Step Change

In the low-lying coastal region of England's East Anglia, climate change is already afoot. At Anglian Water, the £919m (€1.2 billion) utility that serves the region, more than 85% of the incidents that its wastewater emergency team was called on to address in the last fiscal year were weather-related, "far more than in previous years," the company reports. Should the trend continue — and the company fears it will — rising sea levels could eventually submerge many of Anglian Water's treatment works.

But the company reckons it can start taking steps now to prevent the worst effects of global-warming, according to Nirmal Kotecha, Anglian Water's head of supply chain management. "Doing nothing is not an option."

To this end, Anglian Water has pledged to reduce its carbon footprint — the shorthand term for a company's annual greenhouse gas emissions — by 50% by 2035, reversing the trend that saw its CO₂ emissions double over the past 15 years. It's also looking externally to address the problem. Kotecha met with the company's 50 largest suppliers in January "to challenge them to work with us to reduce our collective footprint." By the end of the next fiscal year, in March 2009, its suppliers will need to report both the size of their carbon footprint and the measures they are taking to adapt to climate change if they want to continue doing business with the utility.

Walk the Talk
While it seems as if just about every company is doing something to tackle climate change these days, by addressing its entire supply chain Anglian Water is doing more than most.

Of course, utilities, oil companies and other energy-intensive firms have more experience measuring and managing emissions than banks, retailers and other companies that only recently started to publicise their carbon footprints. In the EU, large emitters have reported detailed CO₂ data since at least 2005, when the union's emissions-trading scheme began. Expanding this exercise to include all of a company's direct emissions of greenhouse gases is "relatively straightforward," says Kotecha, "though it's not always easy to get all the numbers."

On the other hand, companies new to footprint measurement are not so confident. Craig Simmons, co-founder of Best Foot Forward, an Oxford-based consultancy that runs measurement training courses, says he's seeing "very little practical experience" at the companies he's been working with.

Despite this lack of experience, the number of companies reporting the size of their carbon footprints, regardless of industry, is growing fast. Last year, more than three-quarters of the world's 500 largest listed companies participated in the Carbon Disclosure Project, an annual emissions questionnaire sent out on behalf of more than 300 investment houses, up from less than half in 2003. (See "Sizing Up" at the end of the article.) Many companies are attracted to the PR benefits of disclosing this information voluntarily, though others cite the exercise as good preparation for the eventual expansion of emissions-reduction regulation at national and EU levels.

More generally, investors and analysts increasingly view carbon as a "proxy for the efficiency of processes," says Jochen Gassner, a director at 3C Consulting in Frankfurt. "That justifies a more strategic look at it."

Whatever the motivation, measuring a company's carbon footprint remains an inexact science. "You can drive a bus through many of the numbers that are reported," says Richard Sharman, lead partner in the carbon advisory group at KPMG in London. "Many companies, at best, try to measure their footprints too quickly and, at worst, use very poor data."

Because the exercise is largely voluntary, a host of competing standards and protocols for drawing up greenhouse-gas inventories makes the differences between IFRS and US GAAP seem quaint by comparison. From measurement methodologies such as the GHG Protocol to ISO 14064, "the term 'standard' is used very loosely," according to Michael Gillenwater, executive director of Greenhouse Gas Experts Network, a Washington, DC-based non-profit membership organisation. "Most of what's out there now — what people call standards or protocols — are either vague or non-prescriptive, or both." That said, the Carbon Disclosure Project advises respondents to use the GHG Protocol, giving it the most traction for businesses today.

Scope Creep
Despite the difficulty that firms have measuring their own carbon footprints, there is a growing consensus that emissions from any single company reveal only part of the story. When considering the overall carbon impact of a company, "direct emissions are often utterly trivial," asserts David Symons, director of corporate services at consultancy WSP Environmental in London.

Consider UK-based consumer goods group Reckitt Benckiser. In November, it announced an initiative to cut its "total" carbon footprint, including its upstream supply chain and the lifecycle emissions of its products. But the company reckons that its collective carbon footprint was 15m tonnes of CO₂ in 2006, with the direct emissions from Reckitt Benckiser's own manufacturing processes accounting for less than 5% of the total.

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