A window into Microsoft's quest to become 'carbon neutral'

Two Steps Forward

A window into Microsoft's quest to become 'carbon neutral'

Image CC-licensed by Flickr user Robert Scoble

Microsoft today announced a commitment to achieve “carbon neutrality” for its energy use companywide during its upcoming fiscal year, beginning July 1. It’s a bold and somewhat unusual plan, but consistent with the software giant’s other recent sustainability initiatives, which favor sophisticated, IT-fueled projects conducted in a transparent and accountable fashion.

Whether or not it succeeds, the effort demonstrates the potential of pushing the responsibility for improving energy efficiency, reducing carbon emissions and increasing use of renewable energy down to every business unit and operation across more than 100 countries, while creating economic incentives for them to do so.

Those incentives come in the form of a “carbon fee chargeback model” to be administered by the company’s CFO, which levies a fee for carbon emissions to the business groups responsible for incurring them. The fees will be used to build an investment fund with which Microsoft (Nasdaq: MSFT) will purchase renewable energy and offsets. The company intends that those purchases will enable it to reduce net emissions and achieve carbon-neutral status.

Today’s announcement is the result of two sets of events within Microsoft. One is the expiration of the company’s 2009 goal of reducing its greenhouse gas emissions at least 30 percent per unit of revenue by 2012. It met that goal through a combination of efficiency initiatives, such as building retrofits, as well as purchasing renewable energy, and carbon offsets.

The other “was part of a global strategy of how to think about the role of information technology for enabling energy efficiency both within IT but also more broadly,” Rob Bernard, Microsoft’s chief environmental strategist told me last week. “It made us ask, is there something we could do, if we had the right IT systems in place, that would enable us to challenge ourselves and push governance to the next level once we had more information and data? And if we had the right kind of information, why couldn’t we go as fast as possible?”

Finding the right IT partner turned out to be an 18-month process that ultimate whittled a list of more than 50 vendors down to just three — and, finally, to one: CarbonSystems, an Australia-based company whose Environmental Sustainability Platform is becoming the vehicle for carbon emission tracking and management for Microsoft’s 600 facilities in 110 countries. (The system will be fully functional later this year.) Carbon Systems, as my colleague Paul Baier wrote earlier this year, beat out well-known sustainability software leaders such as CA Technologies, Credit360, Ecova, Enablon, Hara, PE International and SAP.

Through CarbonSystems, Microsoft business groups will be able to monitor emissions level and associated carbon fees across its operations in near real-time. “Furthermore, access to up-to-date data will enable us to integrate environmental footprint management into the rhythm of our business, including monthly and quarterly business reviews across the organization,” the company explains in a white paper (PDF) published today. “It will also enable us to provide more transparency to the executives and business leaders responsible for making business decisions that will have an impact on the environment.”

Bernard told me that during the fiscal year ending June 30, 2013, he expects the carbon fees to exceed $10 million, but that the cost savings from efficiency measures to be more than the amount of fees collected.

One of the keys to the success of the whole project is “the governance model,” as Bernard puts it. “It’s creating another level of focus on efficiency and carbon.”

“You can imagine that we have a rather large ERP [enterprise resource planning] system, which is not uncommon in most organizations,” Bernard explained. “And our ERP system can be modified to deal with this. So, you get a bill. You’re already paying your energy bill, but now you’re paying your energy bill plus carbon. You pay for airline tickets, and now there’s a fee that cascades out of that. That all gets paid into a central fund, which we use to offset the carbon that you’ve created locally. Part of the goal is, we want you to be motivated to keep that fee as low as possible.”

The IT backbone and its near-real-time data will help Microsoft’s far-flung operations identify opportunities for efficiency measures. “You may not be aware that employee travel is going up, or that compared to other similar offices around the world you are going out of the statistical norm. Or that the compressor [in a building’s HVAC system] is out of compliance. You may not be looking at the dashboard all the time but the system will and will alert you. So the governance model will start to change how you operate and how you think about efficiencies.”

One of the challenges of being so large and geographically dispersed, says Bernard, is, “There are people doing really interesting and innovative stuff, but the systems aren’t necessarily robust enough so that, if you’re in Country A and I’m in Country B, we won’t necessarily have visibility into what each of us doing. By creating centralized ways to do that, we can better share those successes and tactics more effectively.”

I asked Bernard to confess his greatest concerns about this project — “What keeps you up at night?” He replied: “That the velocity will be quick but won't be quick enough.” Another, almost paradoxical, concern: that his small team is overwhelmed with the demands for information and services from business units and operations seeking to implement efficiency measures and, therefore, lower their carbon fees. “Once people realize that this service is available, the good news/bad news for my team is that it’s going to create opportunities for service, but will we be able to keep up with that demand?”

Either way, Bernard is excited to move forward, and equally excited to share the company’s learnings, both good and bad. “We might get it right, we might get it wrong, but either way we’re going to share what we’re doing. We’ll share the processes and codes. Part of the process is being transparent about the learning and the mistakes — and hopefully the successes.”

Image CC-licensed by Flickr user Robert Scoble.