Carbon management: a step by step guide

Using Apple Inc. as a case study

By Junying Lou

Introduction

The world has witnessed a string of climate disasters in recent years. In the United States alone, there have already been 10 extreme weather events with losses more than $1 billion each in 2020 (NOAA, n.d). China is currently dealing with the worst flooding in more than 20 years that affected about 55 million people (He, 2020). Australia’s 2019-2020 bushfires have destroyed 2,000 homes and 11.2 million hectares, equivalent to nearly half the area of the United Kingdom (Green, 2020). The list could go on, there is no doubt that climate change has become more palpable for people around the world.

Climate scientists have confirmed that “human influence on the climate system is clear” and “warming of the climate system is unequivocal” (IPCC, 2014, p. 2). The urgency of climate actions has called for more effective carbon management from the public and private sectors.

Carbon management is about taking steps to measure and manage greenhouse gas (GHG) emissions within your organisation and extend the reduction of emissions across your supply chain (FDF, 2008, p.8).

What is in it for me as a business?

Saving the planet alone may not be a compelling enough reason for organisations to commit to carbon management. That is why it is important to highlight that carbon management does make a good business case in the following areas (Zhou, 2020, pp. 91-96):

1. Cutting cost: carbon management will open up opportunities for organisations to identify cost-saving areas within and beyond its direct operations through improved energy and resource efficiency.
2. Reducing regulatory risks: more and more countries are adopting ambitious climate targets which will translate to more stringent regulatory requirements for carbon emissions.
3. Responding to stakeholders’ interest: increasingly stakeholders are showing interest in corporations’ effort to combat climate change.
4. Improving competitiveness and promoting innovation: through the process to achieve ambitious carbon reduction targets, corporations will catalyse the transformation of operational practices and adoption of new technologies.

Getting started: setting up a management system

Setting up a management system for carbon management, which includes policies, processes, and frameworks will ensure the credibility of recorded data and results.

Just like any other strategic initiatives, it is imperative to obtain buy-in from the board and senior management. The leadership and oversight at the top level can help secure necessary financial and human resource for the effective implementation, evaluation, and continuous improvement of the organisation’s carbon management plan.

Cross-functional working teams from all levels of the organisation shall be formed with responsibilities clearly defined and allocated. Some common roles include collection, compilation, and reporting of emission data; management and monitoring of carbon reduction initiatives; and staff awareness and education. Other key internal processes, such as procedures to govern data quality, need to be put into place.

What are the key steps?

With support from a well-designed management system, an effective carbon management plan normally involves “measure- reduce- extend” (Cambridge Programme for Sustainability Leadership/Business in the Community, 2009, p. 4)

Step 1: Measurement

When it comes to management, we all heard about “what gets measured get managed”, and this is particularly true for carbon management. To develop an accurate baseline GHG inventory requires identification of emission sources and collection of activity data for conversion to emission data.

Before starting the actual measurement, organisations need to decide on a few things:

Standards to follow for the emission measuring purpose: the most commonly known standards to corporations are ISO 14064-1 and The GHG Protocol Corporate Accounting and Reporting Standard, but there are also other industry-specific standards available.

Organisational boundary: A corporation with a complex organisational structure, such as having multiple subsidiaries, joint ventures, associated companies, etc. needs to determine which parts of the businesses to be included. This largely depends on the approach it selects to consolidate GHG emissions: the equity share approach or the control approach (WBCSD/WRI, 2004, pp. 17-19).

• Under the equity share approach, a corporation accounts for the share of GHG emissions from the operations according to its share of equity owned. This approach best reflects the risks and rewards a corporation is exposed to from a certain operation, but performance tracking of operations that it does not have control over can present challenges.
• Under the control approach, a corporation accounts for 100% of the GHG emissions from the operations it has control over. The corporation needs to choose between either the operational control or financial control. While operational control is more compatible with government compliance programmes and more appropriate for performance tracking, this approach may not fully reflect the commercial reality of the reporting corporation.

Operational boundary:  The operational boundary (Scope 1, 2 and 3) is defined at the corporate level after the organisational boundary is decided, this step determines the scope of emissions to cover.

