Episode 204: Stacy Kauk, Shopify
Today's guest is Stacy Kauk, Head of Sustainability at Shopify.
Stacy joined Shopify in January 2020. She also serves on the advisory board of the Carbon Management Research Initiative (CaMRI) at Columbia University. Prior to joining Shopify, Stacy was Head of the Ozone Layer Protection Program at Environment and Climate Change Canada. Previously, Stacy worked on several chemicals management regulatory initiatives and represented Canada as a member of delegations for the Stockholm Convention and Montreal Protocol.
Stacy began her career as a practicing engineer designing environmental protection measures and pollution prevention controls for a variety of industry sectors. She has worked for the city of Ottawa, Morrison Hershfield and Golder Associates. Stacy holds a Bachelor's Degree in Engineering and Master of Public Administration from Carleton University.
I was looking forward to this episode because everyone knows Shopify as a powerhouse e-commerce company, but far fewer no that Shopify has been helping jumpstart important carbon removal project funding via their Sustainability Fund. In this episode, we cover Stacy's journey to doing the work she does, Shopify's journey to become an unlikely climate hero, and how those two ended up meeting in the middle. We also cover what Shopify looks for in the carbon removal projects they back, and some examples of projects they have funded so far.
Enjoy the show!
You can find me on Twitter @jjacobs22 (me), @mcjpod (podcast), or @mcjcollective (company) and via email at info@mcjcollective.com, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded March 23, 2022.
In Today's episode, we cover:
Stacy’s professional journey that led to her joining Shopify
Why Shopify is focused on climate and sustainability
How the Shopify Sustainability Fund works
What Shopify seeks in carbon removal projects
Examples of carbon removal projects that Shopify has backed to date
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Hello everyone. This is Jason Jacobs, and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help. Today's guest is Stacy Kauk, head of sustainability for Shopify, millions of the world's most successful brands try a Shopify to sell, ship and process payments anywhere. That you probably knew, what you may not know is that Shopify has also emerged as an unlikely leader in helping jumpstart the carbon removal ecosystem.
They recently committed to partner with nine new companies focused on carbon removal to make their total commitment from their sustainability fund, 32 million since launch across 22 companies. Stacy was brought in to lead this effort and take it to market after spending her entire career working on environmental and climate challenges. I was excited for this one because I wanted to hear one, about Stacy's journey and what it was that made her think that joining an e-commerce company was the most impactful thing she could do for climate in the next phase of her career.
And two, I wanted to get a closer look at what Shopify is up to. They're such a good example of how you do not need to be a climate company to do impactful work for climate. And it's really interesting to learn more about why they did it, where they are in their journey, the different iterations that got them to where they are, their long vision, where they're going, what kinds of projects they're backing, how they determine which projects to back and what else they're doing to make their operations more sustainable and help jumpstart the clean energy transition. Stacy, welcome to the show.
Stacy Kauk: Thanks for having me, Jason.
Jason: You are such a visible figure in the climate movement, given both the way Shopify has been this unlikely candidate to step up and take such a leadership role and your role within Shopify, but you and I have never spoken before. So I'm psyched to have you on the show, but I'm also psyched to meet you. I feel like I've been hearing your name a ton.
Stacy Kauk: Yeah, likewise. I listen to a lot of your episodes. So really excited to be on here and to get to dive into all of this with you.
Jason: Likewise, and I did listen as part of my preparation to the episode you did with my partner, Cody Simms when he was still at Techstars. So I feel like he already asked a lot of the questions I would've asked, but I still have plenty of questions left to ask. So I'll try to mix it up a little bit and not just duplicate his efforts, but if there's a little bit of redundancy, that's okay too, because I'm sure a lot of listeners haven't listened to that episode. But he's at a high bar, he's a good host.
Stacy Kauk: Yeah, that was a lot fun. I really enjoyed my conversation with Cody.
Jason: Well, take it from the top, Stacy, just talk a bit about what Shopify does as a company and what your role is within the firm, just set the context for listeners.
Stacy Kauk: Shopify is a leading global commerce company and we've become the platform of choice for entrepreneurs all around the world. We have millions of merchants in over 175 countries worldwide. Some examples of key brands on our platform are Allbirds, Gymshark, Heines, Tupperware, Netflix, FIGS. As a company, we have over 7,000 employees worldwide. And at Shopify, I'm the head of sustainability. And one of those key elements is overseeing Shopify's sustainability fund, which has committed 32 million to date since we launched in 2019, the fund is focused on long term carbon removal, but also emissions reductions. So we're taking a two prong approach and that's my role at Shopify.
Jason: Great. And talk a bit about your personal journey and professional journey for that matter, in terms of how you came to care about sustainability and how it came to be such a big part of your professional role.
Stacy Kauk: Sure. I'll share two quick stories with you about how I came to be at Shopify in this role. So the first story comes from my childhood. When I was growing up in the '80s, you probably remember the ozone layer was the key environmental concern. At the time, there was a lot of stuff in the news.
Jason: It was like refrigerators, then CFCs and, and ozone layers.
Stacy Kauk: Yeah, and styrofoam. I don't know how old I was at the time, but I ate a lot of McDonald's on the way to hockey tournaments and whatnot and-
Jason: Did you grow up playing hockey?
Stacy Kauk: I did. I did.
Jason: Oh, hockey's a huge part of my family's life, both for me growing up and now for my son.
