The carbon opportunity

The greening of the corporate world is a well publicised phenomenon, driven by the contemporary cultural shift towards healthy living, environmental consciousness and the ambiguous concept of sustainability.

This green culture has spawned a corresponding green marketing drive, whereby businesses design products and services to connect with ecologically-minded consumers. Greenwashing is the label used to designate companies that spend more on marketing their green policies than on the programmes themselves.

A growing number of boardrooms see in environmental sustainability not only good business karma but green profits as well. And it is not just the eco-friendly branded businesses that are targeting green consumers. Increasingly, the ‘dirty’ industries are working hard to reposition themselves as environmentally conscious.

Take US auto-giant General Motors – once notable for shunning fuel efficient cars – which has announced it will be offering a range of hybrid cars in 2008, grabbing headlines around the world in the process. BP, the world’s second largest publicly traded oil company, is promising to create the biggest alternative energy company on the planet. And in September, British low-cost airline, Easyjet, called on the UK government to scrap airport taxes on passengers and replace them with taxes on aircraft, that would penalise the heaviest polluters. The motives behind such moves remain fiercely debated.

Much of this greening may be driven by a belief that businesses will be affected by policies, made in the name of climate change, long before they are affected by climate change itself. The prospect of governments imposing carbon taxes looms large these days. The EU has introduced over 200 pieces of eco-legislation. These impose greater burdens on some companies than others.

At a time when the issue of climate change is rarely out of the press, some businesses – mostly in the UK – are seizing the opportunity to capitalise on consumers’ growing concern about climate change by developing carbon emission labels. The idea is to empower consumers with the emissions information, thereby letting the customer decide which product is best, from an environmental perspective.

Paul Dickinson, chief executive of the Carbon Disclosure Project, a New York based independent organisation, believes there is a clear opportunity for companies that get in early: ‘Increasingly, investors view good carbon management as a sign of good corporate management.’ he says. Commenting on the shift to a sustainability paradigm, he adds: ‘This is the thin end of a very long wedge.’

“Organisations need to consider all sides of sustainability

The benefits of carbon labelling schemes include demonstrating business responsibility through a commitment to reducing carbon emissions, improved reputation, increased visibility into production processes and, ultimately, better margins.

There is some confusion, however, over consumer comprehension of the labels. According to research conducted by advocates of the scheme, 66% of consumers say they want to know the carbon footprint of the products they buy. But some marketing specialists suggest that carbon emissions may be too abstract a concept to resonate with all but a small fraction of committed environmentalists. Other research shows that consumers find the plethora of environmental, ecological and fair-trade product labels confusing.

One major concern levelled against the carbon measuring methodology – which at this stage is experimental – is the difficulty of calculating the total emissions generated by a product throughout its entire lifecycle. From farm to fork, a cow produces large quantities of the greenhouse gas methane, yet it is also used to produce both milk and meat. The challenge is to accurately attribute the greenhouse emissions to the quantity of meat or milk produced. Today’s complex supply chains make it even more difficult to accurately assess a product’s total carbon footprint to include the total emissions generated during production, transportation and use.

For the most part, carbon labelling projects have grown out of the Greenhouse Gas Protocol, a decade long partnership between the World Resources Institute and the World Business Council for Sustainable Development to generate a corporate standard to quantify and report the six greenhouse gases covered by the Kyoto Protocol.

In the UK, the government-backed Carbon Trust launched its carbon reduction label in March this year. The experimental methodology was designed to measure the level of embodied carbon in a range of products. In the initial stages of the scheme’s development, a number of brands agreed to trial the label and methodology.

The first products to appear on shelves with the new logo were Walkers Cheese and Onion crisps. To qualify for the label, Walker’s made a commitment to cut carbon emissions within two years, reducing energy use per pack by around three per cent year-on-year and water use per pack by around five per cent year-on-year.

In Walkers’ own research into consumer understanding and perceptions of the carbon reduction logo, findings suggested that consumers welcomed the label and believed it would help them make a difference. A third of environmentally concerned customers said that the label ‘allows people to make a modest contribution towards tackling climate change’, and a quarter said that ‘it is a positive move and more companies should do it.’

“The 'dirty' industries are working hard to reposition themselves as environmentally conscious

When UK health and beauty group, Boots, conducted a survey of its loyalty card users, 65 % of respondents said carbon labelling would make them more inclined to buy a product.

Following on from this, in the summer of 2006, Boots joined forces with the Carbon Trust on a project to measure the carbon footprint of a typical product – shampoo. The project considered the complete product lifecycle, from raw materials through production and retailing to use of the product at home and disposal.

