Why and how small businesses can offset their carbon emissions

This episode explores why an increasing number of small businesses are looking to measure and offset their carbon emissions and how you can begin to do so for your small business. Produced in partnership with JustCarbon, a blockchain-based carbon marketplace, that simplifies offsetting carbon emissions through the purchase of carbon tokens.

Transcript

Sponsor's message: 0:00

This episode is sponsored by JustCarbon. JustCarbon simplifies offsetting carbon emissions, and supports high quality carbon removal projects to combat climate change. To find out more, visit www.JustCarbon.com.

Jon Watkins: 0:16

Welcome to the latest First Voice podcast brought to you by First Voice magazine, the official flagship magazine of the Federation of Small Businesses, and the go-to podcast for news, tips and important information for small businesses and the self employed. This episode we will be exploring why an increasing number of small businesses are looking to measure and offset their carbon emissions, including how you can begin to do so for your small business. And this episode is produced in partnership with JustCarbon, a blockchain-based carbon marketplace that simplifies offsetting carbon emissions through the purchase of carbon tokens called just carbon removal tokens while supporting high-quality carbon sequestration projects. Now, we know that sustainability and environmental issues are rising rapidly up the corporate agenda, but they are also becoming increasingly important for small businesses. So in this episode, we will look at the reasons for that the benefits for small businesses of being carbon conscious, and we will demystify the process of carbon offsetting so you can begin offsetting your own carbon footprint, if you wish to do so. To help me discuss this topic, I'm pleased to say I'm joined by two guests. John Auckland is the founder of global crowdfunding agency Tribe First and an experienced entrepreneur. And Adrian Rimmer is a climate market veteran, and formerly the CEO of gold standard. Thank you both for joining me. I want to start by talking about why small businesses should be thinking about this. John, I'll come to you first. Small businesses are busy with the day to day they've been through a prolonged period of uncertainty yet, despite that, are we seeing increased awareness and desire among small businesses to offset their carbon? What's the demand like among small businesses.

John Auckland: 2:35

So it's a bit of a mixed bag, as you say, the pressures of COVID and rising cost of inflation are impacting businesses significantly, especially when it comes to their workforce. So you may think that, you know, having a focus on on carbon emissions and reaching sort of net zero is not top of their priority. But you know, what I'm quite heartened to see is when we're out there speaking to businesses, just how many companies really do have a desire to to make an impact and make a change. And, I guess COVID made people think a lot differently about many things, it's a bit of a chance to reset, you know, and so fortunately, it doesn't seem like the agencies got away. If you think about 50% of all UK business, carbon emissions comes from small businesses, so defined as companies with fewer than 249 employees, which is around about 34% of the overall UK carbon emissions. And so, we need to tap into the small business community in order to achieve our net zero targets. So I don't think enough is being done by by the government to incentivise small businesses to engage with voluntary carbon market and buy carbon credits. But there's certainly demand from the small businesses themselves, which is, which is pretty reassuring and heartwarming. There was a survey completed by BT, and Small Business Britain. And they found that although 99% of small firms recognise the importance of sustainability, only three quarters of them, so 77%, didn't know how to measure their carbon emissions and said they needed support, which is a crazy number. So, you know, that's part of part of our job, I think, is to help educate SME audiences as to how they can reduce, offset their carbon emissions. And it's also our job to make it incredibly easy for them. So that's one of the kind of raison d' êtres of JustCarbon is to make the market more accessible to more people, and especially to small businesses.

Jon Watkins: 4:46

Okay, so there's growing awareness around the issue amongst small businesses. But, Adrian, I'll bring you in what what are the reasons small businesses should look to offset their carbon and is it likely to become increasingly important for them as they come under increasing pressure from the firms they supply and consumers and so on.

