Sumday's Lindsay Ellis on his non linear journey to startup co-founder
We sat down with Lindsay Ellis to discuss what led him to co-found a carbon accounting startup, and why accountants will save the world.
Sumday: You’re a maybe-engineering student turned Kindergarten teacher’s assistant turned COO of a Carbon Accounting startup. Tell me about how you got here?
Lindsay Ellis: My journey has definitely been non-linear and I've collected a portfolio of experiences over my career, which have been relatively complementary to where we've gotten to. In high school I completed an accounting program, where essentially, I started uni in my last year of high school in Western Australia.
At the time I was deciding if I wanted to be an accountant or do I want to be an engineer? And I almost fell into accounting. I'd been pretty good at it in high school and with the typical accounting brain I thought ‘I've already done a unit so I might as well keep going’. Through that program, I was offered a traineeship with PwC. It meant I was doing full-time uni and full time work for a couple of years at the start of my career, which was pretty hectic. But I found auditing a really interesting place to start. Some of the work is relatively compliance driven, so it's about ticking a bunch of processes and making sure that companies are reporting their financials in a way that's consistent with standards. You develop attention to detail through that process. You also get to see a lot of different businesses and understand not only how they operate and function but what their key drivers are.
Sumday: How did you pivot from traditional financial accounting to sustainability?
LE: I think a large portion of it was something I'd carried with me from childhood. I spent the first five years of my life living in an Aboriginal community in the Kimberley Region, in the northern part of West Australia. I think the interplay between the local communities - foraging, fishing, and all of those pastimes that people had - there was an inherent understanding of sustainability and the true value of being on Country. That's essentially your life source. You have to maintain that relationship in a way that is sustainable. A lot of my early childhood was centred around sustainability without even necessarily realising or having the lexicon for it.
When I was at PwC, I had an opportunity to move to Norway and it was a bit serendipitous. I’d been working really hard and hadn’t taken a gap year, so I saw it as an opportunity to take a career breather, learn a new language and see if I could make a life in Norway.
I got a job as a teacher’s assistant at a Norwegian kindergarten. None of the kids spoke English, so I'd turn up to work every day and apply my Norwegian language classes directly for seven hours, trying to figure out what these excitable kids wanted from me. It was a crash course in both Norwegian language and culture, you’re learning all the nuances you don't think about unless you live abroad or spend time with young children in other places.
In Norway, a lot of the culture is centred around the outdoors and sustainability. Even in the early childhood setting of the kindergarten itself, we spent two or three days a week hanging out in the forest. We’d put on weather gear and wander out into the forest, collect wood, light fires, and do random forest-y things. That was an experience that influenced me, in a way that was different to the context of growing up in Australia.
Obviously Norway is very different to the Kimberley but to get back to some of those core elements was something I really enjoyed. I became fluent in Norwegian and was accepted into a sustainability program at the Norwegian School of Economics. I knew that accounting facilitated doing business, but was always thinking ‘what is beyond that?’. This thinking and my time in Norway with a new sustainability context, helped me pursue this as a career path and an educational opportunity.
The Norwegian university had a joint program with the HEC business school in Paris. When I originally applied for the Norwegian spot, it was a two-year master degree with a focus on natural resource economics. It incorporated elements of sustainability, primary industry usage, and energy. Norway has a lot of oil and gas and a pretty big wind industry. Some of the course was more around the tactical things in terms of each industry and how it all works. It was broader than just pure sustainability. Halfway through that program I applied to turn it into a double degree with HEC in Paris and was successful.
I moved to Paris to pursue a deeper sustainability focus.
Sumday: HEC is one of the world's leading business schools. Did it open your eyes to a whole lot of things you hadn’t had touch points on before?
LE: I probably didn't appreciate how big of a deal it was when I got into the program. There were about 50 people from about 20 different countries and really diverse backgrounds - some had worked on nuclear plants, others had experience in social enterprise or financial accounting. Part of what opened my mind was how broad the sustainability ecosystem is, and what we actually need in terms of skill sets to solve some of these really challenging problems.
