“So the question now is whether we will have the courage to act before it’s too late. And how we answer will have a profound impact on the world that we leave behind not just to you, but to your children and to your grandchildren. As a President, as a father, and as an American, I’m here to say we need to act.”

This post is about taking stock of carbon footprint of things big and small – countries, cities, industrial sectors, firms, products, and supply chains. Through an interactive visual, you can get a sense of carbon footprints of things big or small.

Enjoy!

Since the 1750s, atmospheric concentrations of carbon dioxide have risen from about 280 parts per million and recently crossed the 400 parts per million (ppm) barrier. Green House Gas (GHG) emissions have led to a 0.6 degree Celsius increase in the global average surface temperature since 1900. If the current trends in emissions continue, the Intergovernmental Panel on Climate Change (IPCC) estimates that global temperatures will rise a further 1.4 degrees to 5.8 degrees Celsius by 2100. Scientists agree that such increases will have disastrous effects – disrupting ecosystems (about 30% of plant and animal species will face extinction); increasing and intensifying environmental and climate disasters; endangering the world’s food supply; and causing widespread health issues. The consequences will negatively impact a large portion of the world’s population, especially in impoverished countries.

Yes, it is time to act.

There is widespread agreement today to keep the global average temperature from increasing by more than two degrees Celsius above pre-industrial levels. Scientists estimate that total emissions going forward should not exceed 565 billion tons by mid-century. The total GHG emissions in 2012 were in the order of 31.6 billion tons, and trends indicate that global emissions are increasing by about three percent every year. At this rate, it will take just over 15 years to hit the 565 billion ton number. Reversing this alarming trend will involve concerted carbon management efforts at all levels – countries, cities, local governments, corporations and individuals. My intent is to give you a visual journey of the carbon footprints of various entities – from countries and cities to products and their component parts. Following the adage of “what gets measured gets managed,” carbon footprints can help identify hotspots where action can be taken to mitigate emissions.

Footprint of Countries and Cities

A “carbon footprint” of an entity – a country, city, event, firm, product or service – is the total amount of greenhouse gas emissions (GHG) it produces. Greenhouse gases other than carbon dioxide (CO₂), such as methane, nitrous oxide, sulfur hexafluoride and others are converted to their “CO₂ equivalent” (CO₂e) weight so that a single number can represent the environmental impact of the product.

The accompanying visual (see the “Countries & Cites” tab) shows the footprint of the 20 largest GHG emitting countries in 2012. The Kyoto protocol, signed in 1990 under the “common but differentiated responsibility” principle, set binding targets for 37 industrialized countries (also called “Annex I”) for reducing GHG emissions by the end of 2012. The United States did not ratify the Kyoto protocol. China, India and Brazil – as developing economies – were exempt from emission reduction targets. Attempts to extend the Kyoto treaty beyond 2012 have thus far failed. However, in 2009, the Copenhagen Accord endorsed “the scientific view that the increase in global temperature should be below two degrees Celsius” and that Annex I countries will “commit to economy-wide emissions targets for 2020.” The Accord also recognized that developing nations would have to “implement mitigation actions,” report their emissions and subject these to verification.

Although not legally binding, several countries have proposed reduction targets in connection with the Copenhagen Accord. Compared to 1990 levels, the EU has proposed a target reduction of 20-30%, Japan by 25%, and Russia by 15-25%. President Obama’s plan proposes a 17% cut by 2020 compared to 2005 levels. China has proposed a cut of 40-45%; and India a cut of 20-25% on emission intensity (GHG per unit of GDP) by 2020 compared to 2005 levels. China and India’s measures do not ensure a reduction in absolute emissions – only that emissions will grow slower than GDP growth.

Cities, as the hub of social and economic activity, are both significant contributors of GHG emissions and highly vulnerable to climate change. City governments oversee infrastructure, host and promote businesses and provide services for their citizens.

