Substantive Sustainability

Why focus on climate change?

In part one of this series we introduced the concept of substantive sustainability — basically, post-greenwashing corporate sustainability work. In this follow-up, we’ll talk through what substantive sustainability means in practice as it relates to corporate climate action.

At Seaborne, we work with startups and small companies who want to establish their very first sustainability initiatives. We almost always encourage our clients to consider climate change as their top sustainability priority, even if this specialization is often blended with a holistic embrace of other issues.

The reason we recommend climate change as a starting point for sustainability work is because it has high potential for substantive outcomes, which is to say, outcomes that are both effective and resonant. In the previous post, we explained what effective and resonant mean in the context of sustainability.

To summarize, effectiveness is about pursuing work with real impact — work that’s making a difference towards the most pressing problems and while also being credible. Resonance means that the work is compelling and makes sense in the eyes of consumers. These two traits together get at the cost/benefit relationship between the marketing prospects of a given sustainability initiative and its implementation costs. This cost/benefit relationship is part of what advocates mean when they say that addressing climate change is good for business.

Beyond making business sense, we focus on climate change at Seaborne because it’s a problem facing humanity that the corporate sector is largely failing to confront properly. Our clients recognize that there are compelling moral justifications for working on climate change that go far beyond obligation or profit. This work is chiefly viable because it’s the right thing to do, regardless of what your peers are doing, and regardless of whether or not you will privately benefit from it. It doesn’t have to be any more complicated than that.

We believe it’s possible and worthwhile to take steps in addressing climate change. The rest of this post details how to create a program that lives up to the title. Read on for our commentary and prescriptions on the core elements of modern corporate climate work — emissions accounting (and why we use a product-based approach), emissions reduction, carbon offsets, and the broader strategy that ties these things together.

Step 0: Establishing a “Why”

Taking climate change seriously and considering how we can as individuals, business leaders, and a human collective, take appropriate action is not easy. It won’t always be fun, even if some of the work will be inspiring or satisfying. Before even starting to think about emissions and reductions, we all must find some compelling reasons why this work matters to us, individually, and collectively. To maintain a commitment to this work, we must see our own success and wellbeing tied up in the success of the collective task of responding to climate change. It’s worthwhile it to spend some time articulating your own “why’s” and letting yourself imagine a vision of success before embarking on this journey. This is the beginning of developing resonance in this work.

Step 1: Quantifying Carbon

Standards

In the past, it wasn’t entirely clear how companies should take climate action, even if they knew why. The early days of the corporate climate sector were largely defined by oil and gas entities purchasing offsets of varying quality (likely poor quality) under emissions compliance schemes like the Kyoto protocol. The fact that the first company to voluntarily go ‘carbon neutral’ was a MLM tells a lot about the historical legitimacy of this space.

In recent years, voluntary corporate climate action has gotten a reputation boost, starting with improved techniques for greenhouse gas (GHG) accounting. At the heart of this has been the sector coalescing mainly around two kinds of standards - the GHG Protocol for oversight on what emissions to measure and the ISO 14064 , 14044 and 14067 standards for how bodies should calculate and report these emissions. (There are other widely used standards for financial disclosure as well).

Scopes

Following GHG Protocol standards by the book ensures that your organization is accounting for the emissions it’s responsible for. Those emissions sources range from the fuels needed for company activities (known in the GHG Protocol as Scope 1 emissions), to the fuels needed to generate the electricity the company purchases (Scope 2 emissions). Nearly all other emissions are considered Scope 3, “indirect emissions”. The standards are comprehensive, but just working on compliance to the standards alone does not ensure that an accounting process will lead to substantive climate work. Being substantive in scoping carbon accounting means choosing to measure things that are legible and actionable and sharing credible results.

Too often, large companies report only Scope 1 and Scope 2 emissions, claiming Scope 3 emissions are too hard to quantify, or perhaps outside of the “organizational boundary”. Alternatively, companies may report Scope 3 emissions in a way that is so generalized, that they aren’t legible, citing the protection of IP and trade secrets. If Scope 3 emissions are too tricky for even large companies to report, what’s a smaller business to do?

