With carbon cap-and-trade legislation before Congress and increasing pressure from shareholders, US companies know they’ll have to deal with their greenhouse gas emissions, or carbon footprint, and many are jumping the gun to change their carbon liability into an asset.
“The best-managed companies are evaluating their carbon footprint,” says R. Paul Herman, founder and CEO of HIP Investor Inc., a Californian investment advisory firm that has created two sustainability indexes tracking the S&P 100 and S&P 500 constituent companies. “And they’re managing it lower to save energy and costs, reduce their future volatility of materials costs, mitigate potential environmental liabilities, and create new competitive advantages.”
Getting a handle on these emissions, however, takes work.
Emissions generated in the creation of a company’s principle product or service, whether it’s a megawatt of electricity or a truckload of goods moved 100 miles, can be relatively easy to calculate. But other emissions, like those generated when your employees fly to meetings or when consumers turn on your appliances, are harder to evaluate.
And for sectors with complex supply chains and wider geographic footprints—like home builders (see chart) and retailers—this evaluation requires more thought, and probably more spreadsheets.
“Direct emissions are usually coming out of a company's smokestacks. They are easy to measure,” says Chris Erickson, CEO of carbon accounting and consulting firm Climate Earth. “The problem is that for most companies 80% of their emissions are indirect, and that means they are hidden in their supply chain, because if a company manufactures a product, the design decisions, transportation decisions and material decisions all have direct impact on emissions of the suppliers that provide parts of the product.”