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CSR: Setting Internal Carbon Pricing for Companies

Carbon Pricing

With growing concern across the globe for protecting the environment, carbon pricing has garnered a lot of attention by the governments. The countries all over the world are setting up a carbon tax in order to be more accountable for the emissions caused by them. Joining in the movement of fighting against climate change, several businesses are stepping up too by setting internal carbon tax.

Carbon pricing involves putting a cost on greenhouse gas (GHG) emissions to hold emitters responsible and help drive reductions. While setting an internal price for carbon may seem daunting, but when done correctly, it can be a useful decision-making tool to help companies realise cost savings, manage risks, drive innovation and demonstrate readiness for a rapidly decarbonising global economy.

Based on a report published by the Carbon Disclosure Project (CDP) in 2017, over 1,300 companies, including 139 from Asia, have implemented or plans to implement internal carbon pricing within the next two years. Microsoft uses an internal carbon fee collected to subsidize investments that help the company to reduce its emissions and achieve its goal to be net carbon neutral.

Following are the steps companies can take to develop an internal carbon pricing strategy:

Measure your carbon footprint

Before taking any decision, it is important to gather and study the data. It is important for a company to have a good grip on the scale and reach of its carbon footprint before putting a price on the emissions.

Set clear objectives and define the business benefits

This is an important step as it will help support the business case for why a carbon price is needed. The company needs to be clear about the reason behind setting up carbon tax whether it is ethical, financial or technological. It also needs to be clear about the benefits to the business from this, in order to stay motivated.

Engage stakeholders on internal carbon pricing

Engaging internal stakeholders can help address potential concerns or difficulties for a smooth implementation. Including representatives from the various departments/business units within a carbon pricing committee ensures ownership, accountability and governance.

Choose a carbon pricing approach and set the price

There are tools and guidance available online one can use to set an internal carbon price. A company can start with small steps and then find an appropriate practice that suits it the best.

Measure, communicate and evaluate results

Results from the implementation of internal carbon pricing such as reductions in GHG emissions and cost savings should be evaluated and reported internally and externally to showcase the positive outcomes of the approach and adjusted accordingly if needed to help the company reach its objectives.

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The CSR Journal Team