By Reed Shapiro
Large company after large company, city after city, country after country—are making declarations, setting goals, and allocating investments to go “carbon neutral.”
The Road To Carbon Neutrality
The term, and more importantly the status itself, seems to be a new sort of climate boogeyman. While there seems to be a shared global vision around achieving carbon neutrality, the simple concept of balance: reducing emissions by as much as one creates them opens up a can of worms that most “sustainability” teams have difficulty bringing to their executive leaders who would rather not have to deal.
Why is that?
In most cases, today’s most successful and largest companies (read: biggest emitters) were not built from the ground up to be environmentally balanced. For them, to embark on this journey means to reorganize, and in some cases fully disrupt the foundations of their business. Not an easy sell, nor an easy task. Pitched through this lens, it becomes easy for the road to carbon neutrality to be a sequestered side-project for the philanthropy team, not something that is deeply integrated into the fabric of the organization, its operations, facilities, and personnel.
The less any of those stakeholders understand the concept, the less willing they will be to take it upon themselves to make the legitimate contributions that will actually make it feasible to reach carbon neutrality in a timely manner. “It costs too much.” It’s not material to our business.” “We’re not the worst contributor, focus on them first.”
The unfortunate reality, however, for all who recognize the Scientific Method (you know, the same one that brought forward biology and chemistry, and the basic constructs of reality), is that any shot we have at staving off the worst of the looming climate volatility, those same leaders need to open those cans of worms—and eat them for breakfast, lunch, and dinner.
On the road to carbon neutrality, there are a number of routes any entity can take, and a number of modes through which the dial can be moved.
The routes can be thought of as ways to grow, or de-grow, to orient the development of a company, city, or country. Vertical and horizontal integration are both ways to have greater control over the way products are sourced, produced, packaged, and shipped. The more stops along the chain in your control, the more say over which energy, what inputs, and which distribution methods go into your products or services. It also allows data for analysis and decision-making to flow more easily through an organization.
The closer sustainability data can get to the core operations and market considerations of a business, the more likely it is that principles of sustainable management make their way into the executive suite, board room, and appendages of an organization. For companies who would be hard-pressed to command all means of their production and value chain, like Patagonia, models of circularity and zero-growth are beginning to rise to the top of the list. The company envisions a point in time where new production is capped, and their value comes primarily from servicing the goods they’ve produced and sold, or leasing them and refurbishing over time.
Regardless of which route one takes, there is still then a question of whether to design operations to be lean, with little emissions output or at scale to ensure the most product hitting the market has the fewest emissions per unit.
In terms of the modes of achieving carbon neutrality, these are more wide-ranging, and will likely be sector-specific. However, I’ve laid a number of the core pillars out here, and discussed them in a sequence of feasibility and affordability. The idea is that while ultimately these all need to work in concert together to authentically hit carbon neutrality, they can be taken on in compartmentalized chunks to make the path up the curve easier to digest.
Energy Efficiency and Renewable Energy
Yes, of course, all energy efficiency projects like lighting retrofits, boiler replacements, etc. all cost money. However, the payback period for these investments is often less than a year, and ultimately firms (or municipalities) are finding themselves saving significant portions of money on an annual basis shortly thereafter. Historically, renewables have been less available and more expensive than traditional energy. This is changing rapidly. Wind energy is bidding right around $0.02 per kWh, whereas natural gas is upwards of $0.04. These are the low-hanging fruit. Invest in efficiency and renewables, achieve cost savings off the bat, and use those savings as a pool to fund the next pillars.
Now with a track record of savings that will make any finance department happy, organizations can start digging into the projects that cost more, but that drive innovation, or create value for customers, which will ultimately help chip away at growth and success.
Materials Management and Life Cycle Impacts
Go ahead, procure the organic cotton, and choose the supplier in the US that is a little more expensive (but who if you do the right analyses might be the more economic choice anyway because of the way international shipping fees stack up). The consumers of today’s world are increasingly concerned with what they’re putting on and into their bodies, as well as what the companies they buy from, or the cities they live in are doing as members of society. The willingness to pay is way up—Neilsen reports that 48% of US consumers would “definitely or probably change their consumption habits to reduce their impact on the environment.” If you make it better they will pay more.
Additionally, commodities like carbon offsets, renewable energy credits, or “plastic credits” (plastic neutral has been a hot topic over the past few years) are all means of getting to carbon neutrality (or energy neutrality) immediately. They have been poo-pooed by many as a band-aid, or a last-ditch effort once all other stones have been turned. However, programs like CCC’s Carbon Neutral Checkout® allow companies, buildings, etc. to build the cost of carbon credits into the cost of goods that consumers pay. We’ve established people are willing to pay for better products and services. We are now at a point where these externalities don’t need to be internalized on the company’s direct balance sheet; they can be passed through to the same consumer whose consumption is driving demand, and therefore emissions in the first place.
One Firm’s Hindsight is Another’s Foresight
By the time any company has either made themselves leaner, distributed their operations to be outside of their organization, switched to renewable energy, or offset everything else—at least as of now—it will have been a long journey. That need not be the case. Following this rubric above will allow those just awaking to the prospect of making a change to glide along the road to carbon neutrality.
However, there’s something more important here. Time and time again, firms have embarked with uncertainty, but have slowly tasted the sweetness of being leaner and greener, and more attractive because of it. Finally, at the end of the day, we see these butterflies emerge from their cocoons with these principles of sustainable management deeply integrated throughout their executive core, various departments, suppliers, and channel partners. Environmental balance is only the definition of carbon neutrality—the benefits that come with it are vast.
Don’t be grossed out by the worms, embrace the metamorphosis, and get up the sustainability journey curve to reap the better reputation, leaner costs, lower volatility, etc. that come with carbon neutrality. You’ll wonder why you missed the boat in the first place.