Sustainability reporting part 2: It's an ongoing process not a goal

(This article originally appeared on the 2DegreesNetwork website.)

If you're a committed environmentalist, it’s likely that the push for continuing improvement in sustainability is welcome. But it's also potentially nerve-wracking. It means that, as a sustainability professional, you can never rest on your laurels, and you may have to go back to your board to reset your targets - perhaps more than once, as definitions of "good enough" evolve.

All this becomes easier once you realize that sustainability isn't an end-goal. In an earlier post we discussed the evolutionary nature of carbon emissions and sustainability reporting and concluded that sustainability is a process and a way of working.

Most companies are not in business to consume resources, generate rubbish or emit pollution. They are in business to deliver a product or service to their customers. Resource consumption, waste generation and pollution result from the way they choose to deliver those products and services. Airlines emit carbon dioxide (CO2) into the atmosphere not because they are in the CO2 production business, but because liquid fossil fuels are affordable and have a very high energy density. Commercial farms release vast quantities of nitrous oxide (N2O), a potent greenhouse gas, not because they are in the N2O production business, but because farmers must fertilise and plough their fields.

So what's the best way to set your targets to reduce waste, resource consumption, and pollution?

Airlines could establish a realistic emission reduction target, set it in stone, and make a series of engineering and operational tweaks to achieve that target. However, they will likely not escape continuing criticism from environmental campaigners, passengers and other stakeholders whose concerns about climate change will only grow as they learn more about this threat. Airlines (and their internal sustainability champions) who view sustainability as a way of working instead of a fixed target may take a different view.

Yes, interim targets are a useful way to achieve quick wins and get buy-in across the company. But a company that is fixated on making their environmental performance 10% better will be blindsided by a competitor that innovates to make their performance 10 times better. For an airline 10X better might mean innovating to create a zero-carbon fuel or a designing a completely different type of aircraft.

Whether literal or metaphorical, 10X better means there is no end in sight: you don't know yet how the company is going to achieve its sustainability goal, or the goal so big and long term that you won't be around anymore when it finally gets there. Either way, it means changing the way you think about sustainability. In fact, it may mean rethinking how your company works, as GE did with its Ecomagination initiative.

Each of your company's sustainability achievements is a vital stepping stone rather than an end-point. That doesn't mean it's easy. Acknowledge the hard work required to attain that goal, and celebrate when you've reached it.

Then use that energy to set off towards the next goal. And enjoy the continuing journey.

Sustainability reporting part 1: It’s an evolution not a revolution

(This article originally appeared on the 2DegreesNetwork website.)

It's not easy being the head of climate change or sustainability for a large company. If you're typical, you work with a tiny team and limited budget, and have discovered that making sustainability mainstream can be a long, slow process.

What's more, you're often asked to hit a moving target. Initiatives that seemed cutting edge five years ago are standard practice today. In another five years they'll be considered woefully insufficient.
Take carbon footprinting as an example. In 2007, when Marks and Spencer announced their Plan A initiative, a handful of leading companies measured greenhouse gas (GHG) emissions from their office energy use, plant and equipment, and vehicles. If they looked at their Scope 3 emissions at all, the focus tended to be limited to business travel. By 2012, many publicly listed companies reported their carbon footprint, and the leaders were incorporating their supply chain, customer and product lifecycle emissions into the total. In that same year, CDP announced that they would henceforth give even greater weight to Scope 3 supply chain reporting in their investor questionnaire. Those former leaders that "only" report Scope 1 and 2 emissions would soon find themselves at the bottom of the pile.

We see this progression in the rise of "net positive" initiatives from the likes of Coca-Cola, Kingfisher, Rio Tinto, Ikea and BT. There is something of a sustainability arms race underway. It used to be enough to report on your environmental impact. Then companies began to report about how effectively they were minimizing their impact. But to be a leader today, your targets require you to leave the environment better than when you started.

