If my PR inbox is anything to go by (trust me, it is), companies, and especially stock-market listed megacorps, are scrambling to out-green each other with tales of how the planet will be taking breaths of relief because of what glorious stewardship they provide for our slowly heating planet. Environmental, social and governance (ESG) goals are reported with great glee, but few companies tie it directly to earnings.
There’s an old truism in journalism that people can’t understand distances longer than a football field, and can’t understand numbers larger than their mortgage. PR professionals know this, and time and time again, the public is agog with the numbers. “Wow, company X put $10 million toward climate change!” means that we, collectively, get all warm and fuzzy about Company X. Few of us pause to think how Company X had that $10 million to spend, and when it turns out that it is only a fraction of the marketing budget, it often becomes clear that the “green initiatives” are marketing spend, not planet-improvement spend.
To people who believe we are on a timeline where we are careening toward a late-stage post-apocalyptic capitalist hellscape where humans are cogs and the planet is there to be strip-mined, the only meaningful climate measurement is one where it is balanced against the only real metric corporations care about: profits. And specifically, profits as an intermediate metric for a company’s share price.
A couple of years ago, Danone started reporting its carbon-adjusted earnings per share (CAEPS, very catchy), directly tying its carbon emissions to its earnings with a simple-to-understand formula: Calculate the “cost” of your greenhouse gas emissions, divide it by the number of shares and subtract that from your earnings. It’s bold, especially if the senior leadership team is willing to stand by those numbers over time.
“Danone pioneered voluntary reporting of ‘carbon adjusted’ earnings per share (EPS), demonstrating to shareholders that our carbon-adjusted EPS would grow faster than expected since peak emissions were already behind us—and faster than our EPS would have grown without carbon adjustment,” wrote the ex-CEO of Danone, Emmanuel Faber, on a piece on The B Team. “This added to our dividend capability without jeopardizing the company’s long-term investment in regenerative agriculture. Yet three years down the road, this effort remains a relative anomaly across the business landscape.”
It seems as if Faber may have overreached a smidge, as he was ousted as CEO, reportedly because of his strong climate and environmental bent, after four years at the helm of the French food giant.
The leadership in introducing CAEPS was strong, but it sure didn’t stick — Financial Times only has three mentions of climate-adjusted earnings per share on its entire site, and all are related to Danone. There are other companies reporting it; S&P Global does, and many other companies have other ways of reporting their carbon emissions. The specifics of the metric, and what it’s called, may have failed, but it’s extraordinarily telling that there seems to have been little appetite in the industry for adopting a standardized, linked-to-earnings metric for greenhouse gas emissions. It’s hard to read that as anything but a staggering lack of appetite for actually signing up to a triple-bottom-line approach (planet, people, profit), and points to an extraordinary amount of hot air over a desire to make actual, meaningful change.
Of course, it can be tricky to measure carbon emissions up and down your supply chain, but “tricky” is not an excuse not to try, and to get enough data to be able to make educated guesses about the parts of the supply chain you don’t have full visibility on. By measuring — and by insisting on reports from your suppliers as part of the procurement and billing process — companies have an opportunity to be part of a chain of culture change. And over time, hopefully, it’ll be harder to drastically under-report (Amazon, I’m looking at you…) once companies normalize the reporting standards, and it becomes easier to compare like-for-like.
If you’re running a startup, you have the option to bake carbon metrics into your KPIs and your regular reporting to your board. As your company grows, stay the course and keep reporting it. It’s one of the perks of being a startup founder: You have an opportunity to show what you care about, and running a carbon-neutral (or, what the hey, set your goals higher and take a run at being carbon-positive) company is a pretty decent place to start.
Keyword: Share your carbon-adjusted earnings per share number, you cowards>