VideoAs a company that sells playground equipment to publicly funded parks and schools, Playworld Systems risks any number of nasty falls. It has to worry not only about governmental agencies that try to protect children from toxic materials but also about community groups that are increasingly using their purchasing power to push eco-friendly agendas. So the company decided that it needed a system to analyze all the carbon impacts of its business, whether produced internally or generated in source materials such as steel, plastic, and aluminum parts. The goal of the effort was to measure the reduction in carbon footprint the company could achieve by replacing carbon-intensive components such as those made from PVC (which it has, in fact, done).
With 75,000 parts needed to make its colorful playground solutions, "greening" the entire Playworld product line could have been a massive project, says Steven Malriat, the company's chief operating officer and CFO. But Malriat found what he calls a credible and "quickly achievable" solution: Climate Earth, a carbon-accounting system that calculates an enterprisewide carbon footprint from a company's internal operations and the commodities it buys from upstream suppliers. "Every dollar of material you buy equals a certain amount of carbon emissions," Malriat says. "It's like having a second set of books."
Carbon emissions loom as an accounting issue not only for companies that deal with government agencies or green-minded civic organizations, of course. The push for a cap-and-trade system is gaining steam in Washington, and in April the Environmental Protection Agency said greenhouse gases contribute to global warming and threaten public health, a stance that could open the door to further limiting carbon emissions under the Clean Air Act. A public comment period is under way, "but it's only a matter of time before companies have to report," says Simon Mingay, global research lead in environmentally sustainable IT at consulting firm Gartner. "Our advice is to start now, save a lot of time and hassle, and do it properly and well."
Software makers are already taking various stabs at developing useful products, but the task is far from easy. Measuring how much carbon is emitted by, for example, consuming a given amount of heating oil is relatively straightforward, but figuring out how much total carbon goes into the production of a widget or service is not. Many believe it can't be done accurately without exhaustive data collection from suppliers. And current debates over which party should get how much credit for various emissions-reducing activities will surely intensify once actual data must be entered into actual systems.
First Stages
To date, companies have not rushed to implement systems that can support such tasks: among U.S. companies, only 16% have such IT tools, according to a recent Gartner survey, and even in the United Kingdom, where a mandatory cap-and-trade scheme takes effect next year, only 17% have them.
"The first question companies are trying to answer is, What is the source of greenhouse-gas emissions? What's the big number? What is our risk?" says Mingay.
Which is to say, right now companies are not focused on the IT angle, a fact reflected in the tools they use for their initial rough cuts at carbon accounting. BB&T, a $143 billion retail bank, calculates CO2-equivalent emissions using spreadsheets available on the Website of the Greenhouse Gas Protocol Initiative. (The GHG Protocol publishes widely accepted standards for emissions accounting.) Rockwell Collins, a designer of communications and aviation electronics, relies on a third party to collect and manage its electricity and natural-gas usage, based on the invoices it receives from utility companies. In a recent report, the company stated that "we are still evaluating whether greenhouse-gas accounting information will be externally verified or audited in the future."
Hitting the Limits
Many, if not most, large companies, in fact, currently make do with spreadsheets to collect and manage data on on-site emissions (Scope 1, as defined by the GHG Protocol standard), purchased energy (Scope 2), and "other" miscellaneous sources (Scope 3), such as employee business travel and waste disposal.
Spreadsheets, of course, incorporate a host of uncertainties: who filled in the data, was it checked and verified, and what was the source. "Large organizations quickly hit the limits on what an auditor would accept," Mingay says. "As a company begins to capture data across multiple locations, countries, and divisions, it becomes too complicated for spreadsheets," says Srini Pallia, a vice president of Wipro Technologies, which is developing a carbon-accounting tool.
A number of entities are developing more-sophisticated approaches. Climate Earth's system, as one example, uses as its underlying data source Greenhouse Gas Emissions Factors for 480 U.S. commodities and services. The data is partly based on a UK standard, PAS 2050. On the auditability side, Climate Earth incorporates the verifiable, traceable data in a company's financial accounting system and also hooks into ERP software and travel-reservation systems, among others. "We take your [general ledger] trial balance, upload it to our secure servers, and then our software maps every GL line item to a rule that maps it to a carbon footprint," explains Chris Erickson, Climate Earth's CEO.
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