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The role of HR in managing workforce CO2 emissions
a Vizual white paper
There is hardly a boardroom in the country that hasn't at least discussed reducing its CO2 emissions in the last year. But relatively few companies are able to measure and manage their environmental impact successfully. Here we examine the issues and reveal how HR has a role to play in managing your business's carbon footprint.
Scarcely a day goes by when we fail to be bombarded in the media by news of climate change. Indeed the impact of CO2 emissions on our environment, weather patterns, biodiversity and on humanitarian issues is already tangible. It is, however, sometimes quite difficult to see how this relates to individual choices we make in our lifestyles and, for our businesses, what corporate strategies and business management processes we should follow to reduce and manage our CO2 emissions.
This paper examines why businesses cannot afford not to appraise and manage their CO2 emissions. Ignoring the stark warning of the climate change these emissions bring poses a serious threat to commerce in both the short term - from loss of company market share and business value - and in the longer term - from loss of overall market.
In this white paper, we examine some current business strategies and processes commonly used to manage CO2 emissions which - despite their good intent - often fail to make a difference. We identify a real need for clear leadership of carbon reduction and management programmes in today's companies. We propose new solutions for effective management of carbon emissions that make use of modern business tools and best practices. And we show how HR has a role to play in this transformation.
Every business can make a difference in combating climate change and there is a need for the UK and other developed nations to lead by example, ahead of legislation. Successful businesses will tackle climate change by rolling out simple strategies, engaging staff from across all functions and using incentive management schemes to sustain commitment. We propose that in-house HR departments have a key role to play in helping devise and implement these strategies. In many businesses, the workforce are the biggest contributors to CO2. If you are going to reduce these outputs you will need to change behaviour - changed behaviour will subsequently bring reductions in emissions and costs.
With this in place, businesses will also benefit by ensuring their own sustainability, reducing their overheads, and encouraging happier and incentivised staff. We believe that by leading by example, we can make commerce globally change behaviour and with all our participation climate change will start to recede.
Why carbon emission reduction is vital to your business
In its recent report, the Intergovernmental Panel on Climate Change (IPCC) makes its conclusion that the current and increasing global temperature is a direct consequence of man's actions and addiction to burning fossil fuels. Temperatures are projected to rise by over two degrees centigrade by the year 2100. Although this may seem hard to put into context, the delicate nature of our ecosystems means the damage caused by rising temperatures is already visible in rising water levels, melting ice caps, a reduction in biodiversity and unheard of weather patterns reeking havoc on us globally. There is also a new humanitarian tragedy of environmental refugees - people displaced from their homelands due to rising waters which have caused complete destruction of their homes and livelihoods. This will only increase unless significant steps are taken globally to reduce emissions.
The environmental and humanitarian consequences of climate change are tangible, though the impact on business and commerce has only recently come under focus. Sir Nicholas Stern's report for the UK government risk assessed the impact of climate change for the first time and forecast that our economy would be damaged by 20% if we fail to take action. Stern also showed that the challenge of climate change could be addressed for the minimal cost of about 1% GDP - which seems a very low price to pay. Furthermore, Stern acknowledged significant upsides for businesses that respond to the climate change challenge - new opportunities for wealth creation exist for those that position for the new environment market. For those that take steps to reduce their CO2 emissions, there will be significant ongoing cost savings. In this way reducing and managing CO2 emissions makes business sense.
Every business emits CO2 - through its business administration, its product manufacture and distribution activities and these all contribute to climate change. It is surprising how few businesses are aware of the emissions they make. For example the distance travelled and the mode of transport used on every employee’s commute has a significant impact on an organisation's carbon footprint. Yet very few businesses even attempt to measure their employees’ travel to work as part of their assessment of how much of carbon is burned or emitted as a result of their business.
A useful measure of a business's impact on the environment is called a 'carbon footprint' - this is a
measure of CO2 (and equivalent green house gases) emitted by a business over a period of one year, usually measured in tonnes. Although databases benchmarking business carbon footprints are currently scarce, most companies have footprints of more than five tonnes per year, per person and need to reduce this by at least 20% to make a difference to climate change. If we all did this we would easily meet Tony Blair's pledge to reduce UK CO2 emissions by 20% by 2010, which at present seems a huge challenge.
