News & Events

Matthew Guenther, CSR Asia

Beginning on 1 July, Microsoft will implement a carbon management plan that will reduce the company’s greenhouse gas (GHG) emissions to zero by the end of fiscal year 2013. To accomplish this feat, Microsoft will introduce an internal price on carbon that is equal to current market rates. This article explores what other businesses can learn from Microsoft’s approach towards carbon management.

What is carbon neutral? Carbon neutral should not be confused with carbon zero. Carbon zero means an organisation emits zero GHG gases. I have yet to hear of an organisation achieving carbon zero, though I have read about homes that are completely off the “grid” and are carbon zero. Carbon neutral means that an organisation emits net zero GHG emissions. Although an organisation may favour reducing GHG emissions through energy efficient design or by using renewable energy, the remaining GHG emissions that it emits must be offset through the purchase of carbon credits or renewable energy credits.

"What makes Microsoft’s approach different is that it places the burden of responsibility to reduce carbon emissions on each of its business units."

Microsoft is not the first company to make a commitment to be carbon neutral. Two other notable companies with a carbon neutral commitment are HSBC and News Corporation. Both have achieved this through the purchase of carbon offsets. What makes Microsoft’s approach different is that it places the burden of responsibility to reduce carbon emissions on each of its business units.

In a past newsletter article, I discussed the merits of companies adopting a carbon disclosure approach that placed a monetary value on a company’s GHG emissions as a first step towards integrated reporting. The price of carbon is representative of the external environmental costs associated with a company’s operations. By placing a price on carbon Microsoft is internalising its external impacts and is taking responsibility for its environmental impact. With this carbon neutral plan Microsoft has not only adopted such an approach, but has taken it a step further by placing responsibility for the reduction of its carbon emissions on each business unit around the globe.

Microsoft’s carbon neutral approach is founded on three pillars: Be Lean; Be Green; and Be Accountable. Be Lean revolves around improving the energy efficiency of its operations from reducing office energy use to reducing air travel. Be Green is about investing in renewable energy through long-term purchase agreements or investing in new renewable energy projects and reducing its waste and water footprint. Yet, it is pillar number three, Be Accountable, which is the innovative aspect of Microsoft’s carbon neutral approach.

Through an extensive and detailed carbon management system, developed by CarbonSystems, Microsoft will hold each of its business units accountable for every metric tonne of carbon emitted. At the end of the fiscal year every business unit will be required to pay for the carbon it emits. The money will go towards a global pot that Microsoft will use to purchase carbon credits or renewable energy credits; thus, making Microsoft carbon neutral. Introducing an internal carbon price incentivises its business units to find cheaper and alternative ways to cut their carbon emissions rather than pay the price of offsetting its emissions.

For any CSR strategy to work, internal management buy-in is a pre-requisite, but maintaining momentum on CSR strategy is also very important. Prior to embarking on its carbon neutral strategy, Microsoft created internal buy-in from its managers to ensure that this is the right approach for the company. Many companies may do this, but if the business units lack an incentive to comply with a CSR strategy, then momentum for the strategy may dwindle. By setting a carbon price Microsoft has also solved this issue of momentum loss. Business units cannot hide from the carbon price and their accountability in Microsoft’s global CSR strategy.

To echo CSR Asia’s Chairman, Richard Welford, “The role of management is not to solve problems, but to ensure problems are solved at the appropriate level.” By placing the burden of responsibility on its business units to find solutions to cutting carbon emissions, Microsoft is implementing this approach in its carbon management. Microsoft’s business units are in the best position to find solutions to their emissions of GHGs. Companies should take note of Microsoft’s carbon neutral plan and think about how a similar approach of creating internal incentives could assist in maintaining momentum on thier CSR strategies.