Accountability beyond Boundaries

At Seaborne, we believe that Scope 3 emissions are well within most “organizational boundaries”. In fact, we advise our clients to start with a focus on Scope 3 emissions as an entry to carbon accounting, specifically focusing on the life-cycle emissions embodied the products they sell. Why?

For one, we usually work with small to medium upstart companies, otherwise known as ‘modern internet businesses’. Their teams and infrastructure are incredibly lean, meaning that their Scope 1 and 2 emissions are seriously eclipsed by their Scope 3 emissions. The US Environmental Protection Agency (EPA) estimates that Scope 3 represents 70% of a business’ emissions total, and this number may be much higher for modern internet businesses.

What’s more, as these companies grow their businesses and sell more product, their Scope 3 emissions will likely increase at a faster rate than Scope 1 and 2 will. To be clear, Scope 3 emissions covers 15 different emissions categories, including many outside the life-cycle scope for selling and creating products and services. However, for modern internet businesses, grasping the emissions associated with the products and services they sell should be top priority, and they typically make up the majority of Scope 3 emissions.

Sure, our clients’ Scope 3 emissions are also the responsibility of their suppliers — one company’s Scope 3 emissions are simultaneously their suppliers’ Scope 1 and 2 emissions. Maybe those suppliers should be taking accountability for their own direct emissions. But will they? What’s the real risk of double-counting here? Supplier businesses providing services like shipping, packaging and manufacturing are almost never customer-facing, and their business is fulfilling the demand other businesses generate. Shouldn’t those driving and profiting most from consumer demand be the most accountable? We think so.

Substantive approach to Measurement

Above, we’ve made the case for starting with Scope 3 emissions because this accounts for the majority of GHG emissions for small, product-driven modern internet businesses, and these emissions must be understood to drive reduction and accountability efforts. What does a substantive approach to developing these emission estimates look like?

Life-cycle GHG accounting is the right approach for product-driven businesses to do substantive, product-level measurement work. An annual emissions inventory might be the right tool to estimate Scope 1 and Scope 2 emissions. However, for products, materials or services, a holistic, systems-oriented life-cycle approach is most useful. A life-cycle approach allows for identification of emissions-heavy hot spots along the life cycle, measurement of emissions reduction efforts, evaluation of policy change impacts and exploration of alternative material or process choices (US EPA).

Our life cycle-based work for a mobile phone manufacturer, the Light Phone, helped us realize that effective life-cycle emissions estimations can be reasonably accomplished in a far more lean (read: affordable) manner than by hiring a massive, multinational consultancy with ISO-driven compliance, auditing requirements and reporting procedures. On this project we allowed ourselves to take a step back and reconsider the efficacy of some basic carbon accounting assumptions. Namely, what is to be gained by increasing the fidelity of estimations in a downward direction? Every decision we made about where to pursue fidelity was driven by a substantive mindset: will this information help us make decisions that lead to emitting less? Will this information help us take more responsibility for our emissions, or are we trying to pass the buck?

At Seaborne, we focus on substantive, adaptive and actionable sustainability work. Unfortunately, ISO compliance and auditing alone do not guarantee substantiveness and may actually get in the way of it. We appreciate the guidance the standards provide, but don’t base our processes on ISO compliance and audit-readiness. Instead, we develop science-backed, actionable information and insights for each kind of client situation, while prioritizing efficiency of time and resources so that more small companies can take on this work.

What else?

How can companies substantively measure their Scope 1 and 2 emissions, the roughly 30% of overall emissions that product LCAs won’t capture? Emerging carbon calculator tools like Climate Neutral’s BEE or Watershed are examples of how better software is making it easier to produce emissions estimates. Generally though these new arrivals trade ease for accuracy, and are not true stand ins for the kind of LCA reporting that a bespoke process that’s specific to a product or company would produce. The popular BEE estimator tool for instance uses a reputable, but notably more broad estimation method called Economic Input-Output which uses sector-wide emissions levels to estimate individual business’ carbon footprints based on their revenue sources and spending in different categories like products and services. While it’s good for broad understanding, this type of model often obscures individual product impact.

