Moving Consumer Brands to Climate Neutral

Q: What is Climate Neutral?

Climate Neutral is a nonprofit organization that I co-founded three years ago with the goal of giving consumers the ability to do something about climate change.

Roughly two thirds of global emissions are in some way tied to consumer spending, yet as consumers we have largely been left out of the solutions.

Too often, we’ve been told to either do things that are essentially meaningless—switch from a plastic straw to a paper straw—or unattainable for many—put solar panels on your roof or buy an electric car. A massive chunk of the emissions that consumers are responsible for—so much of the physical stuff that we need to be human: clothing, furniture, electronics, etc.—occurs between those two ends of the spectrum.

We see a huge opportunity for consumers to be drivers of corporate change. Consumer interest channeled through things like B Corp, Fair Trade, and Forest Stewardship Council certifications have pushed companies to do better in their operations. We haven’t seen comparable efforts to mobilize consumers toward a single objective—getting consumer brands to embrace carbon reduction.

Our goal is to make Carbon Neutral certification the most visible way of showing that a brand is taking on the challenge of decarbonization.

Q: Starting this organization was a shift for you. You had been working on climate through policy and finance. What drove that change?

To be clear, I haven’t given up on policy or finance. We need to be pulling on all the levers. And we need them all to work together in a complementary way. But personally, I think, a sense of impatience drove my desire to move into something even more impact oriented. Global carbon emissions have risen about 30% since I started working on climate change. That was a really depressing point to reach.

In focusing on consumers and climate change, I saw an opportunity to work on a crucial issue at an important moment in a way that hadn’t been done. That’s exciting. So is building something from scratch, doing everything from setting strategy to getting in there with a spreadsheet.

Q: Climate Neutral certification is a signal to consumers that a company is tackling decarbonization, but you work directly with companies. Which companies and what’s motivating them?

Companies come to us understanding that, for anyone 17 to 55, sustainability is at the top of the list of things they care about. Products marketed around sustainability are growing faster and selling more. And climate is the top sustainability concern.

Most companies also see climate as having both operational and regulatory risks. Even so, most companies haven’t gone through any comprehensive exercise to look at their emissions. That’s especially true of smaller companies. So our platform has a twofold purpose, which is to certify but also to enable a company’s carbon reduction work.

We’ve certified 335 companies. They come from a lot of different sectors. We’ve worked with Kickstarter and other tech companies, Acumatica and a range of professional and businesses services firms.

The bulk of the companies come from three primary sectors: durable consumer goods, health and beauty, and food and beverage. In those categories the brands include REI, Allbirds, Reformation, OSEA, Rare, Alter Eco Chocolate, Union Wine Company, Fetzer, and Bud Light NEXT. With those three sectors, we’ve got the opportunity to influence a pretty good chunk of consumer purchasing.

We haven’t done anything in consumer electronics, which I would love to do. On the flip side, we’ve specifically chosen not to work with extractive industries. You can, theoretically, make a backpack with zero emissions, but you can’t extract and use a barrel of oil with zero emissions.

Q: Talk me through the certification process.

The process is three steps: companies measure their carbon emissions, they compensate for the past year’s emissions, and they identify reductions they can implement in the next 18 to 24 months.

Carrying out those steps can get fairly technical pretty quickly. We provide a roadmap that says, “Do this, then do this, then do this.” We’ve boiled down a complex problem so that they come out of the process with baseline measurements and clear options that they can act on.

Knowing full well how companies work, putting together a plan on their own, it could easily take two years, and then they’ve got to figure out how to implement the plan. Working with us saves them time. Time is really of the essence when it comes to the climate crisis.

An additional value of certification is it’s a one-size-fits-all, science-based framework administered by an independent third party. Too often companies developing their own climate framework are really taking existing operations and putting a sustainable spin on them in the name of marketing and messaging.

Q: How challenging is it to get a handle on emissions?

