Clean Development Mechanism, Carbon Neutrality and CSR – 4 Case-studiesBy Deepa More, first presented at National Conference on Corporate Social Responsibility, 17th February 2009

at Gitam Institute of International Business, Visakhapatnam, India

Abstract:

Carbon credits, Clean Development Mechanism (CDM) and the more recent Carbon Neutrality are all buzz words that we have been listening to for some time now. These are all in context of climate change, the effects of which are becoming increasingly evident through erratic climate and weather patterns. There is increasing evidence that points the rapid build up of emissions leading to climate change to the equally rapid pace of growth in industrial and other economic activities. Wider understanding and acknowledgement of these risks necessitates action on part of all concerned. The article examines a few cases to understand Corporations’ approach to addressing these risks as well as the role that they see for themselves in this regard. These cases are picked from across continents and from diverse sectors wherein organizations have opted to target Carbon Neutrality as a primary activity to guide their social as well as environmental responsibilities. Carbon Neutrality is the process of neutralizing carbon based emissions (or carbon footprint) through combination of in-house energy efficiency, optimal use measures and balancing the remaining with investments or purchase of offsets in CDM and other projects that result in emission reductions. The trend and underlying ideologies vary from early adoption of internationally accepted and hence mandated requirements which are likely to become more stringent with time to approaches that genuinely understand and appreciate climate change risks. Organizations opting for the latter are found have a heightened awareness of their own unique and influential positions with respect to the world and regional economies and hence see themselves not only as active participants but as taking leadership roles to bring about required changes in their products as well as processes within participant economies. Finally the paper examines concerns being raised in this regard and includes a few possible measures to address the same.

Paper: ‘The fourth assessment report of the Intergovernmental Panel on Climate Change says that to avoid serious ecological and economic damage, the global temperature should not exceed 2deg.C from the pre-industrial levels (it has already increased by 0.74deg.C). This in turn needs CO2 concentration in atmosphere not to exceed 350-400ppm. But this figure touched 379ppm in 2005. If the world has to remain within the 2deg.C target, there is limited scope for future expansion1’.

The paper takes a look at approaches taken by business organizations to address climate change risks in particular and environmental impacts in general. All forms of pollution caused as a result of rapid industrialization, excessive use of fertilizers, chemicals and waste discharges, land degradation due to excessive mining and deforestation and global warming are some of the important environmental impacts. While there have been national and international regulatory efforts to address these impacts, they have not really been effective in reversing or even stalling the damages, the regulations themselves have been seen as a compliance measure rather than being adopted as conscientious effort to address issues at hand. Financial institutions whether local or international, private or public have so far been supporting industry and infrastructure projects based on the economic benefits that would accrue to participating economies giving

1 Down To Earth, Dec 1-15, 2008

little or no consideration to the social and environmental impacts that would and have come about as a result.

Unlike environmental impacts such as pollution and land degradation which are ‘local or regional’ in nature, climate change risks are ‘global’ in their effects. Green-house-gas (GHG) emissions that have been attributed as the primary cause of global warming have a global effect climatologically irrespective of where they are actually emitted. The effects themselves are of catastrophic proportions, as experienced by the numerous natural calamities in recent times that threaten the very existence of a healthy society and escalation of economic costs to individuals, organizations and all nations alike.

The increasing evidence that points the rapid build up of GHGs and other emissions to the equally rapid pace of growth in economic activities post industrialization necessitates that Corporations undertake serious mitigation and adaptation measures in this regard. Mitigation would involve minimizing the risks by reducing emissions via efficiency in operations, switching to ‘greener’ sources of fuel and electricity and reducing wastes to the minimum. It also means making available environment friendly choices to society which too can play its role effectively in this effort. Adaptation would involve creating allowances to compensate for resulting damages in order to cope with the impacts.

The paper studies the approaches taken by four corporations namely, Yahoo! and Dell of US, HSBC of UK and finally ONGC of India who have opted to target ‘carbon neutrality’ as a primary goal to guide their social as well as environmental responsibilities. These organizations chosen from diverse sectors are united in their efforts in addressing climate change risks by minimizing their carbon footprints early enough to be identified as leaders and champions with respect to the scope and energies put together in the effort. This is not to say that they pursue the goal of carbon-neutrality only as a corporate responsibility effort, these organizations are gaining keen insights into the new low-carbon economy that is emerging and are actually making early efforts to position themselves, their processes and products to find better acceptability in the changing market place which will in turn ensure their long term sustainability.

