Just before Thanksgiving, I attended VERGE SF, a gathering of the sustainability community in San Francisco. Overall, the conference was well run, informative, and professionally produced—a success—but I couldn’t help feeling that something was missing from the conversation. Later, I realized what it was: Almost no one was talking about a comprehensive plan to address the bulk of corporate emissions.
Most of what I heard focused on energy efficiency, and in a few cases renewable electricity. This is great, because almost all of our energy comes from fossil fuels, and the combustion of fossil fuels is responsible for 80% of total U.S. emissions.
The problem is these programs ignore the fossil fuel use of their suppliers and service providers since most energy efficiency programs are focused solely on a company’s own direct fuel combustion and electricity use (aka “Scope 1” and “Scope 2” emissions, respectively). These providers include shipping companies and airlines, who collectively generate as much carbon emissions as the commercial enterprises they serve.
Most of the companies I saw at VERGE, and that Terrapass works with on a regular basis, are companies with large consumer brands that are engaged in industries like retail, social media, or high tech. These companies fit into the “Commercial” category above, meaning that together they produce about 1 billion metric tons of CO2e per year from Scope 1 and Scope 2 emissions (see left-most column above). However, these companies are also responsible (albeit indirectly) for a lot of the emissions created by their industrial suppliers (2nd column from the right) and the transportation sector (right-most column). That equates to more than double the Scope 1 and 2 emissions at which their energy efficiency programs are focused.
So what are companies doing about this? For the most part, very little. We have seen leadership from a few (see the box below), but a surprising number of companies have decided to sit on the sidelines and wait for someone else to solve the problem. This recalls to mind a conversation we had in 2010 with one of the largest U.S. retailers, who declared that it would focus only on efficiency and had no plans to address its (rather large) shipping emissions.
Energy efficiency makes a ton of sense. It’s a natural for most commercial entities because it usually has both environmental and financial benefits, thus making it easy to pitch in the CFO’s office. But commercial efficiency alone is not going to get us where we need to go.
Examples of initial efforts or strategies to address Scope 3 emissions
- Supply chain management: Pushing carbon disclosure and mitigation requirements onto industrial suppliers. This makes sense since the suppliers are better equipped to find efficiencies in their own operations, but suppliers must be truly forced to compete on the basis of, inter alia, the carbon footprint of their products (as determined by life cycle analysis or other standardized and verified methodology). The efficacy of this approach is yet to be determined.
- Investment in alternative fuels as a substitute for petroleum. Like investments in renewable energy to reduce Scope 2 emissions, clean biofuels promise a long-term, sustainable solution to our Scope 3 conundrum, but are more expensive than conventional fuels. (Note: A recent study by Terrapass for an aircraft manufacturer concluded that GHG emissions reductions from manufactured bio-jetfuel was about 200 times more expensive than alternative methods of emissions reductions, such as methane capture projects.)
- Reduced air travel: Using technology like videoconferencing to reduce reliance on air travel. Some leading companies have taken this a step further and put an internal price on carbon with the goal of creating an economic incentive to reduce emissions.
- Employee education: Instituting educational and promotional campaigns targeted at employees that are designed to encourage employees to conserve both at work and at home (thus reducing emissions from the “Residential” sector). While this doesn’t reduce actual corporate emissions, it does reduce total emissions, and that’s all that matters as far as the atmosphere is concerned. (It can be difficult to quantify these emissions, however. The main benefit of this activity is for the employees.)
- Employee commuting programs: Instituting corporate-sponsored employee ride-sharing, telecommuting, and other programs designed to reduce emissions from work-related road transportation. (Commuting accounts for about 15-20% of total transportation emissions.)
- Offsite emissions reduction projects: Thousands of tons of CO2e is released every day from small facilities throughout the U.S., like dairy farms or landfills. Companies can help these facilities capture and destroy greenhouse gases by co-funding emissions reduction projects at these facilities—usually at a fraction of the cost of reducing emissions in other ways. See an example of how Google Inc. does this.
In the past two years, U.S. emissions have gone down significantly, thanks largely to sluggish economic growth and very cheap natural gas (which has led to switching away from coal-fired power amongst electric generators). Most corporate footprints have shrunk too, because with fewer employees and greater travel expense restrictions this happens automatically. But we can’t count on weak economic growth to reduce our emissions over the long term. At least, let’s hope that our corporate executives have a better emissions reduction plan than this.
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