Shades of Blue and Green

One of the hottest topics these days is the idea of going "carbon neutral." The spirit of the meaning of the phrase is that a business, product, or individual has mitigated its CO₂ emissions to the point that it has achieved a state of carbon zen wherein its emissions are completely balanced by offsets. There are a great many protocols on how to report a company's carbon footprint, but they all agree on one important thing: emissions of greenhouse gasses fall into three buckets, or scopes.

1. Direct emissions of the reporting organization. This includes fuels (coal, oil, etc.) that you burn yourself, as well as processes (lime kilns, chemical reactions, etc.) that you use.
2. Indirect emissions related to the purchase of electricity, steam, etc. Someone else (usually a utility) is burning fuels on your behalf.
3. Other indirect emissions throughout the supply chain, from use and disposal, and the like. This includes emissions due to leased transportation of goods, business travel, etc.

In all reporting frameworks that I am familiar with, reporting of scope 1 and 2 emissions is required while scope 3 emissions are optional. Now, if the organization reporting is a concrete manufacturer, or a electrical utility, that works out fine. Their emissions from upstream processes (i.e. raw materials extraction) and downstream (i.e. product use, disposal, and transport) are relatively small. Reporting of scope 1 and 2 emissions makes for a reasonable picture of the organization's total emissions. This is not so for professional services companies, most manufacturing, and retail. These companies have considerable scope 3 emissions. In the case of retailing, it is often 90% of their footprint.

Obviously, something is missing here. If these reporting frameworks are meant to be universal, then they are providing a critical loophole for certain industries to report substantially reduced footprints. The most obvious solution is to do away with scopes entirely and just look at the total life cycle impacts of the products, goods, and services being produced. The impacts of organizations are then a simple sum of the impacts of everything produced during the reporting period. In this way, the impacts of the entire supply chain, as well as the use and disposal of products will be given equal weight.

In the case of service industries where the product is ephemeral, the impacts of the design, development, sale, and implementation of the product are used in place of the more familiar extraction, refinement, manufacturing, use and disposal phases. The reporting does not change, just the methodology of how the data is gathered. Even software has a product life cycle, of which pressing, packaging and transporting the DVD is a small part. Similarly, consulting services can still accurately report their emissions, even though they are primarily business travel and other scope 3 emissions.

Once a life cycle perspective is taken, there is no need to partition emissions by scope. The emissions are just that. Additionally, when performing life cycle assessments, all indicators, of which greenhouse gas emissions are just one, are automatically normalized in such a way that similar products and services can be compared in an apples-to-apples manner. The unit on which these indicators are normalized is the functional unit. This requires a slightly different frame of reference from the per-product or per-organization reporting done today. An example of a functional unit could be "100 pieces of toast" and is used to make toasters, toaster ovens, and grills functionally equivalent. Each can toast bread, and each has a different impact from materials to manufacturing to use.

Products in this day and age are, thankfully, built for a particular purpose. With some exceptions (cell phones, computers), most products are built for one function and all other uses are ancillary or represent rare usage scenarios. Because of this, it is easy to describe the functional unit of any given product. Toasters are for toasting: 100 pieces of toast. Ovens are for baking: 100 hours at 350 degrees F. Hardwood flooring is for covering floors: 100 square feet for 25 years. Insulation is for controlling heat transfer: 100 square feet at R30 for 25 years.

As you can see, functional units have a tendency to include a unit of time in their definition. Except in cases where an amount of time is assumed (like with making toast), this is pretty common. Without it, products with high levels of durability are rendered equal to items with low levels of durability. Similarly, aspects of a functional unit may refer to quality of the function, as in the insulation example above. It is not always good enough to answer the questions "What?" and "How long?" You often need to consider the question, "How well?" As in, "How well does this product partition heat?"

In summary, there is another option to the heavy-handed, short sighted methods of reporting greenhouse gas emissions by scope. By taking a life cycle approach, you can get a much better idea of the impacts of a product, service, or organization. With this, customers can start to choose what will help them get carbon neutral. That, my friends, will have to be the topic of another entry.

Kermit was right, it isn't easy being green.  Seriously though, in a way, that’s the whole point for me. This last year and a half that I have been diving deeper and deeper into this issue, I have certainly learned a great deal. And a huge part of my job has been to share the story (what is going on, and what our response to it can be) to basically anyone who will listen. This means I deliver these types of presentations pretty much on a daily basis. And sometimes when I am standing in front of a new group of people, I can see them looking at me skeptically, almost defensively it seems. And I realize that they think that I consider myself somewhat superior because I am the green one. Truth be told though, I am not very green. I'm trying all sorts of approaches:  when I have to drive to work, I avoid the commute hours as much as possible; I had a live Christmas tree; I got a haircut that supposedly doesn't need to be blown dry (this may sound a bit crazy, but hair dryers are energy hogs I understand) but I look quite a bit more disheveled that I am comfortable with; I tried to become vegetarian but that really didn't work as I have to feed a family of four and I'm simply not that creative in the kitchen.  So, you can begin to see that I’m not nearly as green as I aspire to be. And you know why? Because it isn’t easy... yet.

