The software giant has revived the term carbon neutrality, and in doing so has hit on a carbon management model businesses could soon emulate
Way back in the mists of time, before phones were "smart" and bankers were pilloried, there was a brief trend for businesses to embrace so-called "carbon neutrality".
This long lost, more innocent, bygone era (circa 2007) was characterised by a surge in demand for voluntary carbon offsets that offered companies the chance to "neutralise" their greenhouse gas emissions by funding projects in developing countries that promised to cut an equivalent amount of carbon emissions, in effect "offsetting" the carbon.
For a brief moment it looked like an elegant means of cutting emissions at the same time as driving clean tech development and forestry protection funds into poorer countries. And then a host of factors combined to severely undermine the credibility of the concept and corporate engagement with the offset market.
First and foremost the financial crisis hit, pushing carbon management strategies well down the agenda of senior executives. But even before then the concept of "carbon neutrality" had been tarnished by a flurry of stories highlighting flawed carbon offset projects that failed to deliver promised emission reductions. Most infamously, offsets purchased by the band Coldplay to neutralise emissions from one of their world tours were shown to have funded a mango plantation project that had resulted in swathes of dead trees, while on a less glamorous level Chinese industrial firms were accused of "gaming" the offset market by selling carbon credits that should never have been issued.
Meanwhile, green campaigners who had initially been intrigued by the offset model quickly turned their fire on an approach that appeared to provide corporations with an excuse to keep polluting safe in the knowledge they had paid a small sum to support projects that may or may not deliver carbon emissions.
Five years on and while legitimate concerns continue to surround the offset model there are signs that a more mature and effective approach to "carbon neutrality" is emerging – one of which all businesses committed to cutting their emissions should be aware.
Firstly, offsetting has become increasingly normalised, particularly in the aviation and transport sectors, with large numbers of operators offering customers the opportunity to offset their journeys. Obviously, it remains no alternative to avoiding journeys where possible and cutting emissions directly, but it has proved an effective means of driving awareness of environmental issues and encouraging people to invest in emission reduction projects.
Secondly, offset providers have matured and most now adhere to independent standards designed to ensure emission reduction projects deliver the emission reductions they have promised. Again the market is far from perfect and the initial focus should always be cutting emissions at source, but mechanisms for independently verifying projects should provide companies with greater confidence that projects are working.
Thirdly, and most importantly, businesses are proving far more adept at integrating carbon neutrality into a more effective company-wide emission reduction programme. Plenty of companies have adopted strategies that combine the purchasing of offset with multiple initiatives designed to curb direct emissions, but Microsoft's high-profile commitment last week to become officially carbon neutral from this July still feels like a tipping point.
The software giant has not put a figure on the cost of its new commitment, but meeting the pledge to purchase offset or renewable energy credits to cover emissions that cannot be avoided will inevitably cost millions of dollars. That means a significant flow of capital for emission reduction projects in developing countries, but more importantly means a significant new cost line on Microsoft's P&L – a cost line the company has committed to imposing on all its business units around the world.
As Kevin Turner, the company's chief operating officer (note the job title, this initiative is coming from the top), wrote last week:
"In addition to our commitment to carbon neutrality, the part I'm most excited about is our plan to infuse carbon awareness into every part of our business around the world. To achieve this goal, we have created an accountability model that will make every Microsoft business unit responsible for the carbon it generates – creating incentives for greater efficiency, increased purchases of renewable energy, better data collection and reporting, and an overall reduction of our environmental impact.
"To put this into action, we're creating a new, internal carbon fee within Microsoft, which will place a price on carbon. The price will be based on market pricing for renewable energy and carbon offsets, and will be applied to our operations in over 100 countries. The goal is to make our business divisions responsible for the cost of offsetting their own carbon emissions."
Again, none of this is new – plenty of other companies have adopted similar carbon pricing models. But the scale is new – unless I've missed something. Microsoft is the largest company to date to make such a commitment, and regardless of the low cost of carbon offsets currently, it has now made a long-term pledge to recognise the financial impact of its emissions across its operations.
The term "carbon neutrality" may still have the whiff of marketing fluff around it, and there is still plenty of work to be done to reinforce the credibility and effectiveness of the offset market. But Microsoft and others are demonstrating that the concept can provide the basis for a company-wide approach to carbon management that places a price on emissions, drives investment in both direct and indirect emission reductions, and ensures senior managers are tracking an organisation's carbon footprint. Perhaps it's time for "carbon neutral" 2.0.
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