Depending on who you ask, global warming is either the greatest threat to the survival of the human race or a wacky scheme concocted by environmental extremists. Whether you are a true believer or a confirmed skeptic, as a business owner it’s important to recognize that a significant percentage of your customers believe that global warming or climate change is real and that it is caused by human activities.
Recent studies confirm a majority believe in global warming
According to a recent national survey conducted by Virginia Commonwealth University’s Center for Public Policy, 54 percent of respondents considered global warming to be a “major problem” and 23 percent considered it to be a “minor problem." This result is in line with another recent study titled “American Opinions on Global Warming “conducted by Yale, Gallup and the ClearVision Institute. The study found that 71 percent of respondents in the U.S. believe that global warming is happening, with 57 percent believing it is caused mainly by human activities.
If you accept the fact that nearly three-quarters of your domestic customers and anywhere from 80 percent to 90 percent of your foreign customers believe in this, then the natural conclusion is that your company should do something about it.
One solution: establishing a voluntary carbon offset program.
How voluntary carbon offset programs work
Voluntary carbon offset programs allow consumers and businesses to compensate for the carbon dioxide emissions they produce in daily activities. These emissions are identified as the source of global warming. The average person in the U.S. generates around 27 metric tons of carbon-dioxide-equivalent (CO2e) per year. In a carbon offset program, the negative impact of these emissions is mitigated by:
1. Paying for projects that directly reduce the amount of CO2e generated
2. Paying for enhancements or modifications to planned projects that will cause them to emit less CO2e than they would have emitted without your investment
3. Buying the right to emit CO2e on an established exchange and retiring it instead of using it.
These voluntary programs are very different from compliance-related offset markets. These exist in countries where CO2e emissions are legally capped and companies and governments buy and sell the right to emit CO2e.
Who pays for the voluntary carbon offsets?
As a business owner, you have several options:
This option gives the consumer the option to pay an additional amount, similar to a surcharge, when purchasing your product or service. The cost of the voluntary carbon offset is fully absorbed by the consumer and your company simply serves as a facilitator between the consumer and a third-party provider of voluntary carbon offsets. Car rental and airlines have implemented these programs to much success over the past several years. They integrate the option to purchase voluntary carbon offsets into their online checkout process.
Continental Airlines, for example, has partnered with Sustainable Travel International (STI) to facilitate donations to STI from flyers at the time of purchasing a plane ticket. During the online ticket purchase process, the website calculates the amount of CO2e your itinerary will generate and the cost to offset it. I recently purchase a round-trip ticket from Newark to Kansas City and was told that it would cost $7.39 to offset the CO2e generated by my trip.
Company-funded or company-subsidized
Under this option, your company pays all or part of the voluntary carbon offset. Naturally the expense is much higher for the company in this scenario compared to the customer opt-in option. Many companies that sell products or services that are not conducive to a customer opt-in strategy have taken this approach and justified the costs as marketing, public relations, and corporate social responsibility expenses.
Return on investment
Voluntary carbon offset programs are in the early stage of development. Calculating ROI in my opinion is similar to calculating the ROI on new marketing initiatives. It can be difficult at times, but you’ll know if it works. The costs include:
- Finding a carbon offset vendor to work with: Some reputable organizations include The Nature Conservancy, The Carbon Fund, NativeEnergy, TerraPass and The Climate Trust
- Setup costs to manage the program: This could include changes to your sales process and transaction recording costs
- Marketing costs to raise awareness of your company’s new program, including new packaging that promotes the program
- The carbon offsets themselves: These costs vary but a good current estimate is anywhere from $10 to $15 per metric ton of CO2e. A small company with fewer than five employees wishing to offset its employees’ CO2e emissions could start for less than $500 per year.
If your customer base is like the majority of people, they believe that this is an important issue. Word of mouth marketing, new customers, and increased sales from existing customers should more than offset the costs of this program.