Why has carbon footprint management become so important for today’s organizations?

As world leaders agree to tackle climate change, the business community expects new sets of rules to be put in place by governments. Some organizations may think that these new regulations will only apply to a few sectors of activities such as fossil fuels for instance, and will have little repercussion on their business activities. Of course this misconception overlooks the reality of the transition operating in the background, which will affect all organizations to move to a low carbon economy.

One of the reasons for this misconception is that any activity is directly or indirectly linked to fossil fuels at some point in time. For instance, most transportation of raw materials requires gasoline and many industrial or heating processes make use of natural gas. In the province of Quebec alone, gasoline suppliers pass along the costs of carbon to their customers – an additional four cents per liter. And the same applies for natural gas.

For this reason and many others – such as loss of competitiveness and profitability as well as increased risks and stakeholder perceptions – the new landscape calls for companies to actively manage their greenhouse gas (GHG) emissions, also known as carbon footprint management.

Let us look at some of the benefits for organizations to start managing effectively their carbon footprint.

Increased profitability

Many studies have demonstrated that companies who manage their carbon footprint efficiently perform better than the ones who don’t. Indeed, lots of savings can be identified with a better management approach to energy consumption or transportation of goods; for instance, looking at the supply chain (scope 3) – where a large majority of carbon emissions originate – reveals that consolidating suppliers can reduce the pass-through costs while limiting the overall carbon impact.

Improving reputation

Since reputation surely matters to your organization, taking a step towards integrating your carbon emissions into your corporate sustainability strategy sends out a message of leadership to the rest of your organization and the outside world. It also prevents your organization from being seen as a lager by ranking institutions (such as CDP, Dow Jones Sustainability Index).

Why should it matter?

We’ve noticed in many instances that financial institutions and investors are seriously considering the degree of environmental impact of companies as an important criterion in selecting their portfolio.  Therefore, a company keeping status quo runs the chance of being left out of the lead pack.

Stakeholders satisfaction

Managing GHG emissions enables an organization to meet expectations coming from their stakeholders (shareholders, employees, customers and partners alike). Indeed, shareholders are now imposing clear environmental performance objectives and guidelines on organizations. Potential candidates are now looking to work for organizations that have a clear and well-established environmental approach. Investors are re-defining their investment portfolio to take all carbon-related risks out. Those are just a few examples of the new strategies taken by stakeholders to mitigate their exposure to what they now perceive as unsustainable practices.

Risks mitigation

Being proactive in anticipating regulatory & political requirements at an early stage allows organizations to avoid costly solutions down the road and reduces their exposure to fossil fuel price volatility.

Innovation

The new low-carbon economy slowly leads to new patterns in consumer’s behavior. Understanding how activities are affecting the carbon footprint along a value chain will help organizations identify which constraints might apply most severely, and also guide them in making the necessary product or service adjustments.

Being an early mover will provide organizations with a competitive advantage.

By Jean Paquin, Executive VP at Carbon Consult Group

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