Cities have a major role to play in GHG mitigation. First, city governments and services can have a substantial carbon footprint. For example, New York City government operations account for 3.47 million metric tons of CO₂e annually. Tokyo’s city government emissions are 2.06 million metric tons annually. Using renewable energy, expanding and improving the efficiency of public transport, retrofitting public buildings and street lighting, managing waste streams and increasing green spaces all reduce the footprint and enable a better quality of life. Second, cities have a significant impact on how their citizens live and how corporations conduct business. Engaging citizens and businesses through incentives and joint partnerships will galvanize cities to become climate neutral. Portland and Seattle (US), Toronto (Canada) and Yokohama (Japan) have targeted an 80% decrease in CO₂e emissions by 2050 over 1990 levels. Rotterdam (Netherlands) has pledged a cut in emissions by 50% and London (UK) has proposed a cut of 60% in emissions by 2025 over 1990 levels.

more after the graphic…

Industrial sector, Firm, and Product Footprints

Businesses are responsible for 20-25% of the world’s GHG emissions.  Their emissions are a result of their production processes and facilities, the resources they consume, extraction and processing of relevant raw materials in supplier operations and the impact of their product or service on their customers.

Firms are increasingly accessing the risk and opportunities of climate change and integrating it into the overall business strategy. In the latest survey by the non-profit Carbon Disclosure Project of the top 500 global firms, 48% said that they integrate risks and opportunities of climate change into their planning and 65% of them indicated that they had GHG emission mitigation targets. The major reasons for reducing GHG emissions include the increased ability to market new low-carbon products, compliance to existing and anticipated laws, and to increase efficiency while reducing disruptions in the supply chain.

There are multiple standards available to companies for accounting their GHG emissions. The Greenhouse Gas Protocol (GHG Protocol), developed in partnership with the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), is the most widely used standard. It provides businesses a consistent, and verifiable way to account for their GHG emissions. The GHG Protocol specifies three types of emissions called “scopes.” Scope 1 emissions are a result of all company operations – production processes, waste streams, facilities, and employees. Scope 2 is emissions from purchased electricity, and Scope 3 is emissions associated with the supply chain. This includes related emissions from suppliers who handle product components; and the emissions from downstream distribution, use, and end-of-life management of the product/service.

The scope information gives an insight into appropriate strategies to reduce emissions. Scope 3, not surprisingly, for the Energy sector (see the “Industrial Sectors” tab) is almost an order of magnitude larger than the sum of scope 1 and scope 2. While Oil & Gas exploration, drilling, refining, transportation, and storage are responsible for large GHG emissions, the use of oil & gas by other industrial sectors, residences, automobiles, trains, and planes are responsible for most of the emissions in this sector. The solution to reduce emissions in this industry is obviously complex – a national energy policy (President Obama’s policy will move away from coal towards natural gas and this will no doubt help reduce GHGs), fuel efficiency standards, urban planning and transportation all have important roles to play in addition to the firms in the sector.

Firm Snapshot: Apple Inc.

Apple Inc. designs, manufactures and sells a wide range of electronic devices, software, services, and third-party digital content and applications via its retail, iTunes, and App stores.

To manufacture its electronics devices, Apple sources components from all over the world, subcontracts production and assembly primarily in Asia, and sells in its own retail outlets in addition to several over distribution channels (See my post on the Apple iPhone 4 Supply Chain). The “Company” tab shows the scope 1, 2, and 3 breakdown for Apple. Scope1 and 2 are primarily from its facilities. Scope 3 emissions, meanwhile, is more than 50 times the sum of the scope 1 and 2 combined. This includes among others, the emissions from supplier operations, production, transportation, product use, and recycling. The two biggest sources of emissions are production and product use.

Apple’s GHG reductions in production includes reducing material use in devices and in packaging, elimination of certain hazardous materials, and designing the product with appropriate materials such as Aluminum and glass so they can be recycled at end of life. The design also involves energy efficient components and it’s monitoring via software so the emissions during product use are reduced. Apple has increased its reliance on renewable energy by 200% since 2005 and is using 100% renewable energy in its Elk Grove, Cork, and Austin facilities, reducing its Scope 1 & 2 emissions.

 The CO₂e emissions of a product or service include activities throughout its life cycle, right from extraction and processing of raw materials, production and use to end-of-life. The “Products” tabs shows the CO₂e of some common products and services.

 The standard process to compute the footprint of a product is to map the supply chain, identify key activities in the product life cycle and compute emissions. This analysis will identify carbon “hotspots” in the supply chain so that appropriate actions can be taken to reduce emissions in those activities. The iPhone5 for example (see the “Product breakdown” tab) 76% of the 75 kg of CO₂e emissions are from its production, 18% from customer use; 4% from transportation, and 2% from recycling. No surprise that production is such a large part – Apple’s complex and global network of suppliers and assemblers contribute to it. To reduce the impact will take product redesign, engaging suppliers and customers, increasing efficiencies of processes, use of renewable energy and reclaiming products after use to create raw material.