"Assessing how well companies report their sustainability will remain an evolutionary process just as the actual act of reporting also develops."

You can also see this evolution in Carbon Clear's annual FTSE 100 carbon maturity rankings. In order to differentiate between leaders and laggards, each year we have had to take an increasingly nuanced view of companies' approaches to climate change. To take just one area of focus as an example: Does your company measure and report its GHG footprint? Of course it does. Does it follow ISO 14064-1 or the GHG Protocol? Absolutely. Does it include Scope 1, 2, and material Scope 3 emissions? Probably. Does it seek third party assurance? Er, maybe.

Offsetting is a consideration in our carbon maturity rankings, and a little nuance goes a long way here as well. Does your company use carbon offsetting to achieve cost-effective net reductions? Most likely, yes. Are you fully carbon-neutral for at least Scope 1 and 2, or for your corporate travel? Possibly. Have you declared carbon neutrality against the BSI PAS-2060 specification and gotten third-party assurance for your claim? If you're in the FTSE100 and you’re not M&S, probably not.
And so on. This continuously evolving methodology makes it more challenging to perform time-series comparisons that track a company's movement up the Carbon Clear rankings. Without this evolution, however, most companies would end up bunched together. With little to distinguish one firm from another, the rankings would get less useful over time.

Assessing how well companies report their sustainability will remain an evolutionary process just as the actual act of reporting also develops. Neither reducing carbon emissions nor making your business more sustainable are end goals in themselves. There is always more to be done and it’s all about the journey.

In November Carbon Clear will be holding a webinar on 'Carbon reporting schemes: Minimize the pain and maximize the benefits', which will explore the different reporting schemes, how they fit together and how to effectively manage your data to minimize your workload. Find out more and register.

Carbon Clear's Third Annual FTSE 100 Carbon Performance Report

It's that time of year.  The results have been announced. The press releases, released.  The winners are crowing and the also-rans licking their wounds.

Each year, Carbon Clear's publication, "Carbon Reporting Performance of the FTSE 100" attracts more attention from the press and from leading corporations.  In a short span of time, this report has become a trusted tool for understanding which companies are taking seriously their response to climate change. The need for such a tool is as important as ever. As I pointed out last year:

"When we talk with large companies, the vast majority speak proudly of their climate change initiatives. In reality, there is a significant spread in the depth and breadth of carbon management programmes in the corporate world."

Our research separates the stars from the wannabes.

A few trends leap out from this year's research results:

• Integrated reporting is becoming mainstream, with just over half of companies mentioning their carbon footprint in their annual report;
• 56 of the FTSE 100 are reporting at least part of their Scope 3 GHG footprint;
• 29% of companies have set carbon targets that go beyond 2020;
• The number of companies that claim to be carbon neutral has increased by 46% since last year.

There are a host of other interesting findings, but for these and the list of top-performing companies, you'll have to read the report.

It's important to point out that this is not a "name and shame" exercise.  Carbon Clear's research provides a useful diagnostic that can help companies benchmark their performance against their peers, address weaknesses, and increase their ambition.

If you're in the FTSE 100 (or even if you're not), we can provide a customised overview that explores your company's performance and helps you plan your next steps.  Please contact the team at Carbon Clear for more information.

(Back to Carbon Clear homepage)

Waking Up to Climate Change Action

Something extraordinary is happening.

After endless debate about whether climate change is occurring and whether we should think about doing something about it, the conversation has shifted.

After decades of refusal by the largest polluting countries to tackle their greenhouse gas emissions, the policy debate is moving forward.

After years in which climate change was relegated to a few pages in companies' CSR reports, businesses have changed their approach.

At every level of society, people are waking up to the fact that climate change is happening, and recognizing that doing nothing is a losing option for nations, businesses and communities.

