The Elephant in the Room Has a Big Carbon Footprint

by Frankie Ridolfi, VP of Marketing at Climate Earth

Interface CEO Ray Anderson attended the CleanTech Investor Summit last week in Palm Springs, California. That’s a good sign for innovative young companies like Climate Earth — his presence is a signal that investors must participate in creating markets for green products.

Anderson is a legend for rethinking business as usual. He made flooring manufacturer Interface an industry leader by investing in green technologies and using sustainability as a key performance indicator.

His vision continues to drive profitability and market leadership for the company. At the GreenBuild conference and trade show in November, Interface’s booth featured an enormous pachyderm hanging from the ceiling above pillars of fossil fuel — the proverbial elephant in the room. It wasn’t just clever marketing.

According to an Interface representative at the show, the company has extracted so much fossil fuel from its supply chain that it was buffered from fluctuations in oil prices last year.

While competitors had to raise prices, Interface proudly told customers about their efficiency and had no cost increases to pass along. Talk about a competitive advantage.

The Associated Press reported Tuesday that oil prices rose to a 15-month high in January as a result of cold and snowy conditions. Now, prices are being impacted as much by China’s bank lending practices as domestic supply and demand.

Weather and foreign economic policies are only two of an infinite number of factors that affect oil availability and price. This unpredictability presents a threat to profits, especially for companies dependent upon low-margin products and carbon-intensive materials.

CEOs looking for new ways to cut costs should focus on reducing their company’s supply chain dependence on oil. The first step is to understand their current fossil fuel exposure.

Fortunately, carbon accounting offers a business-friendly way to achieve this goal. Like financial accounting, it provides a consistent and reliable way to measure the performance of your company, its supply chain, products and raw materials.

Full-service carbon accounting is managed by specialized experts in carbon science, and as a result, it overcomes historical limitations with timeframes, expense and scope while maintaining high standards of accuracy. For instance, Climate Earth’s accounting system can analyze an entire company’s operations 10 times faster than typical lifecycle assessment can complete a much smaller one-off project. This is not your father’s carbon accounting.

Why start now?

The market is increasingly demanding action. Everyone from industry giants like Walmart to individual citizens want to buy green products and services.

Companies that wait until they are pushed will end up doing carbon accounting regardless. But they will lose out on the time-value of carbon cost reductions and the benefits of market leadership for reputation and top-line revenue.

Meeting the letter of compliance is like receiving a D- grade in school. It’s the bare minimum level of performance acceptable to society. That’s no way to run a company.

CEOs and investors should acknowledge the elephant in the room — enterprise and supply chain carbon emissions — and take their rightful leadership roles in building a prosperous, low-carbon economy.

Frankie Ridolfi is Director of Marketing for Climate Earth Inc.
This article appeared at GreenBiz.com:
http://www.greenbiz.com/blog/2010/01/27/elephant-room-has-big-carbon-footprint?page=0%2C0

The First Real Step

It’s tried and true: you can’t manage what you don’t measure.

At the risk of sounding like a brazen promotion for Climate Earth, I will say what I believe: begin by counting all your carbon because you can’t manage what you don’t measure. Of course you don’t have to use Climate Earth. But do count ALL your carbon, not just your direct emissions and your electric use. This once common practice is a narrow approach and is rapidly fading. The notion that a company that designs and sells a product is not responsible for the emissions of CO2e released in the production, packaging and transportation of that product is like saying that a company is not responsible for the commercial success of its own products.

On December 30 of last year, a Wall Street Journal article drove this point home (http://online.wsj.com/article/SB123059880241541259.html). Dell’s quest to be “the greenest technology company on the planet” is noble, but they chose to measure only a tiny fraction of their actual carbon footprint (approximately 5%). No one questions that a manufacturer must look at the cost and quality of components. The same is true for the cost and quality of services from outsourced manufacturing partners. What materials you use, what partners you chose are key strategic decisions.

In the same way, the manufacturer of a product has control of the carbon footprint of the materials and processes used to produce that product, if they chose to control it. In short, carbon is joining cost and quality as a strategic metric, and knowing the carbon footprint of materials and processes in your products now has measurable value. Carbon emissions produced in the manufacturing and transportation of any product, what we call the carbon intensity of a product, is a key metric for predicting increasing costs of a product. Why? Because cap and trade legislation or a carbon tax will be passed by congress as early as December of this year, and almost certainly in 2010.

House Energy and Commerce Chairman Henry A. Waxman plans to hold at least two hearings a week until he rolls out a comprehensive overhaul of the country’s environmental policy before the Memorial Day weekend. (http://www.politico.com/news/stories/0309/19768.html)

It is now clear that carbon emissions will no longer be free. It is also clear that major direct polluters will pass that cost on to everyone downstream. On top of that, as the economy recovers, China, India, and the US will once again be in fierce competition for oil, which will add volatility to oil prices and drive them up.