Stacy Kauk: Amazing. Yeah, no, I'm a true Canadian. Right? So having McDonald's in the '80s, you had your styrofoam packaging and I was like, this isn't cool. This needs to change. So I wrote a letter to McDonald's and I was like, you know, this packaging has got to go the ozone layer, we've gotta do something about this. I was a little kid. I don't even know if my parents mailed the letter. But my takeaway from that was when they changed the packaging from styrofoam to cardboard, I was like, I can make a difference in the world. I wrote that letter and look, they listened, but not because of me, you know.
Jason: Oh, I was gonna say, like that would've been amazing, uh, but they might have mailed it and it might have had some impact, you don't know.
Stacy Kauk: Exactly. I don't know, but I think that experience and that connection in my head gave me the belief that every person can make a difference. And so that was like my childhood sustainability experience. And then fast forward to before I joined Shopify, I spent 10 years working for the Canadian government and I was the manager of Canada's ozone layer protection for program before I left and joined Shopify.
So I have these touch points from my childhood of being into environmental protection and nature and being concerned. And then my professional career has always played in that space. So there's some nice parallels there. Another little story to share would be in the '90s. I ended up going to junior college in the US to play softball. And I really just wanted to play softball. I wasn't really keen on or really caring about what I did in school.
I was going for the NCAA sports experience. And so I ended up picking computer networking to study. So this is like back in the beginning of.com. This would've been mid nineties and loved it, got really into it, learned how to build computers and really enjoyed that. So after my softball career ended and I needed to get serious with my studies, I decided, well, the logical next step would be a computer systems, engineering degree. I love this stuff. Let's keep doing it.
I got about halfway through my second year and realized that perhaps it was straying from my core love of nature and natural systems. So I hit the reset button and decided to switch to environmental engineering. So at least some of my credit transferred, that was a bonus, but really it was the realization that I love math and I love models. And being able to apply that to natural systems, to protect them, to understand them and design solutions that will minimize wastewater, pollution, purifier, air, all of those things.
I was like, yeah, you know, maybe that's a better use of my skills. And so that's what I did in university. And then I became a consulting engineer trying to use those skills. I learned to help different companies working in various industry sectors, minimize their pollution and their emissions through the application of technology fast forward to now.
And I've had a career that's been within the environmental space, my whole life. I'm now working at a technology company, Shopify that's building at the forefront of web three and I get to lead sustainability here. So it's this lovely intersection of my enjoyment and appreciation of technology, but also the skills I've built as an environmental engineer, practicing actually on the ground that I now get to do both in my current role, which is just wonderful.
Jason: Uh-huh [affirmative]. And talk to me a bit about your whole career in and around environmental engineering and this internet commerce company picks up the phone and calls you, where were they at when they reached out and what was your first thought? 'Cause it doesn't seem like the obvious place to go for someone who spent their entire career in and around environmental engineering.
Stacy Kauk: It really wasn't obvious until I got to know Shopify and what they were doing the best place for everyone to understand what Shopify was up to is to explain where the sustainability fund idea came from. This was really a result of our CEO, Toby going well, we wanna be carbon neutral. We wanna be responsible for our historical missions as a company, but I'm not gonna buy a cheap offset. I'm not gonna buy something just so that we can check a box and say, everything's okay.
From a systems perspective, the logical kind of project to support is one that actually reverses your emissions actually goes out and captures carbon dioxide from the atmosphere and locks it away forever. Yeah. The molecule may not be from your company's operations, but from an atmospheric perspective, you are undoing your footprint. And so he went out and the team went out and was like, well, we gotta go find some projects to support.
Jason: This is still pre Stacy?
Stacy Kauk: This is pre Stacy. So this is back in 2019.
Jason: BS before Stacy.
Stacy Kauk: [laughs] Perfect. As long as it's not the other translation of that acronym. Yeah. So the team all went out and we're trying to find projects that did atmospheric capture with long term storage. So that Shopify could support something that was appropriately impactful.
And there was a realization that there wasn't much actually available. A lot of these solutions are in labs on paper. And what did exist at the time was extremely expensive and in super small quantities. So essentially the product Shopify wanted to buy in terms of a climate project wasn't readily available. Toby identified this as there's a non-existent market.
Jason: Was this pre carbon was carbon direct in and helping advise at that point or not yet?
Stacy Kauk: No this is how everything started to unfold. So this was almost the Genesis of creating the $5 million climate fund.
Jason: This was just like an internal team of people without training that cared basically.
Stacy Kauk: I can't comment on their training per say, but it's people who went out Toby did deep research. Our head of IR cares deeply about this and has done a ton of work over the years at Shopify on this. So they just really started asking questions and connected with people in the carbon removal space as well, like leading academics and were asking questions like, well, where do we get this thing we wanna buy and went down to first principles to figure out why can't we buy this and why is nobody really, really working on it.
Jason: I wanna keep going with you telling the story in a moment, but just a quick pit stop to say that I love this example because here's an online commerce company. I mean, it's a company that's doing very well and has vast resources and things like that, but it's not a company that's quote on quote, related to climate change in terms of the well, every company companies related to climate change, but it's not a company that is actively addressing it as part of their core solution set.
But it's just a company where the leadership cared and started asking questions and took small steps that led to medium steps, which led to bigger steps. And so when people say I wanna switch to a career that puts climate front and center and be great and I supported, and that's what I did. And it's an awesome path, but that's not the only way to help you can stay right where you are and play a big role on helping with the problem.
Stacy Kauk: 100%, every job's a climate job. There's a lot of people that say that if you do the research and you're operating in some adjacent thing, you're building another product or a widget that has nothing to do with climate change. You can always do that in a way that minimizes emissions. And you can always do that in an innovative way that considers the climate amongst all of the other design principles you're applying. So 100% yes, you can have an impact from anywhere without having to move into a climate company specifically.
