While Green supply chain thinking has certainly begun to permeate many companies, has it really risen to the level of board-level priority? Is it time to elevate carbon management to that level of attention and concern?
The answer to the first question is largely no, and the second definitely less, according to a new report from the UK's Carbon Disclosure Project, an organization that provides tools and methods for reporting carbon emissions (see Understanding the Carbon Disclosure Project).
The report, base in part of interviews with Sustainability executives in 10 companies thought to be at the forefront of carbon management, says raising the issue to one of board-level concern is smart business for three primary reasons:
Carbon Regulations Present a Financial and Reputational Risk: Regulatory schemes like the European Union's Emissions Trading Scheme (a cap and trade program) make carbon financially material for energy-intensive firms operating there today, an approach that could expand to other countries. Future direct carbon taxes are also a possibility. High carbon usage could also harm a company or brand's reputation among consumers, the report says.
There is a Strong Correlation between Reducing Carbon Emissions and Energy Costs: Improving energy efficiency is the most immediate and effective action firms can take to reduce their carbon emissions. Often new opportunities for energy saving are found when looking through a carbon management lens. The report says that in some cases senior executives were unaware of the full scale of energy costs until a carbon management program was initiated.
Preparing for Energy Supply Risks can Reduce Carbon Emissions: Decreasing energy consumption through energy efficiency measures is a good starting point for tackling energy supply risks. The report says that many firms are going further and implementing low-carbon on-site energy generation.
The report notes a variety of other pressures that are elevating the importance of strategic carbon management, including the potential that young new talent will want to work for Green-oriented companies to the recent SEC proposal that climate change related risks be included in the financial statements of US companies to the demands for carbon disclosure and management from a company's large corporate customers.
The report contains a nice chart that summarizes the likely impacts of different carbon-emissions related factors on different areas of the business:
Carbon Management Business Drivers
Sourse: Carbon Disclosure Project
Do Carbon Management Leaders Achieve Bottom Line Benefits?
The report argues that investments in carbon emissions and management generally do provide a solid financial return within three primary areas:
- Identifying and Acting on Carbon Emission "Hot Spots": Looking at a supply chain network through a carbon lens can quickly lead to opportunities for energy cost reduction.
- Recycling and Material Efficiency: Through "waste repurposing," Dow Chemical was able to reduce waste materials by some 70,000 metric tons per year and reduce related carbon emissions by 49,000 tons - while generating savings of $17 million annually.
- Substituting "Telepresence" for Business Travel: The least supply chain related area, the report says new technologies can dramatically reduce the need for business travel - and costs. Intel, for example, identified travel cost savings of $14 million after implementing videoconferencing technology as part of its sustainability strategy.
The report provides brief case studies of carbon management success at HP, UK retailer Marks & Spencer, and French car maker Renault.
The report notes, for example, that HP’s revenue grew by a CAGR of 8% between 2005 and 2008, while scope I and II emissions decreased by 6%. This means that HP cut its CO2 emissions by 31% per revenue unit over that time period.
The full report is available here from the CDP: The Carbon Management Strategic Priority.
Any reaction to the findings of this report? Do more companies need to elevate carbon management to a strategic priority - or are things progressing nicely as it stands? Let us know your thoughts at the Feedback button below.
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