Six Keys to Smart, Profitable Carbon Management

Six Keys to Smart, Profitable Carbon Management

Image CC licensed by Flickr user stevendepolo

More and more, companies are getting excited about carbon. That excitement is rooted in the operational efficiency gains and the opportunity to generate revenue, both as a result of structured carbon and energy management programs.

Within companies and across industries, we continue to see the evolution of carbon as a business driver. Many companies are still at the beginning of the value curve: They are just starting to measure their carbon footprints and understand the role carbon plays in their organizations.

But the true leaders in this space are the companies that are creating significant value by managing carbon. These companies are trimming emissions profitably by reducing, for example, energy and fuel consumption. They are being proactive and constantly looking for opportunities to save. These are the companies that are in effect, defining what it means to be sustainable and low-carbon. And they are being rewarded by setting the standards that other companies will have to follow going forward.

My company helps organizations of varying sizes and industries find ways to incorporate carbon management into their business models to make carbon a source of profit, instead of a drain on it. Over the course of our work, we have identified six steps companies undertake that are key to pragmatic and profitable carbon reduction strategies, which we discuss in a recently published white paper.

• Establish a Carbon Baseline and Forecast Growth

The first step is to understand the current state in order to provide a baseline for comparison and a starting point for evaluation. It’s important that this baseline include projections for future growth to account for the overall change in emissions that would naturally result from changes to a company’s operations, such as the opening or closing of facilities.
• Solicit and Aggregate Carbon Reduction Opportunity Ideas

Once the baseline has been established, companies can begin identifying opportunities to reduce emissions. These ideas can come from employees or previously-identified opportunities. They might also be the result of energy audits or other third-party evaluations of a company’s operations. Often these opportunities emerge after looking at the “carbon hotspots” identified in the baseline.
• Define Financial and Carbon Approval Criteria and Quantify Opportunity Value

Once a set of opportunities has been identified, they must be compared to identify which will provide the greatest return and carbon reductions. This helps companies prioritize opportunities and agree on where to invest their resources.

• Create an Implementation Plan

The order in which projects will be implemented can be almost as important as the projects themselves in maximizing the return on capital. Budgeting cycles, capital planning, available subsidies, equipment downtime and many other variables should be taken into consideration to ensure successful implementation.

• Set a Carbon Reduction and Profitability Goal

Now that the projects have been defined and the implementation timeline has been set, the changes to emissions and profitability over time can be forecasted. With this forecast, a company can evaluate whether or not the impact of the opportunities identified in steps 1-4 above are sufficient to create an aggressive reduction goal, or if a more ambitious goal should be considered. Setting a reduction goal is a clear way to engage employees, suppliers and customers, to drive innovation, and to communicate efforts with investors and consumers.

• Track Performance and Repeat

Once these projects are underway, it’s important to consistently measure their performance to ensure they are achieving the objectives and the company continues to make progress toward its goal. Tracking performance allows companies to make changes as necessary and, in some cases, find new opportunities that arise as a result of the improvements.

This rather straightforward approach has consistently provided companies with a structure for creating the most value from carbon management. The organizations that have implemented reduction strategies using these six steps are gaining significant value from carbon and proving themselves to be leaders in sustainability.

Kyle Tanger is the founder of consulting firm ClearCarbon.

Image CC licensed by Flickr user stevendepolo.