Verdant Light

Musings on sustainability and sustainable innovation.

Microsoft’s Carbon Tax: Changing The Rules of the (Internal) Marketplace

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I’m in Seattle this week for some meetings, and today I was able to carve out some time to visit the Microsoft campus and have coffee with a friend and colleague on their corporate citizenship team. We chatted about the state of our sustainability profession, and one of the recurring themes of discussion were the ad-hoc nature most sustainability initiatives. It’s what I like to call the Teenage Sex Problem, after a well-loved quote in the sustainability profession (source, unfortunately, unknown):

Sustainability is like teenage sex: there’s a lot of people talking about it, but not a lot of people doing it; and those who are doing it aren’t doing it very well.

What our profession needs to really move forward are not sexy, celebrated innovations like mushroom packaging or shipping container architecture, but rather, systems that can be built on top of — or better yet, into — business processes.

Microsoft has implemented one very cool marketplace rule that I wish all companies would adopt: they’ve instituted an internal carbon tax. They’ve pledged to carbon neutrality, by reducing emissions as much as they can and offsetting the rest — renewable energy credits (RECs), carbon offsets, wind power purchase agreements (PPAs), etc. Many companies do this, but Microsoft has taken the really innovative approach of passing on the cost of the offsetting to the source of the emissions. For example, if a salesperson elects to fly to a client meeting, there’s a small fee added to their travel booking for the emitted carbon; similar charges exist for, say, groups leveraging time and equipment in a server farm for computation or data storage.

Inside the Microsoft carbon fee

Source: Microsoft sustainability report

I think this is really revolutionary. It aligns the interests perfectly: if the employee makes a decision not to pursue the activity that would emit the carbon, then this eliminates the need to purchase that amount of offset anyway. In reality — posits my friend — the actual fees today are not significant enough to change behaviors. That’s not the point. The system exists, and has been integrated into each group’s business processes — the rules of Microsoft’s internal marketplace. As the cost to mitigate climate effects through offset purchases rises, the marketplace rules dictate that the costs will naturally rise to compensate; and eventually, this will begin to change the behaviors of employees looking to optimize their budgets. (Provided you believe in offsets as a successful system.)

Now if only we could revolutionize the external marketplace in the same way, with carbon legislation.


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