Managing for a Changing Climate:A Business Primer on Climate Change and Carbon Accounting

Sustainability Management Solutions

About SustranaSustrana is a strategic sustainability management company. We help businesses understand, assess, and make sustainable choices that enhance long-term company value. We provide consulting services and technology solutions that enable companies to minimize risk, maximize economic, social and environmental opportunities, and generate innovative ideas. To find out more about Sustrana please visit our website at sustrana.com.

For questions about the topics presented in this paper, please contact:

Jennifer K. Anderson, MPH, SCSPjanderson@sustrana.comor

Nancy S. Cleveland, JD, LEED APncleveland@sustrana.com

A special thanks to Kylie Ford, Alita Ostapkovich, and Dr. Gerard Bricks for their contributions to this paper.

©2015 Sustrana. All rights reserved. This document is for general information purposes only and should not be used as a substitute for consultation with professional advisors.

Introduction 1Background 2 Why the Planet is Warming 2 Where Greenhouse Gases Come From 2 The Future 3Assessing and Managing Climate Change Impact in Business 4 Business Risks and Opportunities 4 Planning a Course of Action 5Taking Action – Measure and Manage 7 Greenhouse Gas Inventories 7 Elements of a GHG Inventory 7 Basic Steps to Creating a GHG Inventory 7 Identifying Opportunities for Reductions 9 Setting Targets 10Conclusion 12Additional Resources 12Endnotes 14

Table of Contents

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Introduction

Over the past 100 years, Earth’s average temperature has risen by 0.8oC (1.4oF).1 This warming is caused by human activity2 and is increasing based on the growth of both population and consumption of fossil fuels. In the 2014 IPCC (Intergovernmental Panel on Climate Change) AR5 Report, over 800 scientists from around the world projected that Earth’s average temperature will rise between 3-10oF more by the end of the century.3

Our use of fossil fuels combined with deforestation and agricultural activities have dramatically increased the level of heat trapping gases in our atmosphere. Collectively, these gases are warming our planet. Not only is the planet warming; the rate at which it is warming is increasing, with most of the warming over the last century occurring in the last three decades. The actual amount of warming we experience in the next century will depend on how successful we are in reducing our dependency on fossil fuel and changing agricultural practices. The next fifteen years is the critical window of opportunity for change.4

Source: http://climate.nasa.gov/evidence/ accessed on 8/27/2014

The warming of Earth’s average temperature changes our climate in many ways. We are already experiencing the effects on human and natural systems from more extreme weather, prolonged droughts, and flooding. In 2012-2013, the United States experienced 25 climate - and weather-related disasters that claimed 1,141 lives and each event exceeded $1 billion in damages ($175 billion total).5 The contributions to greenhouse gases already made over the last 150 years will continue to cause impacts for hundreds more. Even if we completely stopped emissions of greenhouse gases today, we will still experience changes that accumulations to date have set in motion. These include changes in precipitation, sea level rise, increased severe weather, temperature extremes, ocean acidification, food and water shortages, and increased wildfires. All of these changes will have significant implications on businesses, the US economy, society, and humanity as a whole.

These changes will also have substantial, and largely negative, implications for human well-being, which in turn has implications for business stability and sustainability. This white paper will help business leaders to more clearly understand why they should care about climate change and how their actions can impact the future, not only for the company, but for all of society.

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BackgroundWhy the Planet is WarmingScientists have known for nearly two centuries that carbon dioxide in the atmosphere traps heat, and results in what is known as the “greenhouse effect.” It is this greenhouse effect that makes life on Earth possible; without the greenhouse gases, Earth would be a frozen rock unable to sustain life. However, too high a concentration of greenhouse gases will also have adverse effects to life on the planet. For this reason Earth is sometimes referred to as the “Goldilocks planet,” not too hot and not too cold. As emissions of carbon dioxide and other heat trapping gases, such as nitrous oxide and methane, further accumulate in our atmosphere, they act as a ‘thicker’ blanket around the earth. This more absorptive atmosphere allows energy from the sun to penetrate and warm the earth, but reduces the amount of Earth’s infrared (IR) radiation that would otherwise escape back out into space. The trapped IR radiation increases the extent to which the planet is warmed by the sun.6

The increased warming also creates positive feedback loops that exacerbate the impact beyond the direct effect of the gases in the atmosphere. Melting ice sheets in the Arctic, for example, change the reflective surface area on the planet. As the ice sheets melt, areas that were once white become dark grey. The white areas reflected solar radiation back into the atmosphere, whereas the darker areas now absorb the solar radiation, increasing the average surface temperature even further. As the ice covering the Arctic Ocean melts, the water itself warms the surrounding landmass, melting the permafrost. The permafrost while frozen, sequesters a tremendous amount of trapped methane and CO2. As it melts, these two potent greenhouse gases will be released into Earth’s atmosphere. These positive feedback loops result in a multiplier effect that speeds up warming.

