By Peter Shmigel, Director Sustainability

There is a powerful new brand in town called “carbon neutral”. If your organisation is thinking of associating itself with this brand, it’s worth thinking about what “carbon neutrality” represents – and even more importantly - what it may not represent.

When you do that, you might find that in some cases the “carbon neutral cart” has been placed before the horse that is hard work toward genuine environmental improvement. Smart companies in this space will be the ones with “horsepower” and not just hype.

Let’s start at the beginning. The notion of “carbon neutrality” holds that through its activities an organisation has no net effect on carbon levels. Whatever “baddies” it emits into the atmosphere, it cancels out, negates or “neutralises” through the creation of “goodies”.

The “goody” that currently gets the most press is the purchase of “carbon offsets”, which is essentially investing an organisation’s money through a third party ( a “carbon offset provider”) in beneficial projects, such as the development of renewable energy technology or reforestation.

In my own view, this approach is well intended, but it certainly can’t be the only way a company tries to do the right thing. Indeed, it’s not surprising that there’s increasing community and stakeholder skepticism about “carbon neutrality”. The satirical and activist-run website www.cheatneutral.com foretells what’s to come about corporate “carbon neutrality” when it’s not matched with more substantive approaches. As Cheatneutral says:

“When you cheat on your partner you add to the heartbreak, pain and jealousy in the atmosphere. Cheatneutral offsets your cheating by funding someone else to be faithful and NOT cheat. This neutralises the pain and unhappy emotion and leaves you with a clear conscience.”

It’s plausible that an organisation could still call itself “carbon neutral” even if it was intentionally increasing its energy use and its greenhouse gas emissions - as long as it was willing to buy enough “offsets”. Do such practices actually substantially decrease the rate of global warming and make the world significantly more sustainable? I’d be very interested to see some serious modelling that can make the case.

Another concern is the accuracy of the very term itself. “Carbon neutrality” implies that an organisation has very systematically calculated all its greenhouse gas emissions (its “footprint”), very accurately recalculated those emissions into carbon equivalents (“conversion factors”), and very carefully matched / picked valid projects into which to put its money (“offsets”). Assumptions usually need to be made and they need to be of the most conservative variety.

Achieving “carbon neutrality” is simply not as easy as using some on-line calculator and then handing a cheque to some green entrepreneur for some anonymous projects. Indeed, the carbon offset market is a new and emerging one. Like most new and emerging markets, it has its share of snake oil specialists, trying to make a quick buck before the inevitable regulations are introduced. The better players in the sector are pushing for high standards of self-regulation and the ACCC is also having a look.

Even the spin doctors are cautious. The UK’s Chartered Institute for Public Relations has issued a draft “Best Practice Guidelines for Environmental Sustainability Communications” that (rightly) state the following:

“Many consumers believe that being carbon neutral denotes good environmental practice, where as this could actually mean that a company has bought themselves a good reputation - drawing a green halo over their brand. Quoting being ‘carbon neutral’ needs to be used carefully, particularly with regards to carbon off-setting as part of the process.”

Given these issues, Parker & Partners’ counsel to clients who want to legitimately participate and position in this space is based on what we’re starting to call the carbon management hierarchy of priorities: reduce, renew, & replace.

• Reduce. Most organisations can make significant strides in lowering their energy usage / greenhouse gas emissions – often with a financial payback. Indeed, from an international and national policy standpoint, the benefits of energy efficiency are too often overlooked – probably because fewer people will make money from it.
• Renew. Choose to get your juice from certified GreenPower sources and directly support the renewable energy sector – rather than through middlemen that inevitably add to the transactional costs of the sector.
• Replace. Once you’ve applied the above two strategies, and lowered your impact on the natural environment, consider “offsets” as a way to achieve neutrality for your remainder emissions and to generally support a transition to a lower carbon future.

For good measure, I’ll add another R – for Research. Namely, if you are going to use “offsets” as one component of a total package, be sure to research several key elements. Asking hard questions of providers will ensure the legitimacy of what you’re buying and optimise your organisation’s involvement. Here’s some sample questions:

o What procedures does the provider use to measure the “footprint” of your greenhouse gas emission generating activity?
o What does the provider count within the “scope” of your footprint? Is it site, process, or event specific or does it involve the supply chain?
o Is the provider accredited / certified / verified – both in terms of how they “footprint” and the projects that your offsets will support?
o What types of projects does the provider put your money toward? Renewable energy – what type and where? Reforestation – what type and where? Carbon sequestration – what type and where?
o Are the projects ‘additional’, eg, or, would they have happened regardless of the offset investment?
o Are the projects they support somehow relevant to your own activities and/or stakeholders?

As outlined above, an organisation actually needs to work quite diligently to legitimately claim the “carbon neutral” title. As regulators, stakeholders and the public get up to speed and exert greater scrutiny of companies’ environmental claims, the more plausible descriptor could often be “low or lower carbon” .

And, that is the heart of the matter: credibility. Credibility in what an organisation does and what an organisation claims. When it comes to corporate environmental performance and positioning, that’s the ultimate test that companies need to apply to themselves: is what we’re doing truly substantive improvement and is what we’re saying 100% true? The smart companies know that positively answering those questions goes well beyond calling oneself “carbon neutral”.