The headlines tell the story, in no particular order:

• 19 June 2013 - Utility-scale PV costs in the U.S. drop to $3/Watt, and are expected to reach $0.36/Watt by 2017.  This compares to $2.20/Watt for onshore wind, $1.00 for combined-cycle natural gas, and $8/Watt for the coal-fired carbon capture and storage plant under construction in Mississippi.
• 19 September 2013 - Russia urges discussion of geoengineering in upcoming Intergovernmental Panel on Climate Change report.
• 11 September 2013 - UK Astronomer Royal calls for research into geoengineering options as worry grows about the pace of carbon reductions.
• 15 September 2013 - the UK's Liberal Democrat party makes a controversial vote in favor of nuclear power to fight climate change.
• 20 September 2013 - Many electric utilities have looked to carbon capture and storage as a reason to keep building fossil fueled power plants in a carbon-constrained world.  Now that the Obama Administration is rolling out rules limiting emissions, lobbyists are changing their tune.
• 12 September 2013 - Overall Scope 1 and 2 greenhouse emissions have fallen 14% since 2009 at the 500 largest listed companies, even as performance lags for the most energy-intensive firms, according to the CDP.  Importantly, more and more companies include a discussion of climate change risks and opportunities in their annual investor report, instead of in their less-read CSR reports.
• And then there's fracking.

A few themes jump out from these, and many other headlines in the news.

First, the economics of clean energy increasingly make for unlikely bedfellows.  Utilities are arguing against CCS while supposedly "green" political parties are voting in favor of nuclear power and hydraulic fracturing.

Second, serious and respected thinkers are beginning to advocate increasingly desperate measures to address climate change - up to and including radical geoengineering approaches.

Third, the business world is increasingly split on their approach, with one influential group racing ahead to capture the opportunities presented by a lower-carbon economy.

There is an influential, large and ever-growing group of people and organizations that "get it" - they know climate change is a fact of life and are thinking seriously about how to respond.  This is an extraordinary turn of events, and one that will lead to major shifts in how we do business in future.

The message from this steady drumbeat of news headlines is clear.  The need to reduce emissions and tackle climate change is a fact of life, now, not for some point in the hazy future.  Those businesses that have yet to build a robust climate change response into their corporate strategy are missing an opportunity to reduce risk and to build business value.

Don't Wait for "Someone Else" to Fix It

Several years ago I was in Senegal when the car I was in got a flat tire, in the middle of nowhere. We couldn’t get the wheel off because the key to remove the bolts was missing. And it was getting dark.

As it turns out, our problem was short-lived. My Senegalese colleague stood at the side of the road waving his arm and every single car that passed us stopped to help. The road wasn't very busy, but within a few minutes we’d found a driver with a matching key.  We changed the tire and were back on our way.

If you get a flat on I-95 in America, or the M4 in Britain, other drivers will rarely stop. They assume you will have paid for your AAA (or AA) membership, or will use your phone to call a tow truck for assistance. In other words, “Why should I help? Someone else will come along, and they'll be better equipped.”

Cellphones were not very common in Senegal at the turn of the millennium. Neither were professional roadside assistance companies.  As a driver you knew that if someone was broken down on the side of the road, they needed your help.  And you knew that if your car broke down you would have to turn to other motorists for assistance.

When it comes to climate change, too many of us pretend that we're all driving down I-95 or the M4 with a cellphone and paid-up roadside assistance.  We continue on our way, confident that someone else will take care of it.

Too many companies and individuals make only token efforts at carbon management. More and more businesses may measure their carbon footprint, but scratch below the surface and you'll find the exercise confined to a small team - and for a worryingly large number of firms, data quality remains an issue.  Fewer than one in ten FTSE 100 companies use carbon neutrality to take immediate responsibility for their greenhouse gas impact, with many making pledges to get around to it sometime in the next 35 years. And efforts to spread carbon management throughout the corporate value chain are only just beginning.