We start with explaining a few basics with respect to the carbon terminology. Being ‘Carbon Neutral’, or having Zero Carbon Footprint, means achieving net zero carbon emissions i.e. balancing a measured amount of carbon released into the atmosphere with an equivalent amount via sequestration or through offset projects. Sequestration means physical capture of carbon dioxide and other green house gases and storing them in water bodies or underground although the costs for this would be quite enormous. Trees are the original sequestrators and hence the chosen route for carbon capture is via afforestation in vacant lands and reforestation in degraded erstwhile forested areas. Offsets are made for those emissions which can be neither minimized nor can be sequestered locally and hence need to be done elsewhere either through plantations or via energy efficiency / greener energy projects through mechanisms such as those under the Kyoto Protocol and other routes. The underlying logic is again driven by economics, offsets are chosen where ever it is more cost-effective to adopt energy efficiency or energy substitution projects. Offsets can also be purchased through international commodity exchanges where they get listed in the form of either certified emission reductions (CERs) or verified emission reductions (VERs) or directly from organizations having a surplus in any of these carbon credits. Carbon credits, CERs and VERs are all units of carbon dioxide removal or reduction for all forms of sequestrations and offsets.

One carbon credit equates to saving or sequestering of one tone of carbon dioxide equivalent (tons CO2e or tCO2e) emissions. In addition to carbon dioxide, there are other GHGs being constantly identified, prominent among them and those identified under the Kyoto Protocol with their global warming potential (GWP) are listed below;

GHGs GWP (in CO2e) (source: IPCC)Carbon dioxide (CO2) 1Methane (CH4) 21Nitrous oxide (N2O) 310Hydroflourocarbons (HFCs) 140 - 11700Perflourocarbons (PFCs) 560 - 9200Sulphur Hexaflouride (SFCs) 23900

To explain the above figures take for example methane (CH4) which is 21 times more potent than carbon dioxide and hence one ton of methane saved/sequestered would equate to 21 tons of carbon dioxide meaning earning 21 carbon credits. Again carbon dioxide (CO2) is not as potent a GHG as compared to the others, however due to it being emitted in huge quantities, its effect is greater than all GHGs combined.

The Kyoto Protocol (KP) was launched in 1997 under the United Nations Framework Convention on Climate Change (UNFCCC) and came into force in 2005 with Russia’s joining resulting in necessary number of ratifications by countries who accounted for 55% of carbon dioxide equivalent emissions of 1990 levels. KP requires developed countries (listed in Annex 1 of the protocol) to limit their greenhouse gas (GHG) emissions to individual targets, resulting in an average 5.2% reduction in the GHG emissions from their 1990 levels in the first commitment period 2008-12. Via the mechanisms - Joint Implementation (JI), Clean Development Mechanism (CDM) and International Emissions Trading (IET), it enables public or private sector initiatives of developed countries to meet their GHG emission reduction commitments by investing in GHG mitigation projects in other industrialized and more importantly in developing countries. JI considers offset projects amongst developed countries while CDM caters to offset projects located in developing countries. Carbon credits earned under the Kyoto mechanisms are called CERs and all those earned outside KP are called as VERs2. All mechanisms are market-based, JI and CDM are project based, where as IET is a trading mechanism and allows trading in carbon credits between developed countries.

The stages to achieve carbon neutrality begin with assessment of existing carbon footprint, taking measures to minimize the same at source and then balancing out the remaining via above mentioned options of sequestration or offsets. We now take a look at the cases-studies. In the cases the approach taken was to trace out company carbon footprint, performance with respect to target deadlines, leadership approach towards addressing climate change risks and respective actions taken to achieve carbon neutrality. Wherever data was available, attempt was also made to include company’s efforts in addressing other environmental impacts and safety measures for both employees as well as end-users. Finally analysis is made to identify possible issues that

2 Verified Emission Reductions or VERs are emission reduction projects that are outside the Kyoto-CDM Mechanism which lays down stricter criteria for eligibility, projects that do not fulfill the CDM criteria are registered under the VER route and are usually associated with shorter cycle times.

could arise as a result of company approaches and a few recommendations made to address the same.

Carbon Neutrality Case- study 1: HSBC and Carbon Neutrality

Name and Organization: HSBC Holdings plc is a public limited company headquartered in London, UK. As of 2008, it is both the world's largest banking group and the world's largest company3. It has global reach and financial fundamentals matched by few other banking or financial multinationals4.

Main Business: Banking and financial services, it has significant lending, investment, and insurance activities around the world.