We help companies tally emissions all the way up the supply chain and all the way down to customers. In the language of carbon accounting, that’s Scope 1, 2, and 3. Scope 1 is direct greenhouse gas emissions generated by a company. That’s a relatively straightforward exercise. Scope 2 is indirect emissions coming from things like electricity, heating, and cooling. Again, that’s pretty easy to get at by making some calculations based on utility bills.

Scope 3 is a very different exercise. It’s the emissions from your supply chain. That’s a lot more complicated, because you’re having to make assumptions about all the things that happen, in many cases, three or four or five corporate relationships away.

Tracking things back that far can be daunting, time consuming, and expensive. The good news is that the life cycle assessment profession has been encountering this challenge for years and has modeling techniques that deliver reasonable estimates. Published databases of emission factors make it possible to get a number for, say, emissions tied to finished nylon from a supplier in China.

When we combine the Scope 1, 2, and 3 emissions, the result is a good representation of where the biggest sources of emissions are. The state of measurement is far behind where it should be, but it’s good enough to let companies know where to focus their decarbonization.

Q: Climate Neutral built a tool to guide companies through the emissions accounting.

When we started, we assumed there must be software that helps companies calculate their carbon footprint. We thought we’d choose the option that was accessible, cheap, and credible. We found nothing fitting those criteria.

It was a huge, unexpected challenge. From our perspective, the cost of emissions measurement should not be the lion’s share of the cost the companies incur. So we’ve designed around a goal of having companies spend about 90% to 95% of the total cost of certification on the purchase of carbon credits and the early investments in decarbonizing their operations. Not on measuring and planning.

That was possible because we put together our own software, the Brand Emissions Estimator (BEE), as we were launching. We essentially put the brain of a life cycle assessment expert into the BEE. It’s structured so that whether someone does marketing or operations or sustainability, they can do the work and finish the entire process in a matter of three or four months.

I should note that, in developing the BEE and doing everything else that went into launching Climate Neutral, I’ve drawn on almost every course that I took during the joint degree [at Yale SOM and the Yale School of the Environment]. It’s been fun to use all those different skills.

We’ve come to realize how important building our own emissions accounting tool was to delivering on the speed, low cost, and technical rigor underpinning certification.

Not coincidentally, we’ve started to see carbon measurement software startups raising a bunch of venture capital. The growing interest and demand also mean data gaps are starting to be filled. For example, there are now resources to get the carbon intensity of specific commodities, a roll of steel or aluminum, or a bale of cotton. And, increasingly, it’s possible to get data on the specific practices of individual manufacturing companies within the supply chain.

There’s a lot of opportunity still out there that we’re seeing companies recognize and innovate around. My hope is that this will happen in a way that facilitates widespread access to that data rather than creating silos.

Q: What happens once companies have measured their carbon emissions?

Our belief is that companies need to be investing simultaneously in cleaning up historical emissions and reducing future emissions. The first act is the cleanup part. That involves purchasing eligible, verified carbon credits through the voluntary carbon markets and showing that that’s been done to a standard that we believe is acceptable.

Q: There’s been criticism of carbon offsets. Is that a concern?

Carbon offsets are definitely an area of active debate. We argue that the offset market is necessary but not sufficient for global decarbonization. That is, I don’t think that we’ll achieve the decarbonization that we need to without offsets, but offsets won’t take us the entire way.

The offset market looked the same from about 2010 to 2018. It was about the same size and mostly the same people were doing roughly the same things throughout that period. Then the 2018 IPCC report crystallized this notion of needing to make substantial progress on climate by 2030. There was this explosion of interest, which put the offset market under a lot of scrutiny.

The carbon offset industry, in general, hasn’t done well demonstrating its successes or proactively acknowledging its failures. That opened the market to criticism. Some is justified. Some is a distraction. The truth is that there are great projects and there are terrible projects. They’re not all the same.

Ultimately, there’s a huge opportunity for voluntary carbon markets to drive decarbonization in more systemic ways. Beyond forests and other familiar carbon sequestration projects, carbon finance can be used to help companies and industries and countries embrace real business opportunities to decarbonize.

