Climate Neutral: The New Minimum Standard for Corporate Responsibility

Phillip: [00:00:00] Hello and welcome to Future Commerce, the podcast about cutting edge and next generation commerce. I'm Phillip. We gave Brian the day off today, but I'm sure that we're gonna have an awesome episode because I have with me two guests who are part of an organization that we've talked a lot about on the show, especially a lot on social media and in our FC Insiders newsletter. It's organization that we joined as a supporting member not so long ago. And again, if you've been paying attention, you know, you've heard about Climate Neutral quite a bit. So we're really excited to invite two folks from Climate Neutral to tell us a little bit about their initiative. Here today with us are Austin Whitman, CEO at Climate Neutral, and Caitlin Drown, Brand and Communications Manager at Climate Neutral. Welcome.

Austin: [00:00:41] Thanks, Phillip. Great to be here.

Caitlin: [00:00:43] Yeah, thank you for having us.

Phillip: [00:00:44] Glad to have both of you. Yeah, just for those who may not be familiar and not clued in, or are tuning in for the first time... Austin, could you tell us a little bit about climate neutral and a little bit about your organization?

Austin: [00:00:57] Absolutely. We are a young nonprofit organization founded in about March of this year, 2019, and we exist with the sole purpose of helping businesses understand what their carbon footprints are and take meaningful actions to reduce those carbon footprints and then offset the entirety of their impact on the environment. So we're a small organization, as I mentioned, we're a startup. I'm sure through the course of this discussion, we'll get into all the different pieces of what we do. But we're trying to address one of the largest gaps in the globe's ability to deal with climate change, which is we simply don't understand. People don't understand where carbon emissions come from, and they don't understand what to do about them. And so climate change becomes this really difficult and intractable problem because it just feels so scary and like something we can't do anything about. So we're trying to enlist consumers in the conversation by creating a label that will be used by companies to indicate that they've gone through our process and really to get consumers engaged in asking companies to join. So we're excited to have Future Commerce as one of those companies, and we're up to about 70 brands total, so far.

Phillip: [00:02:30] Wow. So you're focusing, it seems very intently, on retail or brands or technologies or media organizations that are focused in the world of retail. Tell us a little bit about who those launch partners were in retail and maybe why retail? Why are you starting there?

Austin: [00:02:48] That's a great question. You know, we started with brands that have recognizability to consumers because we feel like consumers are the economic engine for the companies where they buy products and services. And the two brands that funded us and provided our seed funding to get off the ground... One is called BioLite Energy, and they're based in Brooklyn. And one is called Peak Design, and they're based in San Francisco. They each make physical products. And in the course of making those physical products, they also make carbon emissions. And their view over a few years of understanding what their carbon footprint look like was that there are limits to how much they can reduce their footprint on their own. But there is a lot more that they can do beyond just what they can reduce. And so they have this very unique perspective in kind of the realities, the difficulties and also the opportunity to do something about carbon emissions. So the retail focus is really born out of this need to enlist consumers, so that there's a strong signal to companies that doing something about the carbon footprint is going to be economically meaningful.

Phillip: [00:04:14] I find it interesting because that's a big push, and it's becoming recognizable in the consumer trust and mindset that exists around certain brands. I think of other labels that exist like Certified B. How do you stack up in the world of that labeling and sort of trust building with the consumer? And are you attracting brands that have large consumer footprint, so to speak? What are some of the brands that are signed on with you, and do they have the kind of audience that would help give you credibility based on their prior trust of those brands already?

Austin: [00:04:53] That's a very complex question. {laughter} To pick that apart a little bit, we're working with a number of brands already that many consumers would be aware of. So Kickstarter is one of our brands. They've got I think at one point I heard somewhere between 14 and 15 million people have backed a Kickstarter campaign since their founding. Allbirds is another large one. They sell mostly shoes, but very trendy in Silicon Valley. And it's hard to walk down a street of San Francisco and not see a pair of Allbirds shoes. Peak Design and BioLite, in their own right are well-known brands.

Phillip: [00:05:36] Yeah. For sure.