The course involved 2-3 weeks in Botswana meeting government officials, including visiting a diamond mine. As far as life experiences that have led me to where I am, the trip to Botswana is up there. The government at the time was looking at how they could price natural capital which we were able to deep dive on. I walked away from those sessions, and thought that even with my accounting background there’s a huge opportunity to have a really tangible impact on people. It was a formative experience and even though it took me a long time to return to it, it certainly sparked my interest in pursuing something in sustainability and accounting.
Sumday: From there, was it a straight shot back to Australia?
LE: After finishing the program in Paris I accepted a role as the procurement manager for a startup in New Zealand [A high end food kit delivery company similar to Hello Fresh]. They were looking at sustainable supply chains and opportunities to source local ingredients. That was the thing that drew me in. I thought, okay, there's a really strong sustainability tie-in and an opportunity to have a look outside of accounting.
So I moved from France to Auckland, New Zealand and did that for about a year. They were pretty fast growing and we increased headcount and sales significantly in that period of time.
Sumday: At that point in time, had you come across carbon accounting in practice?
LE: It was interesting. At the food kit company, we were looking at how we measure impact, and carbon was certainly one of the things. They were relatively early on in terms of understanding how the transportation of these food kits were a key part of their impact. They had already engaged a transportation contractor who was carbon neutral. They were looking at the impact and the waste associated with our boxes and other things. So we were doing some of this work and looking at it through a bit of a carbon lens, but not in a way that would break down scope 1, 2 and 3. It was more tactical around specific issues that would impact programs or initiatives that we were running.
Sumday: Now you live and work in Burnie, Tasmania. How did that happen?
LE: I was on holiday visiting my brother and mum who both lived in Tasmania. I thought the food kit company had been a really interesting experience, and I was pleased to have built up my procurement knowledge, but realised it wasn’t a career avenue for me. I wanted to get back into the accounting space but was unsure about the next move. During my month in Tassie, a local mining company advertised a job for a business analyst. Coming from WA, mining is a pretty big thing, and I find elements of the industry fascinating. I applied and gained an interview. At the time I was backpacking, so I had to rush to get a haircut and some dress shoes the day before my meeting. I saw an opportunity to work on sustainability related projects and ended up getting the job.
There's a few different disciplines of accounting. This role was more management accounting, working with internal stakeholders to identify business cases to make changes and track progress over time. That's the type of accounting I really like. It allows you to have a tangible impact, at least in my opinion. I would be on the mine site once a week understanding how things worked and I started to get more involved with their energy reporting. The mine was a large user of natural gas and a big carbon emitter. We had to report to the government around scope 1 and 2 emissions as part of the safeguard mechanism. I started getting involved in carbon accounting in the context of that and then more specifically, I was involved in some of the projects to reduce emissions. That’s where I met Jess (Richmond, Sumday's CEO) and we started working together on things like hydrogen projects, looking at the potential to replace natural gas at one of our facilities.
We put together a case asking for grant funding from the government, and it received board approval. We took everyone on the journey and it ended up receiving funding. That was one of the catalysts to demonstrate we could actually move the needle on some of the big sustainability projects. The company itself was a one-mine operation and didn't have too many other opportunities for really large projects which was a catalyst for starting Ellis Richmond. We thought, ‘ok we've worked in this space in the context of a specific company/project, but how can we help other complicated businesses reduce their emissions through some of these really tactical, meaningful projects?’.
Sumday: Talk me through starting the accounting firm, and then when you realised you could potentially make more of an impact by becoming a software company.
LE: We started an accounting firm, creatively called Ellis Richmond. Our aim was to do sustainability reporting and help people on the sustainability side of things, alongside traditional management consulting and accounting. We were doing a few broad sustainability strategy projects - one with an energy retailer for example, looking at opportunities to participate in new markets. But largely we were doing management accounting and outsourced CFO type work across a number of companies. We started to think there would be an opportunity to incorporate carbon accounting into normal accounting and clients were showing some interest. Some of that was driven by a passion for the space and an opportunity to get more accounting-y about the sustainability work and others were satisfying stakeholders. We realised there was a portion of the market that was willing to pay for this and call us bias - but we thought accountants were best placed to do it.
