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Episode
103

Kristian Rönn

CEO and Co-Founder of Normative

Ep
103

The Rise of Carbon Accounting: What Does Good Look Like? - Kristian Rönn of Normative

Mar 22, 2022
With
Kristian Rönn
48:50

The Rise of Carbon Accounting: What Does Good Look Like?

In the race to net zero emissions, the leader in the carbon accounting space that helps companies calculate and reduce their emissions is Normative. Today, we have Normative’s CEO and co-founder, Kristian Rönn, here to share the lessons he has learned in the past eight years since creating Normative with his friends and what progress they’ve made on the path to sustainability.

Being a startup founder is definitely no easy job, and Kristian said that sometimes, you need to take a step back in order to reflect and recalibrate what the best way forward is for the company and your team. This is Kristian’s advice based on his experience, and he offers many more nuggets of wisdom, such as how to avoid hitting a wall or  what to do when you do hit a wall, so listen to this episode and find out more.

Kristian’s key lessons and quotes from this episode were:

  • “You need a different type of personality when you start a company than when you grow with the company.” (33:24)
  • “What you need to be in the end is humble.” (37:40)
  • “You don't have to be the CEO just because you're a founder. I think it takes humility either way, but where startups fail is when you don't have that humility.” (38:17)
  • “What is the way forward? How will we have the biggest impact in 10 years, 20 years, or whatever it might be?” (40:36)

In this episode, we also talked about:

  • The history of carbon accounting and how Normative works (9:48)
  • The difference between ‘net zero’ and ‘carbon neutral’ (16:51)
  • The three scopes of emissions and how to prevent double accounting (20:58)
  • Kristian’s core lessons in his entrepreneurial journey (33:14)
  • An important startup that Kristian experienced and wants you to avoid (41:28)

Transcript of the episode

Maiko Schaffrath  00:00

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You are listening to Impact Hustlers, and I am your host, Maiko Schaffrath. I have made it my mission to inspire the next generation of entrepreneurs to solve some of the world's biggest social and environmental problems.

And for this reason, I am speaking to some of the best entrepreneurs out there who are solving problems such as food waste, climate change, poverty, and homelessness. 

My goal is that Impact Hustlers will inspire you, either by starting an impact business yourself, by joining the team of one, or by taking a small step, whatever that may be, towards being part of the solution to the world's biggest problems.

In today's episode, I speak to Kristian Rönn, the founder of Normative, a comprehensive carbon accounting solution. Normative connects to ERP and accounting systems to calculate the carbon footprint of businesses using more than 200 million different data points.

Normative is also backed by 2150, a fund here based in London, ETF Partners as well as Chris Sacca's Lowercarbon Capital, amongst others, and carbon accounting, to me, really seems to be one of the fastest-growing sectors and startups in general. I see loads of new decks every week of startups being launched into carbon accounting space. 

But the interesting bit is Normative has been on this, and Kristian has been on this for more than seven years already, so this isn't some crazy new idea from last week. This is somebody that's been working in this space and has been working with really big players out there to implement carbon accounting solutions.

So, for that reason, I'm really excited to speak with you, Kristian, and thanks for making the time.

Kristian Rönn  03:08

Thanks a lot for having me.

Maiko Schaffrath  03:11

Thank you. So, tell us a bit more about your personal story. How did you actually end up starting Normative and what did you do beforehand? Why are you doing what you do?

Kristian Rönn  03:25

So, long story short, or every time you say long story short, it becomes a really long story, right? But I actually want to start very early on. For as long as I can remember, every thread in my life has been to live my life with full intentionality.

To me, that means basically living my life according to my values. I've always been a bit of a thinker. I remember when I was six, seven years old, and we lived on the countryside. My family lived close to this petting zoo. You've got the pet goats and sheep and other animals. 

That was the time when I realized that the meat that I was eating was actually made from the same animals, and I felt this intense uncomfortability with that fact. So, that cognitive dissonance that that brought to my six, seven-year-old brain was so uncomfortable that I felt like I had to stop.

I had to stop to become a vegetarian. I think that was the start of something where I felt like, okay, I got obsessed with this idea of living according with my values. 

At that point in time, I didn't fully know what my values were. If you assume fast forward a few years, we got internet access when I was in my very early teens, and I got obsessed to read about philosophy online, mainly on Wikipedia.

