News Article
April 29, 2013

Reducing Enterprise Carbon Intensity - Doing the Math

By Clay Nesler



Every year more organizations commit to reduce their carbon footprint.  In 2011, nearly three quarters of the Global 500 companies responding to the Carbon Disclosure Project  announced public emission reduction targets ­— an 18 percent increase over 2010. For these organizations, a carbon intensity measure is often used as the basis for setting carbon reduction goals. This allows an organization to track the efficiency of its operations (i.e., carbon emissions per unit of output) without being penalized for growth.



While carbon intensity is a practical indicator of overall enterprise greenhouse gas emissions, it provides little insight into what specific actions organizations can take to improve performance.  This is where a little bit of mathematics helps.



Starting with the most common carbon intensity metric — tons of CO2 equivalent per million dollars of revenue — you can create a simple equation with variables related to building density, energy use intensity, carbon emissions factors and employee productivity.  These are the factors that energy and real estate professionals have the most influence over and they are key drivers of enterprise carbon emissions reduction.



C = D x E x F x P

Where:

C = Carbon intensity measured in metric tons of CO2 equivalent per million dollars revenue

D = Density factor measured in square feet per person

E = Energy Use Intensity measured in kBtu per square foot

F = Carbon emissions factor measured in metric tons of CO2 equivalent per kBtu

P = Productivity measured in employees per million dollars of revenue



The density factor, D, relates to the density of the organization’s real estate portfolio in square feet per person. One of the best ways to reduce an organization’s carbon footprint is to shrink its physical footprint.  That may include consolidating offices and redesigning workspaces with more flexible, open and collaborative environments.  Organizations that monitor actual occupancy over time find average space occupancy in the 40-60 percent range. Encouraging virtual offices, personal videoconferencing, hot desking and hoteling can reduce space requirements by up to 25 percent, often with increased employee productivity.



Energy use intensity, E, is measured in kBtu per square feet. Annual use of electricity, natural gas and other fuels can be converted to kBtus and divided by the total square feet of the real estate portfolio.    While energy use intensity is highly dependent on a facility’s original design and construction, retro-commissioning, operational improvements and whole-building retrofits can significantly reduce energy consumption.  For buildings over 10 years old, whole building retrofits and tune-ups can yield 20-30 percent efficiency improvements with reasonable returns on investment, especially when financed through energy performance contracting or Property Assessed Clean Energy (PACE) financing.



The enterprise carbon emission factor, F, is the total of each site’s energy usage, multiplied by the regional carbon emission factor, divided by total energy consumption. Regions with a high percentage of coal-fired electrical generation have much higher emission factors than those with greater dependence upon hydro or nuclear energy. Reductions in the enterprise carbon emission factor are possible by moving facilities to regions with lower emission factors, on-site production of renewable energy and/or buying renewable energy certificates (RECs) to offset the emissions of purchased electricity. 



The final factor is productivity, P, measured in employees per million dollars of revenue.  Real estate and other organizational leaders can have a significant impact on employee productivity through investments in technology, high performance buildings and better workplace design. The workplaces where employees work and the tools they use to communicate and collaborate with co-workers, customers and suppliers are important drivers of employee engagement, attraction and retention. The annual salary and benefits of today’s knowledge workers far exceed the annual utility costs for most organizations and improvements of only a few percent can have a big impact on organizational effectiveness as well as carbon intensity.



Johnson Controls made a public commitment to reduce the carbon intensity across its global enterprise by 30 percent from 2002 to 2012.  Achieving that goal in 2008, the company set another 30 percent intensity reduction target by 2018.  In addition to tracking the overall carbon intensity on a quarterly basis, tracking of the four factors from the carbon intensity equation provided insight into which actions were having the greatest impact and offered opportunities for improvement.



There are many variations for measuring carbon intensity including indexing carbon emissions to the square feet of real estate, numbers of employees, units of production…even barrels of beer.  The good news is that the carbon intensity equation can be easily modified to isolate each different organization’s key drivers for improvement.   It just takes a little math.

April 2013