Jeff Bezos is finally ending secrecy over Amazon's role in carbon emissions

Key Points
  • Amazon will finally disclose its carbon footprint this year, a move the online giant has previously resisted.
  • Amazon recently announced its Shipment Zero goal under which the company aims to have 50 percent of all deliveries reach net zero carbon emissions by 2030.
  • Companies including FedEx, DHL and UPS have reported to the CDP, an environmental nonprofit that releases climate performance grades.
  • Amazon won't report through the CDP, which in the past has given Amazon an F for non-participation.
An Amazon Air plane is parked at Ontario International Airport on February 4, 2019.
Katie Schoolov

Amazon can be relentless in pursuit of its goals — making two-day shipping possible anywhere in the U.S. and building its own fleet of cargo planes are good examples. But when it comes to one of society's biggest challenges, dealing with climate change, the online giant has not been seen as a corporate leader. That is beginning to change.

Amazon recently announced its Shipment Zero goal, under which the company aims to have 50 percent of all deliveries reach net zero carbon emissions by 2030. Amazon also is finally tracking its carbon footprint and for the first time will release a carbon report this year. It's a type of climate change disclosure that has become more common among major corporations but which the Jeff Bezos-led company has long resisted.

"Amazon has not been a leader when it comes to disclosing its carbon footprint," said Sue Reid, vice president of climate and energy for Ceres, a nonprofit that advocates investors and companies to tackle sustainability issues like climate change.

True to form, Amazon is going its own way with the climate report. Rather than releasing its findings to the CDP, formerly known as the Carbon Disclosure Project — an organization that collects data from major companies every year and compiles it into what the nonprofit claims to be the most comprehensive collection of self-reported environmental information — Amazon is developing its own approach to tracking and reporting carbon emissions.

Amazon would not disclose how it plans to achieve net zero status or report its carbon emissions beyond its blog post.

When one of the largest companies is saying the issue is real and human activity causes it and here is what we will do, it is exceedingly important and they deserve credit.
Tim Smith
director of environmental, social and governance shareowner engagement at Walden Asset Management

Reid is willing to give Amazon the benefit of the doubt. "The disclosure element, the commitment of the company to disclose later this year what it says has taken a couple of years' worth of data to get its arms around, is a huge piece of the equation of what investors are looking for to show that companies are taking climate change seriously."

So are other investors, who have been pressuring corporations for years.

Tim Smith, director of environmental, social and governance shareowner engagement at Walden Asset Management, said CDP is an important tool that investors use, but it isn't the only part of the litmus test. "The most important is huge companies, whether Walmart or Amazon, saying they are committed to moving in this direction. ... When one of the largest companies is saying the issue is real and human activity causes it and here is what we will do, it is exceedingly important and they deserve credit," Smith said.

Reid said Ceres will be keeping a close eye on Amazon's in-house methodology for calculating greenhouse gas emissions and how comparable it is to organizations like the CDP. "It's really important it be transparent with how they've done their math and comparable to other disclosures so investors can look at how Amazon compares to the other companies in their portfolio," she said.

Where Amazon has received an F

Other experts are concerned Amazon's self-reported carbon emission report won't measure up.

"If you are doing such a fantastic job, you would join something like the CDP, which is a verified, structured system that allows us to understand what you're doing and to benchmark your performance against your peers," said Aseem Prakash, director of the Center for Environmental Politics at the University of Washington.

Last year slightly over 7,000 companies disclosed their carbon footprints with the CDP. When combined, the reporting companies represented over 50 percent of the total global market capitalization, according to the CDP website.

UPS received an A from the CDP in 2018; DHL received an A-; FedEx received a B. Since 2010 the only grade from the CDP that Amazon has received is an F — for non-participation.

Prakash said Amazon has yet to disclose its carbon footprint because there has been a lack of pressure, from both customers and investors, for the company to do so. "The single most important issue is return on investment," Prakash said. That is changing as Amazon faces pressure not just from investors but its own employees.

Last year, 16 Amazon employees who owned stock in the company filed a shareholder resolution requesting Amazon's Board of Directors prepare a public report describing how the company is planning for disruptions posed by climate change, and how they plan to reduce the company's fossil fuel dependence. The resolution was pointed: "Amazon is both affected by and contributing to climate change," the report stated.

"I think we have to add pressure, we have to encourage them, and it can be positive," Prakash said of Amazon's recent steps in the right direction. "You have to have a situation where no deed goes unpunished, good or bad."

What Amazon is already doing

Reporting carbon emissions is a good first step, but proactively changing a business to be carbon-neutral is a far larger challenge.

Amazon has invested in a massive wind farm in Texas, solar farms in four other states, and launched a frustration-free packaging program last year aimed at eliminating waste through the supply chain. But experts have long shown concern about Amazon's secrecy surrounding carbon emissions, and even as it begins to more directly deal with climate issues, skepticism remains.

But a recent Greenpeace report contended Amazon Web Services — among other technology companies with data center businesses that are energy-intensive and growing rapidly with the boom in cloud computing — has been opaque when it comes to publicly reporting its current energy use and how fast it's growing, although the company has committed to operating its global infrastructure at 100 percent renewable energy.

