Munch-based climate tech startup Tanso, which sells software to help industrial manufacturers carry out sustainability reporting and carbon accounting, has banked €6.5 million in early stage growth funding.

The investment breaks down into a €4 million seed raise, led by Cologne-based investor Capnamic, with existing investors including as UVC Partners also participating; and €2.5M it took in last month via an EU innovation grant under the bloc’s EIC Accelerator program.

The EU program aims to support homegrown startups to scale and the accelerator’s 2023 work program included “environmental intelligence” among a number of green tech areas of focus, aligning with the bloc’s overarching goal of becoming ‘climate neutral’ by 2050.

We first talked to Tanso back in fall 2021 when its trio of founders had just nabbed pre-seed funding. Since then they’ve been busy — getting their first “climate intelligence” product to market and supporting a growing number of manufacturing businesses’ to report their carbon emissions.

Tanso’s customers number in double digits at this point, per co-founder and CPO Gyri Reiersen. Tanso has also been growing: With the team now numbering around 20 and more hires on the way.

Reiersen tells TechCrunch the startup has picked up customers around the German-speaking DACH region, which means in Austria and Switzerland as well as its home market of Germany. “The majority in industries such as automotive, machine manufacturing, and steel production,” she adds. “In the next phase, we look at other exciting industries in manufacturing and neighboring geographies.”

The EU is expanding sustainability reporting requirements on companies, under regulations such as the Corporate Sustainability Reporting Directive (CSRD) — as well as via emissions trading rules and mechanisms like the Carbon Border Adjustment Mechanism (CBAM). And Tanso notes that from 2025 every company with an annual turnover of more than €40M and a balance sheet total of more than €20M (or more than 250 employees) will need to calculate and publish its own carbon footprint as part of its annual reporting — so its building a suite of software tools in anticipation of rising demand.

It suggests sustainability regulations are forcing more companies to make improvements to their products geared towards reducing emissions in order to stay competitive — pointing to household brand names like BMW and Bosch paying increasing attention to sustainability as a criteria for supplier selection, for example.

“We believe that carbon will become a factor is procurement processes and suppliers benchmarked on their carbon performance. This means to win contracts, products need to be designed and manufactured with environmental impact factored in,” argues Reiersen. “We support our customers in benchmarking their products and companies with others and identifying hotspots and reduction potentials to stay competitive.”

The core product, aka the Tanso Climate Intelligence Suite, was launched last fall. It remains focused on industrial manufacturing companies (so mostly medium-sized businesses) which Tanso argues are under particular pressure to decarbonize given how polluting heavy industry tends to be. It cites figures suggesting manufacturing companies are responsible for around a third of Europe’s carbon emissions but says many have not been caught by sustainability reporting requirements up to now.

However a lot more of these manufacturers will be as the EU’s sustainability reporting requirements expand in the next couple of years.

Tanso’s ISO-compliant software is designed to support its target industrial enterprise customers in calculating, managing and reducing carbon emissions — at both company and product level. “Our core product is the corporate carbon footprint (CCF) module, where companies set up a standard process to continuously manage their full carbon accounting for all worldwide production sites for full Scope 1-3 [emissions reporting],” explains Reiersen.

“Smart imports and integrations automatically map raw data from ERP [enterprise resource planning] and logistic systems to emissions factors in our calculation engine. Thereby, we reduce effort and create the basis for solid data analysis, drilling down on the most granular level where it adds value to go deep. Customers can also set Science-Based Target (SBTi) conform targets, strategically plan their reduction measures according to their real emissions, and actively steer their emissions.”

Tackling product carbon footprints (PCF) is about addressing “information bottlenecks in the supply chain”, per Reiersen, who flag an incoming launch in this area.

“Next week, we will launch a simple PCF calculator for individual products together with Europe’s largest industry association VDMA [Germany’s Mechanical Engineering Industry Association] with over 3,500 members, to accelerate the information transfer in the supply chain.

“We have already tested this with over 60+ companies in a beta phase. In addition to this, we develop currently automated PCF calculations for our customers’ full product portfolio, as well as a supplier engagement module to support suppliers in their PCF exchange. The largest hinderance for suppliers to sharing data is expertise in calculation and internal data complexity.”

Reiersen says the plan for the latest funding injection is to move into the next phase of product development — which means making the software more modular so the startup can provide targeted support for both CCF and PCF calculation and optimization and mesh with more manufacturers’ needs.

“To this end, we are significantly expanding our team and will hire a number of experts from the fields of life cycle assessments and data analytics to further develop and expand our product offering,” she adds, noting also that the funding will allow the startup to pour more resource into building additional product modules at the same time as ramping up the sales team for the core product. So it’s foot on the gas to help others take their feet off the gas.

“Our mission is to not only have Europe’s industrial emissions as ‘carbon under management’ in our software but to unlock and accelerate the decarbonization we need to mitigate climate change,” she adds.

Tanso banks a seed for its CO2 footprint software for industrial manufacturers by Natasha Lomas originally published on TechCrunch