Regardless, we encourage the sustainability sector to adopt more of these approaches in attempt to not make perfect enemy of good. In the context of climate change where speed and scale counts, any tool that can get more companies taking steps where they otherwise wouldn’t be ought to be viewed as net positive.

Step 2: Emissions Reductions

After an organization determines the sources and scale of their product or enterprise-level emissions, planning for and making reductions comes next. It’s imperative that this step isn’t skipped even though it might be the most difficult part of forming a climate plan.

Emissions reductions suffer from a catch-22. It’s difficult to directly reduce emissions because the economy and its encompassing supply chains are generally not configured to confront climate change. On the flip side, these supply chains are rarely climate-neutral because companies rarely take steps to try to directly reduce emissions.

If there’s one party that has to budge first in this standoff though, it’s individual companies. In a free market environment, the agency of microeconomic actors will always trump the agency of macroeconomic systems. How can companies take their first steps on a path to reduction? It first depends on what stage of growth a given business is. Since Seaborne often works with upstart companies, we prioritize emissions reductions from a sourcing and process perspective. It’s far more impactful to prevent emissions in the first place than it is to build a business around them and then cull them back.

How feasible are preventive emissions reductions? The answer is often highly contextualized and it’s difficult to make one size-fits-all recommendations. A couple of broad strategies can be found across sectors. For starters, all businesses that consume electricity should seek out clean, renewable power, ideally from direct grid generation (as opposed to Renewable Energy Credits, which are like a cousin of carbon credits). Perhaps more importantly, businesses should select suppliers and manufacturers who do the same. The average level of grid cleanliness varies widely by US state, with additional variation at the local level based on infrastructure and energy sources. Ideally, a supplier should be able to help customers understand how much energy their processes use, and the local energy supply carbon intensity — how much CO2 is emitted for each unit of energy made available on the grid or produced on-site. Businesses must start including these considerations when choosing production partners.

But what happens when a business inevitably hits a wall of hard-to-reduce emissions? Perhaps sourcing a sub-component requires oceanic freight or your recipe relies on commodity agricultural inputs grown with ammonia-based fertilizers. So many processes currently lack viable carbon-free alternatives. Unless a company is positioned to radically change their product price point or manufacturing processes in pursuit of decarbonization, they’re stuck with an uncomfortable amount of residual emissions.

Step 3: Carbon Offsetting

The Ugly

Because companies too often find reducing in-house and third-party emissions unpalatably hard to do, carbon offset credits invariably enter the picture as a final effort to reach ‘net-zero’. This basically means that even if a company’s supply chain emits GHGs, they neutralize these emissions with the reduction or sequestration of carbon emissions elsewhere.

If there’s a single aspect of corporate climate action that’s garnered a reputation for greenwashing, it’s offsetting. Since their widespread usage took off in the past two decades, carbon offsets haven’t been provably effective despite being so widely used. The reasons for this are numerous and can be summed up by understanding the difficulties in offsets fulfilling several essential criteria (additional, permanent, enforceable, and beneficial beyond carbon) in order to be considered effective.

Despite decades of work in the carbon offset credit space, the many options in this space are hardly created equal. Consider Verra, an industry standard offset registry—looking through the projects that Verra has approved, you’ll find everything from methane digesters to forest management projects. Starting to evaluate these projects through the lens of additionality, one quickly groks the complexity.

Offset projects that claim to build out clean energy in contexts where it wouldn’t exist appear to offer additionality. But this would also mean that clean energy development for the sake of clean energy development is economically unviable, which is a confusing starting point. And what about the rebound effect of these new energy sources? How can a supporting organization get clarity and truth here? Speaking bluntly, many offset purchasers just don’t. They rely on offset providers to sell them trustworthy projects. Unfortunately, these providers have an incentive to offer products of highest quality and face little accountability when they don’t.

On top of these complexities are the basic administrative costs of maintaining and verifying an offset credit’s durability for anywhere between 10-100s of years. To prove this point, we sampled the Verra registry for projects that have been listed as certified credits in the past to see what they currently were up to.

