It has been a year since Microsoft launched what it calls the biggest commitment in the company’s history to focus on the climate crisis. It was last January when they announced their commitment to become carbon negative as a company by 2030. This meant that by that date they will remove from the environment more carbon than they emit. In addition, by mid-century they committed that they would remove from the environment all the carbon that Microsoft has emitted directly or through electricity use since the company was founded in 1975; an endeavour that was dubbed their moonshot.
“We forecast that in our first year we reduced Microsoft’s carbon emissions by six per cent, or roughly 730,000 metric tons,” Brad Smith, Microsoft president says. “We have purchased the removal of 1.3 million metric tons of carbon from 26 projects around the world. We are committing to transparency by subjecting the data in our annual sustainability report to third-party review by the accounting firm Deloitte and to accountability by including progress on sustainability goals as a factor in determining executive pay, starting with our next fiscal year.”
Microsoft marked the anniversary by publishing what it called its most comprehensive sustainability report to date, that reviews not only the commitment to be carbon negative, but also to become water positive, zero waste, and create a planetary computer to gather data that will help improve the world’s biodiversity.
“While we have naturally spent much of the first year building the foundation for the decade ahead, we have also started to make real and measurable progress in reducing Microsoft’s carbon emissions,” Smith adds. “During our first year, we reduced our emissions by six per cent, from 11.6 million metric tons to 10.9 metric tons. By 2030, our goal is to cut our emissions by more than half. This means that if we sustain and then improve upon these reductions for ten consecutive years, we will reach and hopefully exceed this goal.”
Taking account of scope 3 emissions
A small part of last year’s reduction was due to the decreased activity the world experienced because of COVID-19. Obviously that aspect is unsustainable, making other and more significant sources of progress more important. At the top of this list is the need to accelerate a shift from fossil fuels to renewable energy in its facilities and emissions reductions by its suppliers.
“As we take stock, two underlying changes are proving critical in moving us faster and farther,” Smith explains. “The first is the expansion of our internal carbon tax to scope 3 emissions, meaning carbon emissions by our suppliers and from customer use of our products. For years we have applied an internal carbon tax to our scope 1 and 2 emissions. This meant that each part of Microsoft paid internally (at a rate of $15 per metric ton) for the carbon emitted for its direct emissions like travel and electricity. At the start of our new fiscal year this past July 1st Amy Hood expanded our internal carbon tax to include scope 3 emissions, beginning with a lower rate of $5 per ton that will increase each year.
“Already this is incentivizing teams across the company to focus on their suppliers and the emissions from their products. My favourite example comes from our devices team, which built an audit management system using Microsoft Power BI to track performance and enable continuous supply chain improvements. Similarly, our Xbox team developed a new feature that reduces power from 15W to less than 2W when the device is in standby mode.
“These improvements point to the long-term importance of the change we made last year to our Supplier Code of Conduct by requiring a greenhouse gas emission disclosure. This has increased transparency and helps us to more effectively partner with our supplier to reduce their emissions. Now we are making this data an explicit part of our procurement processes, including in our buying decisions.”
Getting real with carbon accounting
One facet of this totting up process that Microsoft are clear that need improving is what they call carbon math. It is recognised that the current methods used for carbon accounting are ambiguous and too discretionary, and to ensure that progress reported on an accounting statement is truly progress in the real world, clear protocols are essential.
“Our experience this year has given us greater conviction that the foundation for almost all progress is the combination of accurate standards, real economic incentives, and effective technology-based measurements,” Smith continues. “We think that it is a powerful mix that can accelerate progress around the world.”
Removing carbon from the environment
One of the most dramatic actions this past year has been the work to remove carbon from the environment. In its report, Microsoft announced that they have now purchased the removal of 1.3 million metric tons of carbon from 15 suppliers across 26 projects around the world.
“This is both a giant leap and a modest step,” Smith says. “On the one hand, we believe this is the largest annual carbon removal purchase any company has ever made. It is creating a new and dynamic economic market that the world needs. But compared to what we need to accomplish by 2030, it is only an initial step. Using our moonshot analogy, I think of it this way – if our goal is to get to the moon by the end of this decade, this is the equivalent of sending an astronaut into orbit around the earth. It puts us on the right path, but we have a long journey ahead.”
These purchases come from a Request for Proposals (RFP) that was published in July, with the goal of removing one million metric tons of carbon. Microsoft received proposals from 189 projects from 79 applicants in more than 40 countries, including proposals for 55 million metric tons of carbon removal this year. “In partnership with our third party technical and scientific experts, Carbon Direct and Winrock International, we reviewed all these bids,” Smith explains. “We sought to be clear eyed about the durability and risk of each removal proposal. In other words, for how long would carbon be removed? How much of the removal would have happened without the project? And what were the risks of leakage by shifting emissions to another area?
“This process helped us create a carbon removal portfolio that meets our needs today and bets on future technologies. Even more important, this has helped us assess a variety of strengths and weaknesses that will benefit from shared and continuous learning around the world.”
The good and the bad
For the strengths, Smith highlights some key principles that worked for them this past year. This includes a commitment to combine carbon reduction with carbon removal, so the second does not become an excuse to avoid the first. In addition, it is imperative that Microsoft move away from paying for carbon avoidance and focus on paying for carbon removal. Carbon avoidance may involve paying someone to not emit carbon on your behalf, while carbon removal involves paying someone to remove carbon on your behalf. “Of course, the carbon crisis at times requires that we avoid taking new steps that would emit additional carbon,” Smith says. “But paying someone not to emit carbon is literally paying someone to do nothing. And we know we will not solve the climate crisis by doing nothing. We need to do something, and it needs to be big.”
Despite the impressive steps the company has made, Smith is also keen to point out the weaknesses in their efforts, which he says are also big. “There is no real existing carbon removal ecosystem, and the world must build a new market on an unprecedented scale and timeline, from nearly scratch,” he explains. “This will be incredibly hard, requiring integrity, public-private coordination, and heavy investment simultaneously.
“We are hopeful that our RFP will contribute to something that is much bigger than ourselves. Our early sense is that the world is not just ready, but anxious to create this new market. That is why we are making all 189 carbon removal proposals publicly available, except for proprietary information. We are also sharing our learnings about what worked and what did not so that others can accelerate their own carbon removal.
“There is a second big weakness in our initial work as well. Reflecting the state of the market today and our immediate need for carbon removal, nearly all the carbon removal solutions we are purchasing are short-term and nature based. The small remainder come from medium-term blended or big bets on long-term technology solutions.
“If we look at this work through our moonshot analogy, this is not the rocket that will take us to the moon. The world needs to invent substantially stronger technology-based solutions than are available today. That is why we established our $1 billion Climate Innovation Fund, which is now investing in new technologies like direct air capture. And it is why the world will need many more investments from across the philanthropic, private, and public sectors. We are encouraged by the broadening investments in this space and the public leadership of the European Union, the United States, and other governments. Much more will need to follow.”
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