Last week, a few of us drove to Indy to attend an event hosted by the Indiana Sustainability Alliance. The speaker was Mike Molnar, Director of Sustainability for Cummins Diesel Engine company, and he spoke about his company’s recent commitment to sustainability and massive effort to reduce their carbon footprint.
It was interesting to see some of the business logic that would propel a global industrial corporation to embrace environmentalism. I think there are 3 important factors at work:
- First, Cummins is primarily acting in anticipation of future carbon tax or cap legislation, whch explains why the program is almost entirely focused on greenhouse gas reductions.
- Second, the company is leveraging public concern about climate change to improve their brand image. This is supported by public carbon diclosure programs which allow Cummins to advertise their environmental responsibility relative to competitors.
- Finally, by focusing especially on reducing electricity use, Cummins is able to see a huge return on investment. Roughly, the company invested $11 million up front and is now seeing $7 million savings in energy costs annually.
Overall, it is really encouraging to see such progressive action from the private sector. One point, however, stuck out as impetus for critical discussion. Cummins’ massive effort resulted in a 20-30% reduction in carbon intensitiy, measured as emissions divided by dollars of revenue. However, because the company’s business was growing so rapidly during this time, the absolute reduction was only about 2%. In order to address climate change, we need to significantly reduce total emissions below current levels. How can this be achieved in an economy that is constantly growing?