And then, I found this philosopher, Peter Singer, and then later Jeremy Bentham, the founder of a branch of philosophy called utilitarianism where, basically, the main tenant is that you are supposed to optimize wellbeing for all sentient beings. 

And to me, it just made so much sense that that is actually my values. I want to maximize well-being for sentient beings. And then, I started to think more deeply when I started high school. I studied mathematics and computer science at high school. I was very much into the quantitative sciences. 

But I started to think, what can I actually do with the rest of my life? Because I was supposed to choose what I would do for university and so on. What can I actually do, where I can live in accordance with my values, maximize well-being for sentient beings. 

My conclusion was that the best thing that I could do was to reduce global catastrophic risks and existential threats, basically threats that risk destroying all life on planet earth. That includes climate change. It can include global pandemics, or asteroid impacts, or super volcanoes.

I started to read more about what are the threats facing earth, and I got to learn about a Swedish philosopher called Nick Bostrom who worked at the University of Oxford. 

That was actually one of the first people that systematically started to review what are the potential risks that society is facing. After I finished my studies, I actually moved to Oxford to work for a research institute that Nick Bostrom was headings called The Future of Humanity Institute.

I got very inspired by those types of ideas. But ultimately, I decided to leave academia, because I felt like the missing link was not just doing the research on what we can do to reduce global risks such as climate change, but actually making that actionable for the right decision-makers. 

And for climate change, that means presenting data to companies on what their total emissions are and how to reduce those emissions. I was absolutely certain that, of course, that there must exist, some kind of software for companies to calculate their carbon emissions and keep track of that, manage it, and reduce their emissions. 

But, turns out that that didn't exist. So, I felt like I had to almost leave academia out of necessity that this thing doesn't exist, I have some software knowledge, so I can start a business around that. So, I left Oxford for Sweden and started Normative with two of my friends. Yeah, back then, nobody talked about carbon accounting whatsoever. It was actually really, really hard getting started.

But now, as you mentioned in your introduction, everyone is talking about it, and I think that's great. Like every time I'm seeing a new competitor, I'm actually super excited.

Because back then, you felt very lonely. You felt a little bit crazy, almost. But now, the market is taking off, and it feels like the rest of the world is catching up to those early ideas that we had eight years ago.

Maiko Schaffrath  09:28

And to be clear-

Kristian Rönn  09:29

So, that was the long story short. 

Maiko Schaffrath  09:31

Yeah, absolutely. But a few years ago, to be clear, there was no such thing as carbon accounting, at least nothing that was labeled that way. There were maybe sustainability reports for some companies, but that was about it, isn't it?

Kristian Rönn  09:48

So, carbon accounting still existed. The Greenhouse Gas Protocol Standard for carbon accounting has existed for around 20 years, and there were a few companies out there that were actually calculating their emissions, but all of them were doing so with Excel spreadsheets.

The main problem with doing it with Excel spreadsheets is the same problem that you're not allowed to do your financial accounting with Excel spreadsheets. 

There are a lot of things that can go wrong, and especially if you look at the data, even today, of companies that are calculating their carbon emissions, the numbers are not even comparable.

It's not comparing apples to apples, because some companies only calculate some aspects of their emissions like their electricity and emissions from their utilities or business travel, and others are more ambitious. 

But it means that you don't have comparable numbers in the end, and the only way to get comparable numbers is to have rigorous, standardized principles and to encode those principles into software. I mean, we have done it before with financial accounting. 

That's why we can compare the profit and loss statement between two legal entities, but you can't do it with carbon accounting, and it's a huge problem that needs to be solved, especially due to the fact that we need to move trillions from non-sustainable to sustainable businesses in order to avoid a global climate catastrophe. 

But none of those trillions are going to be allocated effectively unless we have a clear definition of, the carbon accounts of this company are comparable to the carbon accounts of this company. Otherwise, all claims of net-zero or whatever it is, is completely meaningless.

Maiko Schaffrath  11:44

Absolutely, and yeah, let's talk about that. How does Normative actually work? I looked at a few of your talks before when I did my research. It seems like, again, you have a mathematics background, and you've included that.

You have a really strict way of how it actually works which is driven by mathematic formulas and not just by claims. So, give us a bit more of an overview of how Normative then actually works and how that's different to what's already out there.

Kristian Rönn  12:15

So, Normative is a carbon accounting engine. What that means is that we calculate the emissions of our clients, and we help them take the right actions, so they can go towards net zero emissions. That journey contains several steps. The first thing that we start by doing is that we do a so-called hotspot analysis. 

