10 Things I've Learned About Carbon Footprinting
10 Things I've Learned About Carbon Footprinting
As part of the GreenBiz 10 Year anniversary, I was asked to review the progress that has been made in carbon footprinting and carbon accounting during the past decade. In short, we've made stunning progress and learned much as a collective industry and community.
Ten years ago, none of the basics existed -- the standards and tools we all take for granted today. In 2000, we had very little awareness and no adoption, no registries and no carbon regulation, either direct or cap-and-trade. The World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD) did not publish its first corporate standard for carbon calculation, including boundary conditions, Scopes 1 and 2, etc., until 2001. Today, this standard is used internationally for corporate carbon footprints and is an essential tool for companies and their stakeholders to understand carbon risk and quantify abatement activities.
In 2000, a handful of pioneering companies -- perhaps less than 20 -- had calculated their company footprints. Ten years later, the vast majority of large corporations publicly report their company footprints, and those who don't are viewed as laggards. Large companies such as Walmart and Procter and Gamble now ask for the footprints of their suppliers. We've also seen the emergence of voluntary reporting programs and registries over the last decade, including The Carbon Trust, Carbon Disclosure Project, EPA Climate Leaders, The Climate Registry, and others -- all essential for progress.
Carbon accounting had moved from an idea to mainstream business practice. The next 10 years promise significant advancement in Scope 3 reporting, supply chain reporting, product level carbon data, and verification.
We have learned much during the last decade. Here is a list of my top 10 lessons that are applicable to sustainability executives today:
1. There are Four Types of Carbon Footprints
Make sure your senior management understands the difference:
- Organizational or enterprise carbon footprints are the most common and typically are reported voluntarily in CSR reports and to carbon registries, such as the Carbon Disclosure Project (CDP), The Climate Registry, am others.
- Facility level carbon footprints are used in mandatory greenhouse gas (GHG) regulation, rather than organization or enterprise carbon footprints. Mandatory reporting in the U.S. under the EPA, for example, covers facility level, not company level, GHG emissions.
- Product-level carbon footprints are calculated through a methodology called life cycle assessments (LCA). Many competing methodologies and approaches exist, but LCA can provide data about the full environmental impacts of products, which can guide management teams more strategically than enterprise carbon footprints.
- Project-level carbon footprints are calculated for specific projects, such as those used for carbon offsets or energy efficiency projects.
2. Energy is the Flipside of Carbon
To calculate a carbon footprint, organizations need energy use data. Energy directly relates to carbon emissions because a reduction in energy lowers an organization’s carbon footprint. Sustainability leaders should incorporate this truism when presenting budget requests to senior management. Regardless of one’s position on climate change, using less energy saves money and reduces emissions.
3. Energy Use Data Rarely Exists in Electronic Form
Energy use data, such as the amount of electricity or natural gas used at a facility, is rarely available in electronic form, despite massive investments in IT systems. Sustainability teams need to recognize this and budget appropriately, since 50 percent to 80 percent of the time and budget spent on a carbon footprint project may be dedicated to gathering energy use data.
4. Carbon Footprints at the Organizational Level Help Identify Cost Savings
In our experience, organization-level carbon footprints reveal cost savings potential nearly 95 percent of time because the carbon footprint analysis brings the company’s total energy spend to the attention of senior management.
For example, one large company discovered it spends more than $100 million annually on electricity, making it the second-fastest growing cost center after health care. The visibility led to numerous corporate initiatives aimed at reigning in these previously unmanaged costs. Carbon footprint analyses also tend to uncover billing errors, including double billing and billing for offices no longer occupied, in addition to good internal energy use metrics, such as kWh/sq ft.
5. Life Cycle Assessments for a Representative Product Provides Insights to Prioritize Investments
Life cycle assessment or analysis (LCA) is a methodology for calculating the carbon footprint of a product. For companies that design and manufacture products, LCA can be tremendously insightful and guide management toward the most environmentally impactful investment areas.
For instance, an LCA analysis of yogurt for Stonyfield Farm showed that methane from cows were by far more environmentally impactful than emissions from their facilities, or even product transport. This led to changes in management priorities and innovations in cow feed. While prohibitively expensive to do for all products, an LCA for typical products is money well invested.
6. Spreadsheets are a Good Tool to Start, but Don’t Scale
Spreadsheets are a cost- and time-effective tool to calculate an organization’s carbon footprint, but they quickly become cumbersome, especially when organizations have more than 10 facilities, report externally to multiple stakeholders, need numerous ad hoc internal reports, and must compare and reconcile yearly data. More than 70 software vendors now offer carbon management or Enterprise Carbon Accounting (ECA) software to automate the process of collecting, managing, and reporting emissions.
7. Publicly Reported Carbon Emission Data Flows to Wall Street -- Be Sure Your Knows?
The vast majority of large publicly traded companies now voluntarily report their carbon emissions publicly, many to the CDP. Reported carbon emissions are also now shared with investors via Google Finance and Bloomberg terminals, and investors are increasingly using this data to compare companies, such as comparing the tons of emissions per dollar of revenue for each of the top 10 car manufacturers.
Investors have for decades used financial information that is audited and confirmed by the CFO as accurate. Increasingly, investors are expecting reported emissions data in the same way. CFOs need to be aware of this to ensure confidence from investors. Just as CFOs can’t afford to have mistakes or changes to financial data, they need to avoid mistakes in reported emissions data and understand investor needs in this area. The recent ruling from the U.S. Security and Exchange Commission on disclosing climate risk to investors highlights this trend of environmental information being provided to investors in a more structured and systematic way.
8. Carbon Footprint Errors and Data Corrections Will Likely Occur -- Plan for Them
Due to the cost of collecting actual energy use data, companies often need to estimate energy use for some energy sources when calculating their carbon footprint, or they may discover later that incorrect data were used. In short, mistakes and adjustments are inevitable during the first few years of reporting an organizational footprint. Sustainability leaders need to set expectations correctly with senior management for this -- especially with the CFO -- and make adjustments quickly and transparently when it becomes necessary.
9. Walmart and Other Customers are Serious About Sustainability -- Get Ahead of This Trend
Increasingly, large companies such as HP, Bank of America, Procter and Gamble and Walmart are requesting environmental data from existing and potential suppliers. Some, including P&G and Walmart, have rolled out programs to grade suppliers in several environmental areas, including carbon emissions, water, waste, and energy use.
Other firms are seeing a significant increase in the number of Requests for Proposals (RFP) that include environmental data for new businesses. Sustainability leaders need to work with sales and account management to stay head of these trends and to be sure their environmental data, including carbon emissions, are ready for the growing number of future requests.
10. Setting a GHG Reduction Goal Can Be Complicated -- Track Both Absolute and Intensity Goals
Whether to have a public GHG reduction goal is a major decision for senior management and the sustainability team. Only a handful of companies have publicly stated goals. The two main types of goals are absolute reduction of CO2 emissions or intensity goals, such as emissions per dollar of revenue or car produced.
Both have pros and cons. For instance, a rapidly growing company that is adding manufacturing plants may find it impossible to have an absolute GHG reduction goal. Conversely, changes in outsourcing/insourcing mix or product levels may show improvement or decline in an intensity metric, despite the fact the company did not make any material improvements in specific carbon reduction projects.
Sustainability leaders should drive toward management alignment on a goal, track both measurement types, and strive for genuine reductions in energy intensity and organizational environmental impacts, using the most appropriate measure.
Paul Baier is vice president of consulting at Groom Energy.
Image CC licensed by Flickr user lrargerich.