Archive for August, 2008
The majority of global executives regard climate change as being strategically important but fewer act on these opinions according to a survey conducted by McKinsey Consulting. The survey also found that many executives are actually positive about the opportunity for climate change to boost the bottom line.
Standard approach
There are relatively good standards and guidance available on how business should account for their greenhouse gas emissions and so we see a lot of consistency between businesses in this area. Similarly as regulations regarding reporting or pollution cap-and-trade systems, or carbon taxation emerge in different regions then businesses have a clear prescription to follow.
However, there is no authoritative guidance or established best practices guiding business on how they should consider climate change in other aspects of their strategy and operations: corporate reputation, brand and customer engagement; planning for the environmental risks associated with climate change; procurement and supply chain management; development of products and services; employee engagement; and so on.
So it is not surprising that the survey found there were mixed views about where responsibility for ensuring their companies take climate change into consideration actually lie. Roughly equal percentages of respondents apportioned responsibility to C-level executives, corporate-level strategists, and business unit or functional unit managers. It won’t be surprising to you that even in a low carbon-intensity business Greensense believes that climate change should be a C-level executive responsibility.
Carbon Management Office
So what is the right organizational model to act on this responsibility? Greensense recommends that it’s customers establish a Carbon Management Office. There are a two basic models for a Carbon Management Office.
Firstly where the Carbon Management Office is a centre for excellence that acts in a consulting capacity setting standards; selecting tools such as carbon management software; providing support to business area managers with training, guidance and best practices; and, providing strategic advice to the executive. In this case responsibility for carbon emissions, energy production and use, maintenance of a carbon inventory and of meeting regulatory requirements is distributed within individual business areas.
Secondly where the Carbon Management Office also has a centralized governance role with ownership of the corporate carbon inventory; responsibility for reporting on business performance related to climate change; responsibility for compliance and regulatory reporting; and responsibility for enforcing processes and policies related to climate change. For example, the process where by all new corporate initiatives must prepare a Greenhouse Management Plan and the conditions by which this plan must be submitted to an executive committee for review and approval.
While establishing a Carbon Management Office is a clear best practice there isn’t a one-size-fits-all solution. The Carbon Management Office must be aligned to the companies culture, structure and strategy. So, for example, we also see cases where there may be multiple Carbon Management Offices: a centralized corporate office and a separate office attached to a business area with high carbon-intensity operations and specialized monitoring and compliance requirements.
Internal carbon markets
As maturity and understanding of carbon management increases within companies we also see the Carbon Management Office providing an internal carbon registry enabling business areas to exchange carbon credits and pollution permits to meet individual emissions targets. This will enable the business to more efficiently meet its overall external emission targets. This kind of opportunity is a good example of the benefit of having the right organizational model in place.
Making sense of climate change
Please contact us if you’d like to establish a Carbon Management Office in your company.
The Vulcan Project is inspiring climate science with important lessons for business.
This project has mapped carbon dioxide emissions in the United States in 2002 at the level of individual factories, power plants and roads. As well as making the research data available online the project has developed some amazing visualizations such as those shown in the following video.
The same team is now building on these results with the Hestia Project, which aims to provide “detailed space-time information on fossil/industrial CO2 emissions via an intuitive, interactive, photorealistic, three-dimensional visualization of the Earth.”
This work is inspiring and clearly demonstrates the value in having detailed and verified data and having the ability to visualize the data to aid in education, planning and decision making.
At Greensense we think data capture and data visualization should be part of all businesses climate change strategy. We think having the capability to see and understand your business’s carbon inventory — at a sufficient level of detail — is the key to enabling meaningful actions to be taken and new strategies to be developed. This detail should extend across your supply chain and down into individual business areas and business activities.
Many businesses are already developing carbon inventories but are doing so only to meet regulatory requirements, such as those under the National Greenhouse and Energy Reporting System in Australia.
While initiatives to develop corporate carbon inventories are important, without the capability to capture data at the right level of detail and visualize that data these inventories won’t be the strategic tools they could be.
The two photos below are of Perth CBD. The top photo was taken on a weekday evening in July 2008 at about 8pm in the evening. The photo below was taken a few days later on a Sunday night at pretty much the same time. *
So why is it that Perth’s office buildings are lit up like a Christmas tree on a weekday evening but not at the weekend? Some some crude estimates (based on counting office floors that are lit) suggest that 60% fewer lights are left on over a weekend evening than at the same time during the week.
I think it’s safe to say that it isn’t because Perth’s offices are full of hard working employees at 8pm on a weekday evening. Sure, there’ll be a few folk burning the midnight oil but most of this lighting is going to waste.
Let’s try and work out what this equates to in terms of CO2 emissions. We’ll pick on Central Park as it’s the tallest building on Perth’s skyline. In an earlier post we estimated Central Park’s emissions at around 16,000 tonnes CO2e per year
Now we know that lighting is responsible for around 21% of electricty consumption in commercial offices. Based on that we can estimate that lighting in Central Park generates around 3,200 tonnes CO2e per year or an average 9 tonnes per day. Down at this level it becomes clear that leaving lights burning unnecessarily, even for only an extra hour or two every day, can in itself be a significant cause emissions.
