Step Change

Difficult at the best of times, measuring a company's carbon footprint is about to get even more so.

As a result, most companies are “simply lost,” according to Philippe Spicher, director of Swiss research firm Centre Info. “They know they have to do something, but it’s difficult and costly.”

As one CFO involved in a long-running, much delayed footprint project confirms, it’s tough to find “common ground” with competitors on measurement issues. Until there is industry-wide agreement, companies are reluctant to be the first to report their emissions, lest a rival should use a more lax method to make itself look greener. “It’s not necessarily an impossible task,” the finance chief sighs.

To facilitate the process, “the challenge for the carbon market is to find tools that are easy to understand and implement, even if they are less accurate,” says Gassner of 3C Consulting. According to Tom Baumann, co-founder of Ottawa-based environmental consultancy ClimateCheck, a company that can measure its supply chain footprint within a 20% margin of error “is doing spectacularly.”

One Step at a Time

When Anglian Water decided to get a rough idea of its supply chain’s carbon footprint, it teamed up with a handful of fellow utilities and turned to Achilles, a supply chain management firm. “We look for systems that are relatively simple and nudge people towards reducing emissions without making value judgements,” says Colin Maund, CEO of Achilles. After commissioning research from the Saïd Business School at nearby Oxford University, the firm identified a government-sponsored scheme in New Zealand, dubbed carboNZero, as the most appropriate for its aims. “Many of the other schemes were so complicated that only the biggest companies could ever attempt to use them,” Maund notes.

Achilles will roll out the New Zealand–inspired system this year on behalf of Anglian Water and others. In addition to annual audits of the “effectiveness and honesty” of suppliers’ carbon footprint reports, the firm will benchmark best practice and vet participants’ plans for improvement. “As long as there is a management process to reduce emissions, that is about as much as we can reasonably expect at this stage,” reckons Maund.

Even so, companies shouldn’t expect investors to be satisfied for long. “It’s dangerous to rely on just what the companies publish,” says Spicher of Centre Info. He learned this recently when client Pictet asked for an assessment of the climate-change exposures of companies on the Geneva-based bank’s investment radar. Finding little reliable, comparable information on supply chain emissions reported by companies, Centre Info developed its own metric called envIMPACT.

With the help of the Swiss Federal Institute of Technology, Carnegie Mellon University and others, the tool uses macroeconomic lifecycle assessments for hundreds of sectors, processes and products to measure around 2,000 global companies in terms of “carbon intensity units,” or greenhouse-gas emissions per unit of revenue. In June, Société Générale issued a report on “European carbon winners and losers” that incorporated envIMPACT scores into its traditional financial ratings, bolstering a number of buy and sell ratings.

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