Carbon Neutrality Highlights: HSBC is one of the earliest companies and the first major bank to go ‘carbon neutral’. In 2004 HSBC made public its intention to go carbon neutral by January 2006 and achieved its objective three months ahead of schedule.

Carbon Footprint: In 2003, HSBC had a carbon footprint of over 550,0005 tons CO2e for the entire year across its key country operations. It attempted a trial run of carbon neutrality for the 3rd quarter of 2004 for which carbon dioxide emissions were estimated at 170,000 tons CO2e.

Carbon footprint for entire year 2003 = in excess of 550,000 tons CO2e Carbon footprint for 3rd quarter of year 2005 = 170,000 tons CO2e

Targets set: To neutralize the carbon footprint of 170,000 tons CO2e for 3 rd quarter of 2005 primarily through investments in offset projects and beginning Jan 2006, HSBC would launch a major initiative across all its operations towards reducing energy use and sourcing green power in addition to offsets.

CEO Speak - Top Management Leadership in Climate Change Mitigation Efforts: Sir John Bond, HSBC group chairman, said: "HSBC has a deep and longstanding commitment to the environment, and it is our judgement that climate change represents the largest single environmental challenge this century. It will have an impact on all aspects of modern life. It is therefore a major issue for our customers and our staff, as well for every organization on the planet, no matter how large or how small."

Details of purchases made in Offset (emission reduction) projects: Four projects from a list of 100 were chosen with help of environmental partners The Climate Group6 and ICF Consulting7

3 According to a composite measure by Forbes magazine, 2008. Source: HSBC News Archive 20084 "HSBC Fact Sheet" HSBC, March 2008.5 Emissions for HSBC key country operations in 2003 were 558,000 tons overall, of which the UK accounted for 152,000 tons, the US, Canada and Panama 106,000 tons, Asia-Pacific 278,000 tons, Brazil 10,000 tons and France 13,000 tons. Source: HSBC Fact Sheet, 2004.6 The Climate Group is a major international non-governmental organization working in climate change and mitigation measures. It is credited with drafting the ‘The Climate Principles’, a voluntary and comprehensive framework for the finance sector’s response to climate change. http://www.theclimategroup.org

after examining them for criteria of genuine sustainability. Investments added up to US$750,000 resulting in a cost per ton of US$4.43, details of projects are given below,

i. Te Apiti Wind Farm in North Island of New Zealand is Gold Standard8 certified and cuts carbon emissions by 125,000 tons CO2e

ii. Organic Waste Composting Project at Victoria in Australia displaces methane by carbon dioxide and cuts carbon emissions by 15,000 tons CO2e

iii. Agricultural Methane Capture Project at Sandbeiendorf, Germany is a biogas plant that uses methane for electricity generation and cuts carbon emissions by 14,000 tons CO2e

iv. Vensa Biotek biomass co-generation located in Andhra Pradesh in India is a 4MW power plant that uses agricultural biomass to generate electricity that supplements the existing power supply as well as feeds the balance into the state grid. The project has generated employment and other economic development benefits in terms of business opportunities and has helped cut emissions by 16,000 tons CO2e

Package of in-house measures to cut down on emissions: i. Optimizing energy use within buildings, employee travel and other activities to result in

an emissions cut of 5% over a three year period beginning 2005ii. Sourcing green power

iii. Making continual efforts in energy efficiency to make carbon neutrality as cost-effective as possible on a year on year basis9

External Awards and Landmark Achievements: HSBC has been in the top 50 companies in the Carbon Disclosure Project's Climate

Disclosure Leadership Index10 since 2004, which means that HSBC is in the top 50 companies globally in terms of climate leadership

HSBC is the third highest-rated bank in the Dow Jones Sustainability Index11

7 ICF International, a global professional services firm, partners with government and commercial clients to deliver consulting services and technology solutions in energy, climate change, environment, transportation, social programs, health, defense, and emergency management. http://www.icfi.com 8 Gold Standard is an international certification for carbon credits that evaluates projects on their genuineness with respect to both criteria of additionality and greatest sustainable development benefits. It is regarded by many environmental non-governmental organizations as the most credible certification scheme for carbon emission reduction. http://www.cdmgoldstandard.org 9 Total cost for carbon neutrality for HSBC in its first year was US$7 million. Source: www.hsbc.com 10 The Carbon Disclosure Leadership Index (CDLI) includes the companies with the highest scores in the two categories of the carbon-intensive sectors and the non-carbon-intensive sectors, and provides a valuable perspective on the range and quality of responses to Carbon Disclosure Project’s questionnaire. http://www.cdproject.net 11 The Dow Jones Sustainability Indexes were launched in 1999 and are the first global indexes tracking the financial performance of the leading sustainability-driven companies worldwide. www.sustainability-indexes.com