It is sometimes levelled that carbon footprint reduction is too expensive for businesses to achieve - but this is a complete misconception. Most businesses can reduce their carbon footprint significantly merely by adopting better energy management practices (and in doing so significantly reduce their utility bills) and changing employees' travel habits. This can simply be achieved by encouraging a change in staff behaviour - such as implementing 'lights off' policies, encouraging employees to walk to work and replacing some business trips with audio or video conference calls.
A further challenge made is that businesses acting unilaterally cannot make a difference to climate change. Again this is a smokescreen, as once a business adopts successful CO2 reduction programmes, it will influence its competitors to do likewise to 'stay in the market'. Furthermore, there is good evidence that end-user/supply-chain purchase decisions are being made on the basis of the suppliers’ environmental credentials. In this way, by going green your business will ensure defence of its market share - which makes good business sense. In addition, if multiple supply chains all reduce their carbon footprints around the globe, substantial impact will be made - with or without 'carbon quota' legislation.
Committing to carbon emission reduction will save you money. Once corporate behaviours have started to change this will influence how employees act. For example, they will conference call instead of flying, switch off lights when they are not in use, walk to work instead of driving and so on. Whilst each of these actions on their own may not save a business much money, extrapolated across the entire organisation over a one year period it will have a dramatic impact on the bottom line. Closely related to this is how CO2 emissions reduction can make you money. There is no doubt that consumers are more attracted to companies who are environmentally aware and are doing something about it, especially if they have achieved carbon neutrality. There is increasing emphasis on 'greening' the supply chain and purchasers are now looking at the environmental credentials of suppliers. Not being 'green' can cost you business.
Furthermore, stakeholders will demand CO2 emissions reduction. Recently FTSE, the stock exchange index company, changed its criteria for membership of the FTSE4Good index. There are approximately 300 companies in the UK in this index and from February 2007 the new criteria insist that member companies commit both to implementing systems for monitoring carbon emissions and to a CO2 emissions reduction of 2.5% per annum. As a result of this rule change a large number of companies were forced to leave the index, which in turn means their shares are excluded from ethical funds, a fast growing area of investments.
Finally, and most importantly from an HR perspective, your workforce will demand CO2 emmissions reduction. As individuals become more environmentally aware they will want to see this reflected in the company they work for and new hires are more likely to be attracted to employers with strong carbon emission reduction credentials.
How companies measure their carbon footprint
The normal methodologies for measuring a company's carbon footprint involve an initial audit carried out by specialist environmental assessors.
The sources of carbon emissions are identified and an assessment of the carbon outputs made. Generally these assessments are broad-brush and, arguably, not very accurate because they make generalised assumptions when calculating the carbon emitted. The shortcomings of this approach are further compounded because these assessments take place at a single point in time and may not be repeated frequently, making it almost impossible to track emissions over time or by specific function or department.
Why the current ways of managing your carbon footprint often fail
The good intentions of many companies to manage their environmental impact, from SMEs to large corporations, often fail and we examine below some of the common pitfalls every business needs to be aware of and avoid.
Lack of ownership
Emissions management does not always have an obvious home. Some allocate to facilities management, others think it should be owned by operations. Often the finance department has better access to data that's needed but is overlooked. More often than not, the programme is passed around functions regularly and fails to get traction in the organisation.
Lack of engagement
As emissions management can lack a permanent home, communication to and motivation of staff is often poor. Without regular updates in company briefings, emails etc, staff have no yardstick to measure their progress. Often no recognition is made of team achievements and little by way of incentives are offered to staff. This results in poor engagement from employees, a lack of change of behaviours and therefore minimal results. However, if you can measure emissions accurately, especially down to employee or department level, then it becomes possible to incentivise the workforce to change and to keep your staff engaged. Underpinning all of this is how the data is collected. If this process is complicated, difficult to understand or increases an employee's workload, then the workforce is less likely to fully engage with a programme.
If it's difficult people aren't going to do it…..
WRI, a US-based organisation focused on Climate Change, was committed to reducing CO2 emissions across its workforce of 140. As part of this process they chose to collect commuting data from their staff by issuing a questionnaire in a spreadsheet format. After two years they only achieved a 48% participation rate. By moving to a simplified web-based questionnaire they got participation to 65%.With further refinement to improve user friendliness and reduce the time to complete the survey to less than one minute, employee participation was increased to 88%.
