Green Business

Carbon Footprint Decisions Become Part of Risk Management

Green Dollars Make for Less Long Term RiskI ran across an interesting greenbiz press release yesterday that gave me a slightly different point of view on business and carbon footprints and going greener. Yesterday, a company called Planet Metrics announced that Method has chosen their Rapid Carbon Modeling software to help them reduce their carbon footprint. That Method - the pricey consumer-aware eco-friendly cleaning products company - is looking for ways to reduce its carbon footprint is no real news. What caught my attention was the fact that Method considers carbon footprint reduction to be part of their financial risk management strategy.

Now, I usually like to write about personal choices and how we, in our own little way, can make a small difference in the world and small differences add up to big changes when enough people make them. Planet Metrics is business software aimed at helping businesses figure out the carbon footprint chain of their products - in other words, not really for personal home use. But there are a couple of things about it that put the whole carbon footprint argument and the financial arguments against global warming and the concept of cap-and-trade into a different light.

Rapid Carbon Modeling helps businesses make green decisions

First - here's what "Rapid Carbon Modeling" is about. According to Planet Metrics, most companies only consider about 10% of their actual carbon footprint when making business decisions. The other 90%, they say, is built up of factors outside their control - decisions made by their suppliers, for instance. The Rapid Carbon Modeling software is designed to help business assess that other 90% and make decisions based on it.

The Method company, for instance, was trying to decide which of two materials to use in their packaging - a biopolymer and a PET. The logical choice seemed to be the biopolymer, but when they plugged the two different packaging methods into the modeling software, they found that the PET packaging actually reduced the long-tail carbon footprint of their product astronomically. Pretty neat, huh? With just a couple of mouse-clicks, they were able to project costs - both monetary and ecologically - of all of their choices, and make a decision based on the projection.

Well, I thought it was pretty neat anyway, but like Rachel Maddow likes to say - I'm a wonk. Business scenarios and analysis fascinate me. I like looking at various businesses and business models and following how and why they make the decisions that they do. And financial risk management in particular really fascinates me. I also like stepping back from looking at the little things to see how they fit into the big picture - and this bit of software makes it easy to do just that. You can plug in a tiny little factor - like which plastic you choose to pour your soap into - and see how using each of your choices will open your company to financial risk.

Green Business and Risk Management

So what does financial risk management have to do with carbon footprints? The big one right now is how the projected rise in energy costs due to cap and trade will affect the bottom line of many companies - and in the long run, the cost of the goods and services that you pay for at home. With a modeling program like Planet Metrics' Rapid Carbon Modeling software, companies can plug in projected costs of energy - not only for their own product lines, but for the entire chain of their supply line - and choose methods and supplies that will cost less, which will translate to lower costs of the finished products.

And that's pretty cool, I think, because it sorta gives the lie to the stated "fact" that measures like cap-and-trade will necessarily increase the cost of everything we buy. What it WILL do is force companies to make smarter decisions and evolve to use products and methods that will cost less than the methods they are currently using. In other words - innovate.

Green risk management fosters innovation

It will also force companies to take a longer range view of things than they typically do - to assess the real cost of their bottom line. For too long, we've been running an economy where the profit increase in today's bottom line has been the absolute test of a business decision. That business model led companies like Owens-Corning to ignore the safety and health of their workers in order to save money - only to be forced into bankruptcy when those workers ended up with mesothelioma and lung cancer because the company was too short-sighted to recognize that spending an extra few cents per day per worker to protect them from asbestos made more financial sense.

That's the place we're at now - a moment when we - or our elected representatives, at least - have to decide between immediate savings and sustainabilty. We'd realize immediate savings by passing on energy legislation like cap-and-trade - or at least we wouldn't be raising the cost of our current methods of doing business. But we would be shooting ourself in the foot as far as sustainability goes. We would be stifling innovation by enabling companies to continue using our current environmentally harmful energy sources rather than pushing them to develop and embrace newer and cleaner ways of powering their plants and transporting their goods.

The report released June 16 by the U.S. government underlines the risk that we're facing in the near future if we do nothing to counteract the strain we place on the environment. If you haven't read it, you should. You'll find the global climate change report here. It's easy to understand. And it's very very clear about the risks that we're facing.