Climate change has become a vital business topic, prompting many companies to set ambitious goals for tackling it.
“The climate is changing,” says Harvard Business School Professor Forest Reinhardt, who co-teaches the online course Business and Climate Change with HBS Professor Mike Toffel. “Societies around the world are experiencing the costly—and even devastating—effects of these changes. From more frequent wildfires and hurricanes to more intense heat waves and flooding to rising sea levels and changes in the ocean, these effects are projected to intensify and become more unpredictable in the decades ahead.”
Related: Listen to Professor Reinhardt discuss climate change and the tragedy of the commons on The Parlor Room podcast or watch the episode on YouTube.
According to Net Zero Tracker, over 1,000 businesses have set net-zero carbon emission targets—double the figure reported in 2020.
If you want to align with that trend and bolster your business's sustainability practices to make an impact, here’s an overview of how to measure and reduce carbon emissions.
How to Measure Carbon Emissions
Carbon emissions occur when carbon dioxide (CO₂) and other greenhouse gases are released into the atmosphere, contributing to climate-related events such as rising temperatures, melting ice caps, and extreme weather patterns.
Your company can emit harmful CO₂ levels through its operations and supply chain activities, making it essential to consider climate change mitigation, which focuses on reducing or preventing greenhouse gas emissions by improving energy efficiency, transitioning to renewable energy sources, and enhancing carbon sinks.
“An important first step in developing any mitigation strategy is gaining a comprehensive understanding of a company or product’s emissions by establishing its carbon footprint,” Reinhardt says in Business and Climate Change.
Your company’s carbon footprint is the amount of greenhouse gas emissions it generates through creating its products or services. According to Business and Climate Change, calculating it requires considering three scopes:
- Scope 1: Direct emissions from owned or controlled sources, such as company vehicles or on-site fuel combustion
- Scope 2: Indirect emissions from your company’s consumption of electricity, steam, heating, and cooling
- Scope 3: All other indirect emissions occurring in your company’s value chain, such as emissions from purchased goods and services, waste disposal, and employee travel
Identifying your company’s most prominent greenhouse gas emissions sources is crucial to reducing its carbon footprint, surfacing improvement areas, setting reduction targets, and tracking progress.
Common tools and techniques you can use include:
- Greenhouse gas (GHG) protocol: This international tool provides standards and guidance to help measure and manage greenhouse gas emissions.
- Carbon footprint calculators: These online tools estimate business activities’ total emissions and offer detailed insights, such as identifying major emission sources, comparing emissions against industry standards, and highlighting areas for improvement.
- Life cycle assessment (LCA): This technique assesses environmental impacts at all stages of a product's life, from raw material extraction to disposal.
- Environmental management systems (EMS): These systems integrate procedures for monitoring, summarizing, and reporting environmental performance information.
Using these resources, you can better understand your business’s environmental impact and identify areas to reduce emissions—leading to more sustainable practices, improved efficiency, and a stronger commitment to corporate social responsibility.
To further explore how you can help mitigate climate change, here are five ways to reduce your business’s carbon emissions.
How to Reduce Carbon Emissions
1. Invest in Renewable Energy
Transitioning to renewable energy sources is an effective way to lower your company’s carbon footprint.
In Business and Climate Change, New Belgium Brewing’s Chief Environmental, Social, and Governance Officer Katie Wallace discusses the craft beer maker’s commitment to sustainability, highlighting renewable energy as a critical component of its mitigation strategy.
“When we installed our solar panels on the Colorado packaging hall, it was the largest privately owned solar array at that time in Colorado,” Wallace says. “And today, we have many other sources of renewable electricity and have invested quite a bit in efficiencies.”
In addition to using solar panels, the company captures biogas from its water treatment plant to generate electricity and advocates for renewable energy within the Colorado grid—demonstrating its commitment to reducing its carbon footprint and promoting sustainable leadership in the brewing industry.
2. Improve Energy Efficiency
Making your company’s operations more efficient can substantially reduce its emissions. According to the International Energy Agency (IEA), improving energy efficiency can contribute to over 40 percent of the greenhouse gas emissions reductions needed to meet global climate goals by 2040.
Conducting an energy audit is one of the best ways to identify how to lessen your business’s energy use. For example, it could benefit from upgrading its insulation to maintain optimal indoor temperatures and reduce the need for heating and cooling during periods of extreme temperatures.
Switching to light-emitting diode (LED) light bulbs is another effective measure because they use less energy and have longer lifespans than traditional incandescent bulbs. Retail giant Walmart, for instance, uses LED light bulbs in refrigerated display cases, parking lots, and interior lighting as part of an effort to reduce its emissions by 18 percent by 2025.
While such changes might seem small, they can result in considerable energy savings and lower emissions.
3. Optimize Your Supply Chain
Adopting sustainable business practices and encouraging suppliers to be more energy efficient can help reduce emissions throughout your supply chain.
In Business and Climate Change, Vice President of Sustainability and Mobility Strategy at the BMW Group Thomas Becker explains how the company reduces Scope 3 emissions from its supply chain.
“We look into how can we reduce the CO₂ footprint, for example, by the contractual obligation of all our battery cell suppliers to exclusively use renewable energy when they supply BMW,” Becker says. “For example, when we purchase aluminum, where a lot of electricity goes in and I think it’s fair to ask those suppliers to use renewables instead of the standard electricity they may get out of the grid in their market.”
Through such initiatives, BMW has not only reduced emissions but created strategic alignment between its supply chain and environmental goals.
4. Implement Carbon Offsetting
Many companies have turned to carbon offsetting—compensating for carbon dioxide emissions by funding projects that reduce or remove an equivalent amount from the atmosphere—as a viable strategy to reduce emissions.
For example, technology company Microsoft has committed to becoming carbon negative—removing more carbon than it emits—by 2030, leading to carbon offset projects such as:
- Reforestation
- Soil carbon sequestration
- Direct air capture
Microsoft also achieves carbon offsetting by purchasing carbon credits—financial instruments representing the avoidance, reduction, or sequestration of one ton of CO₂ emissions. According to a Carbon Direct report, businesses purchased over 15 million tons of carbon credits during the first three quarters of 2023—a nearly five-fold increase since 2021.
Companies like Microsoft can sell and buy such credits on the carbon market to offset the emissions they can’t directly eliminate and support the development of innovative technologies and practices that contribute to global carbon reduction efforts.
By incorporating carbon offsetting into your emission reduction strategies, you can work toward achieving net-zero emissions.
5. Promote Business Sustainability
Making the business case for sustainability and gaining employee buy-in is essential to meeting emissions goals.
You can start by educating and engaging employees on the importance of eco-friendly practices. You can also develop and enforce green policies and use technology to reduce your business’s carbon footprint.
For example, outdoor clothing and gear company Patagonia consistently promotes eco-friendly practices by offering paid time off for environment-related volunteer work and implementing programs like Drive-Less that financially incentivize employees to commute to work in environmentally friendly ways.
Reduce Your Carbon Footprint
One way to become a more purpose-driven leader is by taking steps to adapt to and mitigate climate change. According to a survey by management consulting firm Deloitte, 50 percent of business leaders are educating employees about climate change and sustainability.
If you’re not yet equipped with the scientific and strategic knowledge to navigate this pressing issue, consider enrolling in a course like Business and Climate Change. Through interactive learning exercises and real-world examples featuring industry experts, you can gain insights to bolster your organization’s climate change strategy.
Do you want to learn more about how to reduce your carbon footprint? Explore Business and Climate Change—one of our online business in society courses—and download our free e-book on becoming a purpose-driven, global business professional.