Jason: Okay. So the Shopify team started down the path asking questions, starting from first principles, uncovering that there was a gap then what?
Stacy Kauk: And then it was like, well, we probably should play a role in addressing that gap. And the decision was made that if we want to buy and support high quality carbon removal projects, we should make a minimum annual commitment to do so. So that there's a reliable demand signal out in the market. Recognizing five million is not gonna create a robust market, but being a first mover to create a market and hopefully bringing others along with us could kickstart the carbon removal market.
And so the decision was made to start Shopify's sustainability fund to allocate a minimum of five million every year towards supporting the solutions and technologies that will reverse climate change. That happened in September, 2019, the decision was made to pursue that. And at that point, the company was like, we need to hire somebody to build that. And that's where I come in. So that would be after Stacy.
Jason: [laughs] And so if I'm hearing right, the initial thought behind the Shopify sustainability fund was that cheap offsets might on paper look like you're counteracting the pollution that the company produces, but it isn't truly doing it because the quality is such spec and additionality and permanence and things like that. And so to go with higher quality products is the desired path, but it is hard to find enough of them to do the job that are truly above the bar. So let's start a fund now with the fund to invest in the companies behind these projects, or essentially just committing to purchasing a minimum of five million per year of these projects in a way in the same way that you would purchase an offset.
Stacy Kauk: Yes, it is not an equity investment. It is a purchase commitment. So we spend that in a very flexible way. What we like to do is prepay. And so we'll make a purchase and we recognize first we're paying a high premium because we're an early adopter. The capital's not amortized over a significant number of carbon removal units that you can buy. So we're paying a very high price, but we also like to pay that upfront so that it gets the capital into the hands of the climate companies so that they're able to do more with the cash. And then they are able to deliver the carbon removal once they're up and running.
And we also like to do longer term multi-year agreements. It's not a one off purchase, like when you go out and you're trying to balance your carbon accounting, and you have to buy X number of offsets by the end of Q1 in the following year to balance your carbon books. We're not doing that one off purchase in these cases, we're signing multi-year deals that give these companies a longer runway. Where they know that they have a buyer for a certain amount of quantity year over year, over year.
And what that's doing is facilitating investment from other sources for those companies, because they're able to demonstrate, look, we've already got revenue on our books and we're still operating a pilot plant. And so that really helps accelerate their development and progress as a company.
Jason: And so given that you have been working in and around the environment for your whole career, I, I feel like carbon removal is a lighting rod topic in the environmental movement. How had you, and had you been thinking about carbon removal as a potential solution before the Shopify opportunity emerged? And what is it about carbon removal that made you excited that this was the place you wanted to anchor for the next phase of your career?
Stacy Kauk: I'd always been a skeptic when it came to offsets and carbon account outing. And I felt that it was very much an exercise like a Catholic absolution, you know, like you, you sin and you go and you're forgiven and everything's fine, but like you still did the bad thing I felt at the time that it really wasn't going to be what would get us there as a planet to reverse and climate change
Jason: Offset wouldn't?
Stacy Kauk: Yeah. Offsets, especially from like low quality projects where it's a sham, they're being sold twice. The forest actually isn't there and you're getting a picture from, you know, another location. And it just seems a little opaque at the time and digging into these kinds of projects and seeing what an offset was actually made of the question in my mind was, well, why would I or Shopify pay another company to not pollute as much as we just did. Paying another company, not to pollute when the technology is there, they should just use it like from a more obligation, you know how to not do it. You don't need me to pay you to not do it. Just don't do it.
That was the frustrating component around avoided emissions offsets. And for me, carbon removal is so much more of a pure application. You're paying someone to provide you with a service to go out and vacuum up your emissions and lock them away for a long period of time. And that's a service, it's a cleaning service essentially, right? You're cleaning the atmosphere on behalf of someone who's emitting something that's unavoidable. I think that's much cleaner way to think about it because carbon removal from the atmosphere's perspective is net negative. Whereas in avoided emissions, your emissions are still up there. You just paid somebody else not to do the same thing.
Jason: For the critics out there. I know some of the critiques that I've heard, but without asking leading questions, what are some of the critiques that are most prominent of carbon removal and how much, and how did you think about those when determining that this was where you wanted to anchor in the next phase of your career?
Stacy Kauk: The most frustrating argument against carbon removal is the one of a moral hazard where if you're spending money on carbon removal, that's money that should be going to emissions reductions. And this viewpoint that they're mutually exclusive. If you're doing one, you're obviously not doing the other, like I think it's a false equation. And I find it very frustrating because we have to do both and we need to do both as fast as possible.
Anyone who pays attention to the economics at all knows that it is more cost effective to avoid emitting a ton today than it is to go out capture and store that ton of emissions in the future. So obviously the money needs to be spent on emissions reductions, and it's way more efficient, but emissions reductions alone are not gonna get us to where we need to be. The science is super clear on that where we actually need carbon removal technologies on top of deep emissions reductions in order to reverse climate change and avoid the most intense and impacts that are now being forecasted by the IPCC and others.
We can't just focus on one or the other. It can't just be avoiding emissions now because we need to scale carbon removal concurrently at the same time, so that we're doing both. And I think that's the most frustrating argument because we need to be doing everything all at once as fast as possible. From my perspective, that means that we need a diverse ecosystem.
