Week of 20 January 2020
Timed for the WEF convening in Davos, Microsoft’s new carbon commitments shift the debate from avoiding and offsetting emissions to removing carbon from the atmosphere, with a particular focus on supply chain emissions
Microsoft has committed to be carbon negative by 2030, and by 2050, to remove from the environment all the carbon the company has emitted (either directly or by electrical consumption) since it was founded in 1975. To understand the implications of Microsoft’s commitments here, let us take a step back.
First, the kinds of commitments to carbon companies can take vary:
- Carbon neutral: the company reduces its emissions and pays to reduce carbon elsewhere to balance the remaining carbon it does emit
- Net zero: the company removes from the atmosphere the same amount of carbon it emits
- Carbon negative: the company removes more carbon than it emits each year
Second, companies have three types of carbon emissions:
- Scope 1: These are direct emissions that the company’s activities create
- Scope 2: These are indirect emissions coming from the production of the electricity or heat the company uses in its buildings
- Scope 3: These are indirect value chain emissions which include the emissions across the company’s value chain (e.g. of the company’s supply chain, associated with the use of products by consumers). This is where the level of emissions tend to be the greatest (but also where the company has the least control)
Microsoft’s commitment is far-reaching:
- Microsoft states that we must reach “net zero” emissions, meaning that humanity must remove as much carbon as it emits each year. (This is aligned with civil society’s recent open letter to World Economic Forum (WEF) delegates to transform the economy to reach net zero by 2050.) The company remarks that companies and organisations “who can afford to move faster and go further should do so.” Microsoft remarks that being carbon neutral will not suffice: the company is committed to reducing, then removing, the company’s footprint. As a first step, the company’s commitment to being carbon negative by 2030 will be achieved by (1) cutting the company’s carbon by more than half and and (2) removing more carbon than the remaining carbon it emits. As a second step, the company’s commitment to remove from the atmosphere all the carbon it has emitted (either directly or by electrical consumption) since it was founded in 1975 will be aided by the company’s financing of a $1 billion climate innovation fund to accelerate the development of necessary technologies for carbon reduction and removal
- The company speaks to the importance of focusing on scope 3 emissions where emissions will be the greatest. To illustrate this, the company notes that it has 100,000 metric tons of carbon as scope 1 emissions, as compared to 4 million as scope 2 emissions and 12 million as scope 3. The company remarks that “we’ve identified another shortcoming that we and many other companies need to overcome. Historically we’ve focused on Microsoft’s scope 1 and 2 emissions, but other than employee travel, we haven’t calculated as thoroughly our scope 3 emissions. That’s why we’re committing to becoming carbon negative for 2030 for all three scopes.” Measures to help the company’s suppliers reduce their emissions include integrating carbon reduction within procurement processes and charging the company’s business divisions an internal carbon fee for all their scope 3 emissions
This direction of travel is evident in other sectors too:
- Nestlé has committed to cut greenhouse gas emissions across its operations and supply chain to net zero by 2050
- Maersk has committed to become carbon neutral by 2050 (with regard to scope 1 – direct emissions)
- Mahindra Group has committed to net zero across the whole range of Mahindra businesses by 2040 (with regard to scope 1 – direct emissions)
(You can view CDP’s recently released 2019 annual A List which names 170 companies “as the leaders acting to address climate risks and build our future zero-carbon economy” here).
"While it is imperative that we continue to avoid emissions, and these investments remain important, we see an acute need to begin removing carbon from the atmosphere, which we believe we can help catalyze through our investments. … Reducing carbon is where the world needs to go, and we recognize that it’s what our customers and employees are asking us to pursue. This is a bold bet — a moonshot — for Microsoft. And it will need to become a moonshot for the world."