Source: http://www.ncdc.noaa.gov/indicators/ accessed on 2/3/2015

Where Greenhouse Gases Come FromThe rapid warming of our planet is the result of the build-up of greenhouse gases in the atmosphere, with carbon dioxide being the most significant of the greenhouse gases.7,8 The rapid increase of atmospheric carbon dioxide is primarily due to the burning of fossil fuels since the beginning of the Industrial Revolution. The largest source of greenhouse gas emissions in the United States from burning fossil fuels comes from the production of electricity, followed by transportation, and industrial uses.9

But it's only a few degrees!It is often hard to understand why a 2 or 3oC difference in Earth’s average temperature is such a big deal. We often experience a 20oF difference in temperature in a given day! But it is long-term average planetary temperature — a change over the course of a century or more — that defines “global warming,” not the change during a day, from year to year, or even decade to decade. When all of those fluctuations are looked at over a long period, you can see a gradual, overall warming. To get a better sense of why a small change has a big meaning, consider that at the end of the last ice age, our average planetary temperature was only 5-9oF cooler than it is now. If New York City had existed then, it would have been under 3,000 feet of ice and 360 feet ABOVE sea level!

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The IPCC, the foremost global scientific body focused on climate change, warns that the next fifteen years are the most crucial for making changes that will limit warming. The findings of the most recent IPCC Fifth Assessment Report (AR5) show that to limit warming to 2oC (3.6oF) above pre-industrial levels, we must cut greenhouse gas emissions by 40-70% of 2010 levels before 2050.13 The total amount of greenhouse gases we can emit and still keep warming below 3.6oF is referred to as our “carbon budget.” The IPCC estimates this amount to be about 1 trillion metric tons of CO2e . As of 2011, we have already burned through about half of this budget.14

Given that the burning of fossil fuels and deforestation are the predominant causes of climate change, we have the power, and responsibility, to limit warming in the future.

Another significant source of increasing greenhouse gas levels worldwide is deforestation. When trees are alive, they act as carbon sinks, absorbing carbon dioxide in the process of respiration. The older and bigger they get, the more they absorb and sequester. Forest soils store more than twice the amount of carbon of trees, although soils absorb CO2 more slowly than trees.10 When trees are cut down, they no longer absorb carbon, and the soil surrounding them is disrupted, releasing CO2 into the atmosphere. Further exacerbating the problem, when humans burn wood the stored CO2 is released. If new trees are not grown to regenerate the forest, the CO2 is released from the carbon cycle into the atmosphere.

The FutureWe have already experienced the effect of these impacts on coastal property, agriculture, and energy. In the next fifteen years, communities across the country will feel the economic toll of changes. Intensifying storms and hurricanes along the East Coast and Gulf of Mexico are estimated to cause an additional $7 billion in property damage each year if we do not pursue significant emissions reductions. The same analysis projected that farmers in the Midwest will likely see more than a 10% decline in crop yields. Furthermore, the rising temperatures are expected to drive an increase in energy demand that alone will require the construction of more than 200 power plants, costing residential and commercial ratepayers up to $12 billion per year.11

While the impact of a 1.4oF temperature rise is already significant, the projected impacts of a temperature increase of over 3.6oF will lead to much more dramatic changes and significant transformations of the natural systems that support life. By 2050, we will likely see between 27 and 50 days over 95 degrees each year—almost three times the current number of days.12

What is CO2e?CO2e or equivalent carbon dioxide is a method of standardizing the radiative force of different greenhouse gas emissions. This allows for them to be added together for analyzing total greenhouse gas emissions. CO2 is used as the base. For instance, each molecule of methane is the equivalent of 25 times as many CO2 molecules. When we talk about a carbon footprint, we are talking about all greenhouse gases emitted, after converting them to their carbon dioxide equivalents and adding them together.