• Scope 1 direct emissions are emissions from sources that owned or controlled by your corporation, including emissions from company-owned vehicles, boilers and furnaces, and emissions from chemical processes, etc.
• Scope 2 indirect emissions are a special category of indirect emissions that are associated with the generation of electricity, heat, or steam that is purchased and used by the corporation.
• Scope 3 indirect emissions are everything else, emissions that are a result of the activities of the corporation, including both upstream and downstream. Scope 3 is an optional reporting category, however, more companies are increasingly interested in measuring and managing their Scope 3 emissions. For example, Apple has been publishing its Scope 1, Scope 2, and Scope 3 carbon footprint in its environmental progress report.

Source: Apple’s Environmental Progress Report 2020

If it is your corporation’s first year in this journey, it means a lot of hard work that can be separated into the following oversimplified and broad categories:

• identification of emission sources
• collection of primary and secondary data including activity data and conversion factors
• conversion to emission data
• and compilation of all data to be reported at the corporate level

Step 2: Reduction

Once the baseline GHG inventory is set, it can be used to guide future actions. Organisations may also find it a golden opportunity to uncover emission hotspots during the measurement phase they wish to concentrate their reduction effort on.

The corporation may consider setting a carbon reduction target to demonstrate its commitment. The carbon reduction target can be absolute or intensity target. The latest development with target setting is the adoption of science-based target among leading companies. According to Science Based Targets initiative (SBTi), a science-based target is defined as targets “in line with what the latest climate science says is necessary to meet the goals of the Paris Agreement – to limit global warming to well-below 2°C above pre-industrial levels and pursue efforts to limit warming to 1.5°C.” (SBTi, n.d.)

It is also important to decide the boundary of your target. As a minimum, the target should be set for Scope 1 and Scope 2 emissions, but since for the majority of sectors, the largest portion of a company’s emissions is Scope 3 emissions (Labutong, 2018), many companies are looking beyond their core operations to set Scope 3 targets. Apple, for an instant, recently announced that it will be 100% carbon neutral for its supply chain and products by 2030. (Apple, 2020)

To achieve carbon reduction targets, a series of carbon reduction programmes shall be devised and implemented. It is worth noting that carbon reduction activities can range from free to very low costs, such as simple user behaviour change like switching off when not in use, to high costs, such as investment in energy efficiency equipment.

We use Apple as an example to explore the wide range of projects and programmes a corporation can consider for emission reduction purpose. The selective projects Apple implemented are discussed in the hierarchical order of carbon management, which is first to avoid or reduce emissions through conservation and efficiency, then to eliminate emissions by switching to renewable sources of energy, and lastly to sequester or offset any residual emissions. (Second Nature, n.d.)

Source: RMIT University Carbon Management Plan

• Avoid and Reduce

With an understanding of where the company’s biggest climate impact occurs, Apple prioritises low-carbon design of its products, at both manufacturing and product-use stages. The improved manufacturing processes that led to higher material efficiency, combined with the use of low-carbon materials like recycled materials, have reduced carbon emissions associated with Apple’s products, for example, it is reported that a 63% decrease in Apple’s aluminium carbon footprint is achieved compared to 2015.

Energy efficiency in Apple’s buildings is another focus area. It is reported that energy efficiency audits of buildings were conducted to identify system improvement opportunities, followed by energy efficiency measures. Apple estimates that its energy efficiency programme along with new building design can save about 7,500 metric tons of CO2e per year.

Apple’s At Home Advisor programme allows AppleCare customer service employees to work from their homes, and this single programme avoided nearly 22,000 metric tons of CO2e emissions in the fiscal year 2019. For other employees, Apple introduced a bus commute programme to reduce the use of single-occupancy vehicles and offer campus bicycles which resulted in an over 6,000 metric tons reduction in the fiscal year 2019.

• Substitute

According to Apple’s report, it has generated or sourced 100% renewable electricity for its global facilities since 2018. The was achieved through Apple’s renewable energy programme, which took a blended approach that involves owning or investment in onsite and offsite renewable projects, entering into power purchase agreements, and purchasing market RECs. Since renewable energy has been the sole source of Apple’s electricity, its Scope 2 emissions were reduced to zero.

• Offset

Apple reported that starting from April 2020, it has realised carbon neutrality for corporate emissions, which include not only Scope 1 and Scope 2 emissions, but also part of Scope 3 emissions, such as business travel and employee commute. In the same report, Apple reported a total of 50,540 metric tons of CO2e for Scope 1 emissions and another 520,160 metric tons for business travel and employee commute, so how could Apple claim carbon neutrality while still generating emissions from these sources?