Adrian Rimmer: 5:05

That in a sense is, is the reason that small businesses should be looking at this issue. There's an increasing groundswell of engagement from, from corporates from the financial sector, and from regulators around carbon emissions. And so, in each of those cases, the fundamental issue is driving towards carbon accounting for companies of all sizes. So understanding what your carbon footprint is, and then addressing it, so putting in measures to reduce it, and then to address the unavoidable balance. So I'll start with just to take each in turn, large corporates now are having to report on climate risk and on their transition strategies. A large part of their footprint is often part of their supply chain. So they are pushing pushing down requirements to their suppliers, often small businesses, to provide measurement and to, to them to show themselves what they're what they're doing about climate. And as a small business, it's really quite hard. Often, unless you're a manufacturer, you're footprint will often be your energy bill. And so a combination of yours you know, electricity and your gas bill. That makes it quite easy to calculate. But it makes it quite hard to do much about it, unless once you've done the obvious energy efficiency type activities, and therefore offsetting the balance is a way of showing that you're you and you understand what that footprint is and that you're taking measures to compensate for that. So that's part of it in terms of addressing procurement as part of a supply chain of a larger company. Banks are increasingly making commitments for net zero. And the way that they are implementing that is to look across the lending portfolio and calculate the emissions associated with that. So increasingly, they are requiring their clients to do the same as a corporate to really look at what their footprint is, and take steps to address it. And then finally, regulators are starting with the largest companies. So there was a an announcement this week around the creation of a transition Taskforce. But that's going to set rules for how companies define their transition plans that is how we're going to move to a netzero processes going forward. And that whilst that's aimed at the largest companies that are listed on the stock market, to begin with, the Financial Conduct Authority has been very clear that he's going to extend that through the powers it has, particularly through its regulation of the financial sector, to push that through the economy. So it really it's in the interest of companies to get ahead of that and take advantage of the of the positioning it offers them. So to calculate their footprint. And there are a range of calculators, particularly if you focus on in on your sort of really the direct footprint around your energy usage. And then to offset the balance.

Jon Watkins: 7:59

John, anything to add on why this should matter to small businesses?

John Auckland: 8:03

Yeah, so I guess I want to talk a bit about the future and why companies should act now rather than procrastinate too much. And, you know, there's a couple of reasons for that. One is that the price of carbon credits is predicted to go up. Look at Mark Carney's task force for scaling the voluntary carbon markets, and, you know, he's saying that the price of carbon for carbon credit needs to come up to $120, around about $25 to $37. You know, that's what we're currently selling JCRs for, the largest carbon removal taken, is where it is now. So that price is likely to increase I think everyone sort of commonly agrees that they will do. So if you procrastinate too much, then then obviously, the cost is gonna get higher versus actually if you look at your emissions now, it may well be worth you sort of hedging for the next few years to to save yourself money. The second reason is, is much more, we're kind of facing this paradigm shift of conscience as consumer. And if you think conscientious consumers, it's a relatively new movement, certainly for being a sort of mainstream movement rather than a fringe movement. But if you fast forward five years into the future, you know, conscientious consumers will be the norm. And they will actively look for bad businesses and bad business practices to make a conscious decision to not purchase from them. So you need to start that process now. We're thinking about how you can protect yourself against this feature. And, and one of the best ways of doing this is obviously thinking about your, your Net Zero strategy and your carbon impacts.

Jon Watkins: 9:40

Yeah, Adrian, you know, how exactly does carbon offsetting work? I'm sure a lot of our audience have heard of it, but not all of them will be clear on exactly how carbon offsetting works.

Adrian Rimmer: 9:54

Sure, essentially, the way that this mechanism works was developed 20 years ago under what was the Kyoto Protocol, and that's something that we remember in the dim and distant past, but essentially, it's the concept that you once you have reduced your emissions to a certain degree, it becomes increasingly costly to do that. And yet, actually, in terms of global warming, it doesn't really matter where you reduce emissions in the world. So if somebody else can do that more cheaply, it makes sense to outsource that process to them, once you've got to a certain point within your process. In order to do that, there needs to be a process that you're you're measuring things that wouldn't otherwise have happened. So somebody would be reducing their emissions anyway, you can't take credit for that. But if you are funding a project that otherwise wouldn't take place, and nature-based projects, which is what we focus on it JustCarbon are a good example of that, where there's no revenue stream, to keeping a forest standing. But it plays an incredibly important role in sequestering carbon from the atmosphere. So if you can support a project that protects that forest and provides a revenue stream to it to make that possible, then you can account for the carbon that's being sequestered. And you can use that to offset your own footprint. So fundamentally, it's about funding activities around the world that wouldn't otherwise take place that reduce emissions in the atmosphere. And there's a complex process around that, I used to run the Gold Standard, which is a certification body, we set the rules and the accounting frameworks for that, and and then on every emission reduction is certified independently to have taken place. So there's a lot of rigour around the accounting process. And then, and those offset buyers are effectively claiming title to the emission reduction that they could be funded.