Our principles on doing that hotspot analysis are that we want to estimate the carbon emissions of every single transaction. Essentially, if something is a part of your costs base in your profit and loss statement, your financial costs, we need to account for it, because it might have a carbon impact. 

In most cases, it has the carbon impact, so that is a way we can actually assure completeness of scope, because that is the main way where carbon calculations go wrong today. Remember how before I said that you can't really compare them because some only account for electricity, some do it for business travel?

But we say the only way we can assure that you do it for everything is that all the transactions that we estimate should account to the total cost in your published profit and loss statement. 

That means, essentially, you upload all of your transactions into our platform. We are able to label them, is this electricity? Is this business travel? Is this procurement of certain raw materials, transportation services, or whatever it might be? And that is what we call the hotspot analysis.

That first order of analysis will not be perfect, but you will be able to see, what are your biggest suppliers? What are the biggest categories in terms of emissions? And then, we will zoom in on those categories and ask for more accurate data.

For instance, we might ask, is this a renewable electricity contract? What are the exact kilowatt hours that you have bought? 

Because just estimating it based on your spend might not be perfect, so we ask those follow-up questions in order to increase the accuracy of the data, then we have a review, and we can suggest concrete actions that you can take in order to go towards net zero.

We help you with your net zero targets as well in order to make sure that it's based on the latest science, and we also have the credentials to do so. We are one of the partners working directly with the United Nations Race To Zero Campaign through Exponential Roadmap Initiative, We Mean Business Coalition, and through something called the SME Climate Hub.

So, I mean, we know what we're talking about, essentially. And then, the next thing that is really important, and not everyone is there on the journey, but that is to engage your value chain. Because on average, what we see more than 90% of an average company submissions are located outside of their organization in their value chain.

So, in order to get real data from that value chain and not just the estimations we provide, you need to engage them and actually invite them to the platform. We have an initiative for that. We are one of the founding partners of SME Climate Hub, as I mentioned, together with Exponential Roadmap Initiative, and We Mean Business Coalition.

It is a UN Race To Zero-accredited project, and it is a pathway where the large companies that we can work with can essentially invite companies from their value chain to account for their greenhouse gas emissions.

So, we do it end-to-end. Of course, it's a journey, and it's a long journey. You need to go net zero before 2050 latest, and we help our clients stay on course.

Maiko Schaffrath  16:28

Got it. Yeah, let's dive a bit deeper on that, some interesting topics on there. First of all, with net zero, do you find with the companies you're working with, they have a shared understanding of what that actually means or [are] there still quite a lot of different standards being applied, different levels of quality of what that net zero actually means?

Kristian Rönn  16:51

There [are] still a lot of misunderstandings, what net zero means, and I think it will take some time to educate the market. For instance, a lot of companies don't understand the difference between net zero and carbon neutral.

For net zero, the definition of that series that you need to reduce your own emissions foremost, both in your own operations, but also in your value chain, and then there will always be a residual. We don't have the technologies to essentially remove those emissions. So, then, you can invest, and we need to invest in nature-based solutions.

I mean, trees, peatland restoration, biochar, it can be many different things. So, that is the definition of net zero. What carbon neutral is, is essentially, you account for emissions, and then you invest in any type of so-called offsets. The problem with the offset market, though, is that it really doesn't work.

I mean, there was this European Commission-funded study a few years showing that around 85% of projects actually don't deliver on their promises in terms of removing carbon from the atmosphere, and there's various issues that you need to look like. Not all offsets are alike.

I mean, if you plant the tree, that tree might only stay there for a few years until it gets burned down, because of climate change, or logged down, or many other ways. But maybe if you take biochar and dig it below ground, it will stay there for a thousand years, so it makes a huge difference. Because if you release greenhouse gases, those greenhouse gases will stay in that atmosphere for 500-1,000 years.

So, if you then invest in something that will only stay below ground for, two, three, four, or five years, it really doesn't work. You're not making up for it, and the problem is that companies don't know about it.

We were talking a lot about what we call involuntary greenwashing, which is essentially an uneducated market hoping that there are simple solutions out there, and they're being fooled, and now, they're being exposed, which is really bad for the reputation.