Q: Which brings us to that last step in the certification process. What do companies end up doing to decarbonize?

With companies that make physical goods, we’re seeing a lot of changes in material choices: switching from aluminum to recycled aluminum, from steel to lower carbon steel, from virgin polyester to recycled polyester.

One interesting change is how understanding the higher carbon emissions of air freight leads companies to retool their whole product development processes. We’ve seen interesting optimization exercises on the sequencing of getting goods from factories to customers in ways that use air freight less.

There’s also a lot of attention on packaging, even though packaging doesn’t make up a particularly significant chunk of overall emissions for most products. Companies do see it as low-hanging fruit.

We also see changes to corporate travel policies and shifts to purchasing renewable energy through the utilities. It all has an effect.

Q: When companies describe their climate goals, there are a lot of different terms being used. Which ones do you pay attention to?

There are a lot of terms. The thing that we need to focus on is getting companies moving on climate in meaningful measurable ways.

The simplest way I would describe it is, net zero is a global state. In a net-zero world, humans aren’t emitting more carbon dioxide or other greenhouse gases than the world is capable of sequestering. Any carbon-removal technologies that we invent and scale could provide a buffer to natural sequestration. We’re trying to reach net zero by some target year in the future, 2050 being the one best aligned with climate science.

To collectively reach net zero, companies, states, countries, even households can achieve carbon neutrality and climate neutrality by taking steps to reduce their emissions and offset those that can’t be eliminated. The distinction between carbon neutral and climate neutral is that carbon neutral focuses on carbon dioxide emissions while climate neutral incorporates a wider set of global warming pollutants and impacts including things like albedo and feedback loops.

One distinction that I think is really important and ties back to the offset discussion: according to definitions that are increasingly accepted in the global NGO community, you can reach carbon neutrality or climate neutrality through a combination of reductions and investing in carbon offsets. But net zero cannot be reached relying heavily on carbon offsets. The idea being, carbon and climate neutrality are a near-term stage which moves us toward the broader systems change needed to reach a net-zero world.

Q: Beyond the value in marketing to consumers, what benefits do companies get from going through the certification process?

For decades, people have been trying to get a price on carbon through policy, and it would make a huge difference, but we still don’t have it and we can’t wait until we do.

Through the certification process, companies are putting a price a carbon. It’s voluntary, but they’re paying to offset their impact. That moves carbon into the business decision zone of a company. It means thinking about products and partnerships differently once carbon is part of the central planning framework.

In a lot of cases, doing this work gives companies an opportunity to form collaborations as they think about improvements in product design or new channel partnerships to manage carbon more efficiently.

Q: Climate Neutral assists with fostering those connections.

We do try to facilitate connections between companies in part by doing certifications in cohorts where, say, 50 companies are coming together for workshops on emissions reduction, carbon offsets, travel policies, or any number of different topics. This shared learning gives them an opportunity to ask questions of each other and pick up new ideas. Those exchanges become the basis for a lot of growth and learning. A nice feature of being a nonprofit is that we aim to help knowledge flow efficiently and cheaply, rather than charging fees for that learning.

Q: Where do you see Climate Neutral going in the next few years?

We want to continue to build out the technology and other knowledge resources that we offer to companies. In the same way free COVID testing is a public health intervention that’s valuable for everyone, accessible, free, or open-source carbon measurement tools are needed.

We also want to move into the supply chain, enabling not just consumer-facing brands but their suppliers to become part of this effort as well.

Like anyone running a nonprofit, I would love to work myself out of a job because we’re no longer a need. Certification is a voluntary market proxy for what good policy could have us doing as the normal course of business. But I’d be surprised if by 2030 there’s no need for voluntary action anymore.

More broadly, a source of optimism for me is the number of folks for whom climate is an absolute central priority. We need to translate that passion into the cold, hard engineering solutions that will help decarbonize the world. But with people doing everything from accounting to design viewing the climate as a real priority, our chances of success are improving. Yale is certainly doing its part training the next generation of leaders in this space.