We need a diverse set of approaches. We need people who are solely focused on emissions reductions, and that's what their jam is. We need people and companies are only focused on carbon removal and that's what they wanna put their money on, because what we need to do is encourage everyone in all aspects. And I don't like the divisiveness of that narrative. And it's very frustrating because anybody who's doing anything should be encouraged, supported, and welcomed to the ecosystem.
Jason: We did touch on one of the big concerns that I've heard, which is around. I mean, essentially the argument is that it's fossil fuel company propaganda, and that carbon removal is permission for business as usual. And if we could truly do both then great, but from a human psychology standpoint, by giving one out, it takes their foot off the gas or off the EV pedal or whatever, to actually clean up their own house as it relates to their generated emissions. Do you worry about that? 'Cause yes, we need both, but do you worry about that psychological element?
Stacy Kauk: This is going to be an unpopular opinion. So I think of it a lot, like wastewater a long time ago, we didn't know what to do with it. And we just threw it out in the street and there were all sorts of adverse health effects and our cities were unpleasant. We didn't like it. We didn't stop generating wastewater. We figured out how to deal with it and how to clean it and how to be responsible.
The solution is still being implemented around the world. There's still issues around this, but we know what we need to do. It's a question of economics when it comes to carbon removal and it being purported as an excuse to continue polluting because technology's gonna save us. Part of me, challenges that and says, well, wouldn't it be wonderful if it did? Wouldn't it be wonderful if we took all of the financial resources and the big brains, and we were able to solve it in a very similar way as we solved our wastewater problem.
And right now we're at the point in history which will be history where we are trying to reduce it. We're also potentially going to uncover solutions that could like, this is gonna cause a lot of clap back. But what if we did develop some solutions that were scalable and were profitable and were able to enable us to emit and know that we were able to take care of it.
It's like science fiction and past 2050, but that potential is there where these solutions could scale and could allow us to begin using fossil fuels again, down the road, which is a crazy concept. But right now we can't afford to be doing that. We have to be reducing our emissions because the technologies are not there. And so for right now, I would agree that we need to be focused on emissions reductions, but we also have to be scaling carbon removal.
So we need investment in both because for carbon removal to get to the scale, we need, allow us to have that permission to still pollute. We have to get to that time horizon first and it's way down the road. So we'll probably wreck our planet before then, if we don't focus on emissions reductions while building these longer term solutions.
Jason: And it seems like the, IPCC report are models that there needs to be lots of carbon removal. But if you double click on that, it seems like it's very unclear in terms of what can actually get us there on that side in a way that has both the scale and the economics that will enable it to do so. And some of the critics have said that we'll never be able to do it at enough scale. We'll never be able to do it in a way where the math works to have this be a viable solution at a level other than these little experiments, like the five million per year Shopify fund. So what would you say in response to that concern?
Stacy Kauk: I mean, what choice do we have? I think the findings that you're quoting and referring to show us that current efforts are inadequate. We know we need carbon removal. And if the current estimates are showing that not enough is going to be there, well, then we better get moving. I spend a lot of time talking to other potential buyers of carbon removal and explaining how you need to get your investments in there now, because we desperately need this.
And I think that that evidence should start spurring action, but we also need other supporting factors at the table. We need policy support, we need advocacy. It's not just going to be about the dollars, these small experiments as you called them. We need a full systems approach to solving the problem, to get these to scale.
Jason: And I'm envisioning, and I don't know if this is the right way to think about it, but that if you're gonna try to deploy five million a year coming in and you wanna do it in a way that is truly additional and high quality and things like that, there's almost like a stack that you need, 'cause you first need to understand. And I'm saying this like a statement, but really this is a question, but I would think you would first need to in your own footprint and what is the gap. And then you need to understand, okay, if that's the gap, well, how do I assess each of these different potential solutions and how can I deploy my capital confidently to ensure, or to give me the peace of mind that it's gonna do what we intend to do. So how do you think about that stack if you even think about it that way and where were you coming in, in terms of being equipped to deploy the five million confidently and where are you today?
Stacy Kauk: [laughs] That's a great question because I was very naive. I was like $5 million. Oh man. I'm so excited to go and, and deploy that capital in the first year, I thought it was gonna be super easy. There's gonna be tons of companies. It's gonna be easy to uncover them. And I quickly learned, okay, there's not a lot to buy. There's really going to be challenges in deploying that $5 million year over year. And that brought me to a lot of discussions with the leading academics and a variety of verticals, you know, from direct air capture to ocean based solutions, to biomass, to mineralization, um, forestry projects, renewable energy soil carbon.
And I started talking to everybody and realized that it can't just be me. I'm going to need to have a network that is able to do several things, flag new and exciting things that are coming out of labs, flag companies that are doing a great job point out the ones that may not have it right quite yet. And I realized that a lot of the experts I was talking to are infact, all on the science team at carbon direct and coincidentally within the first 10 days of starting at Shopify to work on the sustainability fund. I met Jonathan Goldberg and Julio Friedman at Columbia university and had a great conversation with them and realized that tapping into what carbon direct was building in terms of their science board would be really beneficial to the program that I was building.
Jason: By the way, Jonathan is another example of someone who like me was doing something totally different and then decided that he wanted to help and climate and he's manage to find a spot and be having a huge impact. But I think he came in without any training and has just found a way to get up to speed and start deploying his expertise in capital in a way that matters.
Stacy Kauk: Totally. And I'm pretty sure he came from the dark side. Pretty sure he was over on like the oil and gas and energy side of things too.
Jason: I think he was like, yeah, it was like commodities, hedge funds, some, something like that. I don't know finance that whole world is a black box to me.
Stacy Kauk: Yeah. I, I hear you.
