By John Parnell
Last week Microsoft announced a radical new plan to impose an internal price on carbon with the goal of making its travel, data centres and office buildings carbon neutral by July 2013.
Each business division is responsible for its own carbon budget with financial penalties on departments that fall behind. This is appears to be a radical change to their operations, far removed the token gestures and photo opportunities that passed for environmental policies among big corporates in the past.
In the same week Coca-Cola announced they had achieved the highest rating awarded by the independent Carbon Trust in the UK.
Big businesses have comparable financial clout to nation states. Microsoft made more money in 2011 than Kenya and Uruguay combined. The impact that these positive measures can have, should not be estimated.
Critics will always be sceptical of big businesses’ environmental claims, but is it always fair to write their work off as green wash?
“Our analysis shows that the majority of the world’s largest corporations listed on the Global 500 exchange have climate change actions embedded as part of their business strategy,” says Frances Way, Co-Chief Operating Officer, Programs, Carbon Disclosure Project, a not for profit organisation that helps businesses and cities to report and reduce their environmental impact.
“This is the first time we have ever witnessed this in the ten year history of our climate change research and we attribute this to growing board-level awareness of the link between energy efficiency and increased profitability.”
The same critics could argue that even this claim sounds a little intangible. A company says it is acting on climate change and point to the fact that doing so isn’t sending their stock into a nose dive, but that doesn’t make it a trend…
However, Way can offer up evidence to the contrary.
“We have established a correlation between higher stock market performance over time and companies with a strategic focus on climate change,” explains Way. “The improved financial performance of companies with strong carbon action is a clear indicator that it makes good business sense to manage and reduce carbon emissions.”
Way also believes the reverse is true, calling companies that play the “sustainable” card without any credentials “misguided”.
“Companies that talk about the issue but are yet to take real action will have to work hard to remain competitive as we head towards an increasingly resource constrained, low carbon economy.”
So how different is the Microsoft initiative compared to what we have seen before?
“This approach of Microsoft’s should be an effective way to show a business case for emissions reductions,” says Way.
“Making each department pay for the carbon offsets related to their own emissions is a good mechanism for placing responsibility for emissions reductions with each employee. Demonstrating the financial implications of emissions in this way should drive new ways of thinking, education and innovation within the organisation,” says Way.
Off the mark
A major contributor to the cynicism over environmental programs in the guise of Corporate Social Responsibility is largely the result of poorly managed carbon offsetting schemes.
Rigorous rules are required to ensure that offsets are not counted twice and that there is “additionality”. This means that the investment by a company, a government or an individual, is used to pay for a project that was not going to happen anyway.
The debate continues at the UN climate change negotiations over how to count forestry projects (part of what is collectively discussed as land use changes) towards emission reduction targets.
“We encourage companies to first investigate ways to achieve actual emissions reductions as opposed to simply offsetting their emissions to achieve carbon neutrality,” says Way.
The Microsoft model is likely to create a lot of interest, but with the price based on the going-rate for carbon, which is terminally low at present, the pressure to cut carbon will be relieved to a degree.
Whether it is green wash or not will hinge on the renewable energy and offsetting projects that the company invests in.