We did a deep dive on the carbon accounting space to see if we could deliver this as a service in a way that was scalable. We started interviewing software companies and looking at opportunities to integrate this into our offering within the accounting firm. We were doing emissions assessments in Excel, using spreadsheets we’d developed internally by understanding the global standards and best practice. We couldn't find any accounting software that worked for us. It was either too basic, designed for a business to get a quick estimate without our input, or too expensive and we realised the enterprise companies were largely just cleaning the data (for a small fortune) and making assumptions in a black box without enough transparency for us to even explain the process to clients. So we thought, we should just build it ourselves.
In hindsight it was a pretty crazy leap to make. We asked the team if they knew anyone that could build software and Danny knew Simon. He said he was pretty sure he built mobile apps, and fortunatley he was in Tassie on holidays. We accosted him at the Penguin Brewery with a bunch of Canva mockups of what we wanted to build, and (crazily enough) he started the following week.
Danny was already working with us as a principal accountant at Ellis Richmond. Danny, Jess and I were working closely together so we founded Sumday (which was then Local Carbon). Our awesome Senior Data Analyst Toby was in the Ellis Richmond team and we convinced him to jump across to Sumday too.
Initially we thought of it like an internal product - something we would market as a service offering of Ellis Richmond. After many deep discussions, we decided it should become a standalone product, we knew we could help other accountants provide carbon accounting services, making it accessible to businesses everywhere. We thought this would be the only way to make carbon accounting meaningful, moving the world away from relying on outdated averages.
If we hadn’t done that then as Ellis Richmond, we would have had to scale and become a 500 person accounting firm to provide the services that had the kind of impact we imagined, which has natural limitations. It was about a systems based approach, where we could work with accounting firms to help them on the same journey we’d just been on, with the tools we wish we had when we were starting out.
We went down that path and I’ve never looked back.
Sumday: Can you explain why a focus on audit-ready carbon accounting is so key?
LE: We focus on audit ready because there's going to be an increased focus on compliance within sustainability reporting and importantly, everyone needs to trust the numbers if we want consumers and companies to make decisions through a carbon lens. Rightly on wrongly, the world tends not to trust self reported numbers in a quick calculator, let alone make investment decisions based on them.
Within the financial accounting world, what happens is someone prepares the financial accounts and then there's a separate party that interrogates the numbers - verifying them and making sure that they are correct. The whole financial accounting world, and really the economy, is built on the idea that those numbers are accurate. Audit performs this really important function providing trust to stakeholders around the information that's being collected and reported by organisations.
But in order for something to be audit ready or auditable, you need to have a certain process flow that people can follow, which is called an audit trail. For the people that are going to be looking at the accounts, they need to be able to efficiently go back through and understand the process, perhaps even reproduce it or test it to make sure it's accurate. Then they go ahead and test the outputs and make sure that those are all correct as well. Now we need to have processes and systems that facilitate audit within carbon accounting too.
A lot of the software companies in this space are effectively taking a company's key inputs and making very big assumptions around the amount of carbon those inputs equate to. They pull on their own database of average information and in an effort to make it overly simple for a user, they don't provide the transparency required to truly undserstand the calculation that has gone on. For the most part, these companies emerged in an era where mandatory carbon accounting and audit processes weren't a focus. They were never built for accountants to do their thing either.
In that scenario, it's not something that an auditor can pick up and say, “Ok, this is true and correct” because it's essentially just numbers that are occurring in a vacuum. No one can really say if they are accurate or not. More importantly, the numbers very rarely come from primary data provided by say a companies suppliers, or a banks borrowers (where most emissions come from). It's all estimates from averages. There is no way to track net zero in this world and so it must be fixed. Sumday is resolving that by making audit ready carbon accounting accessible to every business, the same way they can go and get help to file their taxes - whether they'e the local baker or Rio Tinto - they can now do with carbon.
