30 Sep Microsoft Makes Carbon Pay

In the world of sustainability, I’m always interested to note when I hear something that is truly new and to note when something is making a new difference even though the underlying structure is seemingly old-hat. Great strategy can each give you a competitive advantage, while legendary leaders always say they’d rather have great execution on a weak strategy than vice-versa. But it is the ability to combine both which produce breakthrough results. And if you can formulate a great strategy that uses market incentives to deliver great execution, you’ve got a bet worth taking.

At the Renewable Energy Markets Conference, held on September 22 in Austin this year, one of the most interesting corporate innovations was from Microsoft.  Microsoft set a goal to reduce its carbon emissions by at least 30 percent per unit of revenue below the company’s 2007 baseline. But to achieve this efficiently and with a lasting effect, they created a plan to foster greater accountability among the individual business units (data centers, development teams, regional offices, etc.) and to reward those areas able to move the needle the farthest with the least cost. So they invented an internal carbon price, which incentivizes energy efficiency and the purchase of renewable energy by taxing units according to the measurement of how much carbon they emit. By internalizing the cost of carbon pollution through financial measures, the fee encourages employees to reduce emissions while raising funds which the company reinvests on energy efficiency and renewable energy projects which benefit the company and the communities in which they operate. Microsoft got more of what they wanted, less of what they didn’t want, and won the EPA Green Power Purchaser Award.