 Final Thoughts

The IPCC reports that to stabilize carbon dioxide levels between 445 and 490 ppm, emissions would need to peak around 2015, along with a 50% to 85% reduction on 2000 levels by 2050. While the current trajectory of public policy and organizational response to sustainable development is encouraging, it falls well short of the reductions recommended to maintain CO₂ concentrations in the 445-490 ppm range, leaving much of humankind susceptible to the risks of climate change. Hopefully, we, as nations, local and city governments, companies and consumers of products and services, can redouble our efforts to significantly reduce our footprints. This effort needs to be focused on how we generate and use energy, increase the efficiency – both ecological and economic – of our industrial and agricultural processes, and finally, how we “close the loop” or conserve and reuse natural resources in supply chains.

Yes, it is time to act.

Malcolm Hegeman contributed to this post and to the development of the visual.

Notes:

 1. This post is an excerpt from my book: Sustainable Supply Chains (Springer)

2. Data Sources:

a) GHG total for countries and per-capita emissions: Climate Analysis Indicators Tool (CAIT) Version 8.0. (Washington, DC:  World Resources Institute, 2011). Can be freely downloaded from: CAIT

b) Cities emission data is available from the Carbon Disclosure Project: CDP Cities

c) Data for the footprints of industrial sectors were collated from the Carbon Disclosure Project: CDP Investor Program

d) Product and supply chain data are self-reported by those companies. Details are available from me.

He talks about how JantaKhoj got started, challenges he faces, and his typical workday.

In addition to his CEO role, Tarun also manages product management, marketing and sales. Prior to founding JantaKhoj, Tarun has worked in various leadership roles in software development, consulting, product management, sales, and marketing. Tarun has PGDM/MBA from Indian Institute of Management Calcutta and B.Tech from IIT-BHU Varanasi.

Q: How did JantaKhoj get started? What is your value proposition to your clients?

In early 2009, I had just quit my earlier job as Vice President of Sales & Marketing at netXccel and was debating whether I should reenter the job market or try my hand at entrepreneurship. I connected with Ajit Gupta, a serial entrepreneur and ex-CEO of Speedera, where I had been a product manager. We looked at various business ideas and eventually narrowed down on people search and background verifications portal. This was an underserved area in India and we thought we can create something new and exciting. We did further market analysis and eventually incubated the start-up in June 2009, after expanding the team with Head-Engineering and Head-Verifications.

We provide the first and the largest people search portal on Indians, covering more than 500 million individuals, that is around 40% of the entire Indian population. Additionally, we aim to provide more detailed background checks, using online and offline approaches, to individuals and businesses, at a reasonable price.

Q: What are the major challenges of verifying someone’s identity and background in India?

The biggest challenge historically has been the lack of centralized databases for identity and background checks. The ambitious, Aadhar Project (National UID Project of India) which is already in the roll-out stage, aims to provide a comprehensive one stop shop for verifying identity. There are two more projects (Home ministry sponsored Crime and Criminal Tracking Network & Systems and Education ministry led National Academic Depository) which aim to create nationwide centralized databases for all police records and education certificates respectively. Till the time, these initiatives are fully rolled out, we have to rely on physical trips to police offices and universities to check the records. Additionally, address checks will still require a physical trip. Employment and reference checks still need to be done through phone, email or a site visit.

Q: What are the operational challenges of physical lookups? Do you need contract workers all over India that do it for you? Do you have multiple layers of verification?

The sheer size of India presents great operational challenges in physical lookups. It is economically unviable for a single entity to have its own workers all over the country. So we have a set of trusted vendors who help us in expanding our physical reach. We do not have multiple layers of verification as such, but periodically we do audits and counter-checks to ensure that the quality and reliability of checks remains impeccable.

Q: How is being an entrepreneur in India different from the US where you have worked before?

This will not be a fair comparison as when I was in US, I was working as an employee with H1-B visa in a consulting firm. So my options were somewhat limited and also at that point of time, even though earlier I had done my MBA from IIM Calcutta, I still had very little marketing and sales experience. After the US stint, I joined Speedera Networks as a product manager in their Bangalore center and continued working in the area of marketing even after Akamai acquired Speedera. This gave me a deep understanding of marketing, pre-sales, customer interactions and Internet based industries. And over these years, India has continued to emerge as a great opportunity for first time entrepreneurs like me. More and more folks are now considering entrepreneurship as a calling and these are indeed very exciting times!

