Risk Management

Chief Carbon Officer

Has the time come for companies to appoint executives in charge of environmental issues?
Tony McAuleyOctober 1, 2007

The “chief carbon officer” designation is not yet in widespread use, but it can only be a matter of time. Such is the speed at which the carbon issue is zooming up the ranks of business concerns that there is already talk of a skills shortage in this burgeoning area.

“Four years ago, when you talked of carbon trading it was only in terms of risk management, but now it is part and parcel of management planning,” according to Pedro Moura Costa, co-founder and president of EcoSecurities, one of the growing number of “offset provider” companies that are at the centre of the carbon management business.

Feeding the need for carbon experts is the complexity of the area, which can only increase. Mark Goddard, a “climate change services leader” at PricewaterhouseCoopers, for example, describes the issue (perhaps hyperbolically) as “possibly the greatest source of business risk in history,” and suggests that carbon management plans cover no less than ten key areas, including regular audits, forecasts and carbon business development plans.

Companies in the sectors already covered by the European Union’s emission trading scheme — power, steel, cement, paper, building materials and glass — have had experts in place for several years now, but many others are ramping up carbon operations, partly because of the potential to create a significant intangible asset through such schemes.

Last month, for example, NetJets Europe, a Lisbon-based sister company of the New Jersey private jet operator, announced its voluntary emissions reduction scheme, at the centre of which is a plan to pass on to customers the cost of carbon offsets from the start of this month. Behind the NetJets scheme are United Nations-approved clean development mechanism programmes — in other words, NetJets buys offsets that are created by, for example, a UN-sanctioned methane-capture project in Chile.

Initially, NetJets expected to phase in its scheme, offering existing customers a choice to pay for the offsets, while automatically including them in contracts that are new or rolled over after October 1st. The cost to NetJet customers, who pay €129,000 a year for membership, would be an extra €4,000 or so. However, according to Robert Dranitzke, a NetJets director in charge of the scheme, 5% of existing customers opted into the scheme in the first week alone. He says the company has had to substantially increase the size of the scheme it had in place.

It’s a sign of how anxious companies are to cover their bases on carbon. Customers of NetJets, for example, who might be expected to come in for more criticism than most as private jet frequent flyers, are keen to jump aboard the NetJets scheme — which was 18 months in the planning — and incorporate the offsets acquired into their own “carbon neutral” plans. It’s a fairly easy way to reduce their liability and, as Dranitzke says, “they want to avoid all the carbon cowboys that are out there.”