The difficulties of accurate data collection
To make the initial calculation of your business's CO2, companies need to find and collate quality data and do this at least annually. Many businesses struggle to find and consolidate data from areas which are often dispersed across several functional departments, such as utility energy consumption, business travel and distribution or freight mileage.
A recent study by Christian Aid concludes that in the UK businesses are under-declaring carbon emissions significantly. They found that if all FTSE 100 companies were to properly report their emissions they would have to declare a further 190 million tonnes of carbon, almost a third again of the current declared level. For example, some businesses focus solely on business administration emissions and completely overlook the impact of their transportation use - for many businesses this is both where the emissions are and where the excess cost lies.
> Those businesses that do calculate the environmental impact of their car fleets often make broad-brush estimates on mileage and emissions that hardly relate to reality. The downside to this is that it stops the company from making valid conclusions and from formulating actionable plans to reduce the impact.
> Those businesses that do measure their environmental impact are often unclear of what reductions they should be aiming for in a good business - both overall and by department or function. Without this benchmarking and granularity it is difficult to establish actionable emission reduction plans.
> Companies often lack the requisite technologies or products to be able to measure emissions by department / function and perceive them to be expensive.
> If a business sets itself the target of reducing emissions over time, then the more regularly the management can see snapshots of their emissions the better they can manage it. The current methods of CO2 measurement, whereby there is an initial audit followed by other assessments six or 12 months later, are too inaccurate and / or too far apart to be of any use to a management team committed to carbon emission reduction.
> There is lack of granularity in the current approaches to carbon emission management. The broad-brush approach means that data is not only inaccurate but it makes it virtually impossible to attribute emissions accurately back to individuals or departments.
If you cannot measure it how can you manage it?
Many carbon footprint calculations are based around generalised assumptions of the carbon emitted by the vehicles rather than applying the specific CO2 rating for each vehicle. For example, a business with a car fleet of 10 vehicles as follows:
1 S500 Mercedes Auto
1 Audi A6 2.0l Auto
2 Ford Mondeo 2.0l manual
4 Ford Fiesta 1.4 manual
If each of these vehicles travels 20,000 km per year on business then the carbon footprint could be calculated in two ways: using a generalised emission for all vehicles; or more correctly, by applying the correct CO2 rating for each vehicle. Using the first approach the total CO2 emissions would be calculated at 44.40 tonnes over a year, whereas using the more accurate calculation the CO2 emissions would be calculated at 31.48 tonnes - giving a 29% variance. When variances like these are calculated across larger fleets and calculations extend to include commuting to work, one can begin to understand the scale of the problem caused by inaccurate measurement.
The role of HR in carbon emission management
Since it has become a topical issue, carbon emission management has always struggled to find a champion in the business - especially where it relates to the workforce. In some organisations it is managed by facilities, others may have an environmental manager. In others, interestingly, carbon emissions recording is the responsibility of marketing and communications.
We believe, strongly, the responsibility for the management of data relating to the carbon emissions of the workforce should rest with HR. As the custodians of the workforce data, HR is best placed to communicate strategy, influence and change behaviour and to put effective systems in place to collect and collate emissions data.
Effective reduction and management of your company's carbon footprint starts with having great sponsorship at the highest level of your business.Your company's sustainability depends on it - so it is imperative for your MD or CEO to get behind your programme, support and sponsor it. HR is a strong influencer and should use its status to secure this senior commitment.
HR has a critical role to play in data collection. The fastest and easiest way to improve workforce -related carbon data is through employee self-service and should be integrated with any e-HR plans you devise or implement. If you make it easy for your workforce to provide information then it will be easier to collect.
Communication of carbon strategies and management is critical - starting with the need to devise and implement policies that both change and reward staff for adopting behaviours and how these are communicated to the workforce. Being seen to be an environmentally aware organisation with clear actions helps with motivating employees and attracting new recruits.
At the heart of successful carbon emission management is your workforce - it is only with their engagement that you will ultimately make the changes and savings for both the environment and the company's bottom line. For this, your teams need an appropriate level of incentive and this has to be reflected in you compensation and benefits plans.
First and foremost we believe it is imperative to choose the right strategies for your business - once this is done, you must make sure your company puts the right policies in place to support them and that these are well socialised with your teams.
