By Neil Braun, CEO, The CarbonNeutral Company
As US companies transition to a low carbon economy, carbon management represents a new and fundamental challenge for business. How companies respond to this challenge has become a strategic issue that can build or destroy brands and reputations.
If companies take on this challenge, carbon management presents an opportunity to deliver immediate business value. Even with a lack of clear international agreements and definitive US federal regulations, the business drivers for taking action on emissions reduction are only strengthening. What may initially appear to be a costly headache can become the cornerstone of CSR plans and a way to win customer loyalty.
Scientifically Significant Stabilization
Many companies have already begun to realize these reputational and commercial opportunities, as well as the value of implementing offset inclusive carbon management programs. These types of plans represent the only way to reduce emissions that are unavoidable and, for many, the only means to reach scientifically significant emission reduction targets. As businesses consider all emissions reduction options, offsets can be a cost benchmark against which to measure the efficiency of all opportunities and act as a driver of behavioral change to adopt energy efficient working practices. An offset inclusive carbon management program therefore delivers a cost-effective way to present an environmental credential to customers to drive revenue and enhance corporate reputation.
Businesses and consumers are increasingly interested in low carbon brands, products and services and the prevailing scientific and economic consensus is that an absolute reduction of 80% in greenhouse gas emissions is required by the middle of this century to prevent damage to the world’s economy. This is at a time when emissions are growing at their fastest rate ever.
There is a massive gap between the “business as usual” global emissions growth path and the “stabilization” trajectory. Most businesses face the same challenge: how to grow profitably while reducing emissions.
To meet the stabilization trajectory, a company would need to average a ~ 4% absolute reduction year over year until 2050. The phrase “scientifically significant” is used to describe emission reductions that meet this stabilization requirement. A report by the Carbon Disclosure Project found the world’s largest companies are on track for an annual reduction of just 1.9%, only allowing everyone to reach the scientifically recommended level of greenhouse gas cuts by 2089. That would be 39 years too late.
Comprehensiveness and Transparency
A company that has a comprehensive and transparent carbon management program stands apart from those that only pay lip service to the issue of meeting significant carbon emission reductions. According to the Carbon Trust “Climate Change, A Business Revolution” report from September, 2009, it is estimated that tackling emissions reduction could create opportunities for a company to increase its value by up to 80%, if it is well positioned and proactive. Conversely, it could threaten up to 65% of value if the company is poorly positioned or lagging behind.
Launching an offset inclusive carbon management strategy involves evaluating all internal carbon reduction projects against the cost of paying for a comparable reduction elsewhere.
The remainder of the target is met through external reductions using carbon offsets. In simple terms, emissions reductions are outsourced as they are less costly than internal reductions or necessary to balance out unavoidable emissions. Offsetting is analogous to common practice outsource decisions such as accounts payable or payroll. Every business makes strategic decisions to make or buy, to in-source or outsource. Delivering emissions reductions is no different.
The widespread and positive reception by the financial community of the Carbon Disclosure Project confirms that the extent to which a company manages its carbon emissions is now a key measure of business performance. A lack of action and preparedness puts brands at risk and valuations in jeopardy. An offset inclusive carbon management program is a high-impact, cost-efficient means of strengthening a business’ environmental credentials and corporate reputation and building value while moving to a low carbon economy.
Neil Braun is CEO of The CarbonNeutral Company, a global provider of carbon reduction solutions and a partner to companies committed to reducing their carbon footprint to strengthen their businesses. Previously Neil was CEO of carbon management business, GreenLife and was a senior executive at corporations including President of the NBC Television Network and Chairman and CEO of Viacom Entertainment, as well as venture stage companies including President and COO of Imagine Entertainment and President and COO of Vanguard Animation. He can be reached at neil.braun [at] carbonneutral.com.