HSBC has also adopted ‘The Climate Principles’12- a voluntary and comprehensive framework offered under for the finance sector’s response to climate change

Analysis:

12 ‘The Climate Principles’ launched in Dec2008 and provide a comprehensive framework for the finance sector’s response to climate change and have been adopted by financial institutions like Crédit Agricole, Munich Re, Standard Chartered, Swiss Re along with HSBC. In addition to management of operational greenhouse gas (GHG) emissions, the principles more importantly provide strategic direction on managing climate change across the full range of financial products and services, including: research activities; asset management; retail banking; insurance & re-insurance; corporate banking; investment banking & markets; project finance. http://www.theclimategroup.org The Climate Principles specifically relate to the sector’s response to climate change when compared to ‘The Equator Principles’ launched in June 2003 and based on IFC and World Bank Group’s own performance standards on social and environmental sustainability and health and safety guidelines.

HSBC believes that corporate social responsibility underpins sustained earnings and growth. At the core of all these efforts is also a carefully crafted business strategy - by being the forerunner in industry responses and crafting measures to address climate change, the Bank has set a new benchmark for the financial sector. “Their efforts would help them gain a deeper insight into the emerging low carbon economy and be exceptionally well placed to understand the needs of and opportunities for their clients” as commented by Steve Howard, Chief Executive of the Climate Group. Thus we see that there are economic benefits too for those who understand and appreciate the changes occurring in the environments both natural and business. To strengthen this effort, HSBC has also entered into a three-year, £650,000 partnership with Newcastle University and the University of East Anglia (UEA) called the 'HSBC Partnership in Environmental Innovation' - to research climate change, society's awareness of the issues and to develop technologies and solutions to overcome some of the problems identified.

Case- study 2: Yahoo! and Carbon Neutrality

Name and Organization: Yahoo! Inc is a Fortune 500 Company, founded in 1994 by Stanford Ph.D. students David Filo and Jerry Yang and is headquartered in Sunnyvale California.

Main Business: Yahoo! provides internet services worldwide and is best known for its web portal, search engine, Yahoo! Directory, Yahoo! Mail, news, and social media websites and services, has a 500 million user base and attracts over 1.5billion+ visitors annually.

Carbon Footprint: Assessment included energy use in all global offices and data centers as well the impact of employees commuting to work and flying for business resulting in an estimate of total carbon footprint of 250,000 tons of CO2e for the year 2007. Thus,

Carbon footprint for year 2007 = 250,000 tons CO2e

Targets set: Group becoming carbon neutral by end 2007

CEO Speak -Top Management Leadership in Climate Change Mitigation Efforts: Co-Founder and Yahoo Chief David Filo has been actively communicating with and taking suggestions from Yahoo’s internet community and mentions “We’re committed to being an environmentally responsible business and to be as transparent as possible in our carbon neutral approach. By sharing our carbon footprint of 250,000 metric tons of CO2 and our best practices, we hope to encourage our industry peers to take action as well. We also hope to inspire our greatest asset, our community of more than 500 million users to make their own positive impact on the environment.”

Areas targeted: 1. In house efficiency measures to bring down emissions projected at 15% annually2. Balance emissions to be neutralized via the offset route

Targets achieved: a. In-house efficiency measures resulted in cutting energy use in its main offices by over

11%, and reducing natural gas consumption by 35%b. Maximizing green power for its main offices, 100% in some instances

c. Investing in offset projects under CDM in Brazil and India all helped to balance out the total carbon footprint of 250,000 tons CO2e

Details of in house measures for emission reduction: Rather than do it by themselves, Yahoo! requested for suggestions on achieving carbon neutrality from the widest range of stakeholders-its users and incorporated as many of them, details of which are given below,

i. Installing window films and controls to switch off non-essential lighting, upgrading mechanical systems with energy-efficient products

ii. Sourcing green power

iii. Locating Yahoo! data centers in temperate climates and cooling them using air from outside instead of relying on energy-intensive cooling systems - one of the novel suggestions implemented

iv. Actively supporting alternative commuting with full-time staff dedicated to help each employee find the best available commute mode to work as well as inspiring each one to take actions to save power in their activities

v. Reducing paper consumption to half and creating a dedicated team to improve existing recycling program

