The Era of Data: When to Dig Deeper and When to Stop
I’m reminded of the Kenny Rogers song, “The Gambler,” which has the line: “Know when to hold ’em. Know when to fold ’em.” In the era of data overload, there’s a certain wisdom in knowing when to fold ’em, or in the context of sustainability measurement, when to stop digging and be satisfied with the numbers you have. The field of sustainability metrics is still young, and there is a general feeling of caution around understanding and trusting the data. The newness of the science incorporates an inherent suspicion in the data and companies get caught up in the quest to keep digging for concrete and provable numbers so they can be defended by any and all attack.
What’s the ROI of a carbon footprint?
But this costs money – potentially a lot of money. What’s the ROI of a carbon footprint? Well, it depends on how much time and money you’ve spent measuring it. If you’ve spent $50,000 and up to 6 months calculating the carbon footprint of your factory or of your top selling product line, I’m sorry to say that you’ve likely spent way too much on the process and you most likely will not recover that money for a very long time – if at all. The only benefit will be the insights you’ve gained along the way. And it’s also likely that you’re going to have to repeat the process more than once as the science, standards, and requirements of carbon footprinting evolves and solidifies.
So what is a company to do? There is no doubt that companies are feeling pressured to measure their carbon footprint. There’s the new cap-and-trade system in California. Retailers such as Wal-Mart and Marks & Spencer have, very publicly, put sustainability on the corporate agenda. There is the ongoing threat of legislative mandates for environmental labeling in Europe. And there is the “keeping up with the Joneses” aspect of making sure your competition doesn’t get ahead of you in the sustainability showdown. Not to mention the many cost reductions that a company can make by identifying and reducing their environmental impacts. The question isn’t deciding whether or not to measure your carbon footprint, but how far to take it.
Up until recently, most carbon footprinting was done “by hand.” When I say that, I mean by one or more consultants with one or more Excel spreadsheets, and potentially one or more visits to the factory, the farm, and the distribution depot. There was, and still is, an influential school of thought that says that carbon measurement must be done onsite and in real time. The problem is that consultants often work on an hourly basis, so every visit to the factory, the farm, and the distribution depot is time logged and invoiced at an hourly rate. And in the end, there still ends up being a lot of uncertainty about the numbers that come out of the dozens of spreadsheets that are produced, even though the insights that the consultants interpret from the data may turn out to be very valuable.
The 80/20 Rule
The real question should be at what point do you stop measuring and start acting on the results you’ve got? I’ve always believed that the 80/20 rule applies to most things in business. And with carbon footprinting, it applies very well. It costs only 20% to calculate your supply chain to 80% accuracy, and it can easily cost up to 80% to calculate the last 20%. That’s indisputable. My point, however, is that 80% (or maybe 85% or 90% if you insist) is good enough to provide a basis for intelligent, resource-efficient, and profitable business decisions. Eighty percent accuracy on a supply chain carbon footprint will clearly define the hotspots – the areas where your impacts are the highest – even if the actual number is not spot on accurate. It will also give you a good idea of where there is waste along your supply chain, and where there are excessive operational steps that can be reduced.
Eighty percent accuracy will also give you a good basis to do modeling to show, not necessarily the absolute reduction in greenhouse gas emissions, but definitely the relative reduction in emissions if you make one or more changes to the supply chain. For example, if you calculate to 80% the supply chain impacts of a frozen lasagna and you find that the carbon footprint is about 4.5kg plus or minus half a kilo. So what? Does that mean anything to anyone? Is that good or bad? Is it high or low? No one really knows! But, if you show that a change in tomato sourcing could reduce the impact by 7% and your costs about the same amount, then that’s something of tangible interest. And that measurement can be easily and accurately done with an abbreviated carbon footprint measurement.
Sustainability as a Standard
The indisputable fact is that carbon footprints and environmental metrics are becoming a standard for business. The other indisputable fact is that the great debate over the value of knowing what those numbers are is ongoing. My advice is to get your numbers in the most efficient way, balancing accuracy with cost, giving you tangible and understandable outputs. In other words, “hold ‘em” until you get almost all the way there, and then “fold ‘em” by using what you have to support intelligent and profitable decisions within your business.
Sara Pax is the president of Bluehorse Associates, a developer of environmental sustainability metrics solutions specialized in the food and beverages industry featuring the Carbonostics suite of web-based applications for carbon & energy accounting, lifecycle assessment and product carbon footprinting. Visit: www.carbonostics.com
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