Microsoft has announced that from fiscal year 2013 (which starts on July 1 this year) the company will be carbon neutral across all its direct operations, including data centres, labs, travel and offices.
The company plans to make carbon awareness an element of every part of its business through an accountability model that makes all business units responsible for the carbon they generates.
To achieve it Microsoft is putting an internal price on carbon based on market pricing for renewable energy and carbon offsets. For emissions not eliminated through efficiency measures, Microsoft will purchase renewable energy and carbon offsets and charge the cost back to the business divisions.
The carbon price and charge-back model is designed to provide an economic incentive for business groups to reduce carbon emissions through efficiency measures and increased use of renewable energy. The operations impacted by the carbon price include data centres, software development labs, office buildings, and business travel.
There’s more detail in a white paper published by the company - Becoming Carbon Neutral: How Microsoft is Becoming Lean, Green, and Accountable.
Microsoft has been rethinking its plan to reduce carbon emissions after announcing disappointing progress in its CSR report published last October. The plan was that by mid 2012 the company would have reduced carbon emissions per unit of revenue by 30% compared with 2007. But the CSR report showed that emissions were up 16% in calendar 2010 and revenue up just 12% for the financial year to June 2011, which meant that emissions per unit of revenue took a step backwards.
There are two advantages to this new plan to achieve carbon neutrality. Firstly, its an absolute figure, not related to revenue, and its an absolute figure we ultimately have to achieve. Secondly, it puts responsibility directly in the hands of business divisions, so it is creating an awareness across the business at ground level.
The downside is that the company is talking about offsets, which are not the favourite way to do it for many people (including me). Offsets do not have a great reputation for achieving their objectives, i.e. reducing carbon emissions. And in this case it seems like a business cost that Microsoft’s divisions could potentially plan for and achieve through financial savings elsewhere.
It’s a commendable scheme, but to ensure it achieves its objectives of reducing emissions it would be better as an internal cap and trade scheme, i.e. the available offsets should be limited and reduced over time to achieve the real efficiency savings objectives, with departments having to bid against each other in auction to acquire the rights to offset. If a department doesn’t achieve carbon neutrality under that scheme then the head of the business unit goes.