Jason: But yeah, it certainly wasn't on the saving the world side.
Stacy Kauk: No, no. And it's wonderful to have all that energy and I love to mentor people in talk, talk to people. I learn so much and I get rejuvenated. And some of the things that we talk about people are searching well, where's the most impactful place for me to work. What part of the carbon removal space should I focus on and where should I join? And I always say, what do you do best?
Because whatever you do best that got you this far in your other career is exactly what you need to bring to the climate space because there will be an analogous role. There will be that skillset that's needed on the climate side of things. And long and behold, that usually helps them focus right in on where they need to go. So Jonathan's a great example. Not that I mentored Jonathan, that's not what I'm saying. He's a great of taking previous life experience and using it to further climate action.
Jason: Okay. So you uncovered that you needed a lot of external expertise. You were talking to the carbon direct team frequently, then what?
Stacy Kauk: Well, and then it was time to make our first set of purchases.
Jason: So you engaged the carbon direct team to help you before that first set of purchases occurred?
Stacy Kauk: They were acting as sort of an advisory service-
Jason: mm-hmm [affirmative.
Stacy Kauk: They provided us with additional due diligence on the scientific and financial side of things like deploying five million into climate needs, a little bit of rigor behind it, not just my rigor. And so they provided support as we were identifying the companies we wanted to work with. So that was really, really helpful. And so we ended up creating two portfolios, our frontier portfolio, which includes technologies that permanently remove carbon dioxide from the atmosphere. So that's director capture products like concrete ocean based solutions, biomass and mineralization.
And then we created our evergreen portfolio, which includes solutions that temporarily remove carbon, so less durable storage options, but these solutions are readily available and deployable now for immediate benefit. It may not be long term benefit, but it'll certainly be helpful right now to reduce global warming-
Jason: Like what?
Stacy Kauk: Oh, like forest protection and reforestation projects, as well as soil, carbon storage. And then we also have in their initiatives that reduce emissions. So this is where we house our renewable energy efforts for Shopify, as well as some initiatives related to transportation. And that's really connected back to Shopify's core business in that we provide tools for brands to build their business. And so part of that is with millions of merchants around the world. They're shipping packages everywhere.
So while merchants shipping packages may not be directly Shopify's emissions, it is the emissions of commerce, right? So transportation and shipping decarbonization is really important for Shopify because it's key to our mission to make commerce better for everyone. So focusing in on transportation's important for our merchants, because it'll give them some access to less submissive solutions when it comes to shipping.
Jason: So when you looked at those buckets that you just went through and you had of carbon direct at your side, helping you assess, what did you find in terms of the state of the supply for these projects and what were the biggest hurdles or challenges in you deploying that capital confidently? Other than expertise, which you just mentioned, how you addressed.
Stacy Kauk: There's a couple of different types of companies. There are some carbon removal companies like CarbonCure and CLIMB Works, who are already operational at this point. And this is mid 2020 they're operational. They are capturing and storing carbon dioxide. They're delivering what they're doing, except it's on a small scale and they have some buyer, not big buyers.
So they're looking for big buyers. They're looking for multi-year deals because they're at a growth inflection for their companies. They want to get enough buyers. So they can demonstrate to sources of capital that it's time to build that next generation facility look, we've got the buyers lined up. And so that group brought me to the question of with Shopify's $5 million fund, what's the most impactful thing we could do to help them. And the most impactful thing we could do is not a one off purchase.
It was a multi-year deal and not do a small deal, do as big a deal as we could manage while still maintaining availability to fund that wide range of portfolio solutions we're looking for. And so that led us to the concept of multi-year deals with options. And so we signed contracts that generally are four or five years in length and often have an option for a five year extension.
So that's almost a 10 year deal that we're able to offer these companies who are at that growth stage. This was the start of our flexible contracting approach. So those are the growth companies. What I also noticed at this time was there's some like really promising companies who are doing bench scale testing and are looking to find ways to get their pilots funded. And so we started talking to these companies and they weren't interested in selling any of the carbon removal that would happen at their pilots.
They hadn't thought about it actually as a way to generate revenue for their, they were like, well, we're just gonna do our pilot. And then once we're done our pilot, we'll be able to like start scaling up and it'll be great. We'll have all the results we need. I'm like, well, if your pilot works, why wouldn't you sell from your pilot?
And so that got us into this idea of pre purchasing from pilots. But then if the pilot goes well, the contract also includes an add-on for a guaranteed purchase from their next scale facility that created the connectivity that some of our companies needed, like planetary hydrogens, a great example, they're working on getting their pilot started, but we've agreed to buy any carbon removal from their pilot and we enter into prepayments with these companies to help them fund research, to bring on senior advisors, to actually buy the equipment they need.
So there's that kind of company. And then another example where we realized we needed to have flexibility and ended up becoming a foundational principle for our fund is with companies that will do their proof of concept. And then when they're successful, like I said, we guaranteed to buy more. We call this doubling down and what it does is incentivizes the success. But then also there's a reward where just because they've executed what we've purchased doesn't mean that it's a one and done we'll be able to do another add-on purchase with them.
So charm industrial is a great example where we bought an initial 1000 tons from them. They over delivered and managed to do that in record time. And so we were like, wow, this is excellent. We need to make sure that we're providing ongoing support. So then we purchased another 2000 tons and that's helped them sell out their capacity for their existing plant. Well into 2023.
Which it sounds like it's not a lot of money that $5 million, but when you package it up year over year and that five million spend is connected and it's done in a focused way that meets all of these different businesses where they're at and the contracts are staged in such a way that it's being as impactful as possible for each of the companies to get them the capital they need when they need it. We're able to really have an out sized impact using our fund.
