JULIA KENNEDY: Welcome to the Carnegie Council's Global Ethics Forum.
I'm Julia Kennedy.
I recently spoke with Sujeesh Krishnan and Euan Murray from The Carbon Trust.
Krishnan oversees The Carbon Trust's operations in the United States and Murray
looks at the company's carbon footprinting work globally.
The Carbon Trust was set up, in part, by the British government to accelerate
the move to a low-carbon economy. In the past couple of years, the nongovernmental
organization has made waves with its ideas for carbon labeling—that is,
putting a number on consumer products to let buyers know more about the environmental
impacts of their purchases.
Walkers Potato Chips
in the United Kingdom has been one of the first companies to go from studying
its own carbon footprint to actually putting its emissions on potato chip bags.
Murray began our conversation by telling me about Walkers' experience.
EUAN MURRAY: The big emissions sources are not where we expect them
to be. That really reflects the idea that this is such a new area of innovation
for companies.
In the case of the bag of potato chips, almost half of the emissions actually
come back from the agriculture stage, from growing the potatoes themselves and
the inputs that go into that potato farming, and also making the sunflower oil
that the potato chips are cooked in.
On first pass, we were all quite surprised that that was where the lion's share
of the emissions were. When we did this a couple of years ago, in the United
Kingdom the big issues on people's minds, what the average consumer would respond
to, were things around packaging and plastic bags and their recycling; and also
things like food miles, so the idea that the distance products travel is a good
indicator. What we were able to show is that, yes, those two are important,
but actually, if that's all you focus on, you miss the bigger picture.
In the case of that bag of potato chips, food miles made up less than 10 percent
of the total carbon footprint, whereas the process to make the fertilizer that
the farmer was using was more like 15 percent. I'm not embarrassed to say when
I first saw that I made the guys go and check the numbers. I didn't believe
it. But it turns out it's true.
If we're really going to take climate change seriously, if we are going to
find the fastest, cheapest, easiest ways to make savings, then we've got to
go, not where the conventional wisdom says we should go, but where we actually
really know the big emissions sources are, where we know the big reduction opportunities
are.
This work has prompted Walkers to set up quarterly supplier sustainability
summits. They get all of their key suppliers together now every three months
and they share ideas for carbon measurement and carbon reduction.
JULIA KENNEDY: The recommendations you make to companies then who are
looking at the supply chain, do you recommend that in the future, as they choose
suppliers, they take into account the kinds of carbon that they emit?
EUAN MURRAY: It's an important thing for companies to be thinking about,
and it's something that we want to help them get their hands around.
Some companies are now in a place where they really understand their supply
chain very well and they've got their suppliers engaged. That for me is the
most important step. We all must help companies realize a problem shared is
a problem halved, and that working collaboratively with their supplier companies
can improve resource efficiency, cutting waste, they can often improve logistics
by sharing routes with suppliers, and all of these things together add up to
a lower-carbon product but also a product that is cheaper to produce, so it
makes clear business sense.
JULIA KENNEDY: Now let's talk a little bit about the labeling piece.
Walkers did put this carbon number on the label. How do you educate consumers
to then know what they are looking at when they see a carbon number on that
label?
EUAN MURRAY: Increasingly, consumers are saying, "We recognize
climate change is an issue. We want to do our bit. But, at the same time, we
expect companies to be doing their bit too and taking the lead, and we expect
companies to make it easy for us to do the right thing."
Consumers are increasingly getting a bit tired of the same old messages, that
it's about insulating their house and about energy-efficient light bulbs. These
things are really important, and they're the things that consumers should tackle
first, but they are almost ready for a bit more now, I think.
So the real challenge that we have now is to help educate them that basically
every purchasing decision that they make has an impact on the climate in one
form or another, either through the emissions that it took to get that product
into their hands or the emissions that are generated when they then use and
dispose of the product afterward.
And so the label for me is really one tool that companies have to start that
education process and to demonstrate a commitment to consumers that they have
taken the responsibility seriously, that they have stepped up and gone through
the process to measure their footprint, and they are committing to reduce it
over time. That for me is the most important thing.
I think companies that claim today they have solved the problem aren't really
credible actually. But if a company steps up and says, "Yes, we want to
do the right thing here—we're not perfect, but we're heading in the right
direction," that builds trust and it helps them open that communications
channel to the consumer so that they can then explain to the consumer how they
can better use the product in their home and make sure it is disposed of in
an environmentally friendly way.
SUJEESH KRISHNAN: And some of these things are also about consumer behavioral
changes. As we look at the supply chain and where carbon impacts are, there
are sets of products where it is actually in the use phase of these products
that the emissions impacts are from a significance perspective. And so that
education and awareness-building process then becomes quite important.