Austin: [00:05:36] And when I go out to San Francisco I have a contest with Peak Design's founder about whether we see more Teslas or Peak Design backpacks. Usually it's about even. We've recently signed up a well-known women's clothing brand, yet to be named, but people will certainly recognize their name when we make the announcement. So I would say... Caitlin would be able to speak to the specific numbers, but we've in the last couple of months we've been doing some activation of the brand by way of letting consumers know that it's going to be on shelves starting in 2020 and trying to do some social media push, and through the companies that we're working with, we've gotten out to literally millions of consumers. So maybe Caitlin wants to speak to that a little bit.

Caitlin: [00:06:23] Yeah, absolutely. So again, I run the social media accounts, and we've noticed, particularly on Instagram, a lot of really influential individuals that aren't associated with one of our brands, and they might just have a sole proprietorship, have been reaching out and promoting us on their own accord. So people, professional athletes, photographers, creatives have really been harnessing the power of their audiences to tell more about Climate Neutral and get more people involved. And again, these are people that are just learning about us on their own feeds, as well, and just really sharing that story and encouraging the brands that they're working with to get certified and then telling their followers, who are just normal, everyday consumers, to really look for this label and get involved and learn more about what the certification means. I think it really gives companies an opportunity to walk the talk of sustainability. It's easy to say, "Hey, we're pro climate change action," but the label actually gives companies the opportunity to show their consumers that they're not just talking about it, but actually taking action in a very transparent way. And that's just been really remarkable to see the response that we've gotten across social and just in conversations that Austin and I have had across the country, basically, of people saying, "This is great. It's transparent. How can I get involved regardless of whether I am a decision maker at a company or just an individual that wants to make a difference in some way?"

Phillip: [00:07:51] %I love all of that. I love what you're saying. I also sort of loaded that question a little bit. And I'd love the sort of agility to respond to it. You know, I think of a brand like Allbirds, which, you know, not everybody may have heard of, but those who have probably understand that they have a little bit of a... They have some credibility, some street cred, if you will, in the space of sustainability. We did an Earth Day piece around them, around the National Audubon Society and some of their efforts to quantify their carbon footprint. And so I love when I see brands like that who have worked very hard to already gain some reputation in the space coming alongside initiatives like Climate Neutral, because I think it transfers that credibility to you there. They're certifying you as much as you're certifying them. I go on ClimateNeutral.org, and I look at the list of certified brands, and I see some very interesting data points from Peak Design, BioLite, Avocado that actually show a lot of transparency in the sort of measure of their current carbon footprint. What is the goal as an organization? What's your structure, and what is your goal in partnering with these brands overall?

Austin: [00:09:17] So goal number one is to understand, to capture a large amount of carbon within this universe of brands that we're certifying. So if we don't build a coalition that has a large carbon footprint, and then get them to do something about it, then we failed in our mission. And so that's really I think one of the most important things from a consumer perspective. The label that we provide is not provided to companies who mean well or who are thinking about doing something in the future. The label is only provided to companies who have specifically done three things. 1) measured their carbon footprint, 2) identified a reduction action plan... So things they're going to do to reduce their carbon footprint and 3) then offset the entirety of their footprint that they measured. And once they've completed that three step process for a calendar year, then they can use the label. And so anyone who has the label on a product has been through that process by definition. So we're hoping to build a coalition of companies that has a large footprint, so we can make a big carbon impact. But in addition to that, we're hoping to mobilize a bunch of companies to actually start to build carbon reductions into their strategy because they've internalized a price on carbon, which is a bit of a technical concept. So I can explain it for a sec.

Phillip: [00:10:44] Sure.

