BY: Devesh Udasi
Introduction
As a second-year MBA & MIS student at the Katz Graduate School of Business here at the University of Pittsburgh, I had several preconceived notions about approaching sustainability problems and how to solve them. My inclination to focus on product development and management with sustainability at its forefront brought me to the Center for Sustainable Business, where the constant ongoing dialogue with companies from the Appalachian region motivated me to better understand the process they undertake to achieve their sustainability goals. As a native of India, coming to a country like the United States where the sustainability as strategy is consistently evolving, understanding the sheer breadth of this topic has been a welcoming challenge for me. My time at the CSB has given me the opportunity to do a deep-dive into carbon as one parameter for that, and I am excited to share my findings with our community.
In the heart of Appalachia, a pivotal shift is underway towards enabling a more sustainable future. Carbon benchmarking is emerging as one of the leading strategies for companies to forge their pathway towards decarbonizing their business models. It is critical to understand the significance of this transformative process in order for a company to mitigate their environmental impact and drive positive change. This article provides a high-level overview into the practice of carbon benchmarking.
Why Carbon Benchmarking Matters
Carbon benchmarking serves two primary purposes:
- The systematic evaluation of a company’s emissions relative to its peers to understand market and environmental performance; and
- The evaluation of GHG emissions internally—a company can benchmark against its performance and measure progress over time.
Carbon benchmarking is more than just measuring emissions — it equips companies with the tools to navigate societal disruptions and policies. By evaluating a company's emission levels, businesses gain insights into their performance. This data-driven approach not only aids in understanding market dynamics, but also empowers companies to set ambitious sustainability goals and track their progress over time.
The 5 Steps of Carbon Benchmarking
Step 1: Planning
In order to initiate the process of carbon benchmarking, companies must first understand the scope of their operations, as well as the types of relevant data they are able to collect. The foundation of carbon benchmarking lies in meticulous emissions measurement and comparative analysis of greenhouse gas emissions. It can be helpful to look to industry peers to assess the company’s own environmental impact, to set annual baselines, and to determine opportunity areas. Companies should define the scope of data they plan to collect and leverage sophisticated sustainability software to manage their benchmarking.
Planning not only involves identifying the scope of data to collect, but also the means of executing this project in entirety:
- Resource allocation
- In-house/outsourced development
- Application procurement
CSB as a resource: The CSB assists companies in understanding the scope of their operations and types of relevant data to collect by leveraging comprehensive emissions measurement techniques. We facilitate resource allocation and decision-making regarding in-house versus outsourced development and application procurement. Additionally, the CSB provides insights into embodied carbon, helping companies assess GHG emissions through industry reports and best practices.
Step 2: Data Collection & Calculation
Once you have planned the entire carbon benchmarking project, the second step is to define what data you would like to start with. Scope 3, or value chain emissions can make up to 80-90% of your total carbon footprint.
Additionally, to effectively measure and track a company’s carbon footprint, it is essential to implement a robust data collection process encompassing a variety of sources and techniques. Legacy data, representing historical emissions data, provides valuable insights into long-term trends and patterns, serving as a baseline for future goal setting. Incorporating legacy data into current assessments aids in identifying areas for improvement based on historical performance.
Use of a software to collect and store data before assessing it for reporting purposes is pointless if the accumulated data is incorrect and/or incomplete. Additional techniques such as automated data collection systems, IoT sensors, and cloud-based platforms can streamline the data gathering process, ensuring real-time monitoring and accurate measurements.
By integrating advanced data visualization tools and analytics software, companies can visualize emission sources, trends, and anomalies, facilitating informed decision-making and targeted emission reduction strategies.
CSB as a resource: The CSB guides the implementation of robust data collection processes, leveraging automated data collection systems, IoT sensors, and cloud-based platforms for real-time monitoring. We can recommend advanced software applications to streamline data gathering.
Step 3: Data Analysis & Direct Internal Comparison
Analyzing your accumulated data is the most crucial aspect of carbon benchmarking, because it assists you with systemically understanding emissions over the course of time.
Most applications which assist with data analysis try to ensure data quality and integrity, without which accuracy of the collected data is in question. Effective analysis of emissions data helps with performance, forecasting, budgeting, and profiling. This data also sets a base for reporting, given that it provides a significant amount of insight into the company’s operations and its carbon footprint.
Additionally, for an efficient internal comparison, companies must select a benchmark year from which to track emission progress in order to quantify their environmental impact. Establishing a benchmark year provides a reference point for measuring emission reductions and monitoring performance year over year. By comparing emissions data annually, companies can evaluate the effectiveness of sustainability initiatives, identify areas of success, and proactively address challenges.
Year-to-year comparisons not only track progress towards emission reduction goals, but also demonstrate the iterative nature of sustainability management. By setting targets and tracking performance metrics over time, companies can alter strategies, allocate resources efficiently, and drive continuous improvement in their environmental stewardship efforts.
CSB as a resource: The CSB assists companies with using applications for data analysis, ensuring accuracy and integrity. We facilitate the selection of an emission benchmark year, enabling companies to quantify their environmental impact effectively. The CSB also helps companies perform internal comparisons to evaluate sustainability initiatives and track emission reductions annually, informing strategic adjustments and continuous improvement.
