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Carbon Neutrality The goal of carbon neutrality is to minimize C02 emissions from ones activities and to offset the remaining C02 emissions by taking alternative measures in other places on earth to neutralize ones impact on the environment Sia Conseil |
Europe, based on the Kyoto agreement, established in 2005 the largest multi-national greenhouse gas (GHG) emissions trading scheme . Since then, big industries have been caped by limitations on GHG emissions enclosing carbon emissions. Their commitment to limit their impact on the environment has been encouraged not only by the potential penalties but as well by economic benefits that new investments in old infrastructure could generate (ex: improve efficiency, better isolation, changes in processes…). Recently we observed more and more car (ex.: BMW), oil (ex.: BP), energy (ex.:EDF) companies and many other heavy industries launching advertising campaigns which are advocating on the “greenity��? of their products. Since such companies are both polluting and investing the most, their marketing departments are trying to create fuzz in the perspective of getting better return on investment. Not only reducing carbon level creates cost savings but well-managed process implementation could produce very promising side benefits .
Turn the necessity to a competitive advantage
Climate change will sooner or later modify the way to do business. Experts seem to finally agree on the effects of human activities on the environment. Governments start to react in order to preserve the well-being of future generations. Companies also have responsibilities, incentives and even interests to reduce their impacts.
Not only carbon reduction actions protects them from a future – and drastic – regulation but also contributes to improve processes and/or save operational costs (ex.: better boiler in coal combustion, more energy efficient robots in automotive supply chain, less waste, less transport, …). Many leading companies got it right and start developing their own program (ex.: GE with its “Ecomagination��? strategy, Volvo Belgium with a zero C02 emission production).
Any process can be monitored by indicators to quantify performance and to make sure it meets objectives. CO2 is becoming in a way a new indicator for business improvement since it is highly correlated to efficiency. It’s a unique measure, a data relatively easily to manage – just another set of variables in a traditional data warehouse –. The hit comes from the multiplication of corrective or preventive actions – which can be very specific depending on the activity – and their follow-up. Hopefully, number of existing methodologies could be adapted and ease the CO2 problem setting in a company.
The following scheme aims to structure a typical way to implement an improvement technique within a company:
- Four majors stages,
- Three different levels of involvement.
Starting from the board of a company which decides to launch a strategy based on carbon cutback, the methodology will have four stages:
- 1. Measure
2. Analyze
3. Implement
4. Control
Depending on the hierarchical involvement different kinds of actions will be taken regarding each step of the methodology by the company, department and employee levels.
A cross functional matrix destined to illustrate the different stages of a carbon reduction, its actions and its immediate benefits on operations plans to give a more tangible point-of-view.
Each stage has its own objectives and expected results which are designed to build and develop the next one.
- 1. Measure
Depending on the process and activities of your company, some CO2 emissions will be:
- measured by dedicated devices – most of those installed devices are by regulation (i.e.: heavy industries) – or
- simply estimated — many sources could provide information and basically all lifecycle C02 emissions of products and services can be estimated.
Information will be aggregated together in a single database in order to have a well-organized accounting of any sources of carbon and monitor variations. The main objective is to clear the path for the “analyze��? stages by highlighting excessive carbon emissions.
- 2. Analyze
After compiling data across the company, a second exercise will establish:
- Main sources of carbon and their corresponding activities, procedures, processes, departments
- A list of potential actions and their cost-benefit analysis
- A set up of clear objectives to reach
Principal goals are to choose the most cost-efficient actions with regard to the company’s objectives. The short list of actions will try to get as many people as possible involved in the project: sponsorship is always a key to success.
- 3. Implement
The most complex stage will be the implementation of chosen actions during the previous stage and the follow-up of each of them. It consists in building:
- A strategy for action, cost follow-up and effectiveness for each department
- A sponsorship from the management
- A person in charge of managing those actions and coordinating resources
- A clear vision of what will be done and inform people of effectiveness of their actions
- A change management methodology: training, assistance
- Smooth actions not disturbing operational activities
This stage is all about giving the means to secure success. A well-prepared implementation ensures to reach objectives more rapidly.
- 4. Control
Along the implementation, regular audits need to be structured based on the monitoring system – built during the “measure��? stage – allowing the adjusting of the plan of actions when required. At the end of this period – year for instance – a major reporting is established to:
- Compare results with objectives
- Control the effectiveness of operational gains through process improvement or cost savings operations
The results of this stage will allow to show:
- Process improvement to the executives
- Cost savings to the shareholders
- A better image to the public
- If relevant – involvement to the regulators
Will you get your money back?
Although process improvements require initial investments, gains are permanent. Basically everything having a cost for a company also has a CO2 impact, so potential benefits can be big. Carbon reduction combines economic and environmental interests. Within a company, the main sources of CO2 emissions can be shared between 5 main categories: the following figure identifies them. Using the above-exposed methodology, the table presents direct benefits in cost savings by reducing carbon sources.
And even more!
Besides the direct internal cost savings generates by process improvement actions, four other incentives can be identified:
- 1.Create a green image
What we call “green affinity��? in customers is growing in developed countries. People are almost at the point to pay a bit more for sustainable goods. Surfing on the wave, an effective marketing department with clear and dedicated strategy on the subject could increase customer perspective of environmentally friendly products and services. “It should not be surprising that many leading companies today are responding by aligning their brands with more eco-friendly activities and attributes��?, says Green Marketing. The market is changing and companies need to be prepared.
- 2.Reduce risks of non compliance
European Union sanctions will always get stricter year after year: caps emissions, nature of gas (NOX, SOX, COX, Particles…), and delocalization of polluting plants… A good way to avoid sanction is to stay ahead regulation standards. In addition, the sooner a company planifies an investment, the better it will be able to manage costs and resources.
- 3.Get state aid
Most of the countries and the European Union are sponsoring innovative projects for energy savings and generation of renewable energy.
- 4.Reduce risk of energy costs
Continuous increase of energy prices and taxes, scarcity of primary energy are becoming greater risks for a company. Reducing use of energy and doing so carbon emissions is part of limiting exposure against uncontrollable costs. Taking into account those financial risks from now on could one day become a competitive advantage if competitors don’t face those aspects seriously.
Conclusion
The assumption of strong correlation between expenses and CO2 emission can help to build a business plan which meets environmental and financial expectations. Many have already understood this. In developed countries, half of the major companies have a board representative in charge of energy and environmental issues. Cost savings is acquiring a new marketing tool: environment.
Carbon reduction is not only a necessary evil for the well-being of our planet; it is a real opportunity for a company to improve the business as usual. Everybody has a role to play for the environment and can still contribute to efficient business development and generate money from it. A strategic choice in a company is an opportunity to seize to move things forward. Company and people do not need experts in order to create a carbon neutral structure but dedicated resources and motivated people with expertise in process change.
Indeed, changing business habits, modifying processes, introducing new policies have never been easy tasks. They require: time, competencies, cash flows, improvement of regulation, intake of new culture and ideas. But benefits – besides direct cost savings – will be multiple, the internal and external image will be valued, an ideal standard for competitors will be set and, bottom line, it will serve the environment and quality of life.
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