We're starting to see more and more products are carbon-neutral, where the manufacturer will have done a whole bunch of carbon accounting around. 

Will take steps to offset that. 

What’s the carbon intensity of this watch? Then they offset that through, hopefully, high-integrity carbon removal credits. 

Yes. So two questions come to mind on that, A, because I'm a salesperson and, obviously, cynical of all things. So if someone says something like net zero, is there someone that comes out and audits or like gives you a stamp of approval on that? Or what does that look? Or I put it on there and see if anybody notices for a while. 

So it's kind of a mixed bag. It kind of depends where you're based. It's a little wild west in some ways, if we're being perfectly honest there. But something like a net zero. There are organizations like such as SBTi, which has a whole bunch of rules in place in terms of sort of process that you have to follow, things that you need to achieve in order for you to sort of ascertain that label. 

So they’ll make sure that's a real – they'll give you a stamp and maybe a badge and say, “There you go. You've earned it.” 

Absolutely, absolutely. 

Then within my second question there is how do you find these projects. Did you give some guys at MIT that really like granola some money? Or what – how does that work?

So those guys are out there. They're doing all that hard work. At Patch, we have – so we are a two-sided marketplace, where in this case Banyan and Banyan’s customers are on the demand side of the marketplace. 

Right. We’re very demanding. 

The demand for the carbon credits. Then we have a supply side of the marketplace, and those are the folks that are either generating or sourcing the credits. We have an entire team at Patch that are dedicated around sourcing credits, finding new projects to pull into the Patch marketplace. We have folks that are then dedicated to ensure that the projects that are potentially on boarded to Patch meet a certain like integrity bar. So there is sort of like a quality assurance or integrity assurance, set of measures that we deploy. 

It’s not just like Patrick's ability to maybe offset my own financial costs by getting that metric ton of money. 

Yes, exactly. There's a whole bunch of sort of guidelines. We have a pretty robust framework in terms of what can and can't be listed on Patch. That relates to things such as is that credit certified by a sort of recognized certification body. When did the climate action or impact actually occur? Did it happen in 2010, or did it happen in 2021? There's a big difference between the integrity or quality between those two years since we're now in 2023. 

Okay. I wouldn't have even thought about that either. 

As you start peeling the onion layers back, it gets kind of infinitely complex, unfortunately. 

So as an account manager, you got a lot to talk and walk through people with. 

Yes, man. It's – we've been drinking from a lot of fire hoses in terms of getting up to speed on everything. 

It's not the way it is. Within that, and let me ask you this, like what's your – out of all the projects you guys have sourced, what's either the most interesting? Is it that kind of vacuum that you talked about? Or what's your favorite?

I think –

Or do you have one?

I do and I think probably the one that resonates most frequently with the most amount of folks is we work with a project called Running Tide, where these folks, they are –

It's not Roll Tide. It's not all about Alabama. 

Not Roll Tide. But I am from Birmingham. So Roll Tide roll, baby. But the –

O-H-I-O. 

Tough start to the season for us. 

That's okay. That's all right. 

But the – so Running Tide, they grow kelp off the coast in the Atlantic Ocean. Then kelp grows much, much, much faster than like a tree does, for example. 

It does the same thing as a tree, even though it's –

Yes.

Okay. 

It’s absorbing carbon as sort of its food. Then they are purposely sinking that carbon into very deep high-pressure low-temperature water, where the kelp effectively never decomposes. When organic matter composes, it starts to release the carbon back into the atmosphere. 

That you're to – 

Right. 

Yes, no.

So it’s this cool hybrid of a nature-based carbon removal technology or project and sort of a human-engineered process. So it's a hybrid in the sense that human intervention is occurring to make this thing happen. 

That's very cool. Is that something that's been going on for a while? Or is this something that they've really started kind of putting the pencil to and getting technical with?

No. This, along with many any of the other human-engineered technologies, are all nascent, I would say. Yes.

