The Road to a Zero Environmental Footprint Corporation
by Kris Gorrepati
A month ago it was shortage of water in Georgia, a week ago it was the refusal of license for a coal-fired power plant in Kansas and next month will surely bring another event that seem to highlight environmental degradation and its effects on daily life of people and corporations alike. Yet behind all these seemingly unrelated incidents is a pattern that highlights increasing competition between corporations and people for scarce natural and environmental resources such as energy, clean air, water and land. Corporations have traditionally addressed Environmental Responsibility from the viewpoint of compliance. However, due to the attention and competitive intensity for environmental resources they have to now include it as a core component of their business strategy. A corporation's environmental footprint and how it reduces the footprint are now inextricably linked to it's the long term strategy, financial health and its position in the marketplace.
2. Corporate Environmental Footprint Components
Most of the focus of environmental footprint conversation so far has understandably been around man-made green house gas emissions (measured and disclosed as carbon footprint) because of their role in the acceleration of climate change. An equally important case can also be made for clean water, pollution and land footprints of companies. In environmentally fragile and distressed regions like China and India, the need to manage and minimize environmental footprint is paramount. Environmental footprint in a holistic sense includes 4 main components; energy footprint, pollution footprint, water footprint and land footprint.
Energy (Carbon) Footprint
Energy footprint is the amount of energy used by the company to support its manufacturing and daily operations. It will include all forms of energy (electricity, natural gas, fuel oil...) used in the company's plants and offices. The energy footprint is primarily expressed as carbon footprint that takes into account the energy source mix up that companies can use to reduce the carbon footprint.
Pollution footprint includes all the air, liquid and solid hazardous pollutants that the company discharges into public streams in an untreated fashion. These untreated pollutants are left to be absorbed by the natural ecosystem or treated by publicly funded treatment systems.
Water footprint includes all the clean water that the company uses to support its manufacturing and daily operations. The water footprint can be reduced by any fully treated water that the company releases into public streams.
The land footprint may not look that important from the standpoint of environmental stewardship. But when viewed from the perspective of fertile farm land or biologically diverse land lost to commercial activities a case can be made for minimizing and offsetting land footprint. The direct land footprint includes all the land used by the company to support its manufacturing and daily operations, including all the real estate.
3. Scope of Environmental Footprint
The environmental footprint of a company can be evaluated on the basis of the scope of its commercial activities. Due to the prevalence of horizontal integration and global supply chain operating models, much of the environmental footprint of a company is in fact embedded in its customer and supply chains. In order to fully account for the environmental footprint a company will have to understand the environmental footprint that is under their direct control and the environmental footprint that is indirectly driven by the company in its supply and customer value chains. Graphic of Direct and Indirect Environmental Footprint
Direct Environmental Footprint
The direct environmental footprint of corporation is the environmental footprint of the company's own manufacturing and operations. The direct environmental footprint is something that is under the direct control of the corporation and often can be quickly minimized.
Indirect Environmental Footprint
The indirect footprint of a corporation includes the environmental footprint of its supply chain and customer chain activities that are driven by the company's commercial activities. Even though most companies do not have direct control over how suppliers and customers address environmental footprint they can nevertheless influence how environmental footprint is minimized or mitigated through policies, management systems and environmentally conscious product and service design.
4. Measuring and Monitoring Environmental Footprint
Many environmentally conscious companies and companies that signed Global Reporting Initiative (GRI) guidelines report environmental footprint at an aggregate corporate level. While the aggregate corporate environmental footprint measurement and reporting is sufficient to abide by the reporting guidelines, it does not offer the insight necessary to mitigate and minimize environmental footprint. A more effective approach is to measure and monitor corporate environmental footprint at the level of detail that can be used to take actions to reduce and mitigate the effects of the environmental footprint. A corporate hierarchy that provides an aggregate corporate view as well as captures details of lower level activities and assets that result in environmental footprint would be one such approach to measure, monitor and understand environmental footprint. Once the company understands the sources, activities and extent of environmental footprint it can try to mitigate and minimize the footprint using methods that are appropriate for the localized context and economics.
