While U.S. companies are gearing up to track and measure their carbon footprint in preparation for forthcoming regulations, experts in the field say the real benefits will come when enterprise carbon management becomes a continuous and integrated business process, not a one-off task for compliance.
Until CEOs take ownership of carbon management as a business transformation challenge, not a corporate responsibility issue, companies will fail to achieve absolute reductions in CO2 emissions, according to a recent report by U.K.-based independent research company Verdantix. The report, “Best Practices for Carbon Management,” pinpointed incomplete and erroneous energy data, unachievable CO2 reduction goals, and insufficient budgets and staff as the primary culprits derailing the success of carbon management initiatives.
In turn, enterprise carbon management isn’t yet an integrated business practice, according to another study by Verdantix. Based on interviews with 16 sustainability executives at firms with annual revenues of $2 billion, Verdantix found that 50% of participants collected their energy and carbon data only annually -- or not at all. The infrequency of carbon data collection and the fact that it’s typically done in isolation as a one-off reporting practice makes it difficult -- if not impossible -- for companies to hit emission reduction targets or achieve any substantial cost savings related to identifying inefficient energy-consuming assets, the report said.
“Data collection is not something companies should be doing once a year,” said Peter Graf, chief sustainability officer for SAP AG. “You’re really looking for continuous improvement … so to get the savings, you have to collect data all the time.”
Carbon management has to be an integrated and ongoing process in order to ensure that the data collected around emissions is actionable, not lying around dormant in some static report. “The real use of establishing a carbon footprint is taking the data and doing something with it in terms of developing opportunities for savings and cost reduction,” said Phil Tesler, CEO at Enablon, which sells an enterprise carbon management software solution as part of a suite of governance, risk and compliance software. Using traditional, manual systems like a SharePoint database or an Excel spreadsheet to track carbon emissions limits the collection process to once, maybe twice annually because of the effort involved, Tesler said. “When you’re looking back at the end of the year, it’s too late -- you can’t do anything about what you found,” he explained. “You have to make it easy to collect the data and track it every day or every month so you can see trends. Then you need to put a plan in place to remediate.”
SAP’s stake in sustainability software
SAP has been out in front on taking a business approach to sustainability, attacking carbon management and other areas as strategic processes, not just reporting efforts driven by compliance. Led by Graf, SAP conducted its first carbon footprint analysis in 2007, at the time employing mostly manual processes on paper or with Excel spreadsheets and going through the exercise just once annually to create a baseline, Graf said. “It was a nervous time for me -- one of the two people working on it walked away, and what they had in their head was much more important than what we had in any spreadsheet,” he said. “We had no way of capturing processes or repeating processes.”
Now in its third year of sustainability reporting, SAP is releasing performance metrics on a quarterly basis, thanks in a large part to the use of its own software to help automate the data-collection process. Specifically, the company is using SAP Carbon Impact to calculate its carbon footprint, and Graf said tight integration with other SAP enterprise systems lets the firm harvest operational data and feed it directly to Carbon Impact for analysis. With the data collection process automated, SAP is able to continuously refine and improve its carbon emissions targets and show the various business units and lines of business where they stand relative to carbon output via a series of dashboards and KPIs (key performance indicators).
“We get early warning signs when we’re not hitting our savings targets, and then we have the ability to work to correct them,” Graf explained. “We can slice and dice our carbon footprint in any dimension we want so … we can compare anything and everything.” SAP’s concerted effort is paying off: In 2009, the firm reduced its overall carbon footprint by 15%, well ahead of its targeted goal of 5% and generating a bottom-line savings of 90 million euros. Graf said that SAP’s long-term commitment is to lower its total carbon emissions by 2020 to where they were in 2000, representing an overall reduction of 50% compared with its peak year of carbon emissions in 2007.
Companies would be well served to take a page from SAP’s carbon management practices. In its recommended best practices for enterprise carbon management, Verdantix advocates appointing a chief sustainability officer, as SAP has done, along with a small program management office to quantify risk, coordinate initiatives and engage stakeholders. Having this kind of top-heavy executive support helps provide the governance that can deliver transformational change.
Verdantix also recommends creating cross-functional process changes across energy, operations and finance groups; implementing integrated carbon management systems to get accurate, timely and complete data; and creating a 2020 strategy to deliver realistic and tangible results.
“Absolute reductions in CO2 emissions require transformational change across governance, strategic thinking and process redesign,” said Verdantix director David Metcalfe, in a prepared statement commenting on the firm’s findings. “Time is running out for CEOs to act before the jaws of GHG [greenhouse gas] compliance regimes and competitive pressures on sustainability close in around them.”