So, our main tenant is to act with integrity and act as a partner to our clients to make sure that they will not be having any greenwashing allegations against them. They will do the right thing, reduce their emissions that go towards net zero emissions. I went a little bit of a tangent there, but the answer is no, the market needs to be more educated in terms of knowing the definitions of net zero.

Maiko Schaffrath  19:42

Super important. And then, the other thing I wanted to dive into is basically the point on supply chains are super complex, especially for some of the biggest companies. They have lots of suppliers. They need to work with them. In many cases , getting the company itself sustainable is maybe the easy bit.

Companies that are relatively lean, they have maybe not that many employees actually and very few operations, but then they're running huge supply chains of external vendors, etc. that are relevant, and you're actually accounting for all three scopes of emissions, scope one, two, and three.

Maybe you can quickly explain what those scopes are for everybody that's not aware of that. And then, how do you make that happen? You say people invite the suppliers onto the platform, but this is such a huge chain of suppliers.

Your supplier has suppliers again, they have suppliers again, and it's very hard for companies to currently even understand what standards their suppliers have beyond some promises maybe.

Kristian Rönn  20:58

Great, great questions. The first part of that question, what's the difference between scope one, two, and three? So, scope one, two, and three is terminology from the Greenhouse Gas Protocol Standard, that everyone at least claims to be using when they calculate their carbon emissions.

Scope one is the emissions from your operations. It might be, for instance, the vehicles that are under your operational control and the emissions from them. If you own oil, gas, heating pans that are under your control. It might be if you're a farmer, you might have cows that are farting, and burping, and releasing methane. That is all under your control in your operations.

Scope two is indirect emissions, but you still have a really high degree of control over them, because it's emissions from utilities, so essentially, purchase of electricity, heating of your offices. You can control what electricity to buy. You can control through energy efficiency measures the outcome of your scope two emissions.

Scope three is a bit trickier. It's your value chain emissions. Some of them are easier to control than others. For instance, business travel and transport, they're easier to control in a sense. You can choose, should I transport it via rail or flights? Business travel, you can choose to do video conferences instead.

But there's a big category, purchase goods and services, which is essentially all of the things that you purchase into your business. So, you might buy a bunch of components to manufacture the goods and services that you have.

And then, there's the emissions from those components and the manufacturing of those components, and that is often outside of your control, but you still need to care about it. I mean, it's the same thing. We expect every company to care about slave labor in the supply chain and value chain. You are essentially responsible for what happens in your supply chain and value chain.

And in fact, if you want to be competitive going forward, you need to de-risk your supply chains and value chains, which means decarbonizing them. So, then, that comes to the next question, how would you actually engage companies in your value chain and supply chain and how do we manage to do that?

The honest answer is that we're just beginning to scratch the surface. I mean, most companies are in a journey where they calculate their full emission, then they're starting to make the reductions in scope one, two, and some scope three categories.

But we have quite a few very ambitious companies that are starting to do it in scope three as well, and we have, in fact, developed this infrastructure called the Business Carbon Calculator that we're going to release soon together with Google.

And we're going to launch it on the UN Race To Zero Initiative SME Climate Hub that I talked about earlier, which essentially makes it possible for a large company to invite thousands of suppliers, tens of thousands of suppliers to account for their carbon emissions through this tool and, that way, keep track of what is going on in the value chain.

So, that is something that we're very, very excited about that, and we think that that can disrupt how value chains are managed.

Maiko Schaffrath  24:46

Got it. I have probably one more question around your solution, and then we'll go dive a bit deeper into some of the lessons learned during your entrepreneurial journey. I think we could do probably a few more hours just talking about the dynamics of carbon accounting and the challenges with it.

I think the one of the questions that I'd love your view on is just, how do you also avoid double accounting? I think that's been a bit of a topic where, basically, if a supplier is reducing their carbon emissions, the companies that don't buy from the supplier take claim to the reductions that they've made, so everybody's double counting.

[Are] there some clear standards on avoiding double counting reductions? That's the first one that I want to ask, and then maybe another part question after that.

Kristian Rönn  25:46

Yeah, so I think double counting is mainly a problem when it comes to offsets, because then, the double counting has some monetary consequences. For instance, if I asked a Swedish company to contribute to some trees being planted in Brazil, then if I take credit for it and then maybe I'll sell it through some kind of market, and then at the same time, the people in Brazil that planted the trees take credit for it or sell it, then we have a problem.