Details of investments made in offset projects: Yahoo! engaged help of EcoSecurities13 and CantorCO2e14 and reviewed over a 100 projects to choose ones that provided the best fit for its overall objectives of providing internet connectivity to all and promoting the message of ‘going green’, details of which are given below

i. Small scale run-of-river hydropower project at Primavera in Western Brazilii. Wind turbines in two locations – Tamil Nadu and Maharashtra in India

External Awards and Landmark Achievements: Yahoo! is ranked among Corporate Responsibility Officer’s (CRO)15 10 Best Media

Companies and ranked #1 in Environment Corporate Citizen category It is designated as one of the ‘Best Workplaces for Commuters by the U.S. EPA’ Yahoo! lists 2nd in the list-of-contenders for the ‘Most Admired Company – Internet Services,

Retailing’ and ranks 6th overall

Analysis: Yahoo! going carbon neutral is like taking 35,000 cars off the road for a year … or turning off the power on the Las Vegas strip for two months! Its recycling efforts keep about 180,000 pounds (approx. 80 tons) of materials out of landfills every year. This is the scale of impact that Yahoo! can and seeks to have with respect to its response to climate change.

13 EcoSecurities among the earliest entrants and leading company in the business of sourcing, developing and trading emission reduction credits and has one of the industry’s largest and most diversified portfolios of emission reduction projects in the world. http://ecosecurities.com 14 CantorCO2e is a leading global provider of financial services to the world’s environmental and energy markets, offering finance, advice, technology and transaction services to clients engaged in using energy and managing emissions across the world. http://www.cantorCO2e.com 15 CRO is the only membership media platform for Corporate Responsibility practitioners, and the professional service providers and non-profit influencers that serve them. The CRO publishes the 20,000-subscriber 'CRO' Magazine and 200,000+ subscriber TheCRO.com, bi-weekly e-newsletters, webinars, and produces the four-time-annual CRO Conferences, http://www.thecro.com/

Following it’s Purple Gene philosophy of ‘doing things in a way that’s innovative, authentic, and uniquely Yahoo!, rather than going alone, it sought suggestions from its community of internet users and implemented as many, novel among them being the one on locating data centers in temperate locations to completely do away with artificial cooling in most months of the year. It created permanent web pages, ‘Yahoo! Green’, that provides an information platform and forum for discussion on all ideas green and ‘Yahoo! for Good’ that connects people with causes to each other and other non-profit organizations. When opting to locate its CDM project in remote destinations within developing countries such as Brazil, it not only provided electricity to a deprived school and village community but also gave it the power of internet connectivity and hence information and an opportunity to connect to over 500 million people across the world and exchange ideas about creating a sustainable world. Yahoo! now seeks to replicate this model in all its offset project locations.

Carbon Neutrality Case- study 3: Dell and Carbon Neutrality

Name and Organization: Dell Inc. is headquartered in Round Rock Texas and is a leading global systems and services company ranked at No. 34 on the Fortune 500 list of companies and having presence in most countries.

Main Business: Powered by its revolutionary direct business model, Dell offers broad range of product categories including desktop computer systems, servers, networking products, mobility products, software and peripherals in addition to enhanced services

Carbon Footprint: While no specific figures are mentioned with regards the actual carbon footprint of company operations, initiatives via in-house measures and offsets target total reduction in CO2 equivalent emissions by nearly 420,000 tons by end 2008. Thus,

Carbon footprint for year 2008 = 420,000 tons CO2e

Targets set: In September 2007, Dell announced it would make company owned and leased facilities "carbon neutral" by end 2008.

CEO Speak: Top Management Leadership in Climate Change Mitigation Efforts: Dell Chairman and CEO Michael Dell said “We’re driving ‘green’ into every aspect of our global business. This includes setting new standards for energy efficiency and green power, delivering environmental and cost savings for customers and aligning key growth priorities with our focus on preserving our shared Earth. Every company can join Dell and the ReGeneration16 in this long-term commitment.” Bell added. "At the same time we're using green technology to drive operating expense down."

Areas targeted: The Company's climate strategy seeks to 1. Improving energy efficiency in its operations2. Maximizing the purchases of renewable power3. Including the supply chain as well in its emission reduction initiatives

16 ‘ReGeneration’ is a website dedicated to all things green and is a Dell initiative. www.regeneration.org

4. Balance to be met via investments in offset projects with developing countries under the Verified Emission Reductions (VER) route and through Renewable Energy Certificates17

Targets achieved: Achievement goal of carbon neutrality five months ahead of schedule. The Company’s drive to target emissions cut primarily through in-house initiatives before turning to carbon offsets is being lauded internationally as the ‘right approach for achieving carbon neutrality’.

a. Actual reduction in emissions via company wide improvement in operational efficiency measures and sourcing green power itself added to a whopping reduction in emissions of 432,000 tons CO2e (more than compensating its target emission reduction)

b. Additionally investments were made in offset projects with the Republic of Madagascar under VER route. Emission reductions under these would average to 100,000 tons of CO2e per annum for 5 years totaling to 500,000 tons CO2e over the 5 years.