So what can we do about it?
There are only two ways that lights get turned off — either it’s the last person to leave the office at night or the building management system (BMS) does it for us. Certainly for larger office buildings like Central Park a BMS will be controlling many aspects of the office environment. Making sure that your BMS is configured correctly and reminding staff of the importance of turning out lights when they go home at night are easy and very cost effective ways to reduce the emissions generated by your office space.
* It’s worth noting that these photos were taken after the explosion at Apache Energy’s Varanus facility which lead to a significant energy shortage in Western Australia. Most office buildings in Perth were supposedly doing everything they could to reduce their power consumption. Even the neon advertising on the tops of the buildings had been turned off!
Some recent research at ANU has found that natural forests are a much better carbon sink than plantation forests. As well as storing up to three times more carbon, natural forests hold the carbon for much longer because they aren’t cut down on a rotation basis like plantation forests.
This is one reason that paying money to plant trees is not always the simple option it appears. Many carbon offsetting options in Australia are based on tree planting. In some cases tree planting projects lead to a mono-culture that reduces bio-diversity. Also, when a tree dies, perhaps because of fire or through land-clearing, then the carbon it has stored is released back into the atmosphere.
Interestingly in 1990, the baseline year for calculating emission targets under the Kyoto Protocol, land clearing was responsible for an incredibly high 24.5% of Australia’s overall emissions (Terms and Impacts of the Kyoto Protocol). Thus we have the infamous ‘Australia Clause’ in the Kytoto Protocol giving credit for reducing land clearing and the reason we have been meeting our recent Kyoto targets.
BP has been telling us about climate change for some time and saying that talk stopped long ago. They have now started a new billboard campaign to tell us that they have helped offset Australian greenhouse gasses by two million tonnes. But what does it mean to offset emissions? Is two million tonnes of carbon offsets a lot? How does the average person evaluate a claim a like this?
Carbon offsets
A carbon offset is an investment in a project that reduces greenhouse gas emissions (e.g. an energy efficiency project) or sequesters carbon in the ground (e.g. reforestation).
Offsetting projects are assessed following the protocols established under the Greenhouse Gas Protocol Initiative. They can then be accredited under a variety of national and International schemes. For example, in Australia they can be reported and certified under the the Australian Government’s Greenhouse Friendly program, as BP has done.
Sometimes carbon offsets are referred to as carbon credits (credit for offsetting 1 tonne of greenhouse gasses). A carbon credit in the context of voluntary offsetting is not the same thing as a credit under an emissions trading scheme and the two are not exchangeable. We’ll talk more about Australia’s planned emission trading scheme (or carbon pollution reduction scheme as the government has started calling it) in a later post.
BP conducts a range offsetting projects under their Global Choice Brand. In Australia this primarily means offsetting the emissions associated with their staff vehicles.
Taking cars off the road
How much of current sea levels will be preserved by offsetting two million tonnes; how many endangered species will avoid extinction; how many violent storms will be stopped?
The Australian government publishes information on the impacts of climate change. However we can’t really relate individual offsetting back to these kinds of real-world impacts.
To help people evaluate the the benefit of offsetting two million tonnes BP have related their offsetting back to cars. They say:
Seven years after launch, our BP Global Choice™ programme had made a reduction in greenhouse gas equivalent to taking over 400,000 cars off the road.
This is an analogy, BP haven’t necessarily taken any cars off the road. Instead they have invested in projects that have offset an amount of emissions equivalent to the emissions produced by a certain amount of car travel.
An average car traveling 25,000Km in a year will produce about five tonnes of greenhouse gasses. This gives us the figure of 400,000 cars (two million divided by five). Having done this calculation we do need to modify BP’s claim a little: “Seven years after launch, our BP Global Choice programme had made a reduction in greenhouse gas equivalent to taking over 400,000 cars off the road [for one year, or 60,000 cars a year for seven years].”
While the concept of a car is more concrete than a tonne of carbon emissions it is still difficult to evaluate a number like 400,000 without some perspective. According to Australian Bureau of Statistics there are about 14 million registered cars and light passenger vehicles in Australia.
Australia’s overall emissions
Another way to assess two million tonnes of offsetting is to put it in the context of Australia’s overall emissions. In the Kyoto Period of 2008 to 2012, Australia’s emissions are forecast to be about 600 million tonnes per year.
That’s about 70,000 tonnes an hour. So two million tonnes of offsetting is equivalent to about 28 hours of Australia’s overall emissions.
Another comparison is with Australia’s per capita emissions, which is about 28 tonnes per person per year. Based on this figure two million tonnes of offsetting is equivalent to the emissions for 70,000 people for a year: somewhere between the population of Bunbury and Ballarat.
The cost of offsetting
Finally we might assess an offsetting initiative in cost terms. Depending on the cost of the offsetting project and the quality of the outcome and the accreditation, offsets typically cost between AU$10 and AU$30 per tonne.
On this basis offsetting two million tonnes might cost between AU$200M and AU$600M: now that’s definitely a big number.