When it comes to the Greenhouse Gas Protocol Standard, double counting can be a problem, but it doesn't have to be a problem. Essentially, the way it works is that if every single company on the planet would account for their scope one emissions, it would add up to the total emissions on the planet.

So, in scope one, you wouldn't have any double accounting whatsoever. It is in scope two and three that you can see double counting, but it's actually okay that you see double counting. For instance, let's say you have a value chain, and let's say I buy some, I don't know, microchips to put into a computer, and that is my step of the production process.

I put this microchip and then I use some soldiering to get it into the computer. That relates to some greenhouse gases. But then, my scope three emissions will be all steps, up streams, like the mining of the ore, the smelting of the metals, putting it into the microchip that I purchased. But, the same thing will be accounted for in the scope three of the chip manufacturer that I bought the chip for.

They will also have the smelting of the ore and mining of the ore and the precious metal into their scope three, but that's actually fine, because it means that we both take responsibility and acknowledge the problem that we need to reduce the emissions in our value chain.

So, as long as we don't double count with our scope one, we're fine, and that's why we have the separation between scope one, two, and three to actually avoid double counting as well.

So, I usually say to companies, double counting in scope three is absolutely fine. It just means that you have multiple partners that you can work together with to take that value chain, supply chain responsibility.

Maiko Schaffrath  28:33

Just a really quick break from this episode to let you know a little bit more about our podcast producer and content agency, Content Multiplied. With all the moving pieces of a business, you can't be stuck managing and creating new content all the time. That's why I've started using Mhyla and her team at Content Multiplied.

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Got it. I hear from you, you're really a missionary on this topic. You care about this topic. You're not just seeing this as an interesting business opportunity, and I assume that that creates some tension as well where maybe you sometimes deal with corporates that see this whole thing, but more like a tick boxing exercise, perhaps, or that are keen to go for- we haven't even talked that much about offsets.

But that are keen to just tick the boxes with the cheapest possible offsets that they could get to then, basically, after they've got all the amazing carbon accounting done, that they could do the least possible thing to get them to some sort of claim that they then can use.

Do you still find that that's really an issue where you need to educate where there's a need to push companies for embracing the highest possible standards in terms of actually taking action on whatever the carbon accounting actually shows?

Kristian Rönn  30:16

Yep. It is and can be a challenge, but it's a challenge that we're happy to accept, and it's actually something that our clients are paying for. I mean, we have the first real carbon accounting solution and the best and most accurate carbon accounting solution on the planet, but I would also say that we pride ourselves to be one of the best advisors on the planet as well, and that essentially means looking at it long-term.

I mean, if you do the wrong things, that will be in the public records forever, and we're not going to be a good adviser if we don't educate our customers and tell them what we think the right thing is to do, and I think everyone will win from that in the end. I mean, that's essentially one of the things that they do.

I mean, they pay us, in a sense, to challenge them. I think that is also what puts us apart from a lot of other players out there. A lot of other players out there, they don't have the same approach. I mean, they gladly sell offsets on top of their platform, even the kind of offsets that are lower quality, where it doesn't stay below ground for at least as long as it will stay above ground, essentially.

So, we think that is just something that makes us unique, and we're really on a mission to educate the market. That is the only way we can go towards net zero emissions together.

Maiko Schaffrath  31:57

Love it. Okay, let's dive deep into some of your entrepreneurial journey and some of the challenges that you've come across. In the briefing to this call, you told me how much you've grown just in the last year.

I think, soon, you'll be 10x your size probably from a year ago, not quite there yet but almost there, I think. So, tell us about that. Again, you've been working on Normative for the last seven, eight years.

It's been quite a journey already. But then, in the recent year or so, you've experienced tremendous growth, and I'm sure it's not all smooth sailing. So, talk us through some of the hardest bits of scaling a company that quickly and lessons that you've learned from that.

Kristian Rönn  32:47

I think, a core lesson for me, at least, and hopefully, this will be good advice to any aspiring entrepreneur or early stage entrepreneur that is listening, a big mistake that we did, and we did this mistake, actually, after we raised our seed round.

Maiko Schaffrath  33:11

2019, I think? Is that right?

Kristian Rönn  33:14

Yeah, that was in 2019. I think we were not mindful about the fact, and I was not mindful about the fact that you need a different type of personality when you start a company than when you grow with the company.

