by Aysu Katun, Green Economy Post
My recent post on a Verdantix report covered how increasing oil and electricity prices, the hidden cost of carbon and board-level climate change compliance issues make energy efficiency a critical issue for companies. Increasingly, more companies are beginning to realize that the need to account for the economic impacts of carbon in income statements, and changes in the regulatory environment, make the development of a carbon management strategy an emerging imperative.
While some companies have taken the lead in carbon management, there are thousands of other organizations, ‘carbon novices’, that are measuring emissions for the first time, or are required to comply with early emissions legislation, but do not know where to start or what to watch out for.
Here is a list of some of the best practices in carbon management outlined by a joint CDP and IBM study “Making Advances in Carbon Management”, Deloitte’s paper on “CFO Insights: Do you have a carbon management strategy?” and Verdantix’s report on the “Energy Efficiency Imperative”, which ‘carbon novices’ may find helpful. These best practices are based on successes achieved and lessons learned by leaders in carbon management. As the joint CDP and IBM study states, they may serve as a guide to any company wishing to implement a successful carbon management strategy.
- Consider monitoring carbon emissions for a period before setting targets
- Set targets and measurement criteria
- Prioritize the areas of carbon emissions that you want to control and target areas where reduction in emissions will have a high impact on the overall measure e.g. energy consumption. Priorities need to be made which are consistent with organizational goals.
- Allow for growth and change in the business when setting targets. ‘Carbon intensity’ targets, which express emissions relative to increases in output or scale of operations, are preferred to absolute targets or percentage reductions in energy use.
- Incorporate carbon management targets into general business key performance indicators.
- Avoid including data from suppliers, outsourced processes, and other operating countries at the outset, because there are issues surrounding the ability to acquire consistent and accurate information in a timely way from them.
Engaging with stakeholders
- Get board level sponsorship and accountability for the carbon management task. The commitment of the executive team demonstrates that emissions reduction is central to the future of the company.
- Develop a framework that clearly clarifies the roles, responsibilities, requirements and decision rights across different stakeholders in carbon management planning, execution and risk management.
- The commitment to managing emissions needs to be shared by first tier managers who play a more direct role and take leadership in the day-to-day operations of their business units.
- Since it is harder to gather carbon data from remote operations, local champions are needed to offset the impression that carbon management is an ‘HQ’ initiated idea.
- Where appropriate, setting business-unit level targets can generate enthusiasm, participation, and commitment
- Involve employees in a focus week on carbon, the environment or CO2 reduction
- Set up a climate change action group led by a senior manager and representatives from people in the business, not just HQ functions
- Help customers understand the risks and implications of climate change
- Don’t dictate – get buy-in from parts of the organization and suppliers before setting targets
- Report back to business units on how they can improve their performance
- Engage with industry organizations to discuss best practice and agree on standards
Carbon Information Management
- It takes time to identify and improve the accuracy of your carbon dioxide and GHG emissions data; allow at least 2-3 years to allow the data to settle.
- Clearly define terms and boundaries and use templates to make data collection easier and more consistent.
- Develop the template with business units to ensure buy-in.
- Establish a carbon data ‘archive’, which can support the ever increasing range of inquiries and reporting requirements.
- Adopt internationally recognized methodologies for calculating emissions to bring credibility to organizational communications and to demonstrate that an organization’s targets are credible and respected.
- Consider using an external auditor to verify your approach and to get guidance on your next steps.
- Split the task of data gathering and data management across sensible business units.
- Piggyback on existing data streams where possible, and automate whatever can be automated.
- Implement a system to remind people to complete their carbon data submissions to save time and a great deal of effort.
- Capture and log energy bills. This helps verification.
- Predict the impact of new climate and waste legislation on business risks and costs. Be sure to include in group audit or other risk assessment functions
- Consider engaging external organizations such as the Carbon Trust and other industry organizations for their expertise ans assistance.
- Concentrate on energy reduction in the short term, travel in the medium to long term.
- Request more detailed energy billing from landlords and utility providers.
- Use cost / reward incentives on different modes of carbon intensive travel with the aim of broadening the range of travel modes available.
- Consider increasing mobile working and using meeting technologies such as video conferencing to reduce travel: show their adoption and use in your reporting.
- If you run a fleet, use available technologies to measure individual vehicle efficiency.
- Replace inefficient assets with more efficient ones.
- Set funds aside for bigger energy efficiency projects, like voltage power optimization and variable speed drives, that provide bigger absolute savings.
Alignment of Carbon and Financial Management Strategies
- Consider cost of CO2 emissions as part of capital investment reviews – as a return on investment calculation.
- Understand the carbon implications of existing and planned investments, and account for carbon costs in all future investments.
- Assemble a multi-functional team within finance (including treasury department, tax, controller’s office) to begin planning for the best ways to integrate the management of carbon with the finance organization.
- Assess how changes in climate and regulations are likely to impact the demand for products and services,the cost of delivering products and services, and value and supply chain relationships.
- Due to the uncertainty in regulations, adopt scenario planning to assess and plan for alternative contingencies.
- Companies will have to guard against non-compliance and frame the core risk control and compliance processes around carbon, so be sure to identify risks of non-compliance.
To obtain more details on how to implement some of the strategies listed above check out the “Making Advances in Carbon Management,” a CDP and IBM study , “CFO Insights: Do You Have a Carbon Management Strategy?”, a paper prepared by Deloitte and Verdantix’s report on the “Energy Efficiency Imperative.”
© 2010 – 2011, Aysu Katun. All rights reserved. Do not republish.