5. Achieving Zero Environmental Footprint
Just as the goal of Total Quality Management driven corporation is zero defects, the goal of an environmentally responsible corporation is to have zero environmental footprint. Yet we know that it is not realistic to minimize the environmental footprint to zero as it most often leads to minimization of crucial economic activity. A more amenable strategy is to minimize the environmental footprint as much as possible without affecting economic activity and offset the rest of the environmental footprint.
Minimizing Environmental Footprint
The company should make use of every economically possible alternative to minimize its environmental footprint. The primary strategies are conservation, waste minimization, reducing hazardous and toxic substance usage and increasing efficiency. In the case of energy (carbon) footprint, the company can change the energy mix to include renewable and low carbon footprint sources such as solar, wind, hydro and nuclear. When it comes to pollution footprint, the ultimate goal of the company should be to reduce all hazardous pollutants released into the environment to zero. If this were to be impossible, which is the case for certain types of industries, the company should take all measures to contain, clean and dispose all pollutants in a manner that does not result in any environmental degradation. Companies should also make an effort to reduce the use of hazardous and toxic substances by substituting them with less harmful substances in manufacturing and products. While the usage and stewardship of water may not be high on many corporate environmental stewardship charters it is an important concern in developing countries or regions that suffer from water scarcity. Companies that use large quantities of water to support manufacturing and operations should minimize and conserve water usage. In addition, water discharges should be cleansed of all the harmful pollutants before the water joins public streams. The land footprint of many companies is not readily seen as something that causes environmental degradation directly. But when seen from the perspective of loss of biologically diverse land to commercial activities it is easy to justify minimization of land use by companies.
Offsetting Environmental Footprint
The goal of achieving zero environmental footprint purely by minimizing environmental footprint is not realistic as it will force companies to curtain crucial economic activity. By combining minimization efforts with offsetting practices companies can achieve the ideal of zero environmental footprint. Offsetting works especially well for environmental footprint components that are global in nature. Carbon and land footprint effects are usually global in nature and are good candidates for offsetting. Carbon offsetting is a moderately well developed market and many intermediaries exist that manage the whole process of developing and ensuring the veracity and results of the offset project. Carbon offset projects support improvements or innovative processes geared towards reducing CO2 or related Green House Gas emissions that would otherwise have not happened had the funds not been provided by the project. Examples of these projects include methane collection at landfills, solar energy, energy conservation in developing countries and forestation. A similar model is applied for offsetting land usage. For example, a company that uses 1000 acres of land for commercial purposes worldwide can completely offset its land usage by conserving and protecting 1000 acres of biologically diverse land in an environmentally sensitive tropical region.
6. Environmental Footprint of Products and Services
Even though the environmental footprint of products and services that the companies design and sell are not directly part of the footprint reduction strategies companies should pay equal attention to reducing environmental footprint of products and services they sell to customers. A commonly used approach to measure the environmental footprint of products and services is Lifecycle Assessment. Lifecycle Assessment (LCA) takes a full product lifecycle (cradle-to-grave or in some cases cradle-to-cradle) viewpoint when measuring the environmental footprint and performance of the product or a service. LCA can be used during the product development phase to guide design options, materials, manufacturing and assembly process selection so that environmental footprint is minimized over the product lifecycle. Graphic of Lifecycle Assessment The trend towards evaluation and rating of environmental footprint of products and services has accelerated recently as retailers like Tesco plan to publish carbon footprints of products. As environmental consciousness becomes a mainstream trend consumers and customers will prefer and purchase products and services that are proven to have lower environmental footprint. It looks more likely than ever that environmental footprint of products and services will be just as important as price and quality as a differentiating factor.
Environmental responsibility is at the forefront of every corporate agenda. Yet many companies find it difficult to formulate and implement a practical and results-oriented approach to environmental responsibility. Zero environmental footprint is an ideal guidepost that companies can strive towards to practice environmental responsibility. And even if the destination is difficult and often impossible to reach the journey itself could be worth the effort in terms of cost savings, brand and market share improvement and finally for being a responsible corporate citizen.