Jon Watkins: 11:39

Okay, so John, you know, Agent mentioned that there's, there's a process, how long does this take, what the practicalities for small businesses.

John Auckland: 11:50

So well, look, a small business can buy a carbon credit, relatively instantaneously, it's just, they don't know, in my experience, where to look to buy in the first place, it's not a simple thing of, of even just Googling buy carbon credit, or buy carbon offset. You know, there's, there's, there's a plethora of choice, and there's a extreme spectrum of quality when it comes to carbon credits. And so the average small business would probably find themselves Googling, you know, where do I offset my carbon emissions, and finding themselves at either a calculator, or a non accredited carbon scheme, such as a tree planting project. So there's various things that will plant trees for you. And so you buy a unmeasured carbon reduction by planting a tree, so it makes you feel good, but to certain degree, it's greenwashing because you've got no real sense of how much club has actually been removed, or whether there's any direct correlation between the carbon you've emitted and the carbon you've removed by paying for the trees to be planted. So my recommendation is for a small business to go and start with a calculator to work out what your Scope 1, 2, and ideally 3 emissions are. So Scope 3 either to do with your supply chain for your customer base, Scope 1 and 2 are emissions directly related to your activities. So you need to start at some stage with a with a calculator, you can go on to the to the JustCarbon website, we've got some calculators, we recommend, Carbon Trust has also got a really good SME calculator. So start there and work out how much you emit, and then search the market to decide what you think is the best solution for offsetting. Now this is one of the reasons why JustCarbon needs to exist is that it's actually quite hard for the small market, small business market to engage with the carbon credit market. Typically, there was a broker that designed for large corporates that there are brokers that act as intermediaries between the project developers and the customers. And they generally tend to do a large volume because they tend to work on commissions or, or margins on the cost of the carbon credit. So what JustCarbon allows is for you to, once you've done your calculation is to buy with relative ease. It's for non-blockchain-experienced people, it's probably quite complicated when you first look at it, but actually we're simplifying the user journey over time. But yeah, just visiting JustCarbon.com and navigating to the section that says 'buy and retire' or 'buy and offset', you can buy instantly, however many JCRs you need to buy so carbon credits you need to buy and it will immediately retire them for them, both from the blockchain and from the carbon credit registries. So we've incredibly simplified the process. If you want to go a step further and start to sort of hedge future year's carbon emissions you can do so, the process for doing that is to work with one of the third-party exchanges that we partnered with, when you go into their platform creative account. And you buy JCRs from the market, it's a liquid market. Meaning they're always buyers and sellers on either side. Some of them are speculators, some of them are product developers directly. Some of them are liquidity providers who bought carbon credits to put on there to sell, you know, any any sort of given time. And we're also using a technology partner called Chintai, that will make that side of things even simpler, because you'll be able to go into their platform, create an account, which automatically creates you a wallet, that allows you to buy JCRs and retire whenever you so wish, or sell them on if you decide that you wanted to buy five years of years worth for predicted carbon credits, offsets and, you know, through activities that have reduced our emissions, which we obviously encourage, realise you didn't need as many as you as you bought for those five years, you can then also sell them back to the market. So we tried to create a really simple solution for SMEs that hasn't really existed until now.