"Companies have improved their climate accounting in recent years, but there remains a high level of uncertainty, particularly in supply chains," said Suzanne Greene, who manages the Sustainable Supply Chains program at the MIT Center for Transportation and Logistics. "When you have highly uncertain numbers, it's difficult to make sustainable business decisions, such as choosing a greener carrier, or to know if you're reaching your climate goals."

Still, she provided some measured support. "We've been waiting for Amazon to join the sustainability movement, so it's great news to have them make an announcement like this, even if it's unclear if they've used the industry standard to set their target" Greene said.

Amazon's Shipment Zero comes after major logistics companies already set plans to reduce carbon emissions.

UPS has the goal of sourcing 40 percent of its ground fuel from low-carbon or alternative fuels and to achieve a 12 percent reduction in absolute greenhouse gas emissions across its global ground operations by 2025. DHL is expanding its fleet of electric vehicle delivery vans, which will use electricity or natural gas and clean diesel as an effort to reach its long-term goal of reducing logistics-related emissions to net zero by 2050.

What it means to be net-zero carbon delivery

To be totally net zero carbon, or carbon neutral, means a company would remove or reduce the same amount of greenhouse gas it is estimated to produce. The Amazon Shipment Zero goal of making 50 percent of its shipments to customers net-zero carbon by 2030 is possible because of improvements in electric vehicles, aviation biofuels, reusable packaging, and renewable energy, the company said in a blog post making the announcement. It declined to provide further comment.

Greene said it's unclear if delivery to customers is the only part of their operations and supply chain that will be included in the reduction target. Amazon already uses hydrogen-fuel forklifts in warehouses and when it comes to small vehicles and vans, Greene agrees the industry has seen improvements delivering packages to customers. It's the long-distance portion of the supply chain, which uses big semi-trucks running on diesel rather than electric or other cleaner solutions, that still needs improving.

Amazon recently led a $700 million investment round in the electric truck start-up Rivian as the company looks to change its delivery methods, and some industry experts have speculated that Amazon could use Rivian's trucks for its global logistics needs.

"Green technologies do exist, but even when they are ready to go, think about how long it will take to adopt these solutions at a greater scale," Greene said. "There are millions and millions of trucks on the planet, and electric vehicles and trucks are going to be crazy expensive, plus there's the question of where you charge them. Long-distance transport is far from ready."

A prevalent method companies undertake toward reducing carbon emissions is through carbon offsetting, which requires calculating a company's greenhouse gas emissions and spending money elsewhere to reduce them, such as methane captures from landfills, tree planting, and investing in solar and wind farms.

Greene argues there are currently no carbon offsetting projects that are specifically related to reducing emissions in the transportation sector, and it's even more important that the methodology Amazon uses to calculate that figure aligns with others in their industry. Since Amazon subcontracts companies like UPS, FedEx and DHL to deliver its packages, transparency on carbon emissions down the supply chain is critical, Greene said.

Initiatives like the Global Logistics Emissions Council Framework and the Science-Based Targets initiative are two sources helping companies develop common reporting methods, Greene added.

Company valuation based on climate change

Americans' belief in climate change has been rising, with 71 percent of Americans saying that global warming is happening, and 50 percent saying they will be personally harmed by the effects of global warming, according to the Yale Program on Climate Change Communication.

Reid said Amazon's commitment to disclose its carbon footprint is a huge piece of the equation for investors with whom Ceres works on factoring climate change into the valuation of a company.

Ceres is also a founding partner organization of Climate Action 100+, which is an investor initiative started in 2017 to hold some of the largest greenhouse gas emitting companies accountable by improving governance, curbing emissions and strengthening climate-related financial disclosures. The initiative is comprised of more than 320 investors who hold $33 trillion in assets under management, and 100 of the largest corporate emitters they target account for two-thirds of annual global industrial emissions. Walden Asset Management also is a member.

"The elements related to customers and employees are really key here," Reid said. "Investors are super attuned to the reputational element of climate leadership. That builds value, it builds loyalty with employees who want to see their company take climate change seriously."

Walden's Smith said that Amazon has historically been "more insular" than other companies and taken a position that they seem to think they "don't need to talk to investors" but they face as many if not more shareholder resolutions than any other company this year and they are responding. "They've made the commitment to measure it and manage it, and I am quite confident," but he added, "The challenge for them will be how to do it."

Google may have the same issue as Amazon when it comes to increasing build-outs of data centers that are energy hogs, but investing in wind and solar farms to power these operations is easier than figuring out a carbon solution for a global logistics operation.

"They don't want to make pledge they can't honor," Smith said. "For investors, while disclosure is very important, disclosure requests have become much more pointed and specific. Investors are much more likely to be asking for the specific steps to change rather than just disclosing [a carbon footprint]. If [Amazon] is moving on the issue and really being proactive, they really need to not only be actively looking at the data themselves but asking, 'what are we going to do and what are our public goals?'"

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