We Are Spirits in a (Green) Material World

posted by Jonathan Zuck on Thursday, December 17th, 2009 at 3:59 pm

-The divergence between material standards and the ethereal world of ICT

We have standards for nearly everything in this green world of ours. There are Green Building Standards (LEED, Green Globes, BREEM, Energy Star, NAHB Green and ASHRAE 189 to name a few), international standards for eco-labeling (ISO 14020 and 14024); Energy Star Standards for equipment, the EPEAT Standard for the green-ness of the manufacturing process and final product, a standard for restaurants (Green Restaurant® 4.0) and even a push by the SEIU and janitors for the “the adoption of green cleaning standards to make their jobs safer.” All of these help to improve the environment in one way or another, and they all have one thing in common: they deal with a measurable quantity of something.

This measurement of physical output is essential; we must know how many Kcals are used heating the water, how much CO2 is pumped out by driving, or how many watts are generated by a wind turbine, and we need international agreement as to the meaning of those numbers.

In the physical world, standards become key. For ICT companies looking to build the tools and technology to green all these homes, factories and even restaurants, defining the physical isn’t so easy.

The carbon marketplace is a good example of this dilemma. While a robust carbon marketplace exists, the measurement of carbon output today is more of a chalk outline than a real footprint. Companies build profiles based on simplistic modeling that looks at square footage and number of employees, and measuring improvements is often done after a change is made, rather than based on models set beforehand.

Carbonetworks and Hara Software are two companies that are attempting to provide the technological underpinnings to a real and active carbon marketplace. Both companies are building tools to measure the entire supply chain and, most importantly, model changes in real time. In the case of Carbonetworks, they are focused on the network effects of carbon whereas Hara is a more traditional single-point analysis approach. The companies use different technologies and methodologies to solve the problems of measuring, monitoring and managing a corporation’s carbon footprint, but both provide products that allow companies to lower emissions. And in the case of Carbonetworks, create a direct interface to the carbon trading market.

And yet to grow that marketplace for carbon, there needs to be agreement as to what a change is worth. In simple terms, the market needs to know that “a cup of carbon in America is the same as a cup of carbon in China.” The interesting conundrum is that while standardizing measurements will enable competition and innovation between Hara and Carbonetworks, standardizing the technology only will prevent competition.

Finally, creating technology to analyze the carbon output for an entire supply chain is the “holy grail” of carbon, but it’s a grail that has not presented a viable business model. Several companies that were trying to solve this riddle have failed–not because their technology lacked standardization, but because they had not found that ineffable mixture which glues money, ideas and product together.

We are still a long way from knowing the right technology to help fill the missing pieces of the entire supply chain carbon footprint. It may be Carbonetworks, it may be Hara, or it may be another player none have heard of yet. But a government-mandated standard today could ensure that we’d never know about that potential new entrant.
Green IT is still capable of “radical innovations”; we should support standards in our material world, while letting our spirits work out the details of the ethereal one.

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Mattias Ganslandt says:

Very true. It is very difficult to have a one mile race if the definition is unclear. As it happens there are at least three defintions, including statue 1609 meters, nautical 1852 meters, Swedish 10000 meters (no I am not kidding). You are absolutely right that measurement is key. How to optimize if you do not know what you are optimizing. Also, markets have failed for less severe problems than this. If sellers and buyers disagree on what is traded we all know that negotiations can fail. Given that this is a global coordination problem it is natuiral to think that ISO should play a key role?
Anastasia O'Rourke says:

Many large companies now make environmental or corporate sustainability reports. But that doesn’t mean that they contain terribly useful information, especially when it comes to the harder performance-type data. Although there are various guidelines and standards for reporting (in some cases, legally mandated) such as the Global Reporting Initiative and CDP, taking a close look at the data contained in these reports is an eye opener.

Of all the indicators that companies are asked to report on, you would think that GHG emissions (or CO2 equivents) would be the most robust> after all there are financial costs and benefits, and in some regions at least, government requirements to do so. Moreover there are standards for reporting on emissions, from the GHG Protocol (from WRI and the WBCSD), guidance from the IPCCC and so on. There are loads of carbon calculators and tools on the market, but quite alot of ferment on the standards they rely upon. Confusion reigns, and consultants are raking it in.

Many problems surface in using this data: what scope of the company are they reporting on? What methodology or calculator is being used and how do you translate between them? And the offset market is going through much of the same.

For financial analysts seeking to understand climate risk, sorting through all this is not an insignificant task, and one requiring a degree of specialist knowledge. Though the environmental community would love for climate risk to be a part of any “mainstream”analysis of a company, its going to be awhile till the standards & the understanding of them are up to snuff.

My question is: where is the leadership going to come from to bring the different standards together into some sort of cohesive whole? Or would doing so result in the lowest common denominator at this stage in the game?

We Are Spirits in a (Green) Material World

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Jonathan Zuck

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