When it comes to the corporate response to climate change, we can't pretend that token gestures will be enough.  In reality, we're all driving on that lonely road in turn-of-the millennium Senegal. Tackling climate change is every company's responsibility.  Don't wait for "someone else" to deal with it.

The Shale Gas Panacea (Part 2) - Does the UK have '43 Years of Gas'?

In a recent blog post, I provided a canned summary of the reasons shale gas has become such a burning issue.  That previous article covered issues surrounding potential environmental impacts, the relative attractiveness of shale gas compared to coal, and the potential for fugitive methane emissions.

In this post, I want to explore what exploitation of shale gas might imply for our efforts to transition to a low-carbon economy.

As a thought experiment, if we were to suddenly replace all the UK's coal consumption with natural gas, we would reduce greenhouse gas emissions by 42 million tonnes, a saving of nearly 10% from the national footprint total of 458 million tonnes CO2e.

Leaving aside the potential environmental impact of extracting this much shale gas, could we do it?  One would think so, judging from breathless headlines like this one in the UK from The Times:

Let's dig into that "43 years" statistic.

The Times article summarizes the findings from a British Geological Survey (BGS) report on the Bowland-Hodder Shale Formation in northern England.  According to the BGS, the mid-range estimate for the total gas in place in the Bowland Shale Formation is 1,329 trillion cubic feet (37.6 trillion cubic meters).  However, not all of that gas will be recoverable at a reasonable price using foreseeable technology.  A reasonable guess might be that 10% will be recoverable - call it 130 trillion cubic feet.

2012 gas consumption in the UK was approximately 3 trillion cubic feet - a figure that has actually declined slightly since 2000, as utilities burn more coal to produce power.

Divide the recoverable gas estimates (130 tcf) by current consumption (3 tcf/year) and you get 43 years. Not exactly cutting edge analysis, but easy to explain.

But is this number useful for anything besides headlines?

The first assumption we might question is that gas consumption will remain constant for the next four decades.  In the U.S., an influx of cheap gas has encouraged utilities to reduce coal consumption and shelve plans for new coal-fired generation; gas consumption increased by one-third in less than a decade.  If, as we expect, shale gas in the UK is cheaper than conventional gas supplies, gas consumption will rise to displace at least some of the UK's coal-fired power plants.  If gas were to completely replace coal and energy consumption otherwise stays flat, natural gas use could rise by nearly 50%, as indicated in the EIA chart below:

If, as expected, electric vehicles make significant gains over the next few decades, then natural gas use could rise still further as gas-fired electricity displaces petroleum.  Even this simple analysis shows that natural gas use could rise dramatically - even if overall UK energy demand does not increase.

However, the Office of National Statistics expects the country's population to rise 30% over the next four decades. Without significant efforts to improve reduce energy demand and shift to renewable energy sources, this projected population increase makes the assumption of constant gas demand even more untenable.

At this point in the analysis, we are piling guesses on top of guesses.  Coming back to our original question, yes, we could completely displace UK coal consumption and drive significant emission reductions, but not for as long as the headlines would have you believe.

And what happens once we've used up that shale gas bounty? Either we lurch back to a heavy dependence on coal, causing greenhouse gas emissions and air pollution to skyrocket, or we switch to lower carbon sources of power like PV, wind, wave, and geothermal - or nuclear.

Interestingly, it would likely take 15-20 years to fully build out renewables on a truly massive scale, along with the electricity transmission and smart grid infrastructure required to make best use of decentralized and intermittent renewable resources. Likewise, it would probably take 20-30 years for nuclear power to stage a significant comeback in the United Kingdom. Whether we employ renewables, nuclear or both is an important debate, but on for another day.

The shale gas revolution, should we choose to exploit it, has the potential to buy us some time.  If we can resolve the far-from-trivial environmental and other challenges facing hydraulic fracturing, we can achieve significant greenhouse gas emission reductions today, even as we build a longer-term low-carbon energy infrastructure for tomorrow.