Counting all your carbon, both direct emissions and indirect supply chain emissions, is economically smart, competitively critical and environmentally responsible.

Begin at the Beginning

If you are wondering where to begin, get a copy of Joel Makower’s new book, Strategies for the Green Economy. (http://www.makower.com)

Joel has been writing and working in the green economy for twenty years. The first ten years he focused on “spreading the green consumer mantra.” He spent the next “more encouraging” ten years working with and writing about companies. The 40 or so short chapters are digestible, practical, to the point and easy to read. The book ranges from providing a three page history of the green movement (a very nice backgrounder), to addressing the tough questions of what consumers are saying, what they are doing and how to reconcile the two. It’s a must read for any executive “in the green,” and is especially powerful for those contemplating a shift.

Green Leadership

Helping executives lead the new carbon-constrained economy.
My blog is written from and inspired by three core perspectives:

First, that the combined creativity and economic power of business is the only force strong enough to lead us into a new carbon constrained economy.

Second, businesses that are dragged kicking and screaming—or even lagging—in the new economy will not survive the next 10 years.

Third, by leading our economy into a new era of innovation and responsibility, the truly great business leaders can transform the negative and well-deserved image of business. Rather than being unethical, ruthless profiteers, creative leaders will provide economic and ecological well-being and opportunities for people to be more positively engaged and more productive.

It’s clear that being a green business leader no longer has anything to do with being part of a fringe movement. It is now the foundation on which every successful and thriving business will be built. Being a green enterprise now means being highly efficient and competitive in a market that is less and less tolerant of companies that are not overtly and transparently demonstrating their commitment to people and planet.

In short, my goal in these posts is to help business leaders figure out what it means to lead into the new era, what a green strategy might look like, and how to avoid pitfalls and inevitable arrows of real leadership.

How executives use enterprise carbon accounting to grow revenue

In a recent article at Greenbiz.com, John Davies wrote about the shortfalls of carbon accounting, in particular the link between the keepers of the carbon footprint and the executives that manage the business. He says “those who are measuring aren’t the same people who are managing.” John was speaking to Jon Guerster, CEO of Groom Energy. Jon’s company designs and implements energy saving projects.

In my view John and Jon are looking backward at companies that count Scope 1 and 2 to be good citizens. The notion of enterprise-wide carbon accounting is just emerging. While some company’s think this term refers to a portion of an enterprise’s carbon, it is really about a strategic look at carbon from cradle to gate and beyond, and taking comprehensive action at the executive level.

Unlike the reports of Jon and John, executives at our client companies are keenly aware of the opportunity carbon presents, and they are leading their companies aggressively. The key is to have regular, periodic reporting to executives and a hard connection to branding strategy, revenue and cost cutting. I just returned from Playworld System’s annual international sales meeting. I was the #3 speaker on day one, following only their CEO and VP of sales. They both talked about the company’s strategic commitment to carbon footprint reduction both in the plant and in the supply chain. The sales force clearly got it. Their customers are making carbon reduction a key criteria for selecting suppliers. Playworld’s executive level commitment is now a competitive advantage. The workshops following my keynote were packed with sales people working hard to learn a whole new aspect of the business. It was clear that the comprehensive, periodic reporting that Climate Earth provides to the whole executive team is key to their success in driving strategy around reducing carbon cost in the supply chain and selling more product.

Carbon joins cost and quality as a strategic business metric

The reasons for having an Enterprise Carbon Accounting of your business are moving fast beyond being a good citizen, building brand and attracting green consumers. Carbon is the next strategic metric. It is a critical measure of future costs.

It’s clear that as we move into a carbon-constrained economy, companies that understand and manage fossil fuel intensive areas of their own operations and their suppliers are going to be far more competitive than those that don’t. Why? Cap and trade and scarcity will drive up the price of fossil fuels. Companies that know where those costs are can begin now to work with suppliers and or find alternative suppliers. Greenhouse gas emissions are the direct by-product of fossil fuel use and are the only straight forward measure.

The change is coming very soon. Nancy Pelosi, Speaker of the House committed to pass legislation this year, as described in a January 22 interview for the San Francisco Chronicle.

Here is what Pepsico had to say on the same day, January 22 in the New York Times: “The main thing is helping us figure out where the carbon is in the chain,” said Neil Campbell, president of Tropicana North America, a division of PepsiCo.

Early last year, IBM research wrote an excellent paper covering the overall issues:
Much of the opportunity to address CO2 emissions rests on the supply chain, compelling companies to look for new approaches to managing carbon effectively—from sourcing and production, to distribution and product afterlife.
“Butner, K et al, Mastering Carbon Management”, IBM Research , Feb 2008.

These are interesting times. In 2009, doing good and doing well are finally coming together.