We quickly came across the 6th largest project on the registry, a hydroelectric damn in Colombia called Ituango, with ~4.3 million tons of offset CO2 per year on offer. Despite being verified as a completed project that claims significant avoided emissions from elsewhere in Colombia, the dam isn’t even completed. What’s more, it’s been fiercely protested by environmental activists for disrupting the local ecosystem and the livelihoods of those who fish the Cauca river. Not only does this offset not currently exist, it is probably creating more environmental harm than good.

It’s unclear whether or not offsets have actually been sold representing this Ituango dam project. Regardless, the shaky foundations that this and many other offset projects sit on feels clear.

The Good

So, if carbon offset credits feel fairly unconvincing or even harmful, yet are required in virtually all serious corporate climate change work, what can anyone do? Fortunately, many groups have realized this problem as of late and have begun to offer offsets that are more convincingly effective.

Carbon removal has become the new name of the game. This means taking carbon that has already been emitted into the atmosphere (as opposed to avoiding it being emitted in the future), drawing that carbon in and storing it in a place where it can’t be emitted again. There are many types of offsets that qualify as carbon removal. Examples include anything from growing and sinking kelp to the ocean floor, direct air capture, enhanced weathering and biochar production.

The reason why carbon removal is seen as superior to other, more standard, approaches to offsetting carbon emissions is because these solutions are more easily measured and verified, and thus can produce more credible offset credits. Carbon removal is also viewed by many climate modelers as an essential tool to confront the ~10% of global emissions that will be very difficult to reduce through conventional methods, and some cite it as required if we are to limit warming to 1.5 degrees.

By being more trackable, carbon removal appears more legitimate than avoidance as an offset credit origin story. In addition, purchase of carbon offset credits based on removal is an opportunity for corporate emitters to support the development of nascent technologies and businesses that remove carbon. These transactions create second order effects that create pathways to a decarbonized economy. Eventually, something like Charm’s bio oil that might have seemed like a crazy science experiment several years ago becomes a seemingly viable carbon removal method. For more on this strategy, see the strong work that Stripe is doing.

Step [X]: Unquantifiable Climate Action

At Seaborne we often work with small companies that care deeply about climate change, but quite frankly aren’t a huge part of the problem. This is certainly the case with small software companies operating in an increasingly digital-first workplace environment, whose largest emissions often come from cloud computing and can be reduced with relative ease.

Even the small companies we work with who are building physical things such as a hardware devices or food and beverage products aren’t really a significant part of the climate crisis compared to medium-to-large sized corporations working in emissions-intensive sectors. Yes, it’s important for the companies we work with to properly address their small share of global emissions, especially if it means they’re baking in good behaviors that will scale alongside their company. But if there’s one point we’d like to advance when describing ‘substantive’ climate action, it’s that it may be more valuable to spend whatever precious resources your company has on impacting climate change as a macroeconomic phenomenon, not just your own tiny microeconomic relationship to it.

This seemingly simple logic is actually a leap from the status quo of corporate climate programming. Traditionally, this sector has operated via self-centeredness. Whether it’s for moral or regulatory reasons, companies measure, reduce, and offset their emissions, and go through painstakingly detailed work to determine exactly where ‘my’ emissions ends and ‘your’ emissions begin. Companies like Shell excel at this game. In an ideal world, the scoped emissions logic spread across all corporate actors would mean that climate change and every metric ton of GHGs are fully addressed. In reality, we live in a world where just a small group of companies stringently clean up their tiny corners of emissions, while the rest of the room is still covered in muck.

Effective Climate Programming: A Planning Scenario

Here’s what effective climate programming can look like in a commonplace example. Say you are the co-founder of a software startup with less than 25 employees and less than $10M revenue. You have a small office you rent in a dense city, where all but four employees live. You decide you want to do something about climate change but don’t know if hiring a consultant from a big firm is worth the cost, or if you can afford it in the first place. You bring the case to your board and they give a thumbs-up for $25k spending to “do something about climate change”. As the decision maker of the org, where do you go from here if you care about making as much impact as possible, but don’t have unlimited funds to do so?

In Scenario A, you find a big firm that offers, among 20 other things, fully ISO-compliant GHG audit and verification services. You work with them for several months to get an extremely detailed and fully auditable accounting of every bit of GHG emissions your company is responsible for that falls within the official ISO frameworks. After this work is done, the firm estimates yearly emissions for your company to be 82 tons of CO2eq. The firm bills you $15k for the project and they recommend purchasing Verra offsets at an average cost of $20 dollars per ton, which totals to $1640. Their recommendations and strategies stop there.