“We may see increased raw material, commodity, and water costs as a result of weather, climate changes and the availability of water. A portion of our cost of sales, or $2.5 billion, could be at risk through increased costs to our supply chain as a result of these risks.“-Dr Pepper Snapple Group Inc. (2013 CDP Report)

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Assessing and Managing Climate Change Impacts in BusinessDespite the wealth of scientific evidence, climate change can be an uncomfortable subject in business. Until recently, it was still considered controversial and political in all but some of the largest companies with the most to lose from climate change. This has changed in recent years as the scientific evidence has become clear, and the effects are felt in communities in the US and abroad.

Even still, the causes and impacts are often not fully understood among business leaders, and direct connections to the bottom line are not clear. While some business leaders may recognize the effects that climate change has on the economy overall, many are still not incorporating climate change impacts into business planning and operations. Consideration of how specific aspects of climate change can present risks and opportunities for a business in the future is an excellent place to start the conversation.

Business Risks and OpportunitiesClimate change can have significant near- and long-term consequences on business operations and profitability due to increased physical, regulatory, and reputational risks. From a physical risk perspective, damages from storms, flooding, and heat waves are already costing local economies billions of dollars.15 Severe weather, flooding, and wildfires can devalue or destroy business assets as well as impact supply chains, resulting in supply disruptions and/or increased cost of supplies. A 2013 CDP* report cataloged the self-reported financial impacts of climate change by 62 companies across 10 industries.16 Between 2011 and 2013, these companies reported bottom line impacts ranging from tens of thousands to hundreds of millions of dollars.17 Looking at these disclosures of companies in a given industry can provide businesses a sense of what to include in their planning and risk assessment processes.

Future changes to regulations also present additional business risks. Regulation related to energy and carbon emissions are already impacting businesses here and outside of the US:

• Countries outside of the US, as well California, have instituted mandatory cap-and-trade programs. • The US EPA requires large emitters of carbon emissions to report their emissions levels publicly. • Building owners in many cities across the US are required to publicly report on building energy efficiency. • Publicly traded companies in the US are required to report material climate change risks in their annual financial

reports.• In the EU, large publicly traded companies are required to report on non-financial factors, including carbon

emissions. The companies that are better prepared to address future changes in regulations will benefit from reduced costs of implementation and may secure a competitive advantage against others who are less well prepared. Identifying regulations that have been implemented in other jurisdictions can be a good way to start monitoring potential future regulatory impacts for a company.

*The CDP (formerly known as the Carbon Disclosure Project) is an organization comprised of institutional members (large companies and investors) that issue direct requests to companies to disclose their greenhouse gas emissions and other environmental impacts.

The International Energy Agency estimated in its World Outlook 2013 report that global demand for space cooling will increase by 170% and 11% for space heating by 2035, using current climate change projection. Starwood Hotels & Resorts Worldwide, Inc. estimated in its 2013 CDP report: “Assuming an average 7% annual increase in cooling demand until 2035 (and without including future energy efficiency gains and also taking into consideration the varying cooling needs for each hotel across our portfolio), Starwood and its owners potentially could incur an approximate $10-20 million ($USD) increase in cooling costs alone, per year (based on the size of our current portfolio).”

This chart shows two projections by the Special Report on Emissions Scenarios. A2 represents continued population growth through the year 2100. B1 is a scenario where population peaks at the year 2050 and includes rapid adoption of clean and resource-efficient technology.

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More and more stakeholders are interested in understanding how businesses are managing climate change risks and opportunities (see Table 1). Ignoring these trends can result in loss of current and future business. Conversely, tracking and working to reduce carbon emissions can result in a reputational and market advantage. Having a climate action plan is increasingly seen as a sign of a forward-thinking company and can make the business more appealing to customers and investors. It also presents an opportunity to enhance brand reputation and differentiate yourself in the market. A good and relatively easy starting point for companies is to calculate and report on greenhouse gas emissions and energy use on the company website or through the CDP or other reporting framework, such as EcoDesk.18.In addition to reputation-related opportunities, in many industries, climate change can present opportunities for new product or service development. These can include low carbon alternatives to existing products, low emissions fuels, or products and services related to the production and distribution of renewable energy. Again, looking at actions being taken by industry leaders is a good start. Further opportunities can be identified once greenhouse gas inventories and life cycle assessments are calculated.