Details of in-house measures for emission reduction:i. Savings through facilities improvements, operational initiatives and a global power-

management initiative resulted in savings of more than $5 million annually and avoiding nearly 32,000 tons of CO2e

ii. Investments in wind power in company operations located in US, China and India combined with green electricity purchases from utility providers resulted in substituting conventional energy equivalent of 645 million kWh and avoidance of more than 400,000 metric tons of CO2e

Details of purchases made in Offset projects:i. Partnering initiatives with Conservation International18 on a habitat and forest

preservation initiative in the Republic of Madagascar that would help protect more than 591,000 acres of tropical forestland threatened with destruction, preventing more than 500,000 tons of CO2 from going into the atmosphere over five years

Other initiatives, Landmark Achievements and External Awards: Dell has committed itself to being the ‘greenest’ technology company on the planet and carbon neutrality is a major milestone in fulfilling this pledge. The commitment would also require the company to continuously seek ways to better itself which would get harder and more expensive with time. It currently ranks ahead of HP, IBM and Apple in the U.S. Environmental Protection

Agency’s Green Power Partnership Fortune 500 registry and actively promotes greater supply of green energy, its global headquarters campus is powered by 100% green energy

Dell has extended its emission reduction drive to include suppliers and transportation. It is the first IT company to join the Carbon Disclosure Project’s19 Supply Chain Leadership

17 Renewable Energy Certificates (RECs), are tradable environmental commodities in the United States which represent proof that 1 megawatt-hour (MWH) of electricity was generated from an eligible renewable energy resource. Source: http://en.wikipedia.org/wiki/Renewable_Energy_Certificates 18 Conservation International is an international NGO in climate change that believes in making active links with various stakeholders such as corporations, governments, other NGOs and community partners. www.conservation.org19 The Carbon Disclosure Project (CDP) is an independent not-for-profit organization which holds the largest database of corporate climate change information in the world. The data is obtained from responses to CDP’s annual Information Requests, issued on behalf of institutional investors, purchasing organizations and government bodies. Since its formation in 2000, CDP has become the gold standard for carbon disclosure methodology and

Coalition to help suppliers with emissions reporting and through improved shipping procedures, better routing, and sitting facilities closer customers

Dell has minimized carbon impact of customer-product-use by adopting the 80 PLUS20

standard for its servers and desktops more than a year ahead of its July 2009 deadline and has also launched its first “hybrid” PC that integrates green energy into its machines

All of Dell’s products are EU RoHS21 compliant wherever they are sold, including India and it plans to phase out use of environmentally sensitive brominated flame retardants22 (BFRs) in new product designs thus making them even safer for use

Dell actively supports recycling and reuse of materials both in its manufacturing and office activities and is the only computer company to offer free recycling of any Dell equipment or any other computer or printer against purchase of a Dell product

Finally Dell’s “Plant a Forest for Me” program launched in September 2007, enables organizations to share best practices and facilitates partners in planting trees in sustainably managed reforestation projects

Carbon Neutrality Case- study 4: ONGC and Carbon Neutrality

Name and Organization: Oil and Natural Gas Corporation Ltd. (ONGC) is an Indian public sector petroleum company, incorporated on June 23 and 1993 and a ‘Navratna23’ enterprise. It is a Fortune Global 500 company and contributes 77% of India's crude oil production and 81% of India's natural gas production. It is also among the highest profit making corporations in India.

Main Business: ONGC has a unique distinction of having in-house service capabilities in all the activity areas of exploration and production of oil & gas and related oil field services.

