Meeting Demands of Carbon Regulators: 5 Levels of Carbon Maturity

The spotlight on mandates for organizations to report and reduce carbon emissions has shone brightly on the two usual suspects of environmental enforcement: EPA and Congress. But amidst a climate bill that seems to face obstacles at every turn, the spotlight is being shared with new regulators that have shown the ability to reach beyond the heavy emitters of big industry. Shareholders, consumers and big business have enacted their own unique forms of climate change legislation for the clean industry, holding businesses to GHG reduction targets and driving sustainability initiatives.

Large organizations have honed in on the supply chain, a primary source of large carbon footprints.

It seems like every few weeks a new company makes the pledge to hold suppliers accountable for energy use and GHG emissions. Ford Motor Company joined the fray recently, announcing that it will initially survey 35 top global suppliers on their energy use and estimated greenhouse gas (GHG) emissions.

Shareholders have progressively become more bullish on climate-change risk. Ceres, a national network of investors, environmental organizations, and public interest groups, announced in March that shareholders filed a record 95 climate change-related resolutions with 82 U.S. and Canadian companies, a 40% increase in resolutions filed over the last year. The organization indicated this is an early sign of the “growing pressure on companies to disclose climate risks and opportunities in the wake of the recent Securities and Exchange Commission’s climate disclosure guidance and other recent policy developments.”

Consumers are showing willingness to pay more for green. A study conducted by Green Seal found that despite the poor economy, four out of five consumers stated that they were buying green products and services. In an April 2008 survey by Harris Interactive, more than a third of Gen Y adults would be more inclined to work for a green company. More, almost a third of respondents said that they would be willing to sacrifice a portion of their salary to work for an environmentally friendly firm.

Carbon Maturity Stages

Regardless of the outside drivers, identifying, justifying and reducing carbon emissions has quickly become a business imperative for the clean industry. The challenge for businesses that fall outside of heavy industry is that many lack the internal resources – environmental engineers and data experts –to identify and report emissions accurately, consistently and efficiently.

No matter the size of the organization or the end goals that defining a carbon footprint will serve, all begin at the same central principle: you can’t manage what you can’t measure. And measuring is simply an exercise in data management. Data defines what the scope of the footprint is and data will define how it can be reduced in the future.

It’s important for the clean industry to assess where they rest in the GHG data collection process. I call this “carbon maturity” and have defined five essential stages with varying characteristics of growth:

• Level 1: Chaotic – Characterized by unknown obligations for recording GHG emissions and a lack of clearly defined goals for environmental management. This unknown process lends to the unknown business risk.

• Level 2: Reactive – There’s knowledge of tracking obligations, and there’s likely some simple data collection being recorded annually, but data exists in silos and the data that is collected is not being verified.

• Level 3: Proactive - Obligations exist in documented form and are known within the organization. GHG emissions data are being collected manually on a quarterly basis and reduction goals have been set based on simple data collection.

• Level 4: Service – Obligations are managed and tracked online and more broadly known throughout the organization. GHG emissions are tracked monthly and a centralized online data collection system exists. Emissions data is compared against specific reduction goals and verified externally.

• Level 5: Value – GHG emissions obligations have progressed into known risks and those risks help trigger operational improvements. GHG emissions data collection and reporting is automated and reductions are based on operational efficiency. Advanced data leads to GHG trending, analysis and predictions.

Environmental Management Outsourcing

For organizations without a data management infrastructure in place, accurately and consistently recording carbon emissions can be challenging. Furthermore, calculating carbon footprint and reducing emissions over time can carry heavy operating costs. To help meet this need, a new managed services category has emerged: Environmental Management Outsourcing (EMO). This market category is proving to help the clean industry realize its carbon maturity. EMO is unique in that it combines two previously disparate services in environmental management: environmental consulting and GHG emissions management software. These services apply to the regulated industry, as well, as companies struggle to assure compliance with new environmental reporting requirements.

This new managed service category can offer companies significant value and preserve internal resources. In the end, the choice to outsource or manage GHG emissions in house all starts at one central point: understanding your data. Data defines what a footprint is, and data will define how it can be reduced it in the future.

Dailey Tipton is VP of Sales and Marketing for FirstCarbon Solutions, a pioneer and industry leader in environmental management outsourcing (EMO).