Did you know?
A PC monitor uses 51kWh of electricity per year (about the same as 500 boiling kettles). If you were to turn off two photocopiers and three printers over one year it would save about five tonnes of CO2.
If 20% of business travel in the EU was replaced by nontravel solutions such as video conferencing then 22.35 million tonnes of CO2 would be saved each year.
If 50% of workers in the EU replaced one physical face-to-face meeting with an audio conference call then 2.1 million tonnes of CO2 would be saved each year.
Heating and hot water can account for up to 60% of a building's total energy costs. Every one degree rise in office temperature adds 8% to your energy bill. Setting lower temperatures in corridors and storerooms can have a major impact. Turning off lights in empty rooms and corridors can save 15% on your energy bill.
If 10% of workers in the EU became home-workers then 22.17 million tonnes of CO2 would be saved each year.
Source:ETNO/WWF
New solutions for accurate measurement and management of your carbon footprint
Once your business has decided on its strategies, the need is for excellent implementation.We believe that HR should lead this initiative, or at least play a major role.
Key considerations for emissions management are summarised below.
> Make clear decisions on ownership and sponsorship of your company's emissions programme. This should be communicated via a web-based communications portal.
> Build awareness and commitment to programme targets with your teams via a managed communications programme.
Little steps…
The International Community School based in central London has recently introduced a scheme to incentivise staff to change their commuting habits. If staff walk or cycle to work they receive an extra £5 per week, paid every quarter. If they choose to come by train or tube they receive a reduced amount and those travelling by car or taxi do not receive anything extra.
> Ensure that reduction targets are realistically achievable - overstretched targets that are never reached are demotivators and will derail your programme.
> Make realistic budgets available to fund employee incentive schemes - their commitments will rapidly payback the company's investment.
Collect and monitor data using an effective system
> Data needs to be collated at a central point from multiple functional areas of the business, measured, interpreted into meaningful information and regularly communicated.
> Introduce a business information system, ideally driven from your workforce data, to provide a 'one stop shop' to enter, manipulate and manage your data. The tool should be web-based and accessible to all from home or work, so that each individual takes ownership for his own personal data. If this system enables employees to see their personal carbon footprint, at any point, then so much the better. If you have an intranet it should be integrated with this so employees can log in without the need to re-key password and user names. This system can work in tandem with your existing HR information system, if you already have one in place.
> Functional and department managers will have additional responsibility for data entry for their own areas. Again, making it easy to input data will help secure 'buy-in' from line managers.
> Use the information system as accurately as possible to ensure your carbon emissions are precise, credible and actionable. If you can report monthly then you should.Your system should be capable of collating and 'pushing' reports without the need to constantly interrogate the system.
> Encourage regular updates of data sets - where possible this should be done seamlessly with other business functions. Rather than making it an extra task it should be integrated with other processes. For example, if an employee is going to submit an expense claim, and if is done using the same system, the carbon calculation should be extracted automatically without causing the employee to undertake any extra work.
> Remember to include the commuting patterns of employees. Any system you put in should allow you to create employee commuting profiles. If an employee follows the same pattern then these need only be entered once and automatically added to any carbon emissions analysis. This has the added benefit of helping change employees' behaviours outside of work, bringing additional benefits to the community footprint.
Communicate your progress regularly – internally and externally
> Measure the company's results regularly and make a dashboard available to managers and directors so they can see achievements against KPIs.
> Make use of different reports to show performance by team / department / company / location.
> Relate CO2 savings to money savings wherever possible - particularly when communicating with your management team and investors.
> Frequently and visibly reward teams or business units making significant progress.
> Promote your company successes through the local press - this will motivate your staff and benefit your company's image as a responsible employer in the local community.
Offsetting as a carbon management option
The ultimate solution to climate change will occur through significant reductions in CO2 emissions. This is the first step that every responsible organisation should take.We also realise that reduction to zero is not possible for every business, due to essential operational functions or distribution needs for example. In these cases, carbon offsetting provides a pragmatic means to further reduce impact on the global environment.
Offsetting is a way of compensating for the emissions caused by funding a reduction to be made elsewhere - often in another part of the world. The process of carbon offsetting involves two steps: first a calculation of your carbon footprint; and second, buying 'carbon offsets' from emission reduction projects. Such projects will prevent / have already prevented or removed an equivalent amount of carbon dioxide elsewhere in the world. As CO2 emissions are distributed across the world, it does not matter whether you make the reduction in Manchester or Mumbai - the positive effect on the environment will be the same.
