We have recently formed a Sustainability* Interest Group at the Consortium of Advanced Management, International (CAM-I) and want to share some of our general research with the Higher Education community. We have also drafted a white paper titled “Carbon, Cost & Profitability – Practical suggestions to create an auditable carbon footprint/emissions profile.” If you would like to participate in the interest group or would like me to email you a copy of our whitepaper please leave a comment below or contact us at CostWiseCollege.
Now I’m not going to get into any heated debate about human impacts on the environment, have we really caused climate change? Is it all part of natural solar cycles? Should we implement an Emissions Trading Scheme? I approach this whole argument from a more pragmatic view point, we know that our standard sources of energy – crude oil, natural gas, and coal are finite resources. Yes we have an awful lot of it and we probably have many more years left but one day it will all run out, so it makes sense to look for renewable energy sources. Also the more energy we use the more expensive it is, so if we try to do things more efficiently and use less energy we should also save money. How we transition globally from fossil fuels to renewable energy sources in a cost-effective way is what the economists get paid the big money for, although in practice it will be the politicians that create the catalyst for change, whether that’s an open market trading solution or a tax is up for debate.
For this posting I’m just going to discuss the benefits of modelling your emissions rather than just measuring it. The first thing we need to figure out is how much energy the organization is actually using and where it’s being used. The calculation of a “carbon footprint” is a great starting point, but we want to take it one step further and model this footprint through the organization.
What do I really mean when I talk about modelling? It’s really about identifying how an organization works, what are the cause and effect relationships inside the organization. This model can contain financial and non-financial measures as well as a range of other measures, in this case, greenhouse gas emissions. The carbon footprint can be used as an input into the model or the carbon footprint could be calculated inside the model, by simply including the readily available ‘emissions factors’ in the model associated with the appropriate energy source, by way of very simple example see the image below for the calculation of CO2 equivalent emissions for electricity using an emissions factor of 0.87 Kg CO2-e per kWh.
- Management can identify high carbon activities and processes and can actively manage them.
- Organizations can report the true emissions profile of the individual product or service they provide to a customer or client.
- The approach is auditable, repeatable and disciplined.
- Once in place can be used to calculate the impact of any proposed tax or emissions trading scheme on the organization.
“Whenever possible, environment-driven costs should be allocated directly to the activity that causes the costs and to the respective cost centers and cost drivers.”
The United Nations Division for Sustainable Development “Environmental Management Accounting Procedures and Principles”
*There are three components to sustainability: social, environmental and economic, or the alliterative People, Planet, Profit. Because this scope is very broad the interest group will initially focus on economic and environmental and in particular greenhouse gases for the environmental aspects. It is the intention of the group to expand this scope over time to cover all aspects of Sustainability.