TJ DiCaprio: Carbon Counter

Microsoft has been tracking emissions since 2009, and we had an earlier goal to reduce our carbon emissions 30 percent by 2012 based on 2007 levels. We met that target through driving efficiencies, investing in renewable energy and purchasing renewable energy. Once we met that goal, though, we realized that with the information and communication technologies industry contributing 2 percent of global emissions and growing, we needed to take a bolder approach. So we set a carbon neutral policy across the company. The carbon fee is really an incentive under our carbon neutral policy.

Well, the important thing was helping senior leadership understand pollution and how to really speak the language of pollution. By putting a price on carbon, suddenly the key leadership of the company understood the external impact of greenhouse gas emissions on our business, and we were able to then drive that accountability across the company. So it was [about] speaking the same language, then really presenting the business case and leading with the business case to the executives.

Yes. It enables engagement, brainstorming, creativity and understanding, and it opens doors to collaboration and cohesion in ways that we couldn’t have imagined otherwise.

The most important thing for us is to set the price signal so we have a common language, and then to evolve that over time. Currently we have price signals that are set based on the source of the greenhouse gas emissions, for example from electricity or business air travel. We’re evolving that pricing model into a blended price so we can increase that over time with the goal being impacting behavior change.

It’s been over nine months since we kicked off the carbon model, and we’ve made significant progress in building the infrastructure — what we refer to as the plumbing of the model. For instance, I was just speaking to one of our general managers with our online business division, and he was talking about the ability to now incorporate the carbon price into long-term planning. Now there’s an incremental cost associated with operational costs, and that’s being included in long-term planning. That’s a real step forward.

And the buy-in is what’s really exciting. We established a carbon neutral council, and representatives from all across the company, or 14 different business divisions, get together on a monthly basis and discuss the progress, evolution and use of funds [from the internal carbon fee]. We’re seeing quite a bit of passion and creativity coming forward to drive innovation — for instance, investing carbon fee funds into long-term internal improvements and efficiency projects across the company. The group from Bing said, “This is such a terrific start; we want to know how we can do more to support carbon reduction.” Those are the types of conversation that the carbon fee model has enabled.

The challenges along the way are keeping it simple. We have so many bright people asking, “How can we evolve this faster?” There’s quite a bit of education and awareness that goes along with a program like this because it is a game changer. So the challenge is balancing between evolution and keeping the program simple.

The exciting thing is that the solution is simple. It is repeatable. Certainly others need to customize it for their own financial structure. At Microsoft, we designed the carbon fee purposely to be repeatable so that other organizations can [implement] the model. Because while we’re keeping our own house in order and making progress, Microsoft is just one organization. To have a bigger impact, we encourage and want to help other organizations implement models similar to this.

And the response has been very positive from different types of organizations, whether they’re Fortune 100s or educational organizations, and even local, regional government up to the federal government. They’re all looking at this as a way to help drive efficiencies and carbon reduction within their own internal operations.

What’s important about the model is driving business objectives, and part of that is mitigating risk. It’s mitigating risk from the organizational perspective or mitigating risk to revenue. And that translates into cost, and costs are relevant across any organization and any sector. So those two primary business goals are a key focus that can frankly be independent of the pros or cons of taking a position on climate change.

Microsoft has invested quite a bit in driving additional energy efficiency measures, and we’re asking ourselves questions such as, how do we use less? How do we provide more for less? How do we leverage innovative, clean energy as a source? And how do you use technology as part of the solution and to change behavior around energy use?