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.