Austin: [00:10:44] I mean, basically, when people go through this process, they are going to be paying for carbon offsets for 100% of their carbon footprint all the way up through their supply chain. And when they pay for those carbon offsets, every ton of carbon that they emit now has a price. So if I emitted twenty thousand tons of carbon last year, I paid $4 a ton to offset that, I have $80,000 tax on carbon, which governments have not created, but which I have essentially created myself. And once I have that, then I'm now motivated to the tune of $80,000 to find ways to reduce that footprint. And so that's another outcome of ours is to essentially establish an internal price on carbon for companies that they will respond to and incorporate into their business planning decisions. We also want these companies to become part of a movement, if you will, and engage with their consumers and speak very candidly and transparently about what they're doing. And so one of our principles since the beginning has been... No one knows how to do this perfectly, and if you look at where we've been on climate, certainly no one knows how to do it well, at all, because we're, by most measures, pretty much failing when it comes to dealing with climate. We as a global community. So our view is you've got to start somewhere. And you at least, if you start somewhere and then be transparent about what you're doing so that if someone has a better idea, come on in and speak up as to what that better idea looks like. So you mentioned the three profiles we have on our page right now. All the companies that get certified will have pages like that come April next year. And so if someone wants to look into the actions that a particular company is taking, understand what their footprint looks like, and what they've done to reduce it, and what they're doing to offset it, that information will be available very transparently. And people can assess, make their own judgment call about whether that's enough, and if it's not enough then let's have a conversation about it. And so that's sort of the attitude and the logic behind putting all the information out there.

Phillip: [00:13:02] Yeah. Logically you can't you can't prove something without measuring it, right? So I assume you said in the three step process, measuring or quantifying is the first step. Do you have brands approach you that have no idea how to even get started? And what are some of the tools, you know, or what are some of the processes that you help them put into place or some education that you give them to get started? And are those tools that you're providing, or are those things that are broadly available and well known and maybe certified in an industry?

Austin: [00:13:39] Yeah, it's a great question. Given that you've identified that, you know, for the last 30 years that climate change is a problem, it's astonishing that so few companies actually know what their carbon footprints are, let alone individuals. When you poll any group of people, whether they're speaking on behalf of their company or themselves, pretty much nobody knows which is equivalent to basically saying I'm going to go on a diet, but I don't know how much I weigh right now.

Phillip: [00:14:07]  Right.

Austin: [00:14:08] So it's a pretty difficult spot to start from. And so one of our objectives is to make it really, really easy for companies to estimate what their carbon footprint is. And today, when a company wants to get down this path, they generally have to hire a consultant and engage in a months long process to do detailed carbon accounting exercise. And we think that that is critical and those exercises are valuable, but that most companies are probably not going to do that, which is again, why most companies don't have any idea what their footprint is. And so we're creating a tool which is a very simple software tool that's based on very well-established lifecycle assessment methodologies that will be available to everyone who goes through our process. And through a series of simple steps, they'll be able to turn essentially some basic inputs about their business, how much revenue they generated in 2019 and what sectors they operate in, what countries they manufacture in, and those kinds of things. They'll be able to turn that information into a usable estimate of what their carbon footprint is. And from there they will have then the information to start thinking about how they're going to reduce their emissions. And one example of an insight that will come from this exercise is a company will be able to say what accounts for or what contributes to the greatest chunks of their footprint and therefore where they should focus their efforts on reducing their emissions. And they'll probably be surprised to see that some things that they thought were higher, larger sources of emissions are actually much lower. And in fact, you know, other things that they thought were lower might be potentially higher. So we shed a little bit of light on that, provide some visualizations that people can use to communicate internally within their companies and get people focused on the work that they need to do to reduce their emissions.

Phillip: [00:16:13] What has been some of the feedback from the brands that you've worked with already? Caitlynn touched on already the sort of public perception. I know that you've had a little bit of press with some well-known folks like Alex Honnold. Tell me a little bit about some of that and how that's helping you spread the word and get other brands on board.

Caitlin: [00:16:32] Yeah, I think just tapping in to the network, and I can also touch more on the relationship with Alex, but just tapping into these really reputable, trusted people has really helped us because it shows that kind of giving their stamp of approval on what we're doing. And, you know, the power of social media and digital marketing channels really has helped us reach new corners of the globe, obviously. But again, if you look at the figures like Alex Honnold, that does show not only that we're onto something here, but that he's kind of standing behind us and showing both brands and consumers, too, that this is something that's worth looking into and that all brands should consider going through the certification process.

