The Carbon Border Adjustment Mechanism (CBAM)
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In this article we’ll explore what the CBAM is, why it’s been created, and what importers need to know ahead of its introduction.
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What Does it Mean to be Carbon Positive?
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Today, many companies use different terms to describe their carbon emissions status, such as the term "carbon positive".
These labels are meant to help others quickly recognize their ambition to tackle climate change. However, the spread of new terms can unintentionally confuse people who aren’t familiar. This can be off-putting, even for people who care about the climate.
Carbon positive is just one example of a phrase that has the potential to confuse people. In this article, we explain why, while offering a wide range of ways to communicate your ambitious carbon emissions reduction plans.
A Quick Reminder on Carbon positive, carbon negative, & carbon neutral
The phrase “carbon positive” is one of the least popular phrases used in corporate carbon emissions accounting today. Why is this?
The descriptions “positive” or “negative” have two different meanings in carbon emissions lingo: they can refer to quantities above or below zero, or refer to qualitatively good or bad actions. The problem is if they’re misunderstood, it could reverse your intended meaning.
For instance, the “carbon positive,” means your business emissions are above zero – which worsens climate change. In fact, most businesses are carbon positive, because it is incredibly difficult to remove more carbon than you produce, today.
However, if you say your business is “climate positive” it means your business emissions are below zero because you’ve removed more CO2 than you emitted. This phrase suggests your actions have reduced climate change.
Let’s look at the full range of descriptions used to label carbon emissions reduction progress.
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Definitions of terms often confused with "carbon positive"
- Carbon positive describes most business as usual situations. It means a business entity produces an amount of carbon emissions that is more than zero. All businesses with a carbon footprint are carbon positive and they contribute to climate change.
- Climate positive means the total CO2 and equivalent (CO2e) emissions of a business entity–whether it’s a product, initiative, or total operations–are less than the CO2e released into the atmosphere. There are several ways businesses can accomplish this: through significant carbon removals or avoided emissions.
- Carbon negative also means the balance of carbon emissions for a business entity falls below zero. Note that “climate positive” and “carbon negative” mean exactly the same thing.
- Carbon neutral means the same amount of CO2 that a business emitted has been removed through carbon removal activities. In other words, the carbon accounting balance is zero.
- Climate neutral means that the climate impact of a company is zero, or insignificant. Companies achieve this by reducing GHG emissions to zero, and ending all environmentally harmful practices.
- Net zero carbon emissions is the same as carbon neutral, as it means a business has balanced its carbon emissions to zero with CO2 reduction, removals, and/or avoided emissions.
- Net zero emissions is a phrase that describes all kinds of GHG emissions into the atmosphere, not just CO2. It suggests the total GHG emissions of a business have been balanced to zero through reduction, removals, and/or avoided emissions.
Which one is the best?
Carbon negative and climate positive describe the best emissions performance, because they refer to removing more CO2 emissions than a company produces.
“ If more businesses around the world achieved this, we would effectively start to pull down the total CO2 emissions sitting in the atmosphere. This would help to stabilize our climate temperature to safe levels. Environmentally friendly business means lower long-term risk to our planet, people, and the economy. ”
This long-term goal is ambitious, but by no means is it impossible.
Just remember that progress won’t happen overnight. Most businesses start by setting goals to become carbon neutral before they strive towards carbon negative operations.
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Why is it important to progressively become climate positive?
We’re witnessing unprecedented environmental changes, and with it comes unprecedented demand for business sustainability related to climate change.
There is no denying the link between climate change and the noticeable effects of hurricanes, polar ice melting, droughts, and wildfire hazards we’re now experiencing each year.
These risks not only threaten communities, they harm the economy overall. What’s worse: they’re occurring at a scale humans have never seen.
👉 However, it’s complicated as a business owner to address a serious, but slow-moving, long-term issue. Climate change evidence has built up over the past five decades.
So what’s prompting business leaders to act now?
For one, transitioning to a low-carbon business model matters more than ever to the most important stakeholders for businesses–their customers and investors.