Carbon Footprint: GHG inventorization is currently underway

process, providing primary climate change data to the global market place. http://www.cdproject.net 20 80 PLUS Gold power supply is a product efficiency benchmark for servers which require 92 percent minimum efficiency for power supply unit at 50 percent of rated output. The 80 PLUS Silver-certified power supply is an equivalent standard for desktops. Source: http://www.80plus.org 21 Restriction of Hazardous Substances Directive or RoHS is a directive adopted by the European Union and took effect on 1st July 2006 that deals on the restriction of use of certain hazardous substances in electrical and electronic equipment. It restricts the use of the following six substances namely lead, mercury, cadmium, hexavalent chromium (Cr6+), polybrominated biphenyls (PBB), polybrominated diphenyl ether (PBDE). Source: www.wikipedia.org 22 Brominated flame retardants or BFRs inhibit ignition or spread of fire and used in certain types of clothings, furnishings and electronic goods. Several BFRs including PBDEs and HBCDs, have known toxic properties, are highly resistant to degradation in the environment and are able to bioaccumulate (build up in animals and humans) and some are now widely accepted as environmental pollutants. Source: www.greenpeace.org 23 Navratna was the title given originally to nine Public Sector Enterprises or PSEs, identified by the Government of India in 1997 as its crown jewels or the most prestigious PSEs, which allowed them greater autonomy to compete in the global market. The initial list of 9 has now grown to 18. Source: http://en.wikipedia.org/wiki/Navratnas

Targets set: The oil major has drawn up an elaborate program to become carbon neutral in a few years and as a pre-requisite to being carbon neutral, has set specific targets to complete organization wide green-house-gas-accounting by 2011.

CEO Speak - Top Management Leadership in Climate Change Mitigation Efforts: R S Sharma, CMD of ONGC and in his role as President of the Indian arm of United Nation's Global Compact24 said, "ONGC will spearhead corporate action to mitigate climate change, leading to zero carbon footprint - a commitment for a Green Society".

Details of measures for emission reduction: Like Dell, ONGC seeks to take carbon neutrality to its core operations.

i. GHG inventorization is currently underway which will include carbon emissions accounting across all field activities such as rigs and platforms in addition to office spaces

ii. Reorientation of organizational systems and processes to comply with the GHG Accounting Protocol

iii. Based on this, location-specific targets for GHG emission reduction would be drawn upiv. Engineering interventions would be made to improve energy and carbon efficiency

including conducting regular energy audits at the installations

External Awards and Landmark Achievements: ONGC won the 2008 Golden Peacock award for its impeccable record in Climate Change

Mitigation. Further, ONGC’s Institute of Drilling Technology secured the Golden Peacock award under ECO-Innovation category in Oil & Gas Sector, while Corporate Health Safety & Environment (HSE) section of ONGC bagged the award under the Environment Management category23.

For its ‘green’ initiatives, ONGC received the inaugural Earth Care Award on 22nd April, 200825.

ONGC was identified as India’s ‘Greenest Company’, as per Business Today AC-Nielson ORG Marg Survey 2004 and also secured the Greentech Excellence Environment Award from Greentech Foundation26

Analysis: ONGC is not new to environment preservation or the carbon emissions field. It has an envious record with respect to green initiatives and the unique distinction of being the only central Public Sector Undertaking (PSU) in the country with four projects registered under CDM. This takes ONGC’s total annual accruable CERs or carbon credits to nearly 120,000 tons CO2e, that is half of Yahoo!’s carbon footprint! ONGC is now looking to increase its presence globally and already has significant investments in Vietnam, Sakhalin in Russia and Sudan. The oil major realizes it too would have to take a leadership role with respect to the environment and climate change and hence the move towards carbon neutrality. Additionally the Navratna’s top policy making body expresses that in addition to this being a step in the right direction where

24 United Nation's Global Compact was formed to consolidate corporate action to advance universal values around human rights, environment, labour standards and anti-corruption. http://www.unglobalcompact.org 25 Source: ONGC Press release, July 28, 2008, http://www.ongcindia.com 26 Source: http://www.ongcindia.com/Download/green.htm

environment issues are concerned, being carbon neutral would more importantly help ONGC to improve operational processes in terms of energy efficiency and adoption of better technology, leading to better business economics with respect other international players in the industry.

Analyzing the cases …All cases studied do indicate an attempt by companies towards minimizing respective carbon footprints. Almost all are making genuine commitments towards ‘green energy purchase’ or sourcing power from renewable and less impacting sources. All have active recycling programs with varying scopes. While Yahoo! tries to leverage its extensive reach to people to bring about favorable changes, some like Dell and ONGC have set ambitious targets for themselves when they plan to take carbon neutrality from their core products and operations to effect reduction in emissions to customer end use. For this they would need much higher levels of technological and financial support.

Financial companies like the HSBC have subscribed to international benchmarks like the Climate Principles which provide a guideline to evaluate financial support when assessing industry and infrastructure projects for their environmental and social impacts. These principles also help in bringing out financial products and incentives that would encourage a beneficial response at all levels.