Jon Watkins: 16:18

Great. And yeah, we talked a little bit around calculators there. And we talked around some of the things that are carbon intensive for small businesses like energy use, and things like that. But Adrian, you know, some some some sort of businesses probably aren't sure whether they even are carbon intensive, or not. And I'm assuming that some sectors are bigger users than than others, what's the what's a good place to start to see if you're, if you're carbon intensive, and if you should be offsetting?

Adrian Rimmer: 16:49

The first point I'd make is that actually all businesses, whatever size, you know, have a carbon footprint, and should be thinking about how they manage it. It actually in some cases, if you've got a smaller carbon footprint, it's much easier to show you're taking action on climate, because you can simply use your energy bill, a simple calculator and come up with a relatively small tonnage and offset the balance, for larger organisations, particularly SMEs that are manufacturing, they would typically be those that have or involved in IT services where there is a large use of datacenters, for example, those types of organisations are much more likely to be sort of much more energy intensive. Again, however, it's a function of in simplistic terms of your energy consumption. And so the place to start for any business is really looking at your electricity bill, your gas bill, and then thinking about things like if you have staff that have company cars, where you know, the emissions associated with their activities. And again, there are very simplified calculators that allow you to do that. And then, as John mentioned, Scope 3 is where you start looking at the impact of your in your in your supply chain, or in terms of the use of the products that you produce. Now, that gets much more complicated. The reality is that right now, dealing with the first two Scopes is the should be the priority, because they're easy to address. And therefore, when corporates or finances are looking to see if you're taking action, you know, that's an obvious place to see that you've got going, there'll be much more understanding of having a more complex supply chain and how to calculate that. But I think those are the those are the sort of starting points. And then really, it's about thinking about how you're going to reduce that footprint first. Now, an obvious areas, many companies are moving to electric car fleets, they're buying green energy. And so you can address some of those, those reduction requirements easily and efficiently by buying the right sort of tariffs. So thinking about where you can reduce energy, and you can engage your staff in that process. And often, that's quite interesting, but companies, people who work for any size of company are often keen to know that they're part of the solution, not part of the problem. And so engaging staff can be quite an effective way to kind of build sort of loyalty within the business and and see that they're playing a part in managing the company for the longer term. But engage them in that process come up with ideas for reducing and once you've implemented what you can, the residual footprint is what you should be looking to address. And so that's then seeing that that's a simple function of the tonnes that you've reduced the tunnels that you're reducing and what's leftover. And really, then that's when a platform like JustCarbon becomes much more sensible because you can simply go there, procure those, retire them straightaway, and report that into your sustainability reports on your website, etc and disclose the process that you've undertaken.

Jon Watkins: 19:49

Okay, brilliant. And look, cost is always important to small businesses, not least as they stare down rising costs of doing business and an ongoing period of uncertainty what the cost implications of this job.

