Is it time for your business to take carbon footprint accounting and reporting seriously? Many small and medium-sized businesses have yet to calculate their impacts and risks.
If you know your businesses’ carbon footprint, chances are you work for a Fortune 500 or S&P 500 company. The biggest companies on the planet take planning seriously. They want to know the environment in which they are operating now, and how that might change and affect their futures.
Should small and medium-sized businesses invest in carbon accounting and reporting? What are the benefits versus the costs and returns? Is it necessary for smaller companies? Our experts Anna Dengler, Great Forest’s V.P. of Business Operations, and For The Long-Term’s Celine Ruben-Salama answer the most-pressing questions.
First, what is carbon footprint accounting?
AD: Carbon reporting is the process of reviewing an organization’s fuel sources and activities that result in greenhouse gas (GHG) emissions. This includes energy used, travel and transportation, and more. Documenting and analyzing this information provides a blueprint for taking steps toward curbing an organization’s environmental impact.
Are companies required by law to do this?
CRS: Laws are getting tighter. In the U.S., while there are no clear, overarching regulations, there are certain requirements on the city and state level. There’s a patchwork of legislation. Companies need to know that there is a lot of activity in this area so things are changing all the time.
AD: Governments that want to reduce their footprint will eventually begin targeting businesses with policies or regulations because they are the largest consumers of electricity. In the U.K., large listed companies are already mandated to report their annual GHG emissions. New York City’s voluntary carbon challenge program encourages businesses to commit to reducing their GHG emissions.
What are the immediate, practical benefits?
AD: The carbon footprint accounting process finds systems or processes that are not working as intended. For example, your carbon accounting may reveal that your footprint is growing even though you’ve put plans in place to reduce energy consumption. Where is the waste coming from? Perhaps it is due to inefficiencies? Maybe the problem is further down your supply chain, or from a particular building or country in your businesses’ portfolio. Or maybe your reduction efforts in one area are getting offset by increased waste and consumption in another sector? Your footprint offers a more complete look at your overall consumption patterns. It will help you see where your emissions are coming from, adjust operations if needed, and set goals that will really improve operations.
CRS: Apart from operational benefits, carbon accounting can be used to gain external recognition as part of a B-Corp Certification, CDP (Climate Disclosure Project) Score, and other ratings and rankings. Although it can be hard to measure, anecdotal evidence seems to suggest that companies that do carbon accounting as part of their CSR (Corporate Social Responsibility) efforts are more likely to attract and retain the best and the brightest employees.
Can you give me some examples of how carbon accounting has helped companies?
CRS: For a large client with massive data centers, carbon accounting revealed that the current location of a large data center (in Arizona) was resulting in a third of the company’s overall carbon footprint. This insight fed into the strategic planning process and helped inform the location of a new data center, in a location where temperatures are cooler and grid electricity is cleaner. The eventual move to a new data center saved the company money on their electric bills and reduced the company’s overall carbon footprint significantly.
AD: A large financial firm came to us looking to understand the impact of their corporate travel on their GHG emissions. This information helped their sustainability team reshape their corporate travel program, making the case that not all meetings needed to be held in person, where video conferencing was available. The company invested in an upgraded teleconferencing system and reduced their travel costs. Overall, their footprint is now smaller, and they are reporting increased productivity with less time wasted on travel.
How much does it cost?
CRS: Costs vary depending on the size and complexity of your business, as well as the scope and boundaries you choose for your carbon accounting. These can range from a few thousand dollars to low six figures. You may be tempted to do a cheap/free, generic carbon footprint with an online calculator, but beware, unless your carbon accounting is tailored to your company and the locations you operate in, you won’t reap the full benefits. Think of it as an investment rather than a cost. It adds resilience. When it pays off, not only do energy costs go down dramatically, but you will be more efficient.
AD: The cost can be tailored to your needs and budget. Large companies can take on some of the responsibilities in-house, but companies that do not have an internal sustainability team should work with carbon reporting professionals. Setting up the system to collect the relevant information can be complicated. You need processes in place for consistency. This includes an inventory management plan, calculation parameters, and assigned roles and responsibilities. Getting it right is key.
Do I need to publicly report my carbon accounting?
AD: The trend is towards more disclosures, especially following the June 2017 recommendations from the Task Force on Climate-Related Financial Disclosures. Investors and consumers are demanding more information about companies’ impacts and what they are doing to manage risks. The CDP (Climate Disclosure Project) surveys businesses every year on their climate policies and carbon footprint to provide disclosure information to banks, pension funds and other investors.
So what should businesses do?
AD: Businesses can and should take advantage of various programs and incentives to start carbon accounting and reporting now. Cities like NYC want to organize and help companies reduce their energy use and report their carbon emissions. We help our clients identify what local programs are most appropriate for them to participate in. We encourage companies to take the lead and make your organization a part of the bigger picture.
CRS: Getting started today will help your company get ahead of upcoming requirements to publicly report on carbon — new mandates are appearing constantly as more countries, cities, municipalities and even stock exchanges, aim to reduce carbon emissions in line with the Paris Accord. While your business might not produce a significant amount of carbon, you might find that your supply chain is carbon intensive. Increasingly, companies are being asked to take their whole value chain into account and work with suppliers to reduce product/service carbon footprints.
To Summarize, carbon accounting and reporting:
- Gives you a clearer picture of your overall consumption. It reveals a lot about your efficiency and waste, and may uncover opportunities to improve operations and reduce costs.
- Helps you gain recognition, such as through certification, for your efficiency projects, and showcases your leadership.
- Allows you to respond positively to increasing demands from customers, vendors/partners and investors for more sustainability reporting and disclosures; it also helps you attract the best and brightest employees.
- Prepares you to respond to future conditions, from potential legislation to increasing climate risks.
- Should be done annually, and properly; costs can vary to fit a company’s needs and budget.