Risks Opportunities

Supply chain disruptionNew products and services

(adaptation/mitigation related)

Physical property/asset damageGeneral advantage in brand and differentiation from

early adoption

Reduced labor productivity due to heat and weatherCompetitive advantage in markets that highly

regulate environmental impacts

Regulatory changes to emissions and energy usage Employee recruitment/preference

Investment devaluation Attraction of investors and customers

Increased expense of fossil fuels and carbon intensive inputs

Improved resource efficiency

Table 1: Risks and Opportunities of Climate Change

Planning a Course of ActionWe are currently inside the fifteen-year window to limit the impacts of warming. We are no longer speculating. It is certain that we need to act fast. Once climate change risks and opportunities have been communicated and understood by business leaders, the next question is, “What do we do?”

A climate change strategy, or action plan, is a document that outlines a business’s response to climate change. This plan is tailored to the company’s risks, opportunities, circumstances, and operations.

There are five main steps to creating a climate strategy:

1. Create a Greenhouse Gas (GHG) InventoryA Greenhouse Gas inventory, also known as a carbon footprint, helps a business to understand what aspects of its operations generate the most greenhouse gases and to identify resource reduction opportunities that can lead to cost savings. It also provides information for reporting to stakeholders on GHG emissions levels.

2. Benchmark Against OthersOnce a business has calculated an inventory, it is informative to compare your emissions to businesses that are similar in terms of size and activity. Are the other businesses’ emissions higher or lower? Are you ahead or behind in taking action? Using intensity measures that normalize carbon emissions to per unit of production, per employee, or per square foot, make comparisons more understandable.

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3. Identify Opportunities for ReductionsA GHG inventory will highlight the business’s largest sources of emissions. This should be a starting point for seeking opportunities for reductions. After collecting project ideas, it is helpful to select a set of criteria (such as cost, feasibility, and risk) that you will use to prioritize reduction opportunity projects.

4. Set Goals and TargetsHaving a goal is a strong signal of commitment to internal and external stakeholders. It motivates people to act internally and enables progress to be reported clearly. Goals should be SMART (Specific, Measurable, Attainable, Realistic, and Time-bound) goals. Reviewing others’ sustainability reports can provide a sense of what types of goals are being set by similar businesses.

5. Report on ProgressReporting on progress is critical to maintaining momentum and communicating your efforts to stakeholders. Identify the metrics you want to track, how the information will get collected, who will receive the reports, how often, and where it will be reported.

Case Study: BNY MellonBNY Mellon is a global leader in investment management and services. It has set a goal to reduce carbon emissions by 10% by 2016. The company reached its goal ahead of schedule, recording a decrease in emission of 32% by 2012. Success was based on a range of projects. In data centers, it concentrated on heating and cooling. The company also purchased 1.125 million Renewable Energy Credits (RECs). The RECs purchased are equivalent to 75% of the company’s power usage in the United States. The RECs fund new renewable energy projects, such as wind or solar farms.

In addition to their energy efforts, BNY Mellon has worked hard to create a culture where employees appreciate the importance of environmental sustainability. They have improved many facilities’ water and energy use, invested in recycling and alterative waste management, and begun to track and measure global paper consumption. These programs have placed BNY Mellon in the top five companies of the CDP’s annual Climate Performance Leadership Index (CPLI). The company is also the biggest contributor to the Fortune 500 Companies Challenge to purchase 10 billion kWh of green power.20

Three of the most critical steps to managing a business’s GHG emissions are: • calculating a GHG inventory• identifying opportunities

for reductions, and• setting goals and targets

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Taking Action – Measure and ManageOnce your strategy is in place, the core action items for bringing a climate action strategy to life are doing the GHG inventory, finding the projects that will yield reductions, and setting specific goals and targets based on what’s possible. The following sections will provide additional detail about executing on a climate action strategy.

Greenhouse Gas InventoriesSetting up the system for maintaining a greenhouse gas inventory can be time consuming, but without a sense of where you are now, it is impossible to know where you need to go and how you are doing along the way. Setting up a system also makes sense because companies are increasingly being asked to report on their greenhouse gas emissions. Having this information on hand will reduce the expense and risk associated with playing catch-up later on.

What is involved with creating a greenhouse gas inventory? Where do you begin? What will you need?

Elements of a GHG InventoryA greenhouse gas (GHG) inventory is the total amount of greenhouse gases emitted as the result of an organization’s activities over a given period of time. A variety of business activities result in the release of greenhouse gases. Some of the most common sources of greenhouse gas emissions include the production of electricity or steam, stationary combustion of fuel (for boilers, heaters, etc.), the mobile combustion of fuel (to run company fleets or for business travel), refrigerants in chillers, gases in fire suppression equipment, and any gas used in or produced during manufacturing processes.