Essentially, when you start a company, you need to be of the type of personality where you actually get a kick out of getting shit done fast, you pull up your sleeves, you do it yourself, you program, you engage with customers, and you almost are in this dopamine cycle of where you feel like, "Alright. I feel powerful. I get a lot of shit done. The company is progressing."

But there's only a limited amount of hours in a given week, and eventually, you will hit a wall. And when you hit that wall, as an entrepreneur, if you haven't planned for that, the company will hit the wall as well, and the company will stop growing. So, for me, that was a realization after we closed our seed round.

We were not growing, and I think a large part of that was due to me. Instead of looking and waking up every day, what I had to do is to wake up every day and actually think about, "How can I amplify my team and build the best possible team to serve our clients in the best possible way?"

But instead, what I was thinking about is, "What am I going to do today? What tasks am I going to complete?" So, I got it all wrong, and it took some help. We actually got help from one of our investors. Eric from ByFounders, he introduced me to this brilliant entrepreneur, Kasper Hulthin.

He started Podio that then got acquired by Citrix and then peaked on that recently got acquired by Workday. I think what he helped doing is, he came in as a little bit of a doctor of, "You actually need to focus on building a team here," and that was an eye-opener for me.

Since then, we have been growing like crazy. Now, I actually have that as a mantra every time I wake up in the morning, and I read that mantra that my purpose here is to be an amplifier to the rest of my team, so we can fulfill our mission of taking the world towards net zero emissions.

Maiko Schaffrath  35:59

The interesting point is I've heard this advice before, and I think there [are] different ways of making this work. There [are] some companies, which actually change their leadership. Maybe the founder steps back at some point, steps into another role, advisory or is more focused on strategy or so.

And then, you hire a CEO that's super experienced and just doing this all the time, focused on the team and the structure. Then, there's people like yourself, which have made the transition from switching from one to the other personality types. And then, within those groups, there [are] founders that enjoy that and thrive on it.

But there [have] also been case studies like, for example, Tom from Monzo, the fintech bank here in London. He spoke very publicly about it. He transitioned from this founder role into the CEO role, and it caused depression and anxiety and very challenging times for him, and ultimately, he did step down, and they did hire somebody.

I'm just wondering, how was that for you? [Was] that journey quite a natural one where you were like, "Okay, actually, now that I know what I need to do, I still enjoy my job as much as I did when I did everything myself," or did you have to get some more coaching on that to be able to still enjoy what you're doing every day?

Kristian Rönn  37:26

I do, indeed, enjoy what I'm doing every day. I feel so incredibly privileged to be working with a team of such brilliance, such immense brilliance. I think what you need to be in the end is humble. And so, I think this story you told. His name was Tom, right?

Maiko Schaffrath  37:52

Monzo, yeah, the fintech banker.

Kristian Rönn  37:56

So, yeah, and I think that requires humility as well to be able to say, actually, what I enjoy is to do whatever it is that you like doing. It might be programming. It might be driving a customer success team. You don't have to be the CEO just because you're a founder.

I think it takes humility either way, but I think where startups fail is when you don't have that humility. You want to stay on top at all costs. And then, it leads to in-fighting. It leads to fights with investors, and you basically bankrupt the business and destroy something that, hopefully, could have been beautiful.

Maiko Schaffrath  38:47

Yeah, absolutely. And then, I guess your reality shifted from, yeah, as you said, focusing on being a founder, focusing on the nitty gritty, being involved in the early stages, you're involved in everything, right?

You're doing sales, you're raising investment, you're building the product, or if you're not in the technical part of the company, you're still heavily involved with the people building the product. So, how does your typical week now look like? Is it all about just managing others? How do you actually implement this goal of serving your team and how do your typical weeks look like as a result?

Kristian Rönn  39:30

My typical week, I go on podcasts, no jokes aside. I mean, I do. I think you can divide it into two parts. I want to spread the message of the importance of carbon accounting and management to go towards net zero emissions.

I want to spread that message in as many channels as I possibly can, and that is the more outwards components. And then, for the more inwards components, I try to do whatever I can to coach and help my team.

I mean, we have really good people in the team, so whenever my help is needed is more when it might be some technical details or decision-making related to product, but I also take a lot of time to reflect or at least try to take time to reflect on strategy. What is the way forward?

How will we have the biggest impact in 10 years, 20 years, or whatever it might be? But of course, you get caught up into details that you don't want to get caught up in the end on a weekly basis. It's a part of our founder life, but I think that's fine.

