Guest Commentary: Preparing Your Organization for the Impending Cost of Carbon

It’s not a matter of “if” the United States will implement a program to reward organizations for reducing emissions and penalize those that do not, but “when.” This means that U.S. companies — particularly global players — can’t afford to keep their sustainability plans on the back burner. In fact, the pressure to reduce greenhouse gas emissions is greater than ever. In 2005, Europe implemented the first large cap-and-trade program in the world under its European Union Emission Trading Scheme, while Australia’s program, the second largest, started this month as part of its Clean Energy Future package. Because of these increasing regulations, many global organizations are designing solutions or building products that adhere to the most stringent requirements. They expect their vendors and suppliers to do the same.

How do you prepare your organization to measure and manage the cost of your supply chain’s emissions? It’s not an easy process, but by taking the following steps your organization will be ready for what will soon become a requirement to compete on a global scale.

Establish a Team
Forming a specific team of employees to help your organization prepare for the cost of carbon is important. But perhaps more important is determining who has ownership over the project. This internal champion is responsible for both charting the course and identifying the team members. If you want the program to take hold, this initiative must reach down through the organization from the very top of the leadership team, ideally the CEO. Once leadership makes the commitment, it demonstrates to the rest of the organization that the effort is important.

You’ll want the team itself to be cross-functional with representatives from as many departments across the organization as possible, from finance and communications professionals to representatives from procurement, operations, manufacturing and logistics. This group is not only going to help establish the vision, but will also execute the strategies and programs at a more tactical level. They should also have exposure to or experience with the standards of the World Resource Institute’s (WRI’s) Greenhouse Gas (GHG) Protocol, the Global Reporting Initiative (GRI) and the Carbon Disclosure Project (CDP). Without an investment in the resources to focus, drive and help align these efforts, it’s very difficult to build a foundation and set a vision. For additional guidance, there are consultants that can help define, direct, develop the team and lead the conversation.

Determine Risks and Opportunities
As with any new undertaking, it’s important to conduct research to gain a clear understanding of your risks and opportunities. Do you know your stakeholders’ (stockholders, customers, employees, regulatory agencies, NGOs, etc.) concerns, questions, wants and expectations regarding your company’s environmental performance? If not, this is where your newly appointed team should focus its efforts.

This in-depth research process also requires identifying your stakeholders and their concerns. If you’re a paper company, for example, environmental groups like the Sierra Club are going to be very interested in your actions. Again, external consultants are available to help with benchmarking exercises, gathering quantitative and qualitative data about competitors, customers, and even governmental and educational institutions. As important as determining your risk is researching the opportunities that exist to capture a return on your organization’s investment. For example, if you’re an appliance company, more than 80 percent of customers are looking for energy and water efficiency, but only 10 percent may be willing to pay a price premium. Alternatively, your sustainability program may open new market potential that was previously unknown.

If you don’t conduct this due diligence, your organization will be susceptible to rework and general inefficiency in terms of laying the groundwork necessary to understand the impact of a cap-and-trade bill and how to lessen carbon dependency moving forward.

Establish a Vision
The GRI, GHG Protocol and CDP provide the framework around which to build your program. It’s critical for the team in place to leverage all of the background research and information against these standards to establish the project’s vision and roadmap. Digesting the information from these guidelines will help you ensure that the metrics and key performance indicators you’re trying to capture also line up with these standards. The vision should be:

• Integrated – Utilize the existing foundation and structure of the organization, such as core values and corporate culture, and then innovate, strengthen and expand from there to showcase the environmental aspect. Preparing for the cost of carbon should not be an activity that is divergent or separate from the policies, goals and overall vision of the company.

• Aspirational – Set a lofty target. Maybe the goal isn’t entirely attainable, but it sets the tone for the overall initiative. It’s a touchstone for all to reach toward and drives the right thought processes and behavior to “get there.”

• Follow a roadmap – It’s impossible to reach your goals if there isn’t a clear path. What do you want to accomplish in the first year? By the fifth year? Which geographies will you focus on initially? Which specific sustainability projects do you want to tackle and in what order? Your roadmap will be defined by the material risks and opportunities you’ve identified, alignment with the various standards, the voice of the customer and your market research.

Establishing a baseline and being flexible enough to change course along the way as you collect data and measure progress is critical. With a solid process, backed by strong communications, transparency, education and a collaborative environment, these preliminary steps will help your organization be at the ready when cap-and-trade legislation re-emerges in the United States. The clock is ticking and now is the time to be prepared.

Ashton Shaw, sustainability engineer for Menlo Worldwide Logistics, designed and is currently implementing Menlo’s sustainability program and related service offerings. Shaw joined the company in 2008 and continues to further Menlo’s sustainability program and meet the growing expectations of the company’s larger supply chain customers.