Counting (Corporate) Carbon - Part 2

I’ve been intending to write this post for a while. But you have to be in the mood to blog about carbon in the evening after a day’s CR consultancy, as an alternative to say, going for a drink with a friend, or chatting to my kids. I have tried talking to my friends and children about carbon, but so far without success.

This is about carbon emissions, specifically corporate emissions. As most professional CR practitioners know, the Carbon Disclosure Project (a coalition of major investors representing $57 trillion of assets under management) has been asking listed companies(nicely but firmly) to disclose their annual CO₂ emissions on a public website.

The logic being that carbon emissions represent a business risk,and that transparency will drive better risk management. No need for an ecological motive.

We are all going to have to get much more carbon literate, in personal purchases and in how we view companies. So here’s a quiz for CR professionals. Below are ten well known companies, five from the US and five UK. Underneath is CO₂ emissions data for all the companies. All you have to do is match the data to the company – easy right? Answers are at the bottom.

BP

BT

GSK

HSBC

Tesco

UK data million metric tonnes CO₂:

0.63, 4.1, 69.4, 2.2, 0.72

Exxon

Verizon

Pfizer

Citigroup

Wal-Mart

US data million metric tonnes CO₂:

1.4, 7.2, 158.8, 20.4, 1.4

 

Of course this quiz is not too hard because the companies are all in different sectors. Even so, you end up wondering if a telecoms company or a pharma company is a bigger carbon emitter.

 

This only illustrates how much we have to learn. But before we can, we need a reliable protocol for calculating carbon emissions. Here unfortunately we’re in wobbly logic land. The accepted methodology is the GHG Protocol of the World Resources Institute (WRI). This well intentioned piece of early thinking is well overdue an upgrade – imagine using Word 1.1 today – and you get the idea.

 

The subtlety surrounds where you draw the boundary around the emissions for which you are responsible. Should you include the products your company buys? If so what about the services? And what about the products or services you sell? Should you include the CO2 emitted during their lifetime?

 

 

To answer this, WRI define three ‘Scopes’ (see pic)

 

 

Unfortunately the logic flaws are all too clear in the diagram. CDP ask companies to report Scope 1&2 emissions.

 

For a bank for example that means heating fuel, electricity and company owned vehicles but NOT business flights which are in Scope 3.

 

This would be quite easy to remedy, but the question of how to treat suppliers is much trickier. Suppliers appear in Scope 3 and pressure is mounting on companies to include supply chain emissions. But how far back do you go? Just complete products purchased? Or components for products? Or materials for components for products?

 

A typical supply chain can commonly have four or five ‘tiers’ in modern manufacturing. And if you are accountable for physical supplies what about services you purchase? Finance for example. How much of your bank’s emissions are your emissions? And if your bank manages funds that happen to invest in your company (a common occurrence) how much of your own emissions owned by your bank, supplied to you as services and finance are you responsible for?

 

You can see why this issue is tying everybody in knots.

 

At lunchtime at Context, we often sit round our big table and discuss whatever comes-up. Our young team are all in favour of companies reporting more comprehensively and trying to include the carbon emissions in their supply chain. I understand their motivation, but don’t think it can work – because it’s complicated and we need simplicity.

 

I view carbon like value added – we count value added at each stage of the supply chain and tax it – we can do the same with carbon. Each company is responsible for its own ‘carbon added’.

 

Ok, so a western brand with outsourced manufacturing gets off lightly, but we need to recognise that emerging economy companies are substantial organisations that must be subject to the same transparency as western companies. We can’t really live with a system where Sony (Japanese)reports and pays taxes for its carbon but LG (Korean) does not.

 

In any case the balance of commercial power is shifting East. It’s increasingly unrealistic for western brand owners to dictate terms to eastern suppliers. Increasingly the supplier is the stronger company. So the idea that a purchaser can manage the carbon emissions of its suppliers is based on yesterday’s power balance.

 

There’s no escaping climate change – whether we are American, European or Chinese or Indian, we must start counting our own carbon and cutting down.

 

CR Sage.

 

Million metric tonnes CO₂
Exxon - 158.8
BP - 69.4
Wal-Mart - 20.4
Verizon - 7.2
Tesco - 4.1
Pfizer - 2.4
GSK - 2.2
Citigroup - 1.4
BT - 0.72
HSBC - 0.63