Just a simple example is what one of our initial partners, Boots,
did with their shampoos. When they measured the carbon impact of those shampoos,
the majority of that impact was actually when somebody buys the bottle of shampoo
and washes their hair, because it is typically done in hot water. So what they
did was they had some of their hair scientists do some research on the effects
of washing your hair in different temperatures of water and then had point-of-sale
advertising and marketing material talking about what the impacts are from a
carbon emissions perspective, but then also the impacts from your hair perspective
and from a cost-savings perspective and all of that.
So I think as we look at the label it's a way to also, I think, try and educate
consumers in a way that their own behavioral changes can also be impacted for
certain types of products.
JULIA KENNEDY: Now, tell me a little bit about what you're doing also
with PepsiCo
in the United States, with Tropicana,
and some of the challenges you have run into in terms of labeling with that.
SUJEESH KRISHNAN: We've worked with PepsiCo now in the United States
for about 12 months. Tropicana was the first of a set of products that we're
working with PepsiCo here on.
With Tropicana it was actually quite interesting, because when you look at
the supply chain of a product like an orange juice, it's coming from Brazil,
the processing happens here in Florida, and then it gets distributed all around
the United States.
Similar to what Euan was talking about from the Walkers crisps example, transportation
miles is where you would logically expect all the emissions to be. But as we
looked at the details, it was primarily around agriculture. So the growing of
the oranges, the fertilizer used in the orange groves, and all of that, is where
the majority of the emissions were.
JULIA KENNEDY: So, clearly, this was really good internal education
for PepsiCo, to figure out how this works. There was some publicity done—The
New York Times ran an article about this—so it became somewhat public
knowledge. But they haven't yet put a carbon label on Tropicana juice. Is that
something you are working with them on, or how did they come to that decision?
SUJEESH KRISHNAN: It's something we are continuing to discuss with them.
Part of the discussion is around the readiness of the American consumer to understand
the label.
So one of the things that they are actually thinking about is: Are there other,
more effective media where this information can be displayed first? So, for
example, a Website or some other material where there is a lot more real estate
to explain what all of this means. It's part of what the PepsiCo team and we
are discussing in terms of how best to communicate this to the consumer, where
it's actually meaningful to the average person.
JULIA KENNEDY: That sort of leads into another topic I wanted to discuss
with both of you, which is how you are finding different markets, both from
the consumer side and from the business side, are receiving your efforts as
Carbon Trust. How do you find your reception different in different places?
EUAN MURRAY: The reception from the business audience is actually pretty
universal. For different companies the balance is different. For some it's mostly
about consumer engagement. For others it's mostly about cost reduction. What
we see is that the business case is strong however that balance looks. And so
they are really stepping up.
I think where the difference lies with respect to the consumer is perhaps around
their current levels of understanding of what climate change is and what they
need to be doing. But I fully expect that in the next couple of years consumers
pretty much anywhere in the developed world will recognize that they have a
role to play and that really this is about partnership between consumers themselves,
between business, and then between governments to have a role in educating and
supporting the other two.
JULIA KENNEDY: How are you rolling this out in the United States? I
know you have several clients in the United Kingdom and abroad, but are you
really trying to work with PepsiCo and a few select clients first and then work
more broadly, or what's your strategy here?
SUJEESH KRISHNAN: No. I think as we look at the U.S. market, there is
work going on in these topics in every sector of the market here. Our goal here
is to make sure that all of these sectors are actually moving in a similar way
as they go forward here.
We are starting to get engaged in the electronics and computer sector. We are
engaged in the food and beverage industry. Everybody needs these tools, and
to the extent that we can help push these things across multiple sectors, then
that's a win for us.
So as we engage, we engage with companies directly. Then we are also engaging
with industry groups and trade bodies as they try to move the entire industry
group or a sector forward. And sometimes those are a little more powerful, because
then it gets the backing of the entire industry to move an initiative forward.
JULIA KENNEDY: How do you envision the breakdown between responsibility
in the private sector versus responsibility in the public sector? I think there's
a lot of "That's the government's job, to regulate; that's the business's
job, to innovate." How do you see that breaking down?
SUJEESH KRISHNAN: I'll start with the U.S. perspective and then Euan
can talk about the global perspective.
From the United States, I think some of the activities now happening at a federal
level, from a climate change perspective, are actually driving companies to
push these initiatives even further within their own organizations. In the next
couple of years, there is definitely a view that a carbon tax or a cap-and-trade
system is going to be in place. With these regulatory changes, there are going
to be impacts on how companies do business and how successful they are in those
sorts of environments. And so getting ahead of that curve and understanding
what the impacts are across their supply chain will help them be better prepared
for those sorts of things.