Jason: And when you budget internally for that fund, how is that viewed in terms of its job from a business standpoint? I mean, is it viewed like a philanthropic contribution for the collective good? Is it a marketing expense? How, how do you think about that?
Stacy Kauk: I guess it would depend on who you ask because there's a lot of angles you can take with the fund. And when I talk about, or I get asked about the return on investment and how we're measuring success and what's the play, it really is the success of the companies that are in our fund. That means that Shopify's being successful. And so internally how we treat this is right now, a lot of the things that we're buying haven't yet been done. Some companies have not yet proven that in fact, this is gonna work at the rate that they expect at the capacity they think.
Scaling and cost curves are still being truth and proven out. So right now it's more of a trying to kickstart and we're very open to risk. However longer term, this is going to transition at as the carbon removal services begin for those companies that are successful as they start to deliver tonnage to Shopify, this certainly will be something that will become material.
And we really hope it will become material to our company because of the impact of our initial kicks starting, the market. We're getting these carbon it's in which we will then continue to retire against either our corporate footprint or shipping services or use them for merchant promotions. Like a great example is black Friday cyber Monday, which is, you know, the largest shopping weekend around the world. And it happens just before the holidays. And we have this beautiful globe that shows all the orders where they're flying around the world. And it's really a wonderful rendering of what global commerce can look like.
And what we do for black Friday cyber Monday is we use the carbon removal credits that we get through to our sustainability fund purchases to make every shipment for every order placed on that four day weekend, carbon neutral, or even actually remove the emissions from that activity. So there's a direct connection to the business in terms of how we're using any of the carbon removal tonnage that it's delivered.
Jason: If I'm one of your peer companies, you know, a competitor or someone, an adjacent part of the commerce stack. And I say, look, that's great that you're doing that, but I run a publicly traded company. I'm accountable to shareholders from a financial standpoint every quarter, and I get that it helps the greater good, but I'm just trying to, you know, save my butt and deliver financial returns for my shareholders. Why would I do this? What would you say?
Stacy Kauk: That's a great question 'cause we've had to answer that we're a publicly traded company as well, delivering quarterly results and are accountable to the board and our shareholders and how we think about it as a commerce company, as the entrepreneurship company, that Shopify is when we think about climate change and the long term climate change has to be dealt with because it's a threat to entrepreneurship and there's a couple layers to this. So I'll try to unpack what I mean by that.
When we think about climate change, and we think about the adverse effects that are starting to be more commonplace around the world, we've got rising sea levels. We have drought, we have wildfires, we have water shortages. We have increasing food prices. All of those things disproportionately affect marginalized as populations around the world. All of those things that are putting stress on those populations, those are the same populations that would benefit the most from entrepreneurship.
Those are the populations that need to become entrepreneurs that need to build their businesses that need Shopify. And when we think about being the entrepreneurship company and having global commerce be something that's sustainable in the long run, we wanna make sure that entrepreneurs and entrepreneurship can thrive and people aren't just focused on surviving.
And so when you look at like 100 year time horizon, we need to take down climate change so that entrepreneurship can persist for everyone globally. So with that perspective, we need to deal with climate change and we need to spend money to decarbonize as a corporation so that we can protect our core business from the threat of climate change.
Jason: And Shopify aside, if you just look at the state of carbon removal and you look at what it will take for it to make a meaningful dent in addressing the problem of climate change, where is carbon removal in the aggregate in getting there? What are the most promising areas within it? And what are the biggest barriers holding it back?
Stacy Kauk: Oh, this is what keeps me up at night and keeps me reading and digging and trying to solve that because there's so much in that question. What I can share in terms of where is carbon removal at? I've seen massive progress in just two years when I started working on this in early 2020, it was massively challenging to spend $5 million. Now it's not hard, it's much easier. And because I've got a view into the 22 companies that are now in our sustainability fund, I can see how they're evolving and what's changing and what their success looks like.
So even with our five million annual spend that we're doing, and obviously we need that to be a thousand times more to get to where we need to go. What that has done is the companies and our fund have raised tens of millions of dollars. They've grown their carbon removal capacity by as much as 80 times, that's 80 X, which is a massive change in two years.
And they've increased their customer base 40 times. So things are working. There is momentum, and I think there is going to be a significant increase in momentum. And I think it's going to accelerate and I'm very hopeful about carbon removal, getting to the point where it's a meaningful contributor to reversing climate change. What I'm excited about is more along the lines of what has not been done yet.
What do we still not understand? What do we still need significant research into? And that makes me think of any kind of ocean based solution right now that is just an untapped wealth of space to put carbon and being a massive carbon sink that the ocean is any solution that uses the ocean. Doesn't have a competing land use. Like we're not trading off places for us to live places, to plant trees and to renature deforested areas.
We're not trading off agricultural space. The ocean has a huge potential and it's hardly yet understood. We've just scratched the surface in terms of how to harness the ocean as the world's largest carbon sink. And so I'm super excited about that area of exploration, because it just has such a huge untapped potential.
It has a different set of risks associated with it, but it sits largely outside. A lot of the criticisms around some carbon removal solutions and nature based solutions specifically where, you know, we can't reforest the world because we have to live and we have to eat so trees aren't gonna solve all of this for us, but if we can use our entire planet and all of the geology, all of the land and all of the oceans, I think we're gonna get there.
