Shopify, the software as a service (SaaS) eCommerce platform provider, is one of the world’s largest corporate purchasers of carbon removal. The company is much more prominent in sustainability than you might think, as head of sustainability Stacy Kauk tells Sustainable Future News.
“If everyone’s running in a certain direction, it’s really important to look elsewhere and see what other opportunities are being overlooked,” explains Stacy Kauk, head of sustainability at Shopify. It is a mantra which fits the eCommerce platform provider in more ways than one.
For one thing, the company does not have a particular interest in ESG or net zero. Read through Shopify’s 2021 Sustainability Report and you will not find one single mention of ESG. By comparison, net zero is talk of the town with precisely two mentions. Yet neither of these citations relate to Shopify itself. “Reductions alone won’t get us to net zero,” the report explains. “We need to support early-stage carbon removal tech today to make sure an abundance of solutions exist tomorrow.”
Flexibility is a fundamental concept. This space is evolving so quickly, and it would be unfortunate to have spent years building the perfect ESG-compliant setup and figure out that [it] isn’t having any impact at all.
Today, Shopify is cited as one of the largest corporate purchasers of long-term carbon removal. There are 28 companies in its Sustainability Fund, which Kauk founded and leads, with technologies ranging from ocean-based solutions, to mineralization, to biomass. In December Shopify, alongside payments provider Stripe, purchased $11 million (£8.6m) of carbon removal from six new companies.
Kauk looks to companies who may score surprisingly well on ESG – citing oil and gas as an example – to explain the ‘flexibility’ required for Shopify’s approach. “[ESG is] about having policies in place and structures, but it’s not so much focused on impact,” says Kauk.
“Flexibility is a fundamental concept. This space is evolving so quickly, and it would be unfortunate to have spent years building the perfect ESG-compliant setup and figure out that [it] isn’t having any impact at all,” adds Kauk. “So we really want to make sure that we’re doing the things that make sense for our business, and also have impact, and are going to build that sustainable future.”
The most prominently displayed partners, however, are five companies concentrating on direct air capture and storage (DAC+S), pulling carbon directly out of the air to store safely and mineralise long-term; Carbon Engineering, Climeworks, Heirloom, Noya, and Sustaera. Direct air capture is one of the areas which particularly excite Kauk due to the small footprint. “Reforesting areas are important, but we can’t reforest the entire planet, so that’s not going to be the long-term solution for the world,” she notes.
Yet a key test of viability for DAC+S is just around the corner. Climeworks is a clear leader in the space. In January, the company announced success in delivering third-party verified carbon dioxide removal (CDR) to corporate customers for the first time, based on validated DAC+S methodologies. Those customers were Shopify and Stripe, alongside Microsoft. The job took place at Orca, the world’s first and largest DAC+S plant, in Hellisheidi, Iceland, promising 4000 tonnes of captured CO2 per year.
Orca will however look like small beer compared to Mammoth, a proposed plant announced by Climeworks in June 2022 just down the road which looks to capture 36,000 tons of CO2 annually. Indeed, Mammoth will look like small beer compared to Carbon Engineering’s 2026 plans to build a facility which can theoretically topple 500,000 tons.
As good as all this sounds, the numbers need to add up – and Kauk expects that the coming year will see the results. “We’ll start to see whether or not [it’s] achievable at that scale, and I think that’s going to dictate a lot of things going forward,” says Kauk. “I think it’s going to be a pivotal moment for carbon removal, especially direct air capture. We’ll actually get some real cost data, they’ll actually be operating the plant, and we’ll actually understand if pricing is going to come down, as we hope it will.”
With millions of dollars of investment behind it, might a little bit more than hope be needed? “What we do know is the research and lab tests for all these kinds of solutions indicate that it should work,” Kauk clarifies. “The question isn’t if it’s going to work, it’s more ‘is it as promising as we hope?’ ‘Is it as impactful as the model said it was going to be, or is it better?’
“I think what we will find out is whether or not these different technologies and solutions are going to be a meaningful component of our long-term climate solutions set,” Kauk adds.
