What Is a Carbon Footprint of a Company?

Carbon footprints can linger longer than those on a beach.

A footprint is a mark left upon a surface when walking. A carbon footprint is the carbon dioxide emissions (CO2e) that result when fossil fuels are burned; although not visible, carbon emissions leave a mark upon the environment. A company's carbon footprint is the total sum of the carbon emissions used during operations and includes emissions that result from manufacturing and transporting products in addition to those that result from heating and powering company buildings.

Carbon Costs

Factories contribute greatly to a firm's carbon footprint.

Why would a company want to identify their contribution of carbon emissions to the atmosphere? Because the U.S. Environmental Protection Agency (EPA), the Securities and Exchange Commission (SEC) and international insurance companies are requiring greenhouse gas inventories. Carbon dioxide is a greenhouse gas contributing to climate change. The EPA is using this information to identify CO2e sources and come up with programs to prevent human health and environmental harm. The SEC is using greenhouse gas inventories to assess a company's exposure to climate change risks. Insurance companies use the information in their actuary models to develop appropriate premium amounts.

Carbon Trading

Trading carbon allowances puts a free-market mechanism in place to reduce pollution.

Carbon inventories are mandatory for major sources of CO2e, for instance, utility power plants. Cap and trade is a system by which the EPA will place a cap on allowable limits of CO2e. Once a cap is in place, trading can occur between those major sources that exceed their limit and those that come in under their limit, on an annual basis.

Offsets

Adding forests can mitigate a company's pollution.

Trading is one mechanism that can be used to offset a company's CO2e. Other offsets include forestry projects that take carbon out of the atmosphere as trees grow. A company can decrease its carbon footprint by purchasing sustainable forestry projects and including their carbon absorption factors in their overall footprint calculations.

Corporate Image

Corporations friendly to the environment can fare better.

Most consumers are willing to pay more for products created with environmental and socially conscious methods. A low carbon footprint can be a great marketing tool. A company that transitions to renewable energy sources for products and services will advertise its environmental benevolence, but a company has to know its carbon footprint first.

Net Zero

Some very innovative businesses are trying to become net zero companies, meaning they will run their company in such a way as to offset any carbon emissions with carbon-free energy sources. For instance, a skin care company could use wind power to manufacture its products, biodegradable packaging and natural gas powered vehicles to transport its products to market (natural gas emits fewer carbon emissions than oil). It may still use carbon-based energy sources for other aspects of its business, but the renewables and low carbon energy sources decrease the company's overall carbon footprint.

References

• SEC Commission Guidance Regarding Disclosure Related to Climate Change
• EPA Greenhouse Gas Inventory

Resources

• ENVIROWORDS