Introduction
Mitch Selby (00:00):
We were willing to be a first-mover in this space because somebody needed to move. Somebody needed to be that demand signal, and we were willing to take on the risks associated with taking that position.
Anna Stukas (00:11):
Amazing. And thank you.
Mitch Selby (00:13):
You're welcome. We were excited that there was companies to buy from, like you guys.
Anna Stukas (00:26):
Welcome to Speaking in Tonnes, where industry leaders share their ideas and experiences related to carbon removal. I'm here today with Mitch Selby from Shopify Sustainability Fund. Mitch, thank you so much for joining us today. I can't believe that after four years of working together, this is actually the first time that we've been in the same room together in real life.
Mitch Selby (00:47):
It's really nice to be here, and thanks for having me. And so good to see you too.
Anna Stukas (00:50):
I'm really excited to talk today about some of the work that Shopify has been doing in the carbon removal space. It's well known that Shopify has taken a huge leadership role in catalyzing carbon removal purchases. Can you talk us through the formation of Shopify Sustainability Fund and its objectives, and maybe what you see as some of its notable successes to date?
Mitch Selby (01:12):
Our Sustainability Fund was launched by our CEO back in 2019. It was a commitment to spend five million annually on the most promising carbon removal – climate solutions in general – that we could find. With carbon removal, we wanted to support technologies that were pulling CO2 out of the atmosphere and locking it away. And the goal really was to be a demand signal to continue to scale up, to develop your technology, to put it out into the real world.
And then, also, other entrants to enter the market, come into the lab knowing that there is a buyer for what they could potentially sell someday. And then we got to work. So, in the five years since the fund launched, we've allocated in our contracts $55 million. Of that, we've paid out probably around 20 million. And then that's resulted in 84,000 tons of removals in our contracts, much of which we haven't received yet.
But we have received some. So definitely really happy with the inflow of new companies into the market. We've seen hundreds of new companies enter the market, which is really exciting for us. Buyers haven’t entered the market as fast as we would have hoped. But overall, we're happy with the progress and we're ready to double down.
Starting a Sustainability Fund
Anna Stukas (02:18):
You know, in 2020, Shopify came on board as our very first customer of carbon removal. That was game-changing for us. It really proved that there was a market for this. What led to Shopify's decision to make that kind of a bold move, at a time when it had really never been done before?
Mitch Selby (02:38):
It's a great question. There is a bit of a story. Back when Shopify went public in 2015, our CEO penned a letter in the filing at the time and he said, “I want to be a company that sees the next century.”
And then fast forward to 2019, around the time he launched the fund, he was doing some thinking. He had read a lot about climate, and he realized that the climate problem was a bit of a threat to that statement. And Shopify needs to take action. We were willing to be a first-mover in this space because somebody needed to move. Somebody needed to be that demand signal, and we were willing to take on the risks associated with taking that position.
Anna Stukas (03:13):
Amazing. And thank you.
Mitch Selby (03:15):
You're welcome. We were excited that there was companies to buy from, like you guys.
Shopify’s Planet App
Anna Stukas (03:18):
So, I'm going to talk about something near and dear to your heart. In June 2022, Shopify launched the Planet App, which powers carbon neutral shipping and helps merchants to connect with climate-conscious consumers. Can you tell us about how this works and what kind of response you've gotten so far?
Mitch Selby (03:41):
Yes, you are definitely right that I'm excited about Planet. Like, the potential is huge. So, the way planet works is, it's an app that Shopify merchants, the millions of Shopify merchants, can add to their online store. It calculates the emissions associated with each of the shipments that they make to their buyers. We take that number, we go out and source carbon removal credits on behalf of our merchants from suppliers like you guys, and then we retire them on our merchants’ behalf. Some of these credits are credits that are getting delivered now. Some are getting delivered in the future. That was a really intentional decision.
Anna Stukas (04:15):
So, addressing emissions today and planning for future capacity.
Mitch Selby (04:20):
That's exactly how we tried to set it up. We wanted merchants to have the carbon neutral claim that is so important to buyers, but we also really wanted to support technologies like yours that are delivering in, in your case, the pretty near future.
Anna Stukas (04:34):
So, all the money that Planet generates for carbon removal goes to entrepreneurial, relatively early-stage carbon removal companies. What are you looking for in the companies that receive those investments?
Mitch Selby (04:47):
We have a really detailed diligence process, whenever we bring a company into our fund. The typical carbon removal criteria that you're likely very familiar with. Potential to scale, cost at scale: is it low? Would the project have happened without Shopify, without these purchases?
Then, it's also execution. So, does the team have the ability to execute on their vision? Do they have early results that are promising that make it more likely that they'll be able to execute? We're looking to support a broad range of technologies. Not just companies similar to ones we've already bought for in the past. We're looking towards 2050, thinking about the solution set we want to see at that point, wanting our portfolio today to be a good reflection of what we want that to be in the future.
