As retailers expand their sustainability initiatives, either from a sense of purpose or consumer pressure — or both — the companies that enable more sustainable business operations are also growing. Climate Neutral, which certifies companies that offset their carbon emissions on an annual basis, is ringing in its biggest class in the company's three-year history.
The new cohort includes 12 different industries, and 52 fashion and apparel brands, including Allbirds, Reformation and Ministry of Supply.
Austin Whitman, CEO of Climate Neutral, said the company will certify 330 companies this year (all will be completed by the end of June, but closer to 230 are certified as of Thursday). That's 120% more than in 2020, when the company certified 150 brands. When Climate Neutral first started in 2019, just four brands were certified.
Like many companies that are working to make retail a more environmentally friendly industry, Whitman's goal is to make the process as accessible as possible for companies.
"That's the only way we're going to really get to scale impact, if we make it something that every company can do," Whitman said.
As a result, Climate Neutral built its own software for companies to track their carbon emissions through using operational data that includes everything from the electricity used in the office to the miles traveled on business trips to the production process and how far packages travel before reaching a customer.
Using the Greenhouse Gas Protocol, which breaks down emissions into different categories, Climate Neutral's software has companies collect data on each category, which then generates the company's carbon footprint. Once they've offset that total, they are officially certified as climate neutral for the year.
But the conversation doesn't end there. Companies have to provide a reduction action plan to Climate Neutral outlining what steps they're going to take in the next one to two years to reduce carbon emissions. And Whitman follows up.
"We ask companies to identify those plans and then identify owners of those plans, and then report back to us the next time they certify as to how those plans are going," he said.
Reducing emissions can mean putting anti-travel policies in place or making products from recycled materials or using renewable energy for electricity. Climate Neutral also highlights for companies areas where they could reduce their emissions and gives them some ideas about how to do that.
It's one way to try and standardize how retailers are tackling carbon emissions, and to Whitman, it only makes sense to have one standard. If Climate Neutral can become the trusted consumer standard on carbon emissions, then consumers can begin to understand what it means to be Climate Neutral Certified and make purchasing decisions accordingly.
"Our goal is to, number one, be there present at the point of a purchase decision so that consumers start to understand that … there are carbon emissions tied to everything that you purchase, whether it's a soda or a cup to drink soda out of or a pair of shoes to wear while you're walking down the street drinking the soda," Whitman said. Then, the goal is to get customers to shift their purchasing habits and start buying products that have the Climate Neutral Certified label over those that don't.
Importantly, it also puts a firmer framework around carbon emissions than when companies are tackling the issue by themselves. Long term, Whitman wants the certification to be a basic expectation of all companies. Some environmental certifications have gained considerable clout with the public over the years, including the B Corp Certification, which many consumers now recognize as a sign of a more sustainable company.
Brands like Allbirds and Athleta are baking in those certifications to their businesses from the beginning. In one way, that's good, because it means sustainability considerations are a part of growth from the beginning. But growth is also antithetical to decreasing carbon emissions, so young companies scaling quickly will struggle to decrease their carbon footprint. They can still offset their carbon emissions, but decreasing them is near-impossible to do while growing at a significant clip.
The overarching goal of Climate Neutral is to help companies lower their overall carbon emissions over time, in addition to offsetting their carbon emissions each year. When retailers set their own rules on measurement, though, it becomes more difficult for consumers to understand what kind of action is meaningful, according to Whitman.
"I think there's two things that can be really problematic. One is that companies focus on things that are insignificant, but they make a lot of buzz about them," Whitman said, which becomes a challenge for all but the most informed consumers. "By writing your own rules, you choose what to emphasize, and consumers have a hard time evaluating whether that claim is meaningful or not. The second thing is that voluntary action can be less durable. And so by that I mean, a company or a retailer can decide to do something one year because it feels like it's consistent with where the market is going, but then the next year back down from it because it's inconvenient, or it's too expensive."
Large retailers in particular are generally not as willing to commit to the same type of carbon emissions goals that smaller ones are, according to Whitman, either because there isn't enough consumer pressure on those retailers or simply because reducing emissions is a choice, not a must. Indeed, the companies Climate Neutral has passed through the certification process this year account for a total of over $4 billion in revenue, which while significant, is nowhere near the amount that some retail giants make annually.
There are a host of other issues retailers must tackle as well, including water scarcity and quality, but they "pale in comparison" to the current emissions landscape, Whitman said.
Retailers setting their own goals on carbon emissions also leads to a wide variety of plans and end-dates for those plans. For example, Patagonia announced in 2019 that it would make its supply chain carbon neutral by 2025, while 43 brands, including Gap and H&M, in 2018 signed on to a charter to reach net zero emissions by 2050. Whitman is particularly concerned about companies that make carbon emissions goals with long, 10-year or 20-year timeframes attached to them.
"Any given company or retailer is going to be on its eighth CEO by that point," Whitman said, adding that it's important to have retailers on the same, or similar, reduction timelines. "We are so far from where we need to be in terms of reduction and carbon abatement that there's really no room for companies deciding that they're going to count a tenth of their footprint and they're going to plan by 2050 to reduce that or to decrease it to zero."
While retailers are largely governing themselves on issues like this, and some are relying on certification firms like Climate Neutral to push them further in the right direction, those actions can only go so far. Some progress, according to Whitman, will not be possible without further government regulations.
"It's a massive benefit to any company to be able to emit without having to count it and without having to pay for it," Whitman said. "And that needs to stop."