There are seven primary greenhouse gases included in most greenhouse gas inventories. They include:

• Carbon Dioxide (CO2), • Nitrous Oxide (N2O), • Methane (CH4), • Sulfur Hexaflouride (SF6), • Hydrofluorocarbons (HFCs), • Chlorofluorocarbons (CFCs), and • Nitrogen trifluoride (NF3)

These gases are different in terms of their abundance and global warming potency. Some are more common, and others less so. Depending on the industry and activities your organization engages in, your carbon footprint will include different amounts of various types of these gases.

The following is an overview of the steps required to calculate a carbon footprint. These steps are based on the GHG Protocol Corporate Accounting Standard, one of the most well-known and utilized standards for greenhouse gas accounting globally.19 Other standards may also be used and the steps are generally similar.

Basic Steps to Creating a GHG Inventory The general process of gathering information and calculating a GHG inventory is: 1. Determine how you will use your inventory and pick a tool or a standard that supports that use. 2. Choose a Base Year. Your Base Year is usually your first year of calculating emissions. It is also the year against which

future reductions will be benchmarked. 3. Identify the Organizational Boundaries of the inventory. Determine which of your organization’s facilities will be

included inventory and which will be left out. 4. Identify the Operational Boundaries of the inventory. Determine which types of emissions will be included in your

inventory: direct and indirect emissions (Scopes 1 and 2) only, or some or all value chain emissions (Scope 3) as well.

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5. Identify the Sources of Emissions associated with each facility. Investigate each facility and determine what activities (use of equipment, vehicles, refrigerants, etc.) result in greenhouse gas emissions.

6. Collect Usage Data for the sources of emissions. Request data from the owner of each source of greenhouse gas emissions.

7. Calculate the emissions resulting from each source. Use a spreadsheet or software tool to calculate the amount of greenhouse gas emissions based on usage data for each source. You will need to convert the totals of each to carbon dioxide equivalents or CO2e amounts.

8. Report on emissions. Sum all CO2e data and report this information to internal and external stakeholders. This is your Base Year carbon footprint.

Case Study: InterContinental Hotel GroupsKnown for its Holiday Inn and Crowne Plaza brands, InterContinental Hotel Groups began its carbon reduction plan in 2009. In 2013, the hotel owner set aggressive reduction targets to reduce the carbon footprint per occupied room by 12% across all buildings and to reduce water use per occupied room in water-stressed areas by 12% by 2017. The company’s “Green Engage” program resulted in over 16,000 green solutions during 2013. The core feature of the Green Engage program is a software program that allows hotels to enter their impact data. Based on the input, the system then responds with ideas to reduce the facility’s environmental impacts. It offers staff training on sustainability and a wide range of projects and strategies, from picking a suitable site to lighting.

Project suggestions are quite varied in type and scope. After using Green Engage, for example, a Holiday Inn in San Antonio planted an herb garden. The herbs are grown on the hotel’s roof and are watered with condensation water retrieved from air conditioning. Projects included in the system overall were estimated to have the potential to save 77 million gallons of water in California per year.

IHG has also created a carbon calculator. This program calculates how much carbon is created during a one-night stay or a convention held in the hotel, allowing the hotel to determine where it can decrease emissions. The calculator, along with Green Engage, has the potential to save the company an average of $90,000 per hotel in annual energy expense.22,23

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Identifying Opportunities for ReductionsAfter creating a greenhouse gas inventory, opportunities for emissions reduction can be more easily identified. The inventory will highlight which aspects of the business create the most emissions. These areas are the best place to start. To identify opportunities, it is helpful to start by looking at each of the scopes of emissions.

Scope 1 emissions are all direct GHG emissions. These include emissions from vehicles and equipment owned by the business, on-site landfills or wastewater treatment, and releases from production, processing, and storage of materials. Reduction opportunities in Scope 1 emissions can be found by looking at all owned assets, including owned vehicles. Fleets can be converted to lower emission fuels and/or companies can look to improve logistics to burn less fuel when using vehicles. Heating buildings can also be big contributors to Scope 1 emissions. Maintaining and upgrading boilers can have a relatively short payback in addition to reducing emissions. For manufacturing companies, upgrading and better maintenance practices for equipment can make substantial differences.