And then I get excited, because I realize that is the real opportunity here. The promise of software is that we can start to make it much easier to understand and lessen your impact on the environment. Now, in my job, I focus on how I can deliver the right tools to businesses. What can Microsoft Dynamics do to help our customers understand what their impact is so that they can begin to address it? You can read more about our efforts here.  But when you look at all of Microsoft, the potential becomes even greater. As a company we are looking across our portfolio as well as investing in research initiatives to develop and deliver new solutions that can make a difference in what is probably the biggest issue of our lifetimes. I’m extremely proud of the work we are doing as a company and I’d like to share that with you. Check out our website. It is chockfull of lots of interesting information about what we are doing. Plus, right there on the home page there is a link you can click to send us your thoughts on what you would like to see us do. We hope to hear from you!

While I recognize that there have been many interpretations of the meaning of the word "sustainability", I'll beat a dead horse anyway. The concept of sustainability is, most traditionally, rooted in two common quotes:

"[Sustainable development is] development that meets the needs of the present without compromising the ability of future generations to meet their own needs." - The Brundtland Report

"We do not create the future for our children, we borrow it from them." - Paraphrase of Navajo saying

These two quotes, used over and over again, are obviously utopian in nature. They represent the final, not the current, state of sustainability. Other ideas like Cradle to Cradle espouse the same ideal. None represent a roadmap to go from our contemporary, clearly unsustainable, state to one of blissful, closed-loop existence. In short, these are all dreams. Highly laudable dreams, but dreams nonetheless.

The word "sustainability" in context of our lives today is more a concept of forward motion, of continuous improvement. There are no sustainable companies, only companies moving towards sustainability. While we, as a race, continue to use non-renewable resources such as oil and old growth forest, the practices of all of us are inherently unsustainable. Somewhere in the chain of our actions and the reactions they cause, someone is burning oil or coal. Someone is writing on paper from an old growth forest. Depressing, isn't it?

The point is that we are not sustainable. We are, however, becoming sustainable. The process is long and progress is very slow, but there is a clear forward motion. Businesses and individuals are becoming aware of the myriad effects our everyday actions have on the world and each other. If you consider yourself to be in the dark in some ways, you need only pick up Stuff: The Secret Lives of Everyday Things and read about the long process that goes into making the cotton t-shirt you are wearing. The information is out there and becoming more accessible every day.

I just came back from Convergence where we had the first Environmental Sustainability track which was comprised of two sessions on the topic.  One session focused on Reducing Your Carbon Footprint with Microsoft Products where we did a demo of the Environmental Sustainability dashboard prototype and the other where we discussed Environmental Management Accounting principles and how our customers can implement their Microsoft Dynamics systems today in order to get greater visibility to environmental issues related to their business.  Here is a screen shot from the Environmental Dashboard prototype. 

Additionally, I was able to talk to a lot of customers and partners about the environmental issue.  I learned a lot.  I learned that everyone is in their own unique place when it comes to environmental issues.  There are a lot of companies that are quite worried about how their business processes may be affected by these issues, but are not yet driven to explore what that really means.  At the same time, there are companies that have been looking at their businesses from an environmental point of view for quite a while literally blazing the trail into this new terrain. 

Convergence was also interesting from a personal point of view in that I came once again to appreciate that even though we all deal with business applications, we are also quite human!  In every conversation about green initiatives that I had with partners and customers as well as with my internal colleagues, at some point it always comes around to what we are doing in our personal lives to be more green and some of the frustrations that we have around that.  Kermit was right--it isn't easy being green--because it isn't easy to find the "right" answers.  That applies to our personal lives as well as to the businesses we run, consult with, or build software for.  And that is what we are trying to change.  We want to make it much easier to become environmentally aware, and equally easy to make sound decisions taking into account the environmental aspects of those decisions.  It's not a short road, but we are on the track... 

While working on this project, it occurred to me that I needed to have a more in depth understanding of the history of events--from an environmental perspective--that have led us to where we are today.  So, over the course of a week, I put together this timeline.   

I realize that there are many things that are missing that I still need to learn about.  And there are things that have happened either in increments--like the IPCC announcements, or like Kyoto ratification versus when it went into effect, etc.--that I have not added to the slide.  But what I think is interesting is that you start to see the repetitive interplay of actions by the environmental movement and horrible disasters punctuated by the advent of governmental regulations. 

If you are looking at this timeline from the perspective of business applications as I am, you also can see that solutions began to surface around Title V in the early 90s.  Title V is part of the Clean Air Act requiring owners of large stationary sources of pollution such as power plants and factories to get permits dictating their requirements for emissions.  This therefore requires those owners to submit reports on the amount of pollution they are generating.  Title VI is a similar type of requirement for Acid Rain.  Here is a clear cut illustration of compliance driving the need for software solutions, several of which sprang up at this point in US history. 

You can also see the European Union taking reign of the environment through their combined directives WEEE, RoHS and REACh.  Putting software and business practices in place to comply with the requirements therein is surely top of mind for many corporations, not just in the EU, but globally.  Another important thing to note about these directives too is that they don't care how large or small your organization is, if you fall within the restrictions and requirements they put in place, you are required to comply. Yet, it is somewhat quizzical that many companies do not seem to be looking to their ERP vendors to help them in these endeavors.  Can anybody enlighten me as to why?