Another factor is the growing alignment among policymakers, business leaders, and markets facilitating cost-effective strategies to act on climate. Even for businesses owners focused more on profits, there are good economic reasons to reduce carbon emissions, too.
Customers value sustainability & climate action
Marketing surveys have confirmed the growing number of sustainability-minded customers. More notably, however, is their willingness to act on their values.
A 2018 Futerra study estimates 96% of people believe their own sustainable actions can make a difference and 88% want brands to help them amplify this impact. This trend has continued, as five years later in 2023 – there has been a 71% increase in online searches for more sustainable products.
A Dentsu International and Microsoft Advertising survey conducted in 2021, which included 24,000 people across 19 countries – found 59% of customers are willing to boycott businesses that fail to take environmental action in their businesses within 12 months of complaints.
On the other hand, customers find environmental PR hard to judge: with 61% of customers interested in more information to make better choices, but only 20% seeking to verify the claims made in sustainability campaigns. However, a 2020 IBM survey suggests that consumers do indeed care about carbon emissions data – even if they don't make an extensive effort to verify the validity of environmental campaigns.
It shows that almost 4 out of 5 Americans say it’s important that brands are sustainable and environmentally responsible, and nearly 6/10 would choose to reduce emissions and environmental impact by changing their shopping habits.
Finally, more Gen Z customers (75%) are willing to pay more than other age groups for sustainable products, according to a survey from First Insight.
👉 All of these statistics show the power of sustainability to influence customers, and gain loyal supporters. The sustainability mega-trend is expected to continue growing as climate impacts become more severe, and younger people gain more influence over the marketplace as they age.
Investors feel sustainability lowers risk
Investors are using their leverage to bring more companies on board with carbon accounting and emissions reduction efforts. Lower carbon emissions equals more than just environmental awareness, studies have shown it lowers risk for investors.
An investor survey conducted by EY on climate and sustainability found that 98% of investors assess environmental and other sustainability factors in corporate reports. The majority of these respondents (72%) said they use a structured approach for evaluation.
The problem is companies aren’t providing enough environmental risk information, according to most respondents to the EY survey (86%).
“ Providing carbon emissions data is a critical first step to helping investors make better judgments about the sustainability risks for companies. ”
Business sustainability can save money
If carbon emissions reduction sounds like a costly, difficult challenge, consider how it’s actually done. To lower emissions, you’ll need to lower the use of energy sourced from fossil fuels or help others do this.
Recent changes to oil and gas prices show that fossil fuels are notoriously volatile. It can be hard to hinge financial performance on energy sources with such variable costs.
In contrast, solar energy became the cheapest source of energy–throughout history–according to the IEA. This is not that surprising, since the sun is the most abundant source of freely accessible energy on earth.
👉 The other thing worth mentioning is switching to renewables and avoiding fossil fuel costs in other ways like energy efficiency is a boon to the bottom line of businesses.
“ Sustainable business leaders care about efficiency beyond convenience. ”
They are untangling the true costs of shipping, supply chains, and raw materials in ways that unveil smarter ways of doing business.
Shorter trips, digitally enhanced processes, and resource efficiency can all reduce both environmental impacts and financial costs.
👉 Ultimately, sustainable business can cost less while customers perceive it as more valuable. That’s a win-win business model.
How can you make your business climate positive?
On the path to becoming climate positive, there is one first step every business should take. It isn’t lowering energy consumption or declaring a climate goal. Before any of the buzzworthy eco-friendly actions comes number crunching in the form of a carbon emissions assessment.
If the words “carbon emissions assessment” sound daunting, don’t worry – it's simply a way of saying you’ll need to identify which business activities emit CO2 and how much over the course of an entire year.
The result is a business carbon footprint, which is a quick overview of the main sources of emissions for a business.
Before diving into this, though, it’s important to establish a clear methodology for your carbon emissions measurement. This methodology is what investors and other stakeholders will look to to interpret your data.
At Greenly, we perform carbon assessments using an ADEME method as an authorized service provider. We start by assessing business bank expense reports. We use secure banking synchronization to analyze the CO2 emissions of a business.
To add a layer of complexity onto these consumption quantities, we also use a questionnaire to assess operational consumption patterns. This reveals why and how an organization depends on CO2 emitting processes related to food, equipment, transportation, and more.
