Carbon Strategy by Department
by Danny McGee
From an Offset Strategy to a Carbon Strategy
To be at the forefront of climate and sustainability work is to envision an entire economic system that does not exist. Currently, CEOs are tasked with continual growth, keeping the lights on, and avoiding risks that upset operations. There isn't much room for envisioning or influencing an entire system, so sustainability solutions have traditionally been incremental and limited to existing frameworks.
Cue offsets. For 20+ years, companies have been relying on offsets to tell their sustainability story. Even five years ago, companies at the forefront of sustainability offset their carbon footprint by paying to save trees from deforestation (Google was the first company to offset 100% of their footprint in 2007). But this is quickly becoming old news. The recent rush of corporate climate goals and a rise in educated consumers has pushed companies to move from doing less harm to thinking about restorative and regenerative approaches to business.
Offsets were always an imperfect solution, but at least an accessible solution. It showed that companies could monetize their sustainability story, but they do not in and of themselves make a company's operations or products more sustainable.
If the desire is there, how do you transition to a more regenerative business model? Most of our clients are manufacturers, so I have been thinking about this through the lens of processes and products, which are interdependent; processes drive products, and products drive processes. Can we design products void of hazardous materials and incorporate reused or recycled content (product) without a system supply chain traceability (process)? Can you provide a leasing model instead of an ownership model (product) without understanding how your marketing can impact behavior change (process)?
We need this level of innovation in every sector, yet we are stuck in a holding pattern. We are waiting for product innovation to drive process innovation or process innovation to drive product innovation. The two most costly approaches to innovation are doing nothing or putting all the eggs in one basket. This is a systems-level problem that requires a systems-level approach if we aspire for net positive impact).
Benefits accrue from stacked interconnected solutions that grow and mature together. The transition will require faith that small incremental changes throughout the company are good, impactful, useful, and building toward a larger goal. So let's consider where we might start within different spaces of a business.
Breaking it Down by Department
Compliance and Risk
Sustainability efforts often grow out of environmental compliance. What was once a reactionary approach to regulations has become a proactive effort to stabilize costs and expectations by avoiding risk. But what tools are available to the compliance department? What existing operations can we leverage to invest in innovation?
This is where precisely where low-cost engineering solutions can be implemented. LED lightbulbs, on-site solar, regular energy audits, and management systems are proven methods for reducing your carbon footprint, your energy bills, and the risk associated with unexpected costs. These types of solutions fall squarely into the ethos of compliance by minimizing unexpected costs and negative stories.
In some cases, companies are operating in a carbon compliance market. Certified RECs and offsets become essential in this scenario, but also mean their sustainability story is limited. You can't tout being at the cutting edge if you are only meeting the law.
Marketing
If you are in marketing, you are telling your company's story. There's a place for offsets within the marketing story, but I don't suggest they take centerstage. Offsets were designed to help show a commitment to the environment, but they increasingly present more marketing risk than opportunity. What happens when your whole story rests on the backs of forestry projects that (quite literally) go up in smoke?
Marketing departments should diversify their approach to add depth to the sustainability story. You can show commitment through transparency and depth of knowledge. If you are using offsets, invest in projects that have direct meaning to your company and use them to raise awareness on the issues you and your stakeholders care about. Purchase high-quality offsets from reputable sources and ask for help to understand the full risks. Despite being an imperfect product, they are still a valuable tool in the toolbelt.
In some cases, grants can tell an even stronger story than offsets. A strong granting program that is rooted in company values and engages stakeholders is a low-risk approach to telling a profound story around carbon.
Operations
The operations department presents potentially the most significant opportunity for innovation. You can electrify your fleet, swap out refrigerants, separate your waste streams, or change your cooling tower into a system for direct air capture. The challenge is how to do that without risking significant disruption, so it is important to carve out a space for incremental and transitional innovation. Incremental innovation is central to management systems like ISO and Six Sigma, which naturally decrease variability and focus on gradual change.
There needs to be an intentional space for transitional, blue sky, serendipitous innovation not being driven by new products. Devote budget, floor space, and personnel to challenge the existing paradigms and provide a feedback mechanism to the design and engineering team.
Operational innovation doesn't exist only within the walls of your factory; it can be in partnership with your supply chain. Look at internalizing the various externalities throughout the supply chain to have control and realize the actual value of any opportunities. Create a biodigester for food waste or biochar pyrolysis for wood waste to capture carbon within the supply chain. You can then sell or own the associated offsets as part of your carbon strategy.
Product Innovation
According to the EPA, 70-80% of the environmental impacts are locked in during the design phase. When Foresight works with companies to improve their sustainability stories, we often start with the design process. Are you considering the environment early in the process, or are you checking a box after the initial design is set in stone? There are excellent resources for reimagining the design process, but we typically point to the Living Product Challenge for inspiration and benchmarking. By incorporating some of the core elements and constraints of the Living Product Challenge into the design process, you can set a clear north star for regenerative design. Along the way, you'll discover environmental wins that can be highlighted by product certifications like Cradle to Cradle, Health Product Declaration, Life Cycle Analysis, EcoLabel, etc.
Financial and Accounting
Even the accounting department can play a role in facilitating innovation. An internal price on carbon can help to shift decision-making throughout the company. Depending on its implementation, it can even move real dollars to areas of innovation in other elements described above.
It Starts with Leadership
My goal in breaking sustainability into departmental strategies is to spark creativity and ownership through a company. But, ultimately, lasting change comes from above. Leadership that invests in an all-of-the-above approach is going to see the most return on their sustainability story. Too often, leadership relies on only one element to drive the necessary change. Your marketing team or your engineering team cannot, and should not, be doing this work alone. Building a more sustainable future will require companies to create holistic plans that involve every department, starting with solid advocacy from above.
Doing sustainability work, I often think of the serenity prayer: Grant me the serenity to accept the things I cannot change, courage to change the things I can, and wisdom to know the difference.