We’re on a bit of a funding and project development issue at the moment, but I think we’ll get across that.
Kauk was in London at the Innovation Zero event – carbon accounting software was big on the exhibition floor, she reports – to speak on the state of carbon removal right now and the barriers, most of which are economic. “There’s a bit of chicken or egg happening,” she admits. “[Companies say] ‘well, if we’re going to do a project at a certain scale, then we have to have a buyer, and financers aren’t looking to finance a project without a buyer, but a buyer doesn’t want to commit to a project unless they know it’s going to get built’.
“So we’re on a bit of a funding and project development issue at the moment, but I think we’ll get across that.”
The rightful need for long-term climate solutions goes back to small footprint technologies. Kauk says that she would put her bet on ocean-based solutions to prevail in terms of cost-effectiveness. Some of the technologies overlap; Captura, for example, offers a ‘direct ocean capture’ approach through a sea-based electrodialysis machine which generates a stream of atmospheric CO2 directly from ocean water. The utilisation of existing infrastructure such as desalination plants, as opposed to building air contactors – such as Carbon Engineering uses – is encouraged, as Kauk notes.
“I think the hybrid solutions are the sweet spot because they are often much more scalable,” says Kauk. “You can do them at higher quantities faster than you can with the capital-intensive direct air capture. Those are very much like industrial revolution models – you’re learning every time you build a facility so you get those economies of scale, but you have to outlay massive amounts of capital to get those improvements with every evolution of the facility.
“When it comes to an ocean-based solution, you’re going to be able to constantly adapt and change and modify because you’re not relying on a plant – you’re not capex-intensive,” adds Kauk. “It’s more of an operational-intensive approach which you can tweak as you go much more easily.”
This thoughtful approach to understanding business models for emerging sustainable tech gives part of a clue as to why Shopify moves in this space. A quick look at the company’s social media sheds no light, being almost entirely focused on commerce and entrepreneurship best practices. But there you find the rub: if you have so many entrepreneurs building businesses on your platform, sustainability, like charity, begins at home.
If you can build your business from day one, considering sustainability and climate, you will save money in the long term.
“We offer a platform where we have our millions of merchants in over 175 countries across the world. What that does is give us an ability to remove friction from their businesses and help them build sustainable practices, if that works for their brand, because we’re able to use our platform to aggregate demand, make connections, and share information,” explains Kauk.
“If you can build your business from day one, considering sustainability and climate, you will save money in the long term,” Kauk adds. “You may not be able to quantify it and make a business case around it, but it is certainly easier to – and it’s more economically feasible to – avoid an emission than it is to go out and clean it up down the road.
“The future that we’re going towards is companies are going to be accountable for their emissions and reporting them, just like we all do our taxes. That’s eventually the world I think we’re going to be in,” says Kauk. “So anything that we can do today to get ahead of that just futureproofs everyone’s business.”
With emerging regulations such as CSRD in the European Union, that prediction is coming true already. But what about the future of carbon removal if businesses want to play their part? Shopify has published a buyer’s guide to help, but Kauk notes the longer-term outlook.
I would encourage companies to get comfortable with understanding carbon removal and all of the different varieties that are out there before they need to go and rely on making a purchase.
“A lot of companies have net zero targets; a lot have picked dates like 2030, 2035, 2040,” says Kauk, “and when they get there, they’re going to need to buy carbon removal for their remaining emissions that are left over after they’ve implemented all of their reduction plans. And if they expect to be able to just go out and buy it and understand it, and have it available to them in 2030 without doing anything today, I think it’s going to be difficult.
“I would encourage companies to get comfortable with understanding carbon removal and all of the different varieties that are out there before they need to go and rely on making a purchase,” adds Kauk. “Because there’s going to be a lot of competition at that time – a lot of new companies joining that buyers’ cohort that all have a 2030 net zero target.”
So, how best to sum up Shopify’s strategy? It’s not about simply running in the opposite direction just for the sake of it – but finding a shortcut to a finish line that your competitors might not have even seen yet.
