High emissions = low profits!

A carbon footprint measures the total greenhouse gas (GHG) emissions caused directly and indirectly by an individual, event, organization or production, over a specific period of time. The largest single contributor to climate change is carbon dioxide although other greenhouse gases have higher global warming potential. Typically, greenhouse gases are reported in grams, kilograms, or tonnes of carbon dioxide equivalent (CO₂e).

For example, an average car in the United States will produce roughly a tonne of CO₂e emissions over 2,500 miles, or an average European car over 5,000 km. A tonne of CO₂ gas would fill an Olympic size swimming pool!

Carbon footprints can be measured for individuals, products, services, events, organizations or entire regions. Everything has an impact. Everything we do leaves a footprint.

Carbon is expensive. Forecasts for the future price of carbon emissions vary as national governments implement differing carbon regulatory frameworks at different speeds. The current market price in the EU is around £12 ($18) per tonne of CO₂. Over the longer term the Stern Review on the Economics of Climate Change indicated a cost to society of £57 ($85) per tonne of CO₂. This is also called the shadow price of carbon and is now viewed as an underestimate of the long-term costs. In a series of studies developing a detailed Global Greenhouse Gas Abatement Cost Curve, McKinsey & Company concludes that significant greenhouse gas reductions can be made up to a cost of £30 ($50).

Measuring your carbon footprint is important because measuring is managing. A footprint is the carbon equivalent of a financial profit and loss statement. The only difference is that with a footprint, you do not want to be in the black!

Measuring carbon emissions and assessing carbon risks will also raise awareness and communicate the importance of the issue across the organization. Simply asking the question may lead to an insight and useful carbon reduction. For example:

• Why are we leaving all our computers on standby overnight? How much electricity is standby wasting? [Answer = A desktop computer consumes from 1-20 watts in sleep mode (roughly 10% its full power consumption). This may not seem like much but multiply it by all the computers in your office times 16 hours/day times 365 days/year and it adds up.]
• Do we need a clock on the microwave oven in the kitchen? Does the clock use much electricity? [Answer = the clock on a microwave uses just as much electricity over time as the actual process of heating food!]
• Should we be more careful about leaving our truck idling when loading and unloading? How much fuel does idling waste? [Answer = An idling truck consumes roughly 1 gallon of fuel per hour. In the US, the Department of Energy (DOE) estimates that idling of trucks accounts for 10% of total truck fuel consumption].
• What is the impact of shipping a lot of empty space along with our products? How much “wasted space” is in our product design and packaging? [Answer = It could be substantial. Wal-Mart figured out that with laundry detergents they were stocking significant amount of water and fillers. The move to 2X concentration (now surpassed by 3X) saved shipping 400 million gallons of water, 95 million pounds of plastic resin and 125 million pounds of cardboard].

A carbon footprint is a measure of your impact. Carbon risk is the organizational implications of your footprint and your impact. Carbon risk is the “meaning” of your footprint. In a low carbon economy, high emissions mean low profits. If your carbon footprint is a million tonnes CO₂e, it means that you are in big trouble! Not only do you have a significant economic exposure, but you are likely to have a range of other important carbon risks including considerable brand, operational, supply and regulatory risks.

Most organizations will measure their greenhouse gas emissions indirectly. Government agencies, national and international climate change organizations develop and publish datasets of “emissions factors” that cover an extensive array of activities. Emissions factors are linked to typical units of consumption, like kilowatt hours (kWh) of electricity from the national grid, or miles/kilometres driven by an average sized delivery van with average fuel economy.

Carbon intensity is a measure of your organization's carbon footprint normalized to another performance indicator, such as revenue, production units, number of staff. This enables like-for-comparisons between companies of different size or in different sectors. Carbon intensity is often quoted as emissions per unit of revenue. Oil & Gas, Basic Resources, Construction & Materials, Food & Beverage, and Transportation are often cited as the most carbon-intensive sectors.

Being in a less carbon-intensive sector is no guarantee of a small carbon footprint and low carbon risk. Exposure to carbon risk varies widely at company level within all sectors. And it is likely that some of your suppliers and/or customers are in carbon-intensive sectors and merit a close look. You may find yourself carbon-intensive relative to your competitors and facing a serious competitive disadvantage as a result.

While carbon is a highly technical area, you do not have to be a carbon expert to successfully move forward, reduce your carbon footprint and mitigate long-term carbon risks. What is important is to be intimately familiar with how your organization really works. The key is to generate high quality data from your organization and link it to the best available emissions factors. Having poor quality data, or not knowing the quality of your data, is in itself a significant risk.

The important thing is to start. We do not recommend starting with developing a footprint for your entire organization. Our mantra is “start small — think big — and act boldly”. Pick a piece. Start with an office, your transportation or a company event.

In all likelihood, if you haven't footprinted your emissions yet, there are things you can do immediately. Start right now!