The steps we take to perform our carbon footprinting service are as follows:
1. Identify all sources of emissions
Emissions source data comes from internal reports, external bills and receipts, and local authorities. Greenly uses specific parameters for each business case to identify the full range of emissions sources.
Collecting data can take anywhere from a week to several months depending on the size of the organization.
2. Calculate CO2
For every emissions source identified, the emissions type and quantity will be translated into an equivalent amount of CO2.
3. Prioritize emissions reduction steps
The information gathered from CO2 measurement holds powerful insights into the best ways to reduce CO2. With this information businesses can craft a detailed plan to minimize their CO2 emissions in terms of ease of implementation as well as size of impact.
4. Share the results
Reporting a business carbon emissions plan shows commitment to climate action. It also prepares organizations for legal compliance with emerging climate risk reporting standards.
Who should you share your results with? Don’t limit it to the board room. The report should be available for employees, customers, and board members alike to help establish transparency, CSR, and overall commitment to environmental improvement.
How can you reduce the carbon footprint of your business?
The two main ways to reduce your business carbon footprint are emissions reduction and offsetting. To become climate positive, you can nearly reach the net zero line with reductions alone. To blaze trails into carbon negative territory, though, you’ll need offsetting tactics.
For each, there are numerous strategies a business can employ.
CO2 reduction
Reducing carbon emissions sounds simple, and in some ways it is. However, the complexity lies in considering life cycle emissions for every action a business takes.
For instance, replacing a fleet with electric vehicles sounds great in theory. If your region primarily supplies its electricity with coal, this might not accomplish the CO2 emissions reductions you aimed for. Electric cars also use more CO2 in their production than conventional cars.
This example shows that not every “environmental swap” actually pans out. It’s important to track and measure emissions every step of the way.
Some of the most popular ways to reduce a carbon footprint are:
- Energy efficiency
- Switching to renewable energy
- Minimizing waste
- Reducing travel time
- Lowering the digital storage footprint of operations
- Decreasing supply chain emissions
Offsetting
Carbon emissions offsetting means removing CO2 from the atmosphere by funding projects external to an organization or separately from normal operations.
Offsetting projects follow a certain logic to ensure they are high quality and effective at removing CO2 emissions.
The key principles are:
- Additionality: Projects should reduce CO2 that wouldn’t otherwise occur. Additionality requires assessing alternate realities to plausibly determine that an offset isn’t just taking credit for an existing CO2 removing benefit.
- Leakage: Undertaking a project shouldn’t lead to greater CO2 emissions elsewhere. For instance, if trees are planted on land that was traditionally used for agriculture, it could cause farmers to cut down forests to secure a new plot of agricultural land.
- Permanence: Emissions should be reduced for a time period of roughly 80-100 years to be considered permanent. If trees are planted today for an offsetting project and they are cut down 20 years later, this doesn’t achieve offsetting permanence.
- Double counting: To remain effective each project should be sold as an offset once. If multiple businesses invest in the same offset, it halves the CO2 reducing impact of the project for each purchasing company.
Here are some different types of projects businesses can invest in to offset emissions:
- Tree-planting and forestry
- Regenerative agriculture
- Reducing ocean acidification
- Restoring and conserving wetlands and mangroves
- Avoiding emissions by funding renewable energy projects
- Direct air capture and other carbon capture and storage technologies
Companies can use both CO2 reduction and offsets to form a strategy that can achieve a carbon negative CO2 emissions balance.
“ The good news is that the possibilities for carbon emissions reduction are far more diverse than they’ve ever been. It’s an exciting time to get involved in carbon management. ”
What About Greenly?
If reading this article about what it means to be carbon positive has made you interested in reducing your emissions and going green – look no further for help to start your climate journey than with Greenly!
Greenly is the perfect partner for launching a climate positive business initiative as we can supply you with all the data you'll need to be successful in your climate journey. We make carbon assessments easy and practical to complete, giving businesses clarity on the actions they’ll need to prioritize to draw down their CO2 emissions. Request a demo today!
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