Okay. All right. Now, this is good stuff. Like if I'm a company out there trying to – let me ask this. Is there a way to get started with it? How do you – because this kind of feels like a big thing, like we talked about. You peel back the layers, and there's level and level and more intricacies. How does someone just thinking about it, how would they get started with that?

Yes, absolutely. So I think a really cool thing about working with a company like Patch – so the answer to your question is come to Patch. 

Yes, okay. There you go. 

But the reason for that is –

You're allowed to plug. That's –

The reason for that is we work with businesses of all shapes and sizes and varying degrees of sort of sustainability and climate sophistication. So we work with SNB retailers that are getting into the climate for the first time, and they may have a very small footprint. They maybe don't know anything about carbon credits, and so we work to get them smarter and make an informed buying but consultative approach as well.

Okay. So their decision. 

There's a consultative approach, and you're able to just very easily access what I sort of describe as an e-commerce experience for buying carbon credits. So we have a very easy-to-use dashboard. 

That’s catchy. I like that. 

Yes. People get it. We have a dashboard that people can log into. They can browse our menu of projects. They can click into it, see a bunch of information about the projects. 

Okay, cool. 

Then they can basically just add it to a cart and click buy. So that's sort of on like the one end of the spectrum. Then on the other end, we work with some of the largest Fortune 100 companies, some of the largest financial institutions in the United States, in the world. We have a big presence in Europe as well. Some of these folks have very, very sophisticated in-house carbon removal teams. 

Well, I would I would kind of think so. Yes. 

Some do. Some don't. So –

With some of this, like you say, in-house, have some of what Patch's been doing kind of been done internally with some niche programs or –

Yes. So they maybe have procured credits. They've certainly evaluated lots of projects. But they'll come to us because we have some really good in-house expertise and say, “Hey, this is what our portfolio is to date. How do you think we can make that better? This is the claim type that we're trying to achieve. What do we need to do to get there? What are you guys seeing in the markets?” So we have this like very sort of in-the-weeds sophisticated conversation that looks very different than –

Right. They don't have to be experts. They can kind of get your input and go with where you might think might be the best bet for them. 

We're able to support folks that are not experts, and then we're able to support folks that are as sharp as you get. 

Well, there you go. Whoever you are, talk to Hayden. That's right. 

That’s it. 

That's right. Well, you're not going to be talking to me. You're going to be talking to somebody smarter than me. That's for sure. 

Oh, you sound smarter than me at the very least about this, which is good because I wouldn't talk. So I think I got a lot of the questions I want out of there, and I always like to – with this podcast, like what's your message to anyone listening or watching if like whether it's a personal soapbox, and [inaudible 00:16:55] about the Jets loss or win, I guess, losing Aaron Rodgers. But, I mean, from Patch to carbon to the industry of logistics as a whole, what do you have to say kind of as a parting shot or a message?

Yes. I think I would say that like, look, the voluntary carbon markets, sustainability, climate action, it’s this pretty daunting space. It’s very, very complicated. You're sort of damned if you do, damned if you don't in some ways. Doing nothing gets you criticized. Doing something –

Doing the wrong. 

The wrong thing gets you criticized. But the simple reality is that we're dealing with like a pretty urgent climate crisis. 

When you say urgent, like how quickly do things need to shift or change?

Oh, like yesterday. 

Yesterday?

Yesterday, absolutely. So I think like there are really cool companies out there that can help you sort of dip your toe in the climate action waters. Like I encourage everybody to sort of start today because the issue is if everybody just sort of waits or is worried about this risk or that risk, like the problem's not going to get solved. 

Paralyzation of over analyzation. 

Yes. That's exactly it. Yes. No. 

Well, that's awesome. Hayden, thank you very much. 

Thanks for having me. 

Hey, no. Anytime, man. You come back. We'll talk anytime. Thanks, everybody, for listening and watching. This is Patrick Escolas with another episode of Banyan’s Tire Tracks Podcast. We'll see plenty more from us. So thanks for being here.