Scope 2 emissions are indirect GHG emissions from the consumption of purchased energy. Scope 2 emissions include purchased electricity, heating, and cooling. This is often the area with a substantial opportunity for reduction. Similar to opportunities in Scope 1, a lot can be done by maintaining and upgrading equipment so that it uses less energy in the first place. Other changes can be made to building systems, such as the installation of motion sensors or programmable thermostats. Behavior changes, which cost little to implement, can result in substantial reductions.

Scope 3 emissions comprise all other emissions that result from activities that occur upstream or downstream from your organization. Upstream emissions are those that are associated with the supply chain activities, such as the extraction of raw materials, the shipment of supplies, and employee travel and commute. Downstream emissions are related to the distribution, utilization, and disposal of products and services consumed. Many companies find early opportunities for reductions in the areas of business travel and employee commute, as these can be easier areas to assess and manage. Additional opportunities can be identified once companies further evaluate the extent of emissions in each of the fifteen Scope 3 categories.

Once your organization has a good idea of where greenhouse gas emission reductions can happen, the next step is to create targets.

Source: http://www.ghgprotocol.org/feature/download-new-ghg-protocol-corporate-value-chain-scope-3-standard/ accessed on 02/03/2015

GHG Target TypesThere are two types of targets companies use: intensity and absolute. An intensity target is a normalized reduction against a business metric. An example would be “reduced CO2 produced per unit produced,” or “decrease emissions per employee by 2%.” Intensity targets allow companies to demonstrate progress while undergoing organic business growth. They are also useful in benchmarking one company’s efforts against another. Intensity targets allow for an increase in absolute emissions while still reaching the target.

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Setting TargetsAnother, equally important part of creating a climate change plan is setting an emissions reduction target. There are many benefits to having a target. Targets serve to:

• Keep climate change issues “on the radar”• Help minimize and manage GHG risks• Achieve cost savings• Stimulate innovation• Prepare for future regulation• Demonstrate leadership

There is no one way to decide on a target. Reduction targets change based on many factors and will be different for every company. The first step is to establish which target type, an absolute or intensity target, will be used. (See sidebar for further information.)

The questions below are helpful to consider in setting a target for emissions reduction:

• How aggressive do you want to be? Do you want only to comply with market regulations, or do you want to become a leader or fast follower in carbon emissions reduction?

• How much control do you have over carbon emissions and their sources? The degree of control over carbon creation will affect your target. The more you can control how much fuel, electricity, etc. is used in your operations, the bigger your target can be.

• Are there any current or pending government regulations? Consider markets you are currently in, as well as those you might want to enter. If you find a regulation, evaluate whether you meet or exceed this target.

• What are your target boundaries? A target boundary covers the activities, geographic locations, and sources that are included in your target. If your company is global, consider choosing a specific region to start with. It is also important to define which emissions scopes you will include in your target.

Some common approaches to setting carbon targets are:

Feasibility based – This approach is focused on what the organization can most realistically achieve. It begins with listing all possible energy/emissions reduction projects. Then you calculate an estimate of the associated energy and/or emissions reductions. Projects are prioritized and totaled, generating an estimated reduction level and timeline.

Science based – Science or context based targets are aimed at making a pro rata reduction in emissions based on what is needed to limit warming to 2oC (3.6oF). Calculate what percentage of GDP your company is responsible for or use some other method to extrapolate you percentage contribution to the economy. Then multiply that percentage by the estimates of the amount of greenhouse gases we can emit and still keep warming to that level. This will give you an emissions level to which you will need to limit your own emissions in order to “do your part.”

Stretch targets – Stretch targets can be based on either of the above, but they are increased by some percentage to go beyond what seems achievable. The intention is to push the envelope and to drive innovation or significant changes in behavior.

After choosing the type of target to set and how aggressive to be, you need to define the parameters of the target. This includes activities such as setting boundaries (division, domestic only, global, etc.) and, if it is an intensity target, what the unit of measure will be (unit of production, revenue, square feet, etc.). You will need to choose a Base Year, over which you will measure your reductions, and a completion date for your target. Long-term targets (greater than 5 years) can be more aggressive and tend to create a better strategic advantage. However, it can be more difficult to maintain engagement and momentum over the life of the project.