Q: Any words of advice for budding entrepreneurs in India?

Being a first time entrepreneur, I think I cannot hand out any ‘advice’ to budding entrepreneurs as I myself am learning every day. A few points for consideration would be:

• Ensure that you have some financial cover personally. You may not see salary or surplus cash for quite some time!
• Don’t be afraid. Take the jump. The journey is worth it irrespective of eventual success or failure. Either way, you will learn infinitely more than in a regular job.
• Validate your business ideas sooner than later. Learn fast from market. Change course faster.
• Try to hit positive cash flow as soon as possible. In fact, one of the strategic advisors of JantaKhoj went to the extent of recommending being cash flow positive right from Day 1 of the business (unfortunately, we were not able to meet his advice)!

A day in the life:

6:30 –  My four and a half year old son is our ‘natural’ alarm clock. The day begins when he moves in to our bedroom in the morning and shares a few minutes of cuddling with me and my wife. As I help in getting him ready for the school, I quickly check the emails and messages on my smartphone. Online order confirmation emails are always a pleasure to see right in the morning. I also keep an eye on any customer service related emails which I need to escalate to either engineering or customer service team members.

7:30 – After having my son board his school bus, I am out for around one hour of morning exercise (outdoor brisk walking or swimming on alternate days). Invariably my thoughts meander around various aspects of the business – how is the working capital situation, how is the website traffic doing, how to close a particularly large B2B deal, is the PPC campaign really holding up well, is the Facebook presence helping with B2B prospects too?

9:45 – I drive over and reach my office. A few of the team members are already in. If there is any significant update, they will share it immediately with me. But on most days, I settle down and update/review the task list for the day. Next I review the emails in detail and try to respond to them or forward them to suitable owners with team. I do some other quick and regular checks – Google Analytics for website traffic stats, AdWords campaigns progress, AdSense earnings, our Facebook page, company’s Twitter account, CRM dashboard for any alerts/reminders. More importantly, I check the offline chat messages which may have come in overnight and either respond to them myself or forward to the suitable owner within team. I try to close the most important tasks/action items in the pre-lunch part of the day. While I cannot fully control the time for customer meetings, still to the extent possible, I try to schedule them in the first half of the day – the earlier slots work best.

1:00 – I prefer to take packed lunch from home as it turns out to be more healthy and time-saving. I have my lunch with my core team and more often than not, we continue discussing and brainstorming over lunch. Post lunch, I may take a stroll to our bank branch to submit customer payment cheques or any other required paperwork.

2:00 – I review the various marketing campaigns and B2B sales pipeline. Every couple of days, I have one-on-one discussions with my sales team members to do a pipeline and leads review, and to see what we can do to accelerate these deals further.

4:00 – I may have a discussion with the engineering team to see how our new initiatives and existing upgrades are going on. Else I may keep on working on customer service issues and interacting with Verifications team to check the status of various verification cases.

6:30 – I head back home. After changing and settling down, I spend some time catching up with my wife and with my son, either watching/helping him draw or just watching cartoons on TV.

7:30 – We generally have an early dinner, after which I clean up and load the dishwasher. I then put my son to bed at around 8:30 while reading a story (or occasionally a ‘story-a-thon’ if we have extra time!)

9:00 – My wife and I go out for a brief stroll in which we exchange detailed daily notes and other interesting news items from work or otherwise. We watch the TV for some time.

10:00 – Quite often, I come back to my laptop for a final daily summary session – evaluating how the day went off for JantaKhoj, what we can do better tomorrow. Occasionally, I use this slot to do further web-based research on specific topics, markets, competitors.

About JantaKhoj

JantaKhoj (translates to “people search” in Hindi) provides the first and the largest people search portal in India, offering people search and background check services to businesses and individuals.

Its tagline, ‘Search People, Research Background’, precisely describes its areas of service. JantaKhoj provides employee background verification services that enable businesses to verify credentials including address, references, education, employment and criminal history. JantaKhoj also enables people to conduct matrimonial, tenant, driver and domestic help verification among others.

How much does it cost the world’s major airlines to fly a passenger a mile? How much money do they make from that passenger? How full are their planes? Read on…

A little primer on airline economics.

Available Seat Miles (ASM): It is simply the number of seats multiplied by the distance they travel. So in a sense this is the capacity of the airline. The ASM on Southwest’s 137-seat Boeing 737 aircraft from Baltimore (BWI) to LaGuardia (LGA) – a 185-mile distance – is 137 x 185  = 25,345 seat-miles.