In total, you spent ~$17k. Only about 10% of this amount went towards improving the state of climate change, and almost nothing went toward a future strategy and exciting reasons to share your work. Even then, the offsets you purchased at the recommendation of the consultant aren’t exactly provably effective, although they seem trustworthy enough. Even though you technically can, realistically, you’re not going to check on them in 15 years to see if they did their job. At the $20 per ton CO2 price, you’ve bought a sort of murky blend of forest-based projects in unknown geographies. On the plus side though, all the money that you spent on the firm grants you the peace of mind that the work you completed was done under the ISO 14064 standard for quality, which you know because the consultant wrote up a massive pdf report to capture all their work and findings. In terms of communicating this work to the public, your only strategy is to publish this report on your website alongside a blog post. You don’t know too much about the details of the offsets, so you dash off a quick line or two about them in the blog. You came in under-budget, and you’re proud that you did this work. “Maybe if we have more time next year we can be more ambitious,” you think to yourself.

Now let’s consider Scenario B. In this version you decide to take a leaner approach which starts with a more holistic consideration of costs of and benefits relative to your main objective — slowing the progress of climate change and decarbonizing your business operations. The big firm seems expensive for just a report and you feel confident that an ops associate on your team working with a small sustainability studio like Seaborne can get the job done. With their assistance you decide to make a worst-case scenario emissions estimate with an emphasis on determining the biggest emission sources and developing a mid-term reduction strategy. This leaves you in a place where you feel ~95% confident percent that your company’s yearly emibus memessions are under 90 tons of CO2.

A week later they come back with a portfolio of offsets that are called ‘carbon removal.’ One company, Charm Industrial charges $600 per ton, which is 30x more expensive per ton than the offsets you had quickly googled. Another company, CarbonCure charges $100 per ton. You decide to go with this second option, costing you about $9k. At the very end of this process your operations associate, feeling proud of their newfound knowledge of the climate action landscape, makes one final recommendation — a $5k yearly donation to Evergreen Action, which they explain to you is important alongside the offsets purchase to spur political action on climate change.

To cap all this off, you publish a series of blog posts: one, about your emissions sources and your mid-term reduction plans. Another, about carbon removal offsets and how they work as a tool toward decarbonized economies. Finally, you write about Evergreen Action, the annual support you’re giving, and encourage your customers and competitors to do the same. In all, you’ve spent the full $25k allotted by your board, but in this scenario you feel confident that your work actually made an impact. More than 50% of the resources you allocated went directly towards interventions. Plus, the expertise your employee has on the subject from working on the project can directly be translated into next year’s work. Finally, you feel excited to publish your approach to climate work because you feel as if other software companies can learn from it, and that your customers will see it as more than Corporate Social Responsibility lip service.

Conclusion

Hopefully, after reading through and comparing the two scenarios above, it’s clear what we mean by ‘substantive sustainability’ and the balance of effectiveness and resonance that ought to be struck in sustainability programming. At Seaborne, we promote and enable the kind of substantive work and thinking that appears in Scenario B. That is to say, work that uses science-backed methods to help companies understand their emissions sources at a level of granularity that is actionable, but not overkill. We believe that climate action should be more about taking action than generating dizzying levels of detail, which is why we prioritize efficiency and legibility over busy work and rubber-stamping. At Seaborne we’re grateful to our clients and partners who put their trust in us to develop and implement substantive practices together, so that a company’s first steps in addressing climate change are both effective and resonant.

Sources & References

State Carbon Dioxide Emissions Data—U.S. Energy Information Administration (EIA). (2021). Retrieved November 21, 2022, from https://www.eia.gov/environment/emissions/state/index.php

US EPA. Life-Cycle GHG Accounting Versus GHG Emission Inventories. (n.d.). 3. Retrieved November 21, 2022, from https://www.epa.gov/sites/default/files/2016-03/documents/life-cycle-ghg-accounting-versus-ghg-emission-inventories10-28-10.pdf