The Shale Gas Panacea (Part 1)

If you want start an argument, just ask a group of environmentalists what they think about shale gas.

Then pass the popcorn.

Conventional natural gas is pumped from vast underground pools like the deposits found under the North Sea, in Russia and in Saudi Arabia.  Geologists have long known that there was also a huge amount of gas and oil trapped in tiny bubbles in sedimentary rock called shale, spread across vast territories around the world.  However, traditional drilling techniques could not access this gas in a cost-effective manner; by comparison, it was far more cost effective to build and operate a drilling rig in the North Sea than drill for shale gas in Montana.

Two technological breakthroughs changed all that.  The introduction of horizontal drilling meant resource extraction companies could drill a network of wells covering a huge area from a single drilling site, without displacing overlying farms, fields and even towns.  Hydraulic fracturing, or "fracking", meanwhile, provided a means of crushing  shale rock using high-pressure fluid, without strip mining the area.  Once the rock is crushed, any pockets of gas or oil trapped in the rock would flow out along the path of least resistance - typically back along the tunnel created by the drill.

Suddenly, it became possible to extract tremendous quantities of shale gas and shale oil, overturning common assumptions about the availability of fossil fuels.  As a result of the shale  gas boom, natural gas prices in the United States are a fraction of the international gas price.

By 2015, the U.S. is expected to overtake Saudi Arabia as the world's biggest gas producer as  energy companies tap the Marcellus, Bakken and other shale basins.  In the UK, meanwhile, analysts are reporting breathlessly about the potential of the Bowland Basin, which some claim can supply the  country with gas for the next 43 years. I'll be taking a closer look at that number next time, but for now let's agree that there's a lot of gas down there.

Why might this be good news for environmentalists? Per unit of energy, natural gas has a much lower greenhouse gas emissions intensity than coal or oil.  In the United States, an abundance of cheap shale gas is ruining the economics of coal-fired power plants. In 2005, gas accounted for 19% of the country's electricity production; in 2012 this figure was 30%.  Largely as a result, America's greenhouse gas emissions are falling rapidly - even before President Obama's proposed regulation of power station emissions comes into effect.  Here in the UK, low prices for EU ETS permits reduce the incentive for power station operators to reduce emissions; it's cheaper to burn coal and buy a permit than use expensive gas. In addition to its CO2 emissions, coal combustion also releases mercury into the environment and contributes more to ambient air pollution than does burning gas.  A massive influx of cheap gas could reduce output at the UK's coal-fired power plants, and force operators to shelve plans for new coal-fired generation. A cleaner environment and  lower greenhouse gas emissions would be the result.

Why might the fracking revolution be bad news for environmentalists? For one thing, we need to be clear about what fuel shale gas is displacing.  Not all that American coal is staying in the ground: as demand for coal falls in the U.S., its price has plummeted.  As a result, it has been cost effective for some European utilities to buy (relatively) cheap American coal instead of  more expensive European and Middle Eastern gas.  Coal imports from the U.S. were up 23% in 2012.  Seen at a global level, shale gas production may be displacing...gas, not coal.

In addition, hydraulic fracturing is not a tidy process.  The hydraulic fluid is a potent  chemical brew and has the potential to contaminate local groundwater supplies.  Changes to  underlying rock formations have led to a spate of earthquakes in some areas after the  introduction of fracking.  And many environmentalists are concerned that the gas may not always  flow as intended - unplanned releases of inflammable gas can pose a safety hazard, and with a 100-year global warming potential 21 times greater than CO2, natural gas releases from fracking could undo some of the benefit that comes from displacing coal. Other studies argue that this fear is overblown, and energy companies have both the capability and financial incentive to minimise leaks.

While this debate will rage on, I predict that there will be some fracking in the UK, and it will continue to grow in the U.S. The question, then, is whether we can mitigate potential harmful environmental impacts, and use this resource boon as wisely as possible.

We'll return to this issue in a subsequent article.