Revenue Passenger Miles (RPM): It is the number of passengers multiplied by the distance. For the BWI-LGA leg above if 100 people traveled on the leg, then the RPM for the flight is 100 x 185 = 18,500 passenger miles.

Load Factor: It is the ratio of RPM to ASM – on average tells you how “full” the planes are. For the BWI-LGA leg example above, the load factor is 18,500/25,345 = 72.9%.

Airlines typically report these operating numbers on a yearly basis. Southwest in 2009 had a capacity of 98,001.55 million seat-miles and a RPM of 74,456.71 million passenger miles, yielding a load factor of 76%.

The following graphic plots the profit/loss of the airline against the load-factor (See Note 1).  Its interactive – mouse over/click on the graph to learn more.

…more text after the graphic

Surprise! Surprise! Seems like airlines are equally likely to make a profit or a loss even if they are flying with high load factors. One way to think about this is to compute the cost and revenue of moving a seat a mile. The Cost per ASM (CASM) is simply the operating costs divided by the total ASM. Total Revenue per ASM (TRASM or RASM) is the revenue of moving a seat a mile – the total revenue divided by the total ASM. If TRASM is greater than CASM, the airline is making money moving a seat a mile. The graphic above also shows the TRASM and CASM of some of the major airlines in the world. “The Gap” is the difference between the TRASM and the CASM. If it is negative, the airline is making a loss.

Filling the gap

For a given route network, increasing revenue comes down to increasing RPM (or load factor) and increasing “passenger yield” or the revenue per RPM (See Note 2). Easier said than done – it involves the difficult task of managing the complex relationship between price, demand, capacity (ASM), and customer ticket-buying behavior. For example, on the BWI-LGA flight, the lowest price  (three weeks out) I could find on Southwest 5015 was a “Wanna Get Away” fare of $64, or about 34.59 cents to a mile. Southwest spends 10.29 cents a mile to move a seat so they are making 24.30 cents a mile even on a passenger paying the lowest fare. Even if everybody on the plane paid $64, they only have to fill a third of the plane to breakeven.  With many of its passengers paying the $178 “Anytime” fare and the $193 “Business Select” fare, an average 76% full flight is doing very well.

On the other hand, the cheapest fare on Southwest 3701 from Providence (PVD) to Las Vegas (LAV), a distance of 2363 miles, was $169 or 7.15 cents a mile. Southwest is actually losing 3.13 cents on each mile this passenger travels.  Even on a full flight, Southwest needs one in three passengers to pay the  $469 “Anytime” fare or the $493 “Business Select” fare just to breakeven. So managing yield is a delicate dance between passenger demand, how much passengers are paying, how far they are travelling, and how full the aircraft is.

The other side of the profit equation is cost containment. The airline business has high fixed costs – you have to lease planes, secure landing rights, pay the crew, etc. Revenue is generated only when planes are in the air so the strategy to reduce the cost per seat mile is to run a “lean” and efficient airline without compromising service or safety. Allegiant Air’s cheap but profitable strategy is to run infrequent flights from small towns to big tourist destinations in easy to maintain MD-80 aircraft. Southwest’s quick turnaround times – as much as 30 minutes faster than other airlines –saves them from leasing extra planes (See Note 3). We have all seen the self-check kiosks, vanishing leg-room (=more seats), and the lack of food service even on certain long-haul flights — all trying to bring down CASM.

Next time you fly, find out how much you are paying per mile and compare it how much it costs the airline to fly you a mile to see if you have got yourself a deal. My $100 flight from BWI-LGA was not much of a deal was it? That $169 fare on Southwest 3701 – a killer deal, I’d say.

Contact: Ram Ganeshan via ram.ganeshan[at]mason.wm.edu or @RamGaneshan on Twitter

Shoumya Pradhan contributed to research for this post.

Notes:

1. Data Sources: Company 10K, 20F, Annual reports; BTS; World Airline Report. Data is from 2009.

2. In addition to increasing traffic (RPM) and managing yield, there are other – often maligned — revenue streams called “ancillary fees” like change of reservation or baggage fees (Delta raked in $681 million in fees just in the 2^nd Quarter of 2010!) that will increase the revenue per passenger on any flight.

3. In 2009, Southwest had 2546 turnarounds everyday. 30 minutes saved on one of them is 1723 hours of extra flight time per day compared to other “legacy” airlines. Means fewer planes, more money.