There is talk of regulatory changes from a labeling perspective. That may also
impact companies. So you have AB
19 in California. You have some new amendments in the Waxman-Markey
bill that focus on some pilots around carbon labeling and all of that. So
again, it's companies trying to get ahead of public policymaking that will help
them be ahead of the curve as some of these changes come into play.
JULIA KENNEDY: How are you at The Carbon Trust involved in those sorts
of amendments and governmental changes? Do you work at all with the U.S. government,
lobbying, things like that, or are you mostly private sector in your U.S. capacity?
SUJEESH KRISHNAN: We're not necessarily lobbying with the government
bodies, but we have been asked to provide comments on both of those bills, the
AB 19 and the amendments to the Waxman-Markey bill. At those levels it's more
of a collaborative effort of using our experience that we have gained through
the last few years of work to say, "This is how a program could be set
up," either federally or in California. So it's more of a collaborative
process.
JULIA KENNEDY: Expert advice.
SUJEESH KRISHNAN: Yes, exactly.
EUAN MURRAY: I think governments around the world have a role to play
in making sure that everyone does what they need to do. So legislation is the
stick almost. Government has a role to make sure products are safe and that
the worst of the environmental impacts are excluded.
But I think that will only take you so far. The forward-thinking companies
see opportunities there for them to get ahead of everyone else, and that's where
the carrot comes in of a program like ours, in helping them go further than
their competitors, find cost savings and efficiencies that their competitors
haven't yet found. I think there is a balance there.
JULIA KENNEDY: How does this supply chain analysis and your news that
farmers are really key in the carbon emissions process affect the developing
world, and does it affect those kinds of farmers adversely?
EUAN MURRAY: I think it's really important for the developing world
that climate change and climate change mitigation isn't something that we in
the West used to go and hit them over the head with, that actually it is seen
as a way to work together to find the best way to get products and services
into the hands of the consumer. I think that this is good for developing world
farmers, because very often the developing world is the best place to grow particular
products and it's the best place to find other raw materials to make products
to get them into consumers' hands ultimately.
A low-carbon banana is very probably one that comes from the Caribbean or from
Africa to Europe and the United States. It's not going to be one that is grown
in a heated greenhouse in Scotland or Wisconsin. That says we need to be working
with those guys in the Caribbean and Africa so that they can demonstrate that
they are doing the right thing, they've got a good product that we in the West
can be proud of when we buy it.
JULIA KENNEDY: I think there are struggles in the developing world to
try and bring in more fertilizer so that they can really reduce their production
costs, but then on the other side they want to be more sustainable. So what
do you advise in that capacity?
EUAN MURRAY: Farming, like any business, is about managing tradeoffs,
it's about getting efficiency up but keeping the cost base low. Fertilizer,
I think, is going to be an area of focus in the future to make emissions reductions.
The key issues with farming are less about CO2 and more about the other greenhouse
gases. So the two big ones here are methane, which often comes from livestock,
and nitrogen dioxide, which is part of the nitrogen cycle, part of the way soil
works, and very important to make plants grow. But inorganic fertilizer generates
a lot of methane and nitrogen dioxide when you make it, and also there are emissions
from the soils as you apply it, if you over-apply it, and if you put it on at
the wrong time of the year.
So what we are looking for are some simple guidelines that we can give to farmers,
whether they be in North America, Europe, or the developing world, to say, "This
is how best to run that farming system." We are already doing that with
companies like Tesco and
Sainsbury,
Cadbury,
and a number of others, to help educate their farmers about how best to run
their businesses from a carbon point of view as well as a cost point of view.
JULIA KENNEDY: What are your initiatives in China right now? What do
those look like?
EUAN MURRAY: The Carbon Trust is doing a lot of work in China just now,
working with an organization called CECIC,
which is a government-funded organization in China dedicated to environmental
sustainability. We're working with them looking at low-carbon innovation and
a number of other initiatives.
But we also have a set of projects like those in Europe, the United States,
and the United Kingdom, looking at product footprints. Now, of course, a big
chunk of emissions—roughly a quarter by most estimates—of the emissions
from China are to make products that we in the West then go on to buy. That's
a really important piece of information. It shows how our purchasing as Western
consumers and our businesses and our brands here in the West have a very strong
link back to production emissions in China and other parts of the developing
world. And it shows the ability that we have to influence and to work collaboratively
to make reductions over time.
So we're not just relying on a political process, but we have an economic and
a social process too that sits alongside that. That for me is really important.
In the same way as companies we've been working with in Europe, wanting to
replicate that in the United States, we see the same in China. A number of companies
there that are trialing product footprinting and labeling with us are really
extensions of the projects we already have. That's great to see, creating those
global systems and a single standard. It is starting to happen from the bottom
up. That has to be the right way to go about it.
