Startup of the month: Cbamboo

Please give us a brief company description of Cbamboo.

Cbamboo is building the operating system for the world’s carbon border taxes. Our focus is on the EU’s new Carbon Border Adjustment Mechanism. The CBAM is a massive new climate regulation that reshapes the way that supply chains account and pay for embedded carbon emissions. Cbamboo’s software platform will help firms comply with these complex new requirements, and our data tools will help them navigate this new system to reduce their costs and cut their emissions.

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Tell us a bit about the founding story of Cbamboo. When and how was Cbamboo born?

Cbamboo was founded in May 2023 when we (Gabriel and Daniel) met each other on the Carbon13 venture builder, based in Cambridge, UK. Each of us is a first-time founders who quit more reliable careers in order to build something new that could reach venture scale in the climate world. We are both software people, and we were intrigued by the potential for regtech tools to service the wave of new climate legislation coming out of the EU and USA. 

We started researching CBAM as it was going through the final stages of becoming law, and we were amazed by what we discovered. This is a vastly ambitious new piece of legislation. It will be a severe compliance challenge for tens of thousands of companies. But if used in the right way, it will be a huge incentive for businesses to decarbonise industry – potentially the most impactful such measure out there right now. 

The EU is setting up the world’s biggest ever carbon border tax, and it’s a model for the planet, but the European Commission are not software developers, so the gap in the market was obvious. We felt like we could make a huge impact by building the operating system for carbon border taxes everywhere.

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Who are the people behind Cbamboo? Tell us about the founders and initiators of Cbamboo and what motivates them.

I started my career as a journalist covering economics, finance and tax at The Times. I then switched to finance, working for 14 years in a range of investing roles at several hedge funds. But I was always keen to move to an operational role. It seemed like the way in which I could have the most impact, and so in 2022 I quit my job and started figuring out what to do next.

My business partner Daniel first worked as an M&A management consultant at Deloitte, before being drawn into the world of data and taking a Masters in Data Science. He joined a boutique consultancy, where he built and productionised end-to-end data solutions leveraging Machine Learning to optimise client operations and use of data. Like me he wanted to do something bigger and knew that it had to be in the climate space. 

Daniel and I have a shared sense of mission, but complementary working styles. It’s a really good partnership.

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‍Who are typical customers for Cbamboo ? Which problems do you solve for them and what’s usually their biggest pain point?

CBAM is particularly impactful on products made from iron, steel and aluminium. Hence, our initial customers are clustered in the metals importing and autos supply chain sectors, as these are the sectors whose business is most squarely exposed to CBAM. At the moment the pain point is all around compliance, so that’s our focus. We find that many businesses, even very large ones, have a lot of uncertainty about the rules of CBAM. Compliance is a challenge given that most of the information for any single declarant is held by another party in their supply chain. We are building a common platform for easy sharing and reporting of CBAM data.

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‍How would you describe the core competence  of Cbamboo with regards to your customers? 

The most important point that our customers need to know is that we are totally built around the needs of the CBAM process. A lot of businesses are trying to do CBAM as an add-on, but they tend to skip part of the process, whether that’s carbon accounting, supplier outreach, or report uploading. Our bet is that a lot of businesses want one tool to manage CBAM for them from start to finish. We offer an integrated solution. And our team by design combines the skillsets that you need to make sense of CBAM: people with backgrounds across carbon, supply chain, customs, and even politics. We’ve got a lot more planned, but this is where it starts.

We think that clear and accurate communication is core to getting this right. A lot of businesses come to Cbamboo because they’ve seen our marketing and listened to our webinars, and they’ve learnt something useful from what they’ve heard. That builds trust. So we think good comms is going to be a differentiator for whoever wins in this market.

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Looking at your customers: where do you see the most confusion or uncertainty when it comes to the CBAM on their end?

Pretty much everything! To begin with it was chaos: the European Commission did its best but it was a very hard system for companies to get their heads around. Even today we find ourselves answering quite basic questions a lot of the time. Businesses need reassurance that they are on the right path. 

We are now seeing the understanding spread that the supply chain needs to provide carbon data. But there’s still a lack of awareness of what kind of data is required. We see large, sophisticated suppliers sending their customers their existing carbon accounting reports under the GHG Protocol standard. The problem is that EU CBAM sets up a new, subtly different, system for accounting for carbon emissions that also involves a great deal of supplementary data. 

Many suppliers are not factoring in what we think of as the “Russian dolls” effect. That is: they, the suppliers, need to go to their own suppliers of raw materials and in many cases get CBAM-quality emissions data from those upstream actors. That’s a hard ask. We try to explain that the CBAM is ambitious by design, and we are building tools to help.

Another supply chain surprise is that EU companies can sometimes be “third country operators”. That is because they may be upstream suppliers to, say, a stainless steel products producer in the UK. Even though they are EU businesses, subject to the EU ETS, they will still need to comply with the CBAM declarations that would be required of an operator outside the EU. 

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Which department or role is usually responsible for CBAM at the moment and how (if at all) do you think responsibilities might shift in the future?

This is a fascinating one. Hardly any businesses had given this much thought until recently, of course. CBAM looks like a sustainability regulation (which it is), but it also seems to have a lot to do with trade compliance (again correct), and it’s a financial measure too. 

Our expectation is that CBAM eventually will sit with the finance function, at least for all businesses that need to take CBAM seriously. That’s because CBAM is an unusual kind of tax in that it impacts operating profits. Classically, taxes are below the EBIT line and are not top of mind for decision makers. But CBAM, by design, is intended to reshape corporate behaviour. That could play out in two ways. Either we will see importers bear the CBAM charge, in which case CBAM will be treated as a component of gross margin. Or the importers will collectively push that cost burden out onto the border price, in which case it’s impacting the suppliers’ revenue. Either way, getting CBAM right will be a matter for the CFO.

In our experience, only the very largest businesses have committed as much as one FTE to figuring out their CBAM obligations. But that FTE is more often than not to be found in the finance team.

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A very critical factor for CBAM’s effectiveness is the quality and accuracy of data reported and also the question how quality can be enforced. What’s your view on that from an importer perspective and which measures do you expect to see from the regulators in the future?

This is always the pushback against CBAM. But we are optimistic. Firstly, there are enforcement mechanisms planned – third-party verification will be mandatory from 2026 onwards. And the EU will be able to marry up supplier data with customs data for cross-checks and so on. But more generally, we expect CBAM to prompt greater transparency around carbon data around the world. As the data gets generated and shared, it will start to shift to a semi-public set of numbers which can be cross-checked against independent databases. Anomalies will get spotted. 

What’s important for us as a data provider is that the figures we present are robust and trustworthy. We will be helping clients share data among ourselves, and we can’t take responsibility for its ultimate accuracy. But we care deeply about getting this right and we are thinking through ways that we can ensure that the data on our platform, even if it comes from third parties, is highly reliable.

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How do you see the future of Cbamboo? How will the product and the company evolve and what’s your overall vision for Cbamboo?

Our vision is to decarbonise industry. That’s an unimaginably vast project, so Cbamboo can only ever play a small part in that story, but it’s why we are here. With that lodestar in mind, our product will naturally expand to cover all kind of data and financial management tools around CBAM. We will make sure to build tools for every kind of CBAM and CBAM-like system that gets developed. If we can build trust with our customers and product users, then our platform has the opportunity to shine a light on the incentives that exist for businesses to clean up their supply chains. It’s a huge goal and we are very excited to be working on it. 

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