Part of what we’re doing is facilitating a new type of accountant, one who understands carbon so they can provide the service or audit the reporting of others. In turn, that will provide trust to other stakeholders within the ecosystem that are relying on that data as part of their net zero commitments, funding decisions or any other financial decisions they're making. We need to have trust that that information is accurate and correct.
Sumday: What are the biggest hurdles or misconceptions around carbon accounting?
LE: One of the main things my team is working on is trying to bust some of the myths for accountants themselves. Accountants by nature are often conservative and stepping into this new service offering can be daunting. The main thing that surprises people is that there are already global standards that address this. We’re starting to get to a point where accountants can pick those up and follow a set of procedures to get the information that they need to perform an emissions assessment.
As more accountants realise these standards are available now and that they can be performing procedures against them, it becomes an unlock. So, how do we actually do this in practice? This is where the Sumday team comes in, in that we provide the accounting support. We give accountants direction and guidance into specific things they can do to start carbon accounting with confidence. It’s about firstly knowing the standards are there and secondly, knowing that Sumday is able to provide support as they get up to speed. It’s not rocket science, and it’s not that different to what they are already doing, but there are certainly new things to consider.
On the business side of things, there's this big scary notion of scope 3 that people generally either don't understand or just think it's in the too hard basket. I think particularly around purchased goods and services (which is emissions associated with your suppliers) this is a mental block for people. The main thing is that this isn’t that difficult and there’s a series of steps that we can go through to see if the information is available from suppliers and Sumday provides them with education and support when they don't have it. If they don't, you can still account for scope 3 and disclose the approach you have taken in the absence of primary data. It's crazy how often this is simply ignored.
There's always going to be some level of information we should be able to use to calculate and quantify emissions. That’s a great starting point for people. After you’ve done the first assessment using that approach, then the question becomes, “how do we get better data?”. Accountants and internal finance professionals can really help support a business to move along the data quality journey. I think it’s about understanding that scope 3 is not this insanely huge thing, especially if you work through the process in a methodical way.
Sumday: You're a firm believer in education first. Who are you most adamant about educating and why?
LE: I think largely it's accounting professionals, auditors and bookkeepers who have a role to play within carbon accounting. This also includes internal and external finance professionals. Those key stakeholders are who Sumday is focusing on to deliver carbon accounting services. We’re also focused on, ‘How do we upskill people that are adjacent to the company’s accounting process?’. They may be collecting information or doing specific smaller tasks as part of that. A good example is a facility manager. Maybe they need to collect the waste related data or understand the electricity used within the buildings. So those types of non-finance people that are adjacent to carbon accounting are key.
The next stage is taking the knowledge they’ve built around carbon and focusing on what training materials are needed next, including how to build the business case for emission reduction projects.
Sumday: Why are accountants best placed to lead the transition to a net zero economy?
LE: This is the fundamental thing we believe, and it's core to what Sumday is. Accountants (of which I am one) are really an interesting group of people. They're details and process focused. And once they understand a set of principles or standards, they build processes around these things really efficiently. So, if you go back to the systems thinking approach, we need to get people to do emissions assessments in a cost effective and timely way. The key piece of solving the puzzle is delivering this at a price point that everyone can afford. Whether you’re a giant enterprise or an SMB, you’re going to be asked at some point, by someone, to do an emissions assessment, so it needs to be accessible to everyone. Sumday can facilitate that.
The other side of things is the data quality. Obviously anyone can put in random numbers into a carbon accounting calculator and get an output. But how do you know that that's right? And how do you know that the information is true and fair? Accountants provide that rigour and transparency to enable the data quality, first to be understood but then for it to be improved over time. So the combination between being able to do it efficiently and cost effectively and to a high standard is what's going to drive the creation of this amazing database, where everyone can share carbon accounting information and for people to have trust in that information.
Accountants and finance teams are the key piece of the puzzle. Sumday’s job is to support accountants to help their clients and their teams to do this incredibly important work.