John Auckland: 20:02

The say often businesses are quite surprised to discover the costs. And I guess there's also, it's worth noting that the cost varies quite dramatically. If you just focus on Scope 1 and Scope 2, or wherever you also decide to include Scope 3, the difference between the two really is, including Scope 3 is much more honest. And you normally need to engage an agency to support that process, because as, as Adrian said, it's quite complex. And then a facet of higher degree of accounting and looking back through communicating with your customers and finding out you know, what their engagement with you is, and your suppliers, and so on, and so forth. So it just takes time. But even when you factor in Scope 3, a lot of times companies are quite surprised at the costs. So I'll take an example. There's a coffee roaster, for example, their Scope 1 and Scope 2 emissions, this is just a case study for example you can find on the small99.co.uk website, they took some data supplied by C Free, where they supply a number of different caseloads of different types of businesses. And one of these being a coffee roaster, they roast about 15 tonnes of coffee per year, their Scope 1 and 2 emissions would only be about sort of 7 or 8 tonnes, when they factor in Scope 3, then it goes up to 31. So for them to, you know, if they're buying JustCarbon removal tokens to offset that at$37 a tonne, that's only costing them 970 pounds a year, in order to go carbon neutral. So, you know, then you've got to, you've got to a jewellery retailer that has to retail shops, physical retail shops, which, you know, the built environment obviously has quite high high emissions, and also people travelling there. So, you know, part of your Scope 3 is also thinking about how your customers actually come to visit you or travel to you. And their carbon footprint said only 61 tonnes. So, you know, for about $1,700 or £1700 pounds, sorry, they'd be able to go carbon neutral, which they can quite easily factor into the cost of into their margins and pass the cost on to their customers. But you may think it's not that important now, but if you look forward into the future, when it's potentially $100-$120 per tonne, then obviously that cost does go up quite significantly. And the way you reduce that cost in the future is either hedging now by buying in advance, buy your future needs, or you reduce your emissions. And obviously, we encourage people to do both really, good thing about hedging your future requirements or indeed, scoping past emissions, both of them get money back to project developers sooner. So also initiates further climate climate action sooner, and gets more money back into the project developers who typically then reinvest any money that they get back into further climate action. So yeah, there's there's good reasons all around really to, to move faster and not procrastinate too much. And also, you might be pleasantly surprised at the costs. In terms of getting an agency to support you with identifying your Scope 3 emissions, it's hard to do that via a calculator, so typically, that's done through someone coming in and supporting you. Those costs can vary wildly. And we, I know some people that have paid as little as 600, that's £600, I know some people still with small businesses that have paid more like £10,000 pounds. So that's sort of the ballpark you're working with for a small business. But it really can vary and just do your homework really on the different types of agencies you can work with.

Adrian Rimmer: 23:50

I just hadn't there's the Carbon Trust has been really helpful for small businesses and their resources for come from companies like Sage, who are who are looking into this new sort of whole climate resource sections on thinking around disclosure, and around measurement. So there are plenty of resources that small businesses can find on these issues. The other thing I'd say, of course, is there's two issues. One is once you start measuring, then you start managing. So by actually undertaking a measurement of sort of footprinting of your organisation, you see where there is cost and carbon is simply a function, as I mentioned several times in the energy bill. Well, ultimately, if you reduce, you're going to reduce your energy bill. So compensating for the balance is actually can can to some degree pay for itself. And then the other thing is thinking about how you build this into your business model. So actually making a virtue of this in terms of the way that you engage with your customers. And give you an example of a ferry company in Australia that that started to provide a service that was a ticket that built into it an offset, so passengers could choose to buy their weekly ticket, a normal weekly ticket, or they could buy a slightly more expensive ticket that included an offset. So actually, in this case, the company was passing on that cost to to clients of a more expensive ticket. Now it was really interesting about that is that they made the standard ticket red and the offset ticket green. And within a very short space of time, most customers are buying the green ticket. And you know, there's this sort of visible signal of the action that they were able to take simply by buying a slightly more expensive but carbon neutral journey made a huge difference in terms of the way that they went about their daily commute. And in terms of the kind of brand of the ferry company in terms of providing that too. So I think there are smart ways of thinking about how you build this into your business and into your marketing and communication activity as well.

Jon Watkins: 25:48

Yeah, it's brilliant. And John, just finally, where else can small businesses find more information about how to get going on this.

John Auckland: 25:55

So visit the JustCarbon website, www.JustCarbon.com you can get plenty of information there. I'd also recommend you follow us on Facebook and Instagram, we give lots of tips and advice about reducing carbon emissions, market stats for various things that you'll find useful as a small business owner.

Jon Watkins: 26:16

Brilliant, John and Adrian, thanks so much for sharing those insights on an area that I think a lot of small businesses are hearing about, but perhaps not yet active on. It's really interesting. Thanks very much for your time. Thank you also to our audience for listening. While I have your attention, I would just like to remind you that you can subscribe to the First Voice podcast to receive regular updates and guidance on the big issues affecting small businesses. And do please also remember that you can find a whole host of additional webinars, podcasts and other content on the First Voice website at firstvoice.fsb.org.uk Many thanks.

Sponsor's message: 27:09

This episode is sponsored by JustCarbon. JustCarbon simplifies offsetting carbon emissions and supports high-quality carbon removal projects to combat climate change. To find out more, visit www.justcarbon.com