Emission reductions equals profits

Bob Doppelt

Debate about the climate protection bills currently before Congress has largely centered on their potential costs to business and consumers. Will the price of reducing emissions sufficiently to save the world from uncontrolled climate change really be excessive? Not if the experiences of a few companies that found reducing greenhouse gas emissions can produce huge cost savings and enhance competitive advantage are any indication.

AstraZeneca, an international pharmaceutical company with more than 65,000 employees and research and development offices in Sweden, the United Kingdom and the United States, cut its total greenhouse gas emissions by 68 percent compared to 1990 levels and eliminated 99 percent of its ozone depleting gasses. 

AstraZeneca launched its emission reduction activities as a result of growing stakeholder expectations in this area and a desire to manage its reputation and operational risks proactively.

First, the corporate executive team established the initial overall policy and emission-reduction targets. Responsibility was then given to Safety, Health and Environment (SH&E) staff to help each unit identify ways to achieve the targets by encouraging each unit to examine its carbon footprint and devise its own vision of success, reduction targets and strategies for achieving them.

It was not difficult to sell the need for emission reductions to employees. Because many have a scientific background, “All levels of the organization seemed to get the need and focus very quickly,” says Keith Moore, senior environmental advisor at the company. 

Constant innovation and learning has been a core element of the company’s strategy. After all, testing and knowledge creation are how AstraZeneca employees develop new products.

SH&E documented, for example, that since the company started its emissions-reduction effort in 2001 it has saved close to $175 million. In 2008 alone it saved $59 million in energy costs, compared with 2005 costs.

“These savings are actually small potatoes,” Moore says. “The bigger benefits have been the added values, such as attraction of good people who want to work at the company because of its reputation.” The public attention the firm has received due to its emission reduction efforts has significantly increased its brand value. The program has also enhanced our competitiveness, which, Moore notes, is “what it's about at the end of the day.”

The company is now beginning to consider how to prepare for the risks posed by climate change. “We have a large and complex supply chain with its attendant risks and opportunities, and there are issues such as health care goals and respiratory diseases that have factored into our thinking,” Moore says. “We know we must not put ourselves in a position of just responding to events. It is better to help shape how those events unfold.”

Catalyst Paper Corp., a mid-sized company with 2008 sales of $1.8 billion and approximately 2,700 employees, mostly in British Columbia, is one of the largest producers of newsprint, telephone directories, catalogues and other paper products in western North America. In 2008 the company cut its total carbon emissions by 73 percent on an absolute basis compared to 1990 levels.

The company started its program in the early 1990s as an energy-saving initiative, according to Drew Kilback, the firm’s director of risk and environment. It is a big energy user and middle management believed opportunities were available for cost cutting through reduced energy consumption.

It started with numerous face-to-face meetings with employees to solicit energy-savings ideas. This helped get the workforce on board.

Function- and unit-specific teams were then set up, led by middle managers, that developed lists of ideas for energy savings. The costs and benefits of the proposals were calculated and the ideas with the greatest potential were implemented.

As Catalyst Paper worked on reducing its energy demand, the link with greenhouse gas emissions became obvious. Today, the company has a dual focus on energy savings and emission reductions.

Constant internal communication has been an essential element of the program according to Kilback. Daily “tailgate” meetings are held with each crew and ways to cut energy use and emissions are often discussed. The company shares information about successes and other relevant data through its internal intranet.  Quarterly and annual reports are produced that analyze energy and emission trends.

Continual learning is also a priority. Energy and emission reduction ideas continue to be generated by the line workers because, “They know the equipment better than anyone.” Managers and line workers evaluate the proposals and implement those that make sense.

Just as AstraZenca did, Catalyst Paper found that cost savings is just one of the benefits it uncovered by reducing energy use: High quality people that are attracted to the company “due to its commitment to energy savings and climate issues,” is another plus, according to Kilback.

Reducing its energy use and emissions also made Catalyst Paper more competitive in the marketplace. Corporate level employees developed in 2007 Catalyst Cooled carbon neutral paper. By applying the concept of carbon neutrality to its products, it became the first company to mass-market carbon neutrality as product feature. The product generated additional sales in 2008.

The company is also preparing for the consequences of climate change. It determined that the firm’s fiber supply and access to water might be threatened and plans are in preparation to address those risks.

These companies could be the exception, not the rule; but I doubt it. They demonstrate that with concerted effort big emissions cuts are possible in ways that save substantial sums while also improving the quality of the workforce and enhancing competitive advantage. This suggests that reducing emissions is a major opportunity, not a drawback.

Bob Doppelt is the director of the Resource Innovations program and the Climate Leadership Initiative at the University of Oregon. This is the first in a regular series of columns about the adjustments—and change strategies—firms will need to make to succeed in a carbon-constrained world. Contact Bob at bob@sustainableindustries.com.