Source: Apple’s Environmental Progress Report 2020

The reality is that some emissions are difficult to avoid or reduce, so the last resort is to sequester or offset any remaining emissions through sequestration opportunities, Apple, for example, has been investing in projects that protect and restore forests, wetlands and grasslands that have removed enough carbon dioxide to offset the residual corporate emissions. For most organisations, it may be challenging to be directly involved in these types of projects, however, companies can still take advantage of high-quality and robust carbon credits to offset emissions.

Step 3: Extension

The last step and probably the most difficult one is to extend carbon management across its supply chain, but it is also a critical step if a corporation wishes to manage its Scope 3 emissions. To successfully cascade the strategy down to your suppliers, you need to work with your suppliers by prioritising suppliers to engage with and craft a communication plan to initiate and follow up with them, and ultimately it is about incorporating the carbon management criteria into the procurement process (Cambridge Programme for Sustainability Leadership/Business in the Community, 2009, pp. 41-44)

In Apple’s case, as 76% of its overall emissions come from product manufacturing which usually takes place in its suppliers’ facilities, Apple has been working with its suppliers through Supplier Energy Efficiency Program that aims to educate suppliers and help identify initiatives to reduce energy use and manage the implementation of the projects. Apple also supported suppliers’ reduction effort by providing funding for supplier projects, a special fund of $100 million was created for this purpose in 2019. Through Supplier Clean Energy Program, which aims to catalyse the adoption of 100% renewable electricity by its suppliers, Apple has been advocating its renewable energy policy and assisted the transition of its supplier through funding, training and other opportunities. So far, 71 manufacturing partners in 17 countries have committed to 100% renewable energy for Apple production.

References:

National Oceanic and Atmospheric Administration (NOAA). (n.d.). Billion-Dollar Weather and Climate Disasters: Overview. Retrieved August 13, 2020, from https://www.ncdc.noaa.gov/billions/

He, L. (2020, August 9). ‘Everything is gone.’ Flooding in China ruins farmers and risks rising food prices. CNN Business. https://edition.cnn.com/2020/08/08/economy/china-food-economy-flooding-intl-hnk/index.html

Green, M. (2020, January 14). Australia’s massive fires could become routine, climate scientists warn. Reuters. https://www.reuters.com/article/us-climate-change-australia-report/australias-massive-fires-could-become-routine-climate-scientists-warn-idUSKBN1ZD06W

Intergovernmental Panel on Climate Change (IPCC). (2014). Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. https://www.ipcc.ch/site/assets/uploads/2018/02/SYR_AR5_FINAL_full.pdf

Science Based Targets initiative (SBTi). (n.d.). What is a science based target? Retrieved August 14, 2020, from https://sciencebasedtargets.org/what-is-a-science-based-target/

Labutong, N. (2018, July 13). How can companies address their scope 3 greenhouse gas emissions? CDP. https://www.cdp.net/en/articles/companies/how-can-companies-address-their-scope-3-greenhouse-gas-emissions

Apple commits to be 100 percent carbon neutral for its supply chain and products by 2030. (2020, July 21). Apple Newsroom. https://www.apple.com/sg/newsroom/2020/07/apple-commits-to-be-100-percent-carbon-neutral-for-its-supply-chain-and-products-by-2030/

Carbon Management & Greenhouse Gas Mitigation. (n.d.). Second Nature. Retrieved August 14, 2020, from https://secondnature.org/signatory-handbook/carbon-management-greenhouse-gas-mitigation/

WBCSD/WRI. (2004). The GHG Protocol Corporate Accounting and Reporting Standard, revised edition. https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf

Zhou, S. W.W. (2020). Carbon Management for­ a Sustainable Environment. Springer.

Cambridge Programme for Sustainability Leadership/Business in the Community. (2009). Carbon management: A practical guide for suppliers. https://www.cisl.cam.ac.uk/resources/publication-pdfs/carbon-management-a-practical-guide-for-suppliers-1.pdf

Environmental Progress Report. (2020). Apple. https://www.apple.com/environment/pdf/Apple_Environmental_Progress_Report_2020.pdf

Food and Drink Federation (FDF). (2008). Carbon Management Best Practice in Food and Drink Manufacturing. https://www.fdf.org.uk/publicgeneral/carbon_management_guidance_2008.pdf