How tracking expenses can improve a company’s carbon footprint
October 7, 2022
Understanding and managing your company’s carbon footprint might sound like a daunting and complicated task, but what if we told you taking the first step was as simple as collecting some data about your expenses?
We recently sat down with Joanna Auburn, the co-founder, and CPO of climate-tech platform Trace. She shared insights on how easy it can be to start taking climate action when you have the right processes and tools.
See the interview transcript below:
Tell us a bit about yourself. How has your background inspired your climate and sustainability focus?
My interest and passion for climate and sustainability started when I was completing my university studies. As part of my Master of Civil Engineering, I focused on impact-modelling the rollout of electric vehicles across the UK. I then started my career working in sustainability, working for the UK’s first renewable energy retailer (OVO Energy). Following this, I spent four years working in product and technology for Finder. I really wanted to use my experience working in sustainability and apply my product knowledge to a problem that I felt passionate about and would have a positive impact.
I had also previously set up a fashion brand as a ‘hobby business’ and through that process I experienced first-hand how hard it is to make your brand sustainable and understand the impact you have on the planet, especially with limited resources!
The culmination of my professional background and entrepreneurial experience led me to start Trace with my co-founder Cat.
Do you encourage your employees to reduce their environmental impact outside of work and, if so, how?
People who join our team are naturally attracted to working with us because they care about the planet, so there’s not much need for us to convince our team to ‘care’ or take personal steps to be more sustainable!
That said, we don’t have a shaming or judging culture either. Cat and I coined the term ‘climate conscious hypocrites’ when we started Trace - it’s how we describe ourselves because while we care about climate change and taking action as much as we can, we are also imperfect humans and our lives have an environmental impact, especially when we do some of the things we love most like travelling overseas to visit family!
We like to take this ‘progress over perfection’ mentality with our team and members too because everyone doing something is better than only a few people doing everything.
As time and money comes under pressure in these current economic circumstances, it’s unfortunately easy for businesses’ climate-action goals to go amiss. How can companies save capital and time whilst maintaining the focus on these initiatives?
It’s unfortunately true that sustainability initiatives can fall down the priority list in times like these and this can be due to the misconception that operating sustainably always costs a business more than the status quo.
However, it is also widely accepted that businesses which fail to decarbonise their operations over the coming years, will struggle to remain viable both due to market expectations (from customers, investors, financial institutions etc.) and regulatory requirements.
Therefore, I think that in order to maintain a consistent focus on sustainability, it’s important that business leaders start to reframe sustainability from a cost to an opportunity and act accordingly.
For example, by building climate action into the culture of your business you provide the foundation for everyone to start making decisions in their own day to day roles that take sustainability into consideration. Everyone from your procurement and finance team, to your marketing and HR teams can have an active role to play. This not only brings a business closer to their emissions reduction goals, but research suggests that this focus on purpose can have a hugely positive impact on your employee engagement and in turn, productivity.
If a business is wanting to conduct a cost-benefit analysis of investments in different sustainability initiatives, I’d encourage them to start by becoming carbon neutral. By measuring and offsetting their emissions (the key steps to achieve carbon neutrality), a business can effectively put a price on their carbon impact. As the need to decarbonise increases in coming years, the price of carbon will increase too, so the cost to offset a company’s carbon emissions will also increase. This allows businesses to start truly weighing up the cost of inaction and they will discover that reducing their emissions through changing business practices or working with different suppliers who are carbon neutral is more cost effective than simply offsetting all of their emissions each year. The businesses who choose to do this sooner will be much better placed compared to competitors who leave it to the last minute.
When tracking expenses, what metrics should a company focus on and what KPIs or goals should they establish around their carbon footprint and sustainability initiatives?