Austin: [00:17:15] And I'm happy to provide a little more color on the Honnold relationship, which we did our first public launch in June at the Outdoor Retailer show. And we had 16 brands signed up at that time. And we invited Honnold to join us as a moderator of a panel. And his initial reaction was, "Yeah carbon offsetting. I don't really believe in that." And that's why he started his foundation, because he felt like their focus is solar energy. He felt like you've got to go down onto the ground and change things from the ground up. And so, I mean, if you've seen Free Solo you kind of see how he thinks when he's approaching it climb, which is obviously every millimeter of that rock face is mapped out in his mind. And I won't claim that he applied the same exact level of rigor to his research, but when we chatted before the panel, it seemed like he had done extensive reading in coming to an understanding of what we're trying to do and how our mechanism can complement the on the ground efforts that people like the folks at his foundation are working on to get solar installed into villages and on homes around the world. So he developed a comfort with the idea of offsetting because of the immediacy of the impact and, frankly, the ease of doing it. So it provides companies and individuals something that they can do literally instantaneously with the click of a button. They can fund projects that reduce carbon emissions. And I think, you know, he is kind of a good analogy for many people who sort of realize the immediacy of the impact from carbon offsetting and just the value that can create from a climate perspective because it immobilizes carbon offsets, mobilizes investment in decarbonisation around the world that's needed today. It's really a time critical problem. And those investments are needed today. So after going through the process, he's been a great champion for what we're doing. He's provided a couple of quotes for other articles. He did a shout out to our Kickstarter campaign, which we have live going on through December 12th. And yeah, and we just couldn't be happier about the support he's given us.

Phillip: [00:19:48] I feel like he adds a little bit of additional credibility in that he's been sort of outspoken about, you know, outspoken is probably the wrong word. It's sort of like openly skeptical about things like this. And I think you touched on it. Have you found mostly positive reception in the marketplace or have you found others that, you know, sort of need a little more convincing? And do you think that your efforts around things like Kickstarter helped to more broadly attract fans of this type of initiative? Do you feel like it's converting people into... I guess I'm asking a bunch of questions. {laughter} Let me take one more stab at this. Do you think that efforts like your Kickstarter are helping to evangelize your efforts with people that already align to being supportive of this vision? Or do you feel like it's giving you an opportunity to talk to people who had never considered it before?

Austin: [00:20:50] Because of the Kickstarter and because of the PR efforts that we've made in the last few months we've had the opportunity to join a discussion that is at a higher level and volume than I've ever seen it in fifteen or so years that worked in climate and carbon. And in every one of those discussions, the debate comes up about what individuals and what companies can and should do, and of course, whether carbon offsetting is a sensible thing. So, yes, I think we've been able to get our name out there to people who are going to be the immediate supporters, because they just believe that there is a problem and they are looking for any solution. But we've also been able to instigate a number of conversations or even become the basis for reporters to write stories about both sides of the issue. And we support that. I mean, that's obviously an important part of the process is just having all facts out there and all views. And so as a result of that, I think we've been able to change some hearts and minds. You asked about whether we've encountered any resistance or whether there are people who need more convincing. Absolutely. But I think one of the things that we've found is that, on the company's side of things, there's sort of... Think about our audience. There are consumers, and then there are companies. We've got to get consumers excited about the label. We've got to get companies excited about the process and wearing the label. And then the two can kind of connect. Consumers with companies. So on the companies side, we've had a lot of immediate success with small and medium sized businesses. So let's just say under 200 million dollars of revenue. And then we've talked to a number of companies with billions of dollars of revenue. And what's interesting is that people that we meet with at larger companies, in general, when we have the conversation and sort of press them on why they're not doing more aggressive carbon offsetting, the answer is usually, "Yeah, I think we should be doing this, but I can't seem to get it by the corporate finance people," or "This is something that our PR department is a little bit nervous of because of the stigma around carbon offsetting." But there are sort of large company reasons why joining Climate Neutral is not necessarily an immediate "Yes." And the smaller companies that we deal with, we may have a very similar conversation, but then they kind of say, "Well, my CEO thinks we should do this, so we're going to do it." And so our hope is that we get there with the large billion dollar enterprises just as well as we've done with a medium size businesses.

Phillip: [00:23:56] I know we've talked a lot on this show about the efforts of activists like Greta Thunberg and some of the criticism about offsetting is really just in that, you know, carbon neutrality is not enough because the damage is done. The effects are nearly irreversible at this point. We have to do more. How do you respond to the criticism of, you know, "This isn't enough. You have to do more?" What is your response to that sort of a mindset?