Mitch Selby (05:33):
So, merchants are getting access to the same companies, which is really cool because these merchants do not have sustainability teams. They are often one or two entrepreneurs working on a really small business, and we are democratizing this for them, and we're allowing them to show up to their customers in the same way we show up to our customers as taking action on the climate.
Cofounding Frontier
Anna Stukas (05:54):
I love that inspiration. And a lot of that fed in... in 2022, Shopify cofounded Frontier. $925 million of commitment that’s since grown to over $1 billion, by 2030. How did Frontier come together?
Mitch Selby (06:11):
It was really all about knowing that things are progressing, but probably not fast enough. And in order to progress things faster, we need to come together as a group. Shopify’s specific reasons for joining included: it actually allowed us to grow our own commitment, which was really exciting. And probably the biggest one in my eyes was it allowed us to congregate around the same companies.
So, if Shopify’s making a purchase from one company, another buyer’s making purchases from another company in the couple million-dollar range, it's going to be impactful for those companies, but it's not going to have the impact they need to reach that next scale. But if one, two, three, four, five, six, seven, eight, nine, ten companies are all rallying around the same company and they get a $50 million in combined offtakes, then that company has a real chance of succeeding and scaling over a three-to-five-year time frame. And to get to that first or perhaps even second large-scale facility or deployment.
So, that was probably the biggest reason for Shopify joining, and also to attract other buyers as well. There are a few other companies that joined us, founding buyers that had made carbon removal purchases in the past, but there were a couple that hadn't.
And I think us joining gave them the confidence to join a group like this, knowing they were able to, they were going to get support from experienced buyers.
Attracting New Buyers
Anna Stukas (07:25):
What is Shopify’s philosophy on how to attract the next wave of buyers? You want to be the first buyer. You don't want to be the only buyer.
Mitch Selby (07:33):
Yes. Our philosophy in attracting these buyers is really about communication. So, every time we announce a new deal, every time a company delivers credits, every time a company has an exciting milestone they reach, we're really thinking about, how can we communicate this out publicly? What can we get out of this milestone that can attract this new wave of buyers?
We try to do so in a really clear and concise way. Rather than going deep into the technology, we'll talk about it in a way that is accessible by a general audience. And that's worked really well for us so far.
And also focusing on the entrepreneurship story. As you know, Shopify is a company that is all about entrepreneurship. We help small to large merchants succeed and grow their businesses. So, if we can play up the stories of the entrepreneurs behind these companies and all of them, all the companies we support have those stories, I think we can inspire a lot of other buyers to join us, so we're going to continue doing that.
The Key Takeaway
Anna Stukas (08:26):
I love that. Before I let you off the hook, I wanted to give you the opportunity to have an uninterrupted minute and a half to talk about one thing that you want to drive home today. What's the main point that you're hoping people will take away?
Mitch Selby (08:43):
Every year we do an exercise, as you know, where we collect data from all the companies in our portfolio. We look at it in aggregate, and we use it to assess the state of the market. How are we doing? What tweaks do we need to make? I've recently looked at the results from this year, and there are a lot of things that I would love to share today, but I want to hit home the point about the importance of accelerated deployment and actually getting this stuff into the real world, whether it's at pilot scale or large scale.
So, what we've seen across companies in our portfolio is tech de-risking is going really well. We've rarely had a company get to a point where they're like, “this technology is not going to work. Let's give up.” Instead, companies are doing a really good job of when some component doesn't work to figure out what does, and it's often leading to improvements with the technology.
Mitch Selby (09:36):
But deployment is not going as well. We saw quite a few increases in capacity in 2023, but it's not big jumps that we're really looking for. Deployment is just so important. It's so important for so many reasons. A) we need to be drawing CO2 out of the atmosphere as fast as possible in as large quantities as possible.
But B, it's important to just validate the decision that companies like Shopify are making. We can then take those results back to leadership and say, hey, this is what's happened from the purchase we made. It's not just asking for more money, it's showing the results of the money that our companies are putting up there and then giving investors and other buyers a reason to enter the industry. If companies can prove that they can execute, the perceived execution risk by buyers and investors goes way down, and I think they're more likely to make purchases because of that.
Mitch Selby (10:29):
I think, like inevitably, deployment will be slow for many reasons that are unavoidable. Like, as you know, permitting takes a long time.
Anna Stukas (10:39):
Absolutely.
Mitch Selby (10:40):
Building things that are completely novel takes a long time. Even once things are built, getting them up to speed. But there are things that are in our control as investors and as buyers, like Shopify. And I think, given the technology works at small scale, like we've proven carbon removal technology works, financing and purchasing can't be the reason this market doesn't succeed. Like that would be catastrophic.
So, investors, buyers, we really need to step up to make sure the technology that is proven to work does reach the larger scales, because that's just what we need to see next.
Anna Stukas (11:18):
Thank you, Mitch, so much for your time today. I know I've learned things. I hope our viewers have learned things. It's been such a privilege to have you here today. Really, really appreciate it.
Mitch Selby (11:32):
Thanks so much for having me.
Anna Stukas (11:33):
We’re looking forward to continuing to work with you.
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