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Case Study: Microsoft Corp.In 2009, Microsoft CEO Steve Ballmer made a commitment that by 2012 the company would reduce emissions per unit of revenue by 30% compared to 2007 levels. Their core strategy was to use technology to reduce air travel and energy use, and to invest in renewable energy projects. In 2012, they found that while they had achieved most of their intensity targets, changes to the company’s overall business strategy (towards a focus on cloud computing) had in fact led to a gross increase in energy usage. Starting in 2012, Microsoft set a new absolute target of becoming carbon neutral. To achieve this goal, they adopted a three-pronged strategy titled “Be Lean, Be Green, Be Accountable.” Each branch of the company must track a relevant key metric for each pillar.

Be Lean revolves around being highly efficient in operations. The main strategy focuses on utilizing technology to reduce air travel and increase energy efficiency. Electricity is the primary source of direct company emissions. In developing this strategy they segmented branches of the company (data centers, development centers, and office space). Each branch measures its key metric to track progress and identify areas for improvement. For example, the data centers track their power usage effectiveness and can compare that metric across facilities within the company as well as throughout the industry.

Be Green involves investing in renewable energy projects to offset the rising energy usage associated with Microsoft’s cloud computing data centers. Be Green also includes recycling and waste and water use reduction goals. In 2011 Microsoft increase its total waste diversion rate from 63% to over 80%. Within dining facilities it achieved 95% waste diversion and set a goal of zero cafeteria waste by 2015.

The third pillar of Microsoft’s strategy is to Be Accountable. It is focused on creating accountability across the organization. The cornerstone of this strategy is an internal cost for carbon emissions within the company. When accounting for the costs of a project, the full costs of generating the electricity and buying carbon offset credits are included. Starting in 2013, Microsoft also began using a carbon fee chargeback model. The system charges business groups for their carbon emissions. The funds created from that program then finance longer term ROI renewable energy projects. Microsoft has also created numerous programs to engage with their employees and other stakeholders. They have designated Sustainability Champions and an award for employees who make significant contributions to the company’s environmental goals.

Although Microsoft has had to modify its approach, and will probably need to do so again, it has established a solid foundation for an effective climate action program. The company has set both company wide and team goals, implemented a system to track key metrics, and created accountability through their carbon pricing mechanism. Microsoft believes that technology is critical for transforming the world into a sustainable low-carbon economy. Its climate strategy incorporates that vision while creating financial value for the company.21

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ConclusionBusiness organizations are major contributors to the global climate change problem we face. As businesses, we have the ability to make changes that will impact generations for centuries to come. We must recognize our responsibility to take action. The timeframe for making a difference is short, and the work to be done is substantial.

The good news is that there is a positive business case for doing so. Creating a climate action plan and setting carbon reduction targets can improve efficiency, reduce risks, boost innovation, enhance reputation, and grow market share. All of these outcomes can either reduce expense or boost revenue, creating a win-win situation for the business, the environment, and for society.

Additional ResourcesClimate action plans are scalable. Any organization can plan and implement one. It will make a difference. Investing in carbon emissions reductions is investing in your company and in Earth’s future climate, putting your money to work to maintain livability of the planet for future generations.

There is no standard framework for how to create a target or a climate change reduction plan. Listed below are a few other resources that can help your business as it embarks upon the journey to reduce emissions.

Environmental Protection Agency (EPA)The Environmental Protection Agency is an agency of the US Federal Government. Its mission is to protect human health and the environment. The EPA has numerous educational resources and tools to help businesses create carbon

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reduction plans. The EPA website is also helpful in monitoring government regulations.

Guide to Greenhouse Gas Management:http://www.epa.gov/climateleadership/documents/resources/lowemitter_guidance.pdf

Carbon Offsets:http://www.epa.gov/climateleadership/documents/resources/OffsetProgramOverview.pdf

Guidance of Setting GHG Reduction Goal:http://www.epa.gov/climateleadership/documents/resources/design_princ_ch11.pdf

Environmental Defense Fund (EDF)The EDF is an association of more than 400,000 professionals who are dedicated to finding innovative solutions to environmental problems, with a particular emphasis on identifying practical and lasting ways to preserve natural systems. The EDF Corporate Roadmap contains useful information on how to create a reduction plan and set targets.

A Roadmap to Corporate GHG Programs:http://www.edf.org/sites/default/files/GHG_roadmap_Final.pdf

Center for Climate and Electricity PolicyThe Center for Climate and Electricity Policy provides helpful information about creating an internal carbon tax.