Austin: [00:24:26] I completely agree. We need to do far more than we're doing. I would say if the entire world were carbon neutral tomorrow, then we talk about what more we're going to do. But as it is, we're having a hard time getting anywhere remotely close to carbon neutral. So, you know, to kind of go back and use the weight loss analogy, if you want to lose 50 pounds, you've got to start with five, right?

Phillip: [00:24:58] Right.

Austin: [00:24:58] And so I think the point that Greta's making is a really important one, because, yes, at a scientific level, there's atmospheric carbon that we've generated since the industrial revolution that will not clean itself up. And it's important to have technologies and be investing in ways to reduce that carbon from the atmosphere because it is part of the climate problem. On an ongoing basis, we also need to look at how much we're emitting relative to how much the world can naturally absorb and reduce and address that amount. But we're so far from bending the carbon curve downward to a point of neutrality that we have to start somewhere. I will also say, and I'll try not to get too too wonky here, but it's very possible that neutrality leads to positivity, because the way we're counting the carbon neutral, the way we're counting the footprint for our definition of carbon neutrality, is all of the emissions that I generate directly and all the emissions that are generated in the service of making my products when I work with third party suppliers of raw materials and then manufacturing partners. And so there's a saying in the industry that "My Scope 3 is another company's Scope 1," which basically is a way of saying that all my emissions that I indirectly cause because I hire somebody to do something, and they create emissions... If you were to go to that company, their direct emissions are also part of my footprint. So if I define my footprint broadly enough, my footprint overlaps with some other company's footprint. And if both of us went to neutrality, we're getting to positivity. And I hope that makes sense.

Phillip: [00:26:51] It made perfect sense.

Austin: [00:26:53] OK.

Phillip: [00:26:53] That's very, very, very interesting. If we all reach neutrality in some way, or if we all quantifying neutrality broadly in the way that you're quantifying it, then the effects could actually lead to positivity. That's that's really fascinating.

Austin: [00:27:06] Absolutely. And that's part of our goal for this whole thing. Number one, reduce the barriers to companies getting on this path. But number two, to increase the expectation for what neutrality is. So I don't get credit for being carbon neutral just because I bought some renewable energy certificates for my corporate office building, which accounts for 5% of my footprint. I only get it if I meet this larger footprint definition for supply chain down through delivering products to my customers. And so it's lowering the barriers, but raising the expectation, so that we do have a definition of neutrality, that again, if everybody hits it, we're getting to positivity.

Phillip: [00:27:46] I'm curious, you know, in our world, we talk a lot about the online digital commerce shift. We've explored this year in great detail how some of the store closures in the United States have had a channel shift behavior for people that are disproportionately affected by those store closures. I'm thinking about Family Dollar, Payless Shoes, Dress Barn who've all shuttered in certain cities. Those customers are shifting to purchase online, particularly Amazon. Do you think that there is an inherently sort of positive impact to purchasing online because it doesn't involve sort of brick and mortar and travel expenses? Is there anything in there that's sort of maybe a net positive benefit to online shopping? Or are there hidden costs and expansion of footprint that we may not have considered overall in the way that e-commerce is running?

Austin: [00:28:48] One day shipping. That's basically... Unfortunately, with e-commerce, we've sort of trained consumers to expect exactly what they want tomorrow on their doorstep and the emissions... This is why Amazon is coming under a lot of scrutiny for their footprint because they've been large part responsible for setting that expectation. But it's great to have your Prime package show up tomorrow. But that got there, chances are via an airplane, and that airplane has a carbon footprint that's much, much larger per mile than other modes of transport. So the energy use that goes into a store to power a mall is frankly not a huge chunk of what the overall footprint would be for the average... You know, if you spread that across the goods that are sold through a mall, it's just not a significant share. And even the emissions to get that product from a warehouse to the mall, to the mall store, the commuting emissions for people driving to the mall, I suppose. But you've got to net that out against, you know, my neighbor across the street probably gets four packages a day. And the FedEx truck and UPS truck, and the Amazon truck are constantly going up and down the street. So they have emissions, too. So I don't know. I'm not smart enough to have a quantitative answer to that. But I think that we shouldn't assume that just because the stores aren't operating that there's a smaller footprint to our consumption because there are all these other reasons why and other places where the footprint is actually increased.