Step 4: Comparison with Industry leaders
As countries implement their targets and policies and develop more detailed pathways to reduce their greenhouse gas (GHG) emissions, it is important to fully understand the global emissions picture and how it changes over time.
Each sector contributes towards GHG emissions through a variety of different sources. For example, the energy sector, being a major source of emissions, has some of the largest corporate emitters in the US. The emissions intensity in this sector depends on various sources, including, but not restricted to fossil fuels. Each sector has different goals to reduce their emissions intensity and also equip different reduction strategies. For example, the reduction strategies for the energy sector for the Appalachia region include:
- Using smart grids and advanced technologies to boost energy efficiency
- Shifting to renewable energy sources like wind and solar power and their storage
- Implementing technologies to capture emissions from stationary and ambient sources, then utilize and/or store them
- Promoting sustainable land-use practices to reduce deforestation and encourage reforestation
Similarly, most sectors have set regulations and strategies to achieve a common goal, and it is critical for companies to look at the peers from their industry to achieve this collective goal.
The importance of peer-to-peer comparison in carbon benchmarking cannot be overstated: comparing your company's emissions to those of industry peers provides valuable insights into relative performance, industry standards, and best practices. By examining industry benchmarks and trends, companies can gain a deeper understanding of their competitive position, identify areas for improvement, and set ambitious yet realistic emission reduction targets.
Annually comparing your company's emissions data to industry averages and peers enables organizations to gauge their environmental performance, identify outliers, and leverage industry insights to drive further progress. Companies should take this a step further and directly collaborate with industry stakeholders to share best practices. Doing so fosters a culture of environmental responsibility and leadership, and can motivate continuous improvement.
CSB as a resource: The CSB provides data and insights on global emissions and industry-specific reduction strategies, particularly for high-emission sectors like energy. We facilitate peer-to-peer comparisons, helping companies benchmark their emissions against industry standards and identify areas for improvement. Additionally, the CSB encourages direct collaboration with industry leaders to share best practices and foster a culture of environmental responsibility and leadership.
Step 5: Reporting and Communication
Instilling practices of transparency and accountability will ensure that a company succeeds in their long-term carbon benchmarking journey. By reporting and communicating results effectively, businesses not only showcase their public commitment to sustainability, but also invite opportunities for collaborative initiatives. Regimented reporting ultimately holds companies accountable to the targets they set, and increases the likelihood that improvements will be made.
There are 6 primary benefits to this practice:
- Regulatory risk mitigation
- Energy and cost savings
- Supply chain resilience and efficiencies
- Future – proofing the business
- Brand Positioning; and
- Environment & social benefits
While the world moves towards positioning their brands in a way that is best accepted by the general public, it has become imperative to hire a consultant or outsource this practice to external experts.
CSB as a resource: The CSB provides guidance on carbon accounting and reporting practices, highlighting benefits such as regulatory risk mitigation, cost savings, and enhanced supply chain resilience. We assist companies in leveraging software for comprehensive and compliant carbon reporting. The CSB also supports companies in communicating their sustainability metrics effectively, fostering accountability, and enhancing brand reputation.
Conclusion: Shaping a Sustainable Future
As businesses in Appalachia embark on the journey of carbon benchmarking, they are not only embracing a more environmentally-conscious approach to business; they are also setting the stage for long-term sustainability and growth. By centering data as the core of their sustainability strategies, companies can position themselves as leaders in the transition towards a greener, more resilient future.
Many companies arrive at carbon benchmarking from different driving forces. These could be customer and/or investor requests to participate in the Science Based Targets initiative (SBTi) or responding to CDP / CDP Supply Chain questionnaires. These could be industry and/or regulator requests to use GHG Protocols or ISO certifications. These could be employee and/or prospective hire interests to lead in a regenerative economy. Wherever the drive for you starting your journey is coming from, I hope this attempt at a primer for those just starting is helpful. Companies have rightly identified that ignoring carbon emissions tracking has significant negative impact on their accounting and financial performance, which can be addressed by adapting either of the aforementioned strategies.
The Center for Sustainable Business has taken an initiative to conduct preliminary research into the initiative of decarbonizing Appalachia by observing similar practices in other regions around the world. While this process is research intensive, understanding the basics of steps to ensure reduction in GHG emissions is a continuous process and the CSB is committed to provide insights into that process through our periodic newsletters, the Small and Medium Business Summits (specifically focusing on companies in the Appalachian region), and research papers and articles. Please refer our previous articles for more insights into the subject matter:
At the end, adopting a robust carbon benchmarking methodology is not just a business imperative — it is a moral and environmental responsibility that shapes a brighter, more sustainable tomorrow for Appalachia and beyond.
Sources:
What is carbon benchmarking? | Workiva Carbon. https://www.sustain.life/blog/ins-and-outs-of-carbon-benchmarking
Survey: Many Americans support shifting to renewables but still want to drive gas-powered cars | KISU. https://www.kisu.org/2023-07-11/survey-many-americans-support-shifting-to-renewables-but-still-want-to-drive-gas-powered-cars
For better social listening outcomes, stay tuned to your audience over time - Revmade. https://www.revmade.com/stay-tuned-audience-social-listening/
How Many Americans Have Solar Panels in 2024?. https://www.solarinsure.com/how-many-americans-have-solar-panels