Considering a Carbon Tax:FAQ: http://www.rff.org/centers/climate_and_electricity_policy/pages/carbon_tax_faqs.aspx

CDP (Formerly known as the Carbon Disclosure Project)The CDP is an association that, on behalf of companies and investors, provides a framework for organizations to report on their efforts to manage critical environmental impacts. It provides access to company responses to its surveys and publishes several reports annually that provide insight trends, risk disclosure, and company actions. CDP reports are helpful to companies looking for market or industry context when developing a carbon action plan.

3% Solution: http://www.cdpla.net/es/pdf/relatorio_3percent_solution.pdf

Major Public Companies Describe Climate-Related Risks and Costshttps://www.cdp.net/CDPResults/review-2011-2013-USA-disclosures.pdf

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Endnotes

1. NASA Finds 2013 Sustained Long-Term Climate Warming Trend." NASA: National Aeronautics and Space Administration. January 21, 2014. 2014. http://www.giss.nasa.gov/research/news/20140121/

2. Fifth Assessment Report." IPCC: Intergovernmental Panel on Climate Change. January 1, 2013. http://www.ipcc.ch/report/ar5/

3. Fifth Assessment Report." IPCC: Intergovernmental Panel on Climate Change. January 1, 2013. http://www.ipcc.ch/report/ar5/

4. NASA http://climate.nasa.gov/evidence/

5. NOAA http://www.noaa.gov/climate.html accessed on 8/27/2014

6. Climate science is 187 years old. Three significant events in the 1800s laid the foundation for our knowledge today:

• The French mathematical physicist Joseph Fourier published the first paper directly relevant to climate in 1827. He showed that the surface of the earth is heated by solar radiation, not by conduction of heat from the hot interior of the earth. Then he deduced that since the earth temperature was not rising, that the earth must be radiating to space to maintain equilibrium. He inferred that this was happening by IR (infrared) radiation and that there must be something like the greenhouse effect in action, but that process had not yet been described and confirmed.

• In 1861 John Tyndall of the United Kingdom was able to measure IR absorption and radiation by specific gases.• In 1896, a paper by Arrhenius marks the beginning of modern climate science. Arrhenius made the first calculation

(without benefit of computers no less) of climate sensitivity: if the CO2 concentration is doubled, how much will the temperature rise? His result was likely a factor of 2x higher than current estimates, but it was pretty good, given what was then known and not known!

7. Calling increased warming “positive feedback” is counterintuitive without the following definition: “Positive feedback is a process that occurs in a feedback loop in which the effects of a small disturbance on a system include an increase in the magnitude of the perturbation. That is, A produces more of B which in turn produces more of A. In contrast, a system in which the results of a change act to reduce or counteract it has negative feedback.” http://en.wikipedia.org/wiki/Positive_feedback

8. http://www.ipcc.ch/publications_and_data/ar4/wg1/en/spmsspm-human-and.html

9. "U.S. Greenhouse Gas Inventory Report." EPA. April 1, 2014. http://www.epa.gov/climatechange/ghgemissions/usinventoryreport.html

10. Trees: The Carbon Storage Experts." Department of Environmental Conservation. January 1, 2014. http://www.dec.ny.gov/lands/47481.html

11. Risky Business Report." Risky Business. http://riskybusiness.org/report/overview/executive-summary

12. Risky Business Report." Risky Business. http://riskybusiness.org/report/overview/executive-summary

13. Fifth Assessment Report." IPCC: Intergovernmental Panel on Climate Change. January 1, 2013. http://www.ipcc.ch/report/ar5/

14. World Resources Institute http://www.wri.org/blog/2014/03/visualizing-global-carbon-budget

15. Risky Business Report." Risky Business. http://riskybusiness.org/report/overview/executive-summary.

16. CDP 2014: Major Public Companies Describe Climate-Related Risks and Costs.”

17. https://www.cdp.net/cdpresults/review-2011-2013-usa-disclosures.pdf

18. Ecodesk: https://www.ecodesk.com/

19. http://www.ghgprotocol.org/standards/corporate-standard

20. http://www.ihgplc.com/index.asp?pageid=74

21. Microsoft, Becoming Carbon Neutral, 2012 http://download.microsoft.com/download/1/A/C/1AC87972-4DC7-43F2-92A8-8B159C3C8E77/Microsoft_Becoming%20Carbon%20Neutral.pdf.

22. http://www.ihgplc.com/index.asp?PageID=116&NewsID=3238

23. http://www.ihgplc.com/files/pdf/2013_cr_report.pdf