Rick Crawford
Net income or “the bottom line” is generally a good measure for business performance, and the two best ways to improve the bottom line is 1) to cut operating expenses, such as energy costs; and 2) increase top line growth, such as gross sales of products. In sustainable business, we measure what is called the “triple bottom line” which helps measure business performance beyond purely economic factors such as social (labor practices, community impact, etc.) bottom line and environmental (carbon footprint) bottom line. What’s most interesting is that you can improve your economic bottom line by measuring and reducing your carbon footprint. So, what’s a carbon footprint?
A company’s carbon footprint is basically the climate change impact of the business and is measured by calculating greenhouse gas emissions. As we know, man-made climate change is caused by burning fossil fuels and when fossil fuels are burned they emit greenhouse gasses which warm our planet (Yes, just like an actual greenhouse). The most common greenhouse gas are carbon dioxide (CO2), methane (CH4), nitrous oxide (N20) and fluorinated gases. Carbon dioxide is emitted from burning fossil fuels like coal that supply our electricity and oil in for our transportation. Methane is primarily released from agriculture and landfills. Nitrous Oxide is primarily released from Phish concerts (just kidding!) and refrigerants. The potency of these gases vary and is also known as global warming potential (GWP) and a company’s carbon footprint is communicated as metric tons of carbon dioxide equivalent (mtCO2e). Below is some information on understanding global warming potentials provided by the EPA:
- CO2, by definition, has a GWP of 1 regardless of the time period used, because it is the gas being used as the reference. CO2 remains in the climate system for a very long time: CO2 emissions cause increases in atmospheric concentrations of CO2 that will last thousands of years.
- Methane (CH4) is estimated to have a GWP of 28–36 over 100 years. CH4 emitted today lasts about a decade on average, which is much less time than CO2. But CH4 also absorbs much more energy than CO2. The net effect of the shorter lifetime and higher energy absorption is reflected in the GWP. The CH4 GWP also accounts for some indirect effects, such as the fact that CH4 is a precursor to ozone, and ozone is itself a GHG.
- Nitrous Oxide (N2O) has a GWP 265–298 times that of CO2 for a 100-year timescale. N2O emitted today remains in the atmosphere for more than 100 years, on average.
- Chlorofluorocarbons (CFCs), hydrofluorocarbons (HFCs), hydrochlorofluorocarbons (HCFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6) are sometimes called high-GWP gases because, for a given amount of mass, they trap substantially more heat than CO2. (The GWPs for these gases can be in the thousands or tens of thousands.)
So, when calculating a company’s carbon footprint, instead of communicating each gas, we simply communicate the results as mtCO2e which factors in all of the GHG emissions. Carbon footprints are then broken down into two main categories, which are direct emissions and indirect emissions, which are further broken down into 3 scopes and below is a simplified example of each scope:
- Scope 1 GHG emissions: direct emissions from company owned vehicles for example.
- Scope 2 GHG emissions: are indirect emissions from purchased electricity.
- Scope 3 GHG emissions: are indirect emissions from everything from your supply chain, employee commuting, business travel and purchased goods and services to name a few.
In summary, a carbon footprint is an extremely valuable key performance indicator for businesses that can result in a better economic bottom line. For example, a company can measure and reduce its carbon footprint through energy efficiency, renewable energy, etc. which will reduce its operational costs and then market that sustainability story to the growing number of conscious consumers looking to buy from brands that align with their values…if done credibly and accurately.
Want to learn more about improving your bottom line by calculating and reducing your company’s carbon footprint? CONTACT US.