Maiko Schaffrath  41:02

Got it. Got it. Absolutely. And then, throughout your journey, beyond the scaling theme, is there anything else that you found that was a really difficult lesson for you to learn or something that was really hard to understand, but that you had to wrap your head around, and that is maybe useful for early stage entrepreneurs to learn about?

Kristian Rönn  41:28

Yeah, it's early on, and this is interesting. Early on, before, I used to work for this research institute at University of Oxford, there, I learned the skills of grant writing. When I left to start Normative with my friends, the first thing that came to mind is, "Okay, how are we going to get money?"

So, I started to do the grant writing, which I knew how to do, but that became also a little bit of a trap. At that point in time, we actually had a bit of a different approach. We wanted to go to net zero by trying to influence people to make more sustainable choices.

That was our main thesis at that point in time, and that turned out, we actually got a government grant to do that. So, we started to build a product, but we actually didn't have to go out and talk to a lot of customers, because we have this grant in the background that was supporting us.

But then, eventually, we hit the wall of like, "Okay, should we apply for another grant or should we go out and get customers?" I think we lost a lot of time, a year and a half, almost two years by not going out and talking to customers early enough.

And as soon as we did, we realized that we had to pivot. This is more standard startup advice. I mean, right now, I think everyone starting a company knows about it. To me, starting it eight years ago, it wasn't as common knowledge, but always talk to the customers and see what their needs are.

But even doing so was actually quite hard, because we talked to a few companies that were doing manual carbon accounting, but it didn't exist that many. I mean, I think it was 40 companies in total in all of Sweden.

So, nothing at all, super, super small market. It's almost like I felt a little bit stupid like, okay, we're going to go out here, build the product towards a really, really small addressable market. But what we try to keep in mind is the fact that the entire world was committing to going towards net zero emissions.

I mean, we had the Paris Agreement around the corner. So, to me, at least, the logic was sound that if governments pledged to go net zero, they are not the biggest polluters, the government buildings or administration, it's the companies within the jurisdictions of the governments.

So, in order for that to happen, legislation and a push for companies to account needs to happen sooner or later. So, it was a long, long struggle of, okay, when is the market really going to arrive? Do I want to spend another six years waiting?

But eight years later, here we are, and I think the fact that we started this early means that we have a first mover advantage, we have the best infrastructure, the best partnerships to carry this out.

Maiko Schaffrath  45:10

Got it, amazing. One last question is, how does the world look like in 10 years if Normative succeeds, and what's the big vision that you'd like to see as part of reality in 10 years' time?

Kristian Rönn  45:24

Yep. So, I think I want to go into a little bit of history before I answer that question, like the history of how we actually account for things, because the way society accounts for things, it's, in a way, a reflection of what we value.

Accounting is, in a sense, the arithmetic of value. And if you look at Roman and Greek times, accounting, it was just counting the number of sheep and goats and hectares of land, and you did that, or the state did that, because they wanted to know how much taxes you were supposed to pay.

So, accounting was not very sophisticated. I mean, we counted what we could see and what we value. We literally counted it. But then, trade arose, and everything became more sophisticated. Six hundred years ago, in Venice, somewhere, we invented this thing called double entry bookkeeping, which is what we use today to account whether a company is profitable or non-profitable.

But all of these concepts of profitability and unprofitability, I mean, that is all built on the invention of accounting. I mean, how we account for things has evolved over time, and I think the experience of the 20th and 21st century is that the way we account for success is flawed, because it doesn't capture all of the things that we intrinsically value.

I mean, we value future generations. We value the effects of carbon emissions in the atmosphere. But if it's not accounted for anywhere, we can't price it. It will be impossible for us to price it. It will be impossible for market to adapt to and the signals.

So, I think in the future, carbon accounting will be as commonplace as financial accounting, and you will see actually trillions being moved to companies that are performing better in terms of going net zero, and it's done on a backbone of solid carbon accounts, and that will really be a backbone of the financial infrastructure of the net zero emissions economy.

Maiko Schaffrath  47:48

Love it. Love that vision and love how much you focus on this. Thank you so much, Kristian, for joining and sharing some really good nuggets of advice today and some new perspectives from you as well. So, thanks so much for joining and all the best for the journey ahead.

Kristian Rönn  48:07

Thanks a lot for having me. 

Maiko Schaffrath  48:10

Thank you.

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