Jason: I think the voluntary market is important. It's not the only thing we've got, but it seems like it's the bulk of what we've got right now. I, my question is how far can the voluntary market take us? And what is the theory of change here? Look, it's better that you're doing what you're doing than not doing it, but you worry that you'll do it with these little dollars and not to suggest. I mean, it's way better than no dollars, right? But if you need trillions and you're doing five million, then how do those dots connect? What needs to happen? And how much do you think about and resource to ensuring that this entry point or beachhead, if you will, is actually kindling for a larger fire.
Stacy Kauk: That question is perfect because you've almost brought us full circle in our conversation because that's exactly why I chose to join Shopify. And I chose to leave government. That's where I was working before Shopify. I was at the environment in climate change, Canada, working on the regulatory side of things I chose to come to Shopify because I felt at the time and I still firmly believe this, that the voluntary market and corporations are going to be able to move faster than the regulated space.
Governments have very important role in creating a level playing field across industries, through standards and regulation. They really need to make the rules of the game fair, but incentives lie in the market, when I think about business. So joining Shopify was really about having impact and when corporations and business go out and prove that something is possible and spend the money and go look that $5 million that Shopify spends a year has achieved X, Y, and Z.
And we've got all these other companies piling on and more purchases are happening. Work is taking place around defining what a high quality carbon removal credit should be. We're talking about permanence, additionality, atmospheric source CO2. All of those things are starting to be talked about because companies like Shopify are demanding that quality and we're paying for it with our dollars. And when that starts to happen, you will get that follow on.
That'll eventually create the playing field for a carbon removal and governments will start to shore that up. But if you wanna be on the leading edge, I think you need to align yourself with where the incentives lie to get things moving, not to formalize and permanently entrench. What's built. If you wanna do the building, you have to be here and you have to start and you have to get others to contribute and join.
And that's really what we're going to need is a monumental amount of capital being dedicated to purchasing high quality carbon removal, to be that undeniable market demand signal that can be relied upon by the supply side of the equation, that private financing and equity groups and venture capital can rely on to know that these are the companies I need to invest in because there is this market for their product and it's strong and it's going to be there.
And the demand is only gonna grow. And, and so that's really what it's about that using the voluntary market to build something that's robust. And I mean, it's not easy. There's a lot of criticisms. There's a lot of smoke and mirrors, but I think in the long term, we'll be able to create something that will eventually be formalized.
Jason: We've talked a lot about carbon removal. I understand that your role is not just the sustainability fund, but also the head of sustainability for Shopify. And earlier in this discussion, we talked about how one of your controversial views was that potentially while we should do things to, to clean up our own footprints in the short term, maybe in the longer term, if carbon removal is wildly successful, we don't need to do that.
So what are the implications there as it relates to how Shopify thinks about cleaning up its own footprint outside of carbon removal, where are you on that journey? How much do you think about and resource to it, and how much do you believe companies need to think about and resource to it versus just going all in on carbon removal?
Stacy Kauk: You're right. The sustainability fund and carbon removal is one of three parts, three big buckets that I work on. So the first one that you've touched on here is, you know, our corporate emissions-
Jason: Mm-hmm [affirmative].
Stacy Kauk: And our reduction strategy. And then there's also on the product side of things. How do we take the expertise that Shopify has in terms of carbon removal, but also in terms of managing our own corporate carbon footprint, how do we build products and consider that in our products that we're building for our merchants? So there's three sort of spaces to go back to Shopify's house back in 2019, when the realization that carbon removal didn't exist in the quantities and scale that's required. When we were doing that, it was to go out and buy credits from a project that would enable us to be carbon neutral and to be carbon neutral from back 2004, when our CEO launched his first website, that then became Shopify.
We did all that data gathering that measurement. And at the same time as being accountable for our historical emissions, we also identified the critical levers that we needed to pull, to reduce our emissions immediately. One of those was to decommission all of our data centers and transition those to renewable power. That was critical. So with all of that, that was done, we're now at a reduced footprint and I can quote the 2020 numbers, but to give you an example, our scope one scope two and select scope, three emissions. When you take them all together is around 6,000 tons.
That's it, it's not a lot where the power of what I get to work on at Shopify lies is in making sure that what we're doing is pushing decarbonization in two places, decarbonization of the electricity grid, as well as decarbonization of shipping and transportation. We do that and that's connected through the other buckets of my work.
So the sustainability fund, we have two companies in our fund, 12 who manufacture EJET, which is 80%, less carbon intensive than regular jet fuel. And we also have Ram who capture and store emissions from semi-trucks that do ground freight, we're supporting them so that they can scale. And that'll eventually contribute to decarbonizing that sector for the renewable power side of things.
We actually just earlier this year signed our first power purchase agreement, and it was a different kind of approach 'cause we don't have data centers anymore. So we don't have these large point source electricity consumptions. What we've done is aggregate the emissions from all of our employee home offices in North America, figured out what that's gonna be over the next 10 years. And we decided to go out and sign on to support the construction of a new wind farm in Alberta, which is one of the most carbon intensive electricity grids in, in North America.
What we're doing is connecting our initiatives across all of the different areas so that we're moving the gigantic complex system of trying to solve climate change. And we're moving it in the same direction with each of the decisions and interventions that we make across the corporate side, as well as with our fund, but also for our merchants in terms of shipping.
Jason: So there's a couple of substantive topics that I don't wanna close up without at least touching on one is behavior change. We've talked about how carbon removal successful. It means that potentially behavior change might not be I as important, but what is your view in terms of where behavior change fits in? And that's both consumer behavior change in terms of purchasing decisions and stuff like that.