Fears and Concerns…While all this sounds quite nice and at times too good to be true, there are a few concerns that are being raised by environmentalists as well as financial experts who question the effectiveness of measures adopted in meeting the said objective of reduction in emissions. Fears are being raised especially with respect to investments in sequestration or offsets through the plantation route, these are as follows,1. Bringing about the equivalence of carbon sequestration is difficult especially in the case of

plantations. Carbon Trade Watch states that “With plantation-based projects, our knowledge of the carbon cycle is too limited to be able to assess just how much CO2 is being actually absorbed by trees”27. This is so because the trees use atmospheric CO2 during the day and emit it back into the atmosphere during the night. Again there are issues of forest fires and cutting of trees for fuel and other needs. Although trees do capture and store carbon, estimating the exact amount and hence finding equivalence is difficult.

2. Larger scale plantations also involve issues of land rights and social justice, so the overall impact to neighboring societies needs to be taken into account. For example thought needs to be given to the choice of location as well as plantations themselves - fast growing, sturdy but water guzzling plantations may conflict with neighboring agricultural and human needs. Similar would be the situation in case of public lands that historically being used by tribal and wandering societies.

3. There also seems an apparent conflict of interest for land requirements with respect to developing countries. These countries need to grow, they need space for houses, schools, colleges, agriculture, industries and other infrastructure to provide the necessary facilities for

27 Report of Carbon Trade Watch, titled Offset Indulgences for your Climate Sins. Carbon Trade Watch is part of Transnational Institute - an international network of activists and researchers, that traces the impact, global pollution trading will have on society and the environment and urges for research and network-building on greenhouse gas trading and other forms of pollution trading. http://www.carbontradewatch.org

a minimum standard of living and there are chances of them running out of land if all plantation projects are diverted to these nations

4. Also afforestation has limited scope to compensate for all the emissions occurring across continents. If active steps are not taken to reduce energy use and consumption of goods and services (and hence emissions) at source locations then one would run out of land that could be spared for growing trees across any location

5. Again while all companies examined are making all efforts to neutralize their current emissions, nobody has made a mention about emissions that have occurred in previous years. This is an anomaly since the present problem of climate change exists as a result of historic emissions which continue to exist in the atmosphere. Neutralizing current emissions would help limiting their further build-up but initiatives need to be taken for ‘cleaning up’ those that continue to exit in the atmosphere at precarious levels

Possible way forward: Considering the above, 1. The best attempts to achieve carbon neutrality start with energy savings right at the source

whether in industries, office spaces, commercial complexes or residences2. Next, would be to substitute fossil energy with renewable sources of power, again at source

locations3. Sinks such as forestation projects whether taken up locally or elsewhere should only be used

to make up for balance emissions that just can’t be avoided. It seems logical to follow the same hierarchy when countries attempt to address climate challenge at national levels

4. Finally, it should be made as difficult (read expensive) to create emissions as it is to capture or sequester them. Equivalence needs to be brought between the time taken to capture or sequester emissions to that taken for creating them.

5. Addressing historic build-up of emissions, attempt could be made to approach ‘Carbon Negativity’, a concept doing the rounds in very very small forums. This approach encourages organizations to not only reduce or balance out emissions via efficiency and green power projects but requires them to neutralize emissions in excess of their existing and expected carbon footprints. These ‘excess credits’ would in that case not only address historic emissions but could also be utilized to compensate all those emission creating activities that continue to stay out of consideration for reductions for want of required scale or finances

______________Related Websites:

1. http://info.yahoo.com/center/us/yahoo 2. http://green.yahoo.com 3. http://forgood.yahoo.com/go_green/doing_our_part/carbon_neutral.html 4. http://www.dell.com/earth, http://www.dell.com/earth5. http://www.indiaprwire.com/pressrelease/computer-hardware/2008082812505.htm6. http://www.eetindia.co.in/ART_8800514983_1800007_NT_3d8d6faa.HTM 7. http://www.hsbc.com 8. http://en.wikipedia.org/wiki/HSBC 9. http://www.newbuilder.co.uk/newbuilder/NewsFullStory.asp?offset=30&ID=390 10. http://en.wikipedia.org/wiki/Oil_and_Natural_Gas_Corporation 11. http://www.ongcindia.com 12. http://www.newkerala.com/topstory-fullnews-77404.html 13. http://www.indiaenvironmentportal.org.in/node/36212

14. http://www.newbuilder.co.uk/newbuilder/NewsFullStory.asp?offset=30&ID=390