JULIA KENNEDY: I think there is such a stigma about emissions in China.
What are you finding as you are working there? Are you finding that stereotypes
about dirty emissions in China are true or that there really is a grassroots
yen to change?
EUAN MURRAY: I think it's well documented that China has a lot of cheap
coal, and so that is likely to be their power-generating technology of choice
for the foreseeable future. But I think that doesn't mean they are shirking
their responsibilities. I almost see the opposite, that actually there are a
huge number of growing movements in the environmental space in China. It's increasingly
becoming something that the average person is aware of, and climate change is
a big part of that.
So a number of companies have approached us to say, "We want to get on
the front. We see real business benefits in managing our carbon across our supply
chain. We think that will help us with our relationships with our Western corporate
customers and ultimately with those consumers."
Now, as everywhere, there are challenges around getting good data, getting
it all put together in the right way to make up that carbon footprint. But these
are things that I think we can tackle over time. We can't expect to solve the
problem overnight, but we are certainly heading in the right direction.
JULIA KENNEDY: How have you seen the global financial crisis affect
responsiveness to your efforts at The Carbon Trust?
SUJEESH KRISHNAN: The financial crisis has obviously had some impact,
from slowing down the velocity with which companies want to move on some of
these initiatives. That being said, because a lot of these initiatives are around
supply chain efficiency, in this environment it is actually more meaningful
for companies to look at these sorts of initiatives because it actually drives
cost savings through the supply chain. And so from that perspective it is actually
quite interesting for companies to look at this.
Environmental Defense
Fund does some work with KKR
[Kohlberg Kravis Roberts & Co], which is a big private equity firm. They
looked at three of their portfolio companies over the last year: U.S.
Food Service, Sealy Mattresses,
and Primemedia. Across
all these companies over the last year, individually each of those companies
saved something in the order of $5 million to $10 million, just in energy efficiency,
transportation optimization, and waste reduction activities.
So now, if you can scale that across all the different companies out there,
that's a huge savings in an environment of financial difficulty. So I think
from that perspective there is actually huge value for companies to continue
to focus on these sorts of initiatives right now.
EUAN MURRAY: And we have seen that at a practical level. So back to
our Walkers example, we have been working with them now for roughly two years
to reduce the footprint of that bag of potato chips. In that time they have
saved more than 5,000 tons of carbon dioxide and other greenhouse gases, but
that has translated into roughly $600,000 of energy cost saving for them and
their suppliers.
At a time when we need to demonstrate the financial case for this sort of activity,
there is no greater endorsement than that. That's money that hits the bottom
line straight away, and it's actually money that they have said, "We're
going to reinvest that in the next set of energy savings for the two years coming."
That shows why I believe that this is as relevant now as it was maybe three
or four years ago, when we were just starting out.
JULIA KENNEDY: Have you seen any trends emerging that are disappointing,
that are heartening, just as you've been doing this work?
EUAN MURRAY: I think the main trend is just this idea that we've learned
so much as a group of companies doing this work and that actually there's still
quite a lot to learn, we need to do more.
And so the trend that I want to see going forward is that we're able to really
build up that database of information that companies can draw on to do the footprinting
work and that we can make it faster and easier for them to footprint many, many
products at the same time, because the long-term vision for me is one where
carbon emission reduction stops being about individual projects, where every
two years somebody from The Carbon Trust comes along and asks you a set of questions;
rather, it is something that is built into day-to-day decision-making, and that
companies use their accounting systems, or whatever they might be, to capture
that carbon information so that it sits alongside their inventory levels, their
profitability.
So when the management team is sitting down once a month to review that performance,
they've got their carbon footprint there too, and they are able to manage that
in the way that they manage all the other aspects of their business. That to
me feels like a sustainable change, and one where everybody in the supply chain
is doing their bit and passing on that good work down the chain to the next
company. That's the trend that we're on, but that's the trend we absolutely
need to stay on if we are going to make this really scale.
SUJEESH KRISHNAN: Yes. And I think future activities—one of the
key things that I would love to see is these concepts get built into product
design and product development. At the moment a lot of what we are doing is
retrofitting. There are processes and products that we are trying to make better.
But to the extent that these concepts are built into product design, then whatever
comes out at the end of that cycle is already the lowest carbon emission product
or the most sustainable product at the end of the day.
Those are the sorts of ways that I think, as we take this forward, will help
reduce the cost of doing this. It just becomes part of day-to-day operations
and the like.
JULIA KENNEDY: Great. Well, this has been very informative. Sujeesh
and Euan, thanks so much for sitting down with me.