For service-based organisations (e.g. consulting firms & technology-based companies) a top line metric to monitor progress towards reducing emissions, is CO2 emissions (in tonnes/ kgs) per FTE, especially if they are growing. This is because with every additional employee or increase in company output, there is usually an associated carbon impact from the additional electricity usage, waste production, commuting and so on. This means comparing total carbon footprint figures year-on-year can be misleading when a company is growing or can look like no progress has been made, when actually a business may have become more efficient overall and be on track to reaching their reduction goals as a percentage of total emissions.
For product-based organisations, metrics such as revenue to emissions ratios (in tonnes/ $ revenue) is often a more accurate measure of progress, as there are significant efficiencies that can be found in the product manufacturing and distribution processes in addition to the emissions created by back-office operations.
Tracking business expenses is an important component of understanding a business’ carbon emissions because expenditure is commonly used to calculate emissions produced for things like transport, advertising and other key suppliers. When we calculate a business’ carbon footprint we often use their expenses data alongside our benchmarks to understand the likely carbon impact of those purchases.
There is an important caveat to this, however. How much a company spends on certain activities is not the only factor; who they spend that money with is also important. Choosing to work with a carbon neutral supplier, for example, means those expenses are not counted towards your organisation’s carbon footprint as they have already been accounted for. So, sustainable procurement plays an important role in tracking expenses for the purposes of carbon management.
We encourage every business we work with to start engaging with their existing suppliers to help them improve their carbon impact and ideally become carbon neutral, and where that’s not possible, to consider choosing suppliers who are better aligned with their values.
With this in mind, a final KPI businesses should track is what percentage of their supply chain is carbon neutral and/or has ethical and sustainable credentials (e.g. B Corp certification).
How can companies enable the long-term success of their sustainable expense management?
Building processes that incorporate sustainability considerations into everyday decisions.
Building a climate-conscious culture and sustainable processes go hand-in-hand and could include things like:
Developing specific policies (e.g. sustainable travel and procurement policies).
Mentioning the business’ commitment to climate in job advertisements.
Incorporating education around climate change and the business's commitment to sustainability in the onboarding process for new team members.
Building sustainability metrics into the performance reviews of employees
Establishing internal committees or groups that are focused on driving the company’s sustainability initiatives and tracking progress.
Encouraging the team to actively seek out or suggest preferred sustainable suppliers and partners.
Particularly for bigger projects a business undertakes, make it a standard part of the planning and development process to ask, “what is the carbon impact?”. The emissions created by certain activities should be included in any budgets or business cases created to ensure the team has captured both the full cost of the project and any opportunities that exist to have a positive impact.
Now that receipt capture and accounting processes are automated by expense management platforms like Cape, reducing the amount of paper receipts and balance sheets, what other ways can an expense management platform reduce a company’s carbon footprint?
The biggest way a platform like Cape can support businesses to reduce their emissions is by helping them be aware of where their emissions lie within their supply chain and operational expenses. As the saying goes, “what gets measured, gets managed”, so being armed with this information is essential for any business. With this data, a business can consider where expenditure could be diverted to lower-impact activities or suppliers.
Having all of a business’ expense information in one place will also make it easier for it to audit which suppliers are commonly engaged and determine the percentage that are carbon neutral. As mentioned previously, this is a key metric to track, because for most businesses 60% or more of their emissions are considered ‘scope 3’, or sitting outside of their direct control in their supply chain.
When looking at corporate cards, what spend controls would you put in place in order to help employees spend consciously and direct businesses towards sustainability?
Seeing it is usually the bigger expenses that have the largest impact on a company’s carbon footprint, a business could consider implementing spending limits that trigger a supplier’s sustainability credentials to be checked when spending over a certain value. This would involve checking if the company is carbon neutral, or whether they’re taking steps to reduce their emissions compared to competitors.
Travel is usually one of the biggest contributors to a business's emissions and also something individual employees often have direct influence over. Hence, limits could be put in place around the number or total value of flights, taxis, or rideshare trips taken to prompt employees to be more conscious of when these transport options are really necessary and when a low-emissions option might be better suited. Simply choosing to fly Economy instead of Business Class can have a significant impact on the emissions associated with an airline ticket!
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