Developing carbon offset legislation: what is DEFRA’s "code of best practice"?
The UK's Department for the Environment, Food and Rural Affairs (DERFA) has initiated a consultation process to look at developing a voluntary code of best practice for carbon offsetting. The main aims of establishing a best practice code are to:
> Educate people about offsetting and its role in addressing climate change.
> Enable people to make choices about offsetting.
> Increase consumer confidence.
> Show offset providers the quality and verification standards to which they should aspire.
DEFRA's code of best practice is focused towards consumers, and there are no plans as yet by DEFRA to role this out to businesses. Whilst writing this paper (March 07) the draft "code of best practice" had been issued for a consultation process. The code is due for release at the end of the 2007.
There are two broad classes of carbon offsetting products - certified emission reductions (CERs) and voluntary emission reductions (VERs)
Certified carbon credits are traded on international climate exchanges and bring benefits of being fully traceable. Carbon credits can be purchased through the climate exchanges and have been generated by companies selling their unused credit allowance on to the market, where they would otherwise be traded on to other companies to help them to meet their emissions targets. By retiring these credits you are encouraging organisations to continue to make savings of CO2, and pushing the market to make it increasingly expensive for polluting companies to buy more credits.
Clean Development Mechanism (CDM) projects are another form of CER product - these are major CO2 reducing programmes being run in developing countries around the world, and are approved by the United Nations (UN).
Voluntary carbon credits products include tree planting programmes and various energy efficiency or renewable technology programmes, that tend to be smaller than the CER programmes. They can lack the same rigorous certification of CERs, but often provide additional humanitarian benefits and are often less costly. Tree planting reduces CO2 by a process known as carbon sequestration - i.e. trees "breathe in" CO2 and exhale harmless Oxygen. Trees have further benefits of providing sustainable eco-environments.
They provide habitat for wildlife, encourage biodiversity, beautify landscapes. In developing countries, they also support community sustainability by encouraging sustainable land management and build wealth creation.
There are also international energy saving projects, which reduce CO2 emissions by donating clean technologies (e.g. low energy lightbulbs) to developing countries. Again, further benefits include raising awareness of climate change and encouraging sustainable living in developing communities (as well as further humanitarian benefits). For the voluntary projects, it is important to carry out some due diligence to ensure the project will meet your own goals and that it will stand up to environmental scrutiny. As a checklist you should consider:-
> Would these emissions have been reduced or taken out of the atmosphere without our specific funding?
> Are the projects being independently verified and audited?
> Are the carbon savings measurable? In addition, for the tree planting programmes, you should ensure that the trees being planted are indigenous and in keeping with the local environment. Make sure the trees will be looked after and are on protected land. Finally, consider what will happen at the end of the trees life – if the wood is used for construction timber or for furniture, for example, then the carbon will be locked away beyond the tree’s life.
For your company offset programmes provide benefits of:
> Excellent PR opportunities.
> Improved staff morale.
> Improved local profile of your company - helping to attract and retain more high calibre employees.
> Raised profile for your brand and products as being 'carbon zero'.
Conclusions
> Climate change is the biggest challenge mankind faces today.
> Climate change will have huge impact on your business sustainability unless you take action now.
> Corporate carbon reduction strategies and management programmes require sponsorship at the highest level of your organisation and HR has a major role to play in this.
> HR is the most effective function in terms of data collection, measurement, communication and incentive management.
> An accurate measure of your business carbon footprint is the vital first step to reducing and managing your carbon emissions - an effective web-based system that is easy to use can help deliver this in near real time.
> By reducing, offsetting and managing your footprint, you will not only help prevent climate change but save money, build and retain brand image, defend your market share and have happier investors, colleagues and lower staff turnover.
References
The Greenhouse Gas Protocol - WRI
Saving the Climate @ the Speed of Light - Etno/WWF
The Resource-Full Greener Office Guide
Coming Clean: Revealing the UK's true Carbon footprint - Christian Aid
Carbon Disclosure Project Report 2006 - Trucost
Government Position Statement on Environmental
Management Systems - DEFRA
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