Andrew Jenkins, sustainable development manager, Boots, comments: ‘The carbon hotspots were not in the areas we were expecting. The results showed by far the greatest portion of the shampoo carbon footprint was within the consumer use phase. Excluding this phase, 58% of the shampoo product’s carbon footprint was generated by packaging.’

Point of sale material was introduced to provide consumers with advice on reducing personal carbon footprints. Jenkins notes: ‘On the point of sale material we have been putting out advice to consumers to reduce the temperature of the water they use to wash their hair.’

He adds: ‘We make the majority of Boots branded products ourselves, so we are able to influence the internal supply chain. And we were able to realise cost savings at the same time by using recycled plastics.’ According to the group, the incorporation of 30% post-consumer recycled polymer in the bottles reduced their overall carbon footprint by 10 %.

Another benefit of the scheme was to replace corrugated transit packaging with reusable plastic containers. ‘The products are now delivered using a ‘singles to store’ system, reducing stockholding levels,’ says Jenkins.

The project also meant that when the Carbon Trust launched its labelling, Boots was in a good position to trial the scheme. Jenkins also welcomes the positive media attention.

“A common standard would create a level playing field

As a business, Innocent – makers of fruit smoothie drinks – has positioned itself as a healthy, environmentally and socially conscious drinks manufacturer. It operates a variety of sustainability programmes including donating profits to NGOs and tree planting. It is unsurprising then that it joined Boots and Walkers in the initial stages of the carbon labelling project. Innocent found, to their surprise, the dirtiest part of smoothie making turned out to be the individual size plastic bottles made from petroleum products.

Nick Monger-Godfrey, head of corporate responsibility at British retailer John Lewis and member of the British Standards Institute steering group, which is developing the draft product carbon footprinting standard with the Carbon Trust, argues organisations need to consider all sides of sustainability: ‘We can’t look at carbon content in isolation as the only way of assessing the sustainability of a product.

‘Shifting manufacturing to the developed world may be good from a carbon footprint perspective, because there are more sources of renewable energy than in the developing world. But sourcing fair-trade produce from sub-Saharan Africa, for example, could produce many other societal benefits for the region,’ he says.

Overall supportive of the standardised technology to measure embedded carbon in consumer products, Monger-Godfrey believes businesses need to consider all the complexities and whether or not labels are the most effective way of communicating the information. ‘If we are to move to a low carbon economy it is critical that we understand which products are carbon intensive. But we need to look at how that information is presented.

‘I’m hesitant over whether or not consumers want to know the carbon content of their products. Will they use it as a mechanism of consumer choice?’ he asks. ‘I think much more consumer research needs to be done.’

Monger-Godfrey acknowledges the success in identifying a method of measuring embodied carbon and effectively labelling consumer products, but, he adds: ‘The current carbon measurement methodology is extremely resource expensive and there are considerable challenges to overcome in order to extend it to all the consumer products across the marketplace’ Boots revealed that it cost £40,000 and took two months to work out the carbon footprint of a single product.

Work is currently under way to refine the methods used to calculate carbon footprints so that a greater number of products can be measured more quickly. In January, Tesco said it was planning to become the first supermarket chain in the world to assign carbon labels to each of the 70,000 products on its shelves. Terry Leahy, Tesco’s chief executive, hopes that other retailers will label their goods so that a carbon counting system becomes an accepted part of food packaging, in a similar way to nutritional information. Similarly, French supermarket chain Casino has outlined plans to introduce carbon labelling of 3,000 of its own brand products. And in September, US retail leviathan Walmart kick-started plans to measure the amount of carbon used throughout its supply chain and pressure its suppliers to reduce greenhouse gas emissions.

“I'm hesitant over whether or not consumers want to know the carbon content of their products.

Nick Monger-Godfrey, head of corporate responsibility at British retailer John Lewis

It has set a goal of one day using only renewable energy and creating no waste. Meanwhile the Carbon Trust continues to add new names to the list of companies’ trialling its standard.

Call for clearer standards

Despite these positive signs, according to a report released by the Carbon Disclosure Project, less than half of the UK’s top companies have introduced schemes to reduce greenhouse gas emissions.

The research finds that only 38% of UK FTSE 350 sample companies have implemented an emissions reduction programme with targets. Yet some 80% of the publicly-owned companies that responded to the survey saw climate change as presenting both commercial risks and opportunities.

This has prompted a coalition of environmental agencies, UK companies and politicians to write a letter to the environment secretary, Hilary Benn, and the business enterprise secretary, John Hutton, arguing for clear standards on carbon reporting.

The letter says the lack of transparency on carbon reporting ‘undermines the comparative advantage that should accrue to companies with good carbon reporting and control’. The authors believe a common standard would create a level playing field for businesses, allowing investors and consumers to make low-carbon choices and comparisons.