Phillip: [00:30:29] I think that's fascinating, as well. I think that there is a general discussion, at least in our corner of the world, that retailers that are digitally native have a lower net impact by nature of being digitally native. And when we signed with Climate Neutral, one of the things we did in our assessment was we looked very intently at Future Commerce in the way we're building software and the places where we're actually even hosting software, and we found that certain cloud providers like Google Cloud, are working very hard to offset and build and invest into sustainable energy generation and renewable energy, whereas others were not. And so part of our commitment was to look into, you know, even though we are a startup. We're very small. You know, there're 11 people where. We're sort of scattered around. We're all remote. And, you know, we might have a benefit by being digitally native, but it wasn't enough to just stop there. And I feel like more e-commerce or more digitally native retailers might benefit from taking a hard look at that sort of level of detail. So closing out here today, what do you think are good next steps for people that want to get involved? And who are some of the brands, if you could give us a little rundown of some of the brands they would be joining if they were to engage with Climate Neutral? Give us a little bit of insight there.

Austin: [00:32:06] Caitlin, I'm sure you have some ideas about ways individuals can engage.

Caitlin: [00:32:11] Yeah, absolutely. First and foremost is to back our Kickstarter campaign that can be found at ClimateNeutral.org/ks. We have a couple of different levels of pledges available. You can actually back our campaign for $100, and that donation level part of it will be going to fund our organizations. So helping us staff the organization, spread the word, recruit more brands, and communicate with customers. And then you'll actually be able to offset your carbon footprint for the entire year. We are partnering with some offset providers who will be helping us procure credits that will essentially offset the average American's carbon footprint for the entire year. And ahead of the holidays, what better way to celebrate that spirit and give the gift of a clean climate by offsetting someone else's carbon footprint for the year?

Phillip: [00:33:05] That's awesome.

Caitlin: [00:33:06] And businesses are also more than welcome to join, as well. If they back at the $1000 level, we'll start the process of onboarding them to become committed, to become Climate Neutral certified, and that will actually include a down payment on their 2019 carbon offset purchase. This is a great way to kind of again walk the talk of sustainability. Outside of the Kickstarter, connect with us on social media. Check out the website. Spread the word. And as always, as Austin had mentioned, we really like having these conversations and hearing other people's points of view. So, again, just reach out with any questions. We can be reached at info@ClimateNeutral.org. And again, just be on the lookout as a consumer. Just call out your favorite brands. Brands always want to know what their consumers are looking for, how they can improve as a company. So get on Twitter, get on Instagram, and ask your favorite brands to look into the certification and really take responsibility for the carbon that they're emitting into the atmosphere. And business leaders, as well, reach out and learn more about the certification process. We made it very straightforward and transparent because we want this to be a meaningful certification process, but lower the barriers to entry on costs and time required to become carbon neutral which is why we've streamlined the process. Learn more about the certification process, and you're a business, sign up. We'd love to have you.

Phillip: [00:34:32] That's awesome. This has been so great, so informative. I'm so glad to have had both of you on the show. I really appreciate all of your time. And if you are listening to this, we want you to lend your voice to this conversation, and you can do that best over FutureCommerce.fm and scroll to the bottom of the episode, and you can chip in your two cents on what climate neutrality and what carbon neutrality means to you in your retail business. And I wish you both the best of luck and cheers to a successful Kickstarter campaign and to all the success that you'll achieve in 2020 as we all work together towards this mission.

Austin: [00:35:11] Well, thanks, Phillip. It's so great to be here today. Great conversation. And it's also great to have Future Commerce on board as one of our committed brands. So we look forward to certifying you all next year. And I hope your listeners found this interesting.

Phillip: [00:35:24] Yeah, same here. Thank you, Austin. Thank you, Caitlin.

Caitlin: [00:35:27] Thank you.

Phillip: [00:35:27] And thank you all for listening to Future Commerce.

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