But also, I mean, it's more at the systems level of things like fashion cycles and our consultative culture. That's one topic and I'll just put the other or not too, just to get 'em all on the table. That's policy, whether it's incentives, whether it's mandates, whether it's phased obsolescence over time, what is the role of policy and how to Shopify think about its role in each of those buckets, if at all.
Stacy Kauk: I'll tackle the first one, the behavior change component. And let me be clear while I think that in a sci-fi world 100 years from now, perhaps carbon removal will enable us to burn fossil fuels. Again, I certainly do not that belief in the short term behavior change is extremely important in terms of reducing our emissions now to give us the time to develop these technologies. When I think about, and at Shopify, when we think about behavior change in commerce, it's really about surfacing information and doing so in a way that has high fidelity.
Let me give you an example when you're shopping for something online, you're looking at it, especially if it's clothing, you're looking at it or it's a rug, is that color really what the color's gonna be when it gets here? Like, is it gonna match my furniture? It's really important that commerce has a high fidelity where the merchant takes the picture using one device, takes the picture of the rug.
Then that device processes, that file it's then uploaded. It's probably cut and trimmed again because of transmission. And then it goes up to a server where Shopify's operating system is running. Our system, accepts it, then puts it into the platform. But then as the buyer, you're looking on another device, it's coming down from the servers, through the internet, through all these devices that are altering this file.
And then you're looking at the picture of that. Same rug is the orange actually the same orange after it's gone through all of this data transformation. If we can get that right, if we can spend the time in the detail which we do on trying to make commerce a high fidelity experience, then returns, won't be a thing. If we can make commerce the best it be making it digitally high fidelity, it means that we will have less waste.
People will know what they're buying. That's just one example. We also have a feature where using augmented reality, you can use your phone and you can be shopping for a table and you can through your phone, see the table sitting in the room. Oh, that is the right size. That it looks great with that chair. It's not too short. It's the right look I'm going for. And so it's about innovating on the commerce experience and on Shopify's platform that truly enables us to drive that behavioral change by enabling people and consumers to make informed choices.
That's more of about the technology side of things, but it's also on the data and education. And we really have a huge opportunity to influence buyers. When they're choosing say their shipping, if you're buying a table, does it need to be there tomorrow? Do you need overnight shipping? Or can you wait a week? And if you wait a week, what's the climate benefit that you're enabling by using a slower shipping selection. So there's a lot of potential in commerce to do those behavioral changes that we all need today.
Jason: Uh-huh [affirmative] And I easily could have pulled on that thread and asked a bunch more questions, but for sake of time, since we're running out, can we touch briefly on the policy? And then I just have a couple of other wrap up questions, quick ones.
Stacy Kauk: For sure. So when it comes to, I talked a little bit about it earlier that government's role is to create a level playing field. And I believe that, that's critical when it comes to the climate space, but in terms of Shopify's involvement in view, we definitely have opinions on what quality carbon removal projects look like, what permanence is durability and how that should be characterized and formalized into standards is going to be very important because it's about what I talked about earlier, where we wanna make sure that we're removing the smoke and mirrors from the carbon accounting.
It has to be impactful and the best way to do that and to remove friction and to be transparent is to have that quality definition clearly laid out and applicable across the entire sector, in terms of what kind of credit you can buy to allocate towards your corporate footprint. That'll be very important going forward.
Jason: If you could change one thing outside of the scope of your control that could most accelerate your efforts and our efforts to address the problem of climate change, what would you change? And how would you change it?
Stacy Kauk: Can I have two?
Jason: Sure.
Stacy Kauk: The first thing I would change is that there's a lot of discussion around should be a nature based solution. Oh no, the engineered solutions are gonna save us. I really want that to be much more harmonious. If I could change that hero posturing, it would be remarkable because we need all of it. And we need all of it for a variety of reasons and no solutions better than any other solution. As long as they're per providing benefit, then we should pursue them all. So I really would love that picking and downplaying other solutions and pitting them against each other to end and for all of us to recognize that we all have a role to play in this. So that would be the first thing.
And then the second thing that I would also change is I'm a very optimistic person and I think we need to have a lot more optimism when we talk about climate change action and a little bit less of the dooms day. I mean, dooms day is important so that we know the urgency of the situation, but I mean, we're human. And until we feel the adverse effects physically ourselves to where we live our house family, we're actually not gonna change anything, the doom, and glooms not gonna make everybody change their behavior. What we need to focus on is empowering people and building a sense of community. And I think you're doing a great job at that, Jason, with, uh, your podcast and your collective. So,
Jason: Oh, thanks, Stacy. And uh, last question is for anyone listening, that's since fired by your work, how can we be helpful to you? And who do you wanna hear from, if anyone?
Stacy Kauk: I wanna hear from anyone working on a climate solution, I wanna hear from anyone who's interested in buying carbon removal, but doesn't know where to start. Those are our two big pushes finding more companies to support and building up the community of buyers.
Jason: Awesome. Anything I didn't ask that I should have or any parting words?
Stacy Kauk: I think you covered a lot of ground and I think we now have a one, two punch between, uh, Cody's podcast and this episode. So maybe, uh, some co-marketing there would be great.
Jason: Yeah, we'll have to link to Cody's episode when he was still a Techstar before he became one of my partners at CJ, a collective, which we're thrilled about. So Stacy, thank you so much, really awesome discussion and uh, really awesome initiative what an unlikely climate hero, but a climate hero you are. So thank you.
Stacy Kauk: Thanks for having me, Jason.
Jason: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co no that is .co not .com. Someday we'll get the .com, but right now .co, you can also find me on Twitter at JJacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guests. You'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
