Forests

While one study suggested that planting half a trillion trees could draw down a quarter of the world’s carbon, monoculture tree plantations aren’t the answer. Protecting existing forests, combined with rewilding, may be the ticket. A 2020 study said rewilding 15% of farmland could sequester 299 gigatonnes of CO2 per year.

Soil

Many studies estimate that the wold’s croplands could sequester four to five gigatonnes of carbon per year. Others say more realistic estimates are a fraction of a gigatonne each year. Researchers are working to find ways to measure this at scale, as soil can vary dramatically, even from one part of a farm to another.

Bunkers

Researchers say captured CO2 can be stored underground, in oil and gas reservoirs, un-minable coal seams and geological formations (including Albertan caves). The U.S. Geological Survey estimates the United States could store approximately 3,000 gigatonnes of carbon dioxide this way.

Cement

Cement is responsible for 8% of global carbon emissions, but the building material isn’t something we can transition away from. Researchers estimate we can sequester 0.1 to 0.4 gigatonnes of CO2 from the sector by 2050, but so far carbon-capturing cement technologies provide limited gains.

Plastic

Up to 8% of global oil supplies go to making plastic. Can we swap that out with captured CO2? A handful of companies are piloting “low-carbon plastics,” such as polyurethane foams made of 20% CO2. Critics caution against injecting CO2 into single-use plastics mostly destined for landfill.

Consumer products

A growing number of consumer goods are using recycled carbon. One vodka brand claims to convert a pound of air-derived CO2 into pure ethanol. Unilever is piloting laundry pods made with sudsing surfactants partly derived from CO2 captured from a factory. Scaling potential: to be determined.

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In a closed-door meeting between Chevron CEO Mike Wirth and U.S. Secretary of Energy Jennifer Granholm in late June, reported by Bloomberg, both agreed that the shortage in refining capacity will persist and probably get even worse, as the country saw at least five refineries close in 2021 alone. These included a Shell facility in Louisiana and others in California, North Dakota, Wyoming and New Mexico. Analysts blame pandemic market conditions for the closures, as lockdowns slowed demand for oil, but also the energy transition, as some energy companies look to decarbonize their portfolios.  

“My personal view is there will never be another new refinery built” on U.S. soil, said Wirth. “You’re looking at committing capital 10 years out, that will need decades to offer a return for shareholders, in a policy environment where governments around the world are saying, ‘We don’t want these products.’” 

Even the so-called energy capital of the world, Houston, lost a refinery recently. LyondellBasell Industries announced in April it will shut down its refinery in Houston by the end of 2023 and leave the refining business altogether as part of a decarbonization strategy. The chemical company made the decision after unsuccessfully trying to sell the refinery, which will now become the latest in a rash of American refineries that have shut their doors over the last two years.  

“While this was a difficult decision, our exit of the refining business advances the company’s decarbonization goals, and the site’s prime location gives us more options for advancing our future strategic objectives, including circularity,” said Ken Lane, interim CEO of LyondellBasell, in a statement. 

Green transition advocates have been calling for the closure of fossil fuel infrastructure. But the majority of dirty assets being sold off are continuing to operate, only under different ownership. 

A report published by the Environmental Defense Fund (EDF) in May found that many oil majors with net-zero commitments are selling off dirty assets to buyers who don’t have decarbonization commitments. Over the last five years, 155 such deals, worth US$86.4 billion, have moved fossil fuel assets away from net-zero-aligned companies.  

“These transactions can make it look as though sellers have cut emissions, when in fact pollution is simply being shifted to companies with lower standards,” said EDF’s Andrew Baxter. 

Some think there might also be life yet for LyondellBasell’s Houston facility, which refines 268,000 barrels of crude oil into transportation fuels and other products every day. John Auers, executive vice-president of Dallas-based Turner, Mason & Co, told Reuters that the refinery could still sell and that he expects “there will definitely be people knocking on the door” to buy it and keep it open.  

In the meantime, chalk one up for decarbonization.  

A version of this story appeared in the summer issue of Corporate Knights magazine.

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The satellites using this technology won’t be offering pretty pictures; they’ll be doing chemistry, analyzing spectral fingerprints, and telling oil and gas investors where all the leaking methane is coming from. And their data is getting snatched up by firms that analyze the environmental credibility of corporations.

Raw, unstructured satellite data has become an essential tool for investors in the oil and gas sector. Energy companies have a reputation for poor disclosure on their emissions of methane, the number-one anthropogenic heat-trapping greenhouse gas. A recent International Energy Agency report found that methane emissions from the energy sector are 70% higher than the official figures being reported.

Investors increasingly equate poor ESG (environmental, social and governance) performance with material financial risk. Trillions of dollars are now aligning with ESG, which means that tracking corporate adherence to ESG principles has become big business – and large investment firms are increasingly using satellite data to inform their analytics.

Big asset management firms like BlackRock, State Street and Vanguard have internal analytic teams but also purchase data sets from analytics firms such as MSCI, Sustainalytics or Affinitiv, which are integrating satellite data into their corporate ratings.

“MSCI might buy that data from the satellite [data] company and then sell it on to State Street,” says Todd Cort, co-director of the Yale Center for Business and the Environment. “And then more and more frequently, MSCI will just buy the company itself because they’ve got good data investors want. We’ve actually been seeing that a lot lately – these data analytic firms buying up these satellite [data] companies and these social-media-scraping companies.” For example, in 2019, Moody’s bought California-based Four Twenty Seven.

Satellite data is such a hot commodity that investors are turning to it to solve all their transparency issues. And with increasing regulatory focus on methane emissions from the oil and gas industry, it’s no wonder satellite data products are evolving to accommodate this demand. A satellite data platform called MethaneScan, developed by start-up company Geofinancial Analytics, is now distributed by media conglomerate Bloomberg as part of the alternative data catalogue at Bloomberg Enterprise Access Point. And it is activist by design.

“[We] aim to drive rapid methane emissions reduction through satellite-enabled transparency and engagement,” says Mark Kriss, co-founder and CEO of Geofinancial, in an email. “[We] use empirical data and insights to enable major players in the capital, insurance and commodity markets to effectively engage with producers and incentivize rapid change.”

Much has changed in the last decade. In 2011, Montreal-based entrepreneur Stephane Germain founded a private satellite company called GHGSat and, in 2016, launched its demonstrator satellite, Claire. “We were just beginning to show how our demonstration satellite could detect emissions from space,” says Germain. “Today, we routinely detect emissions on a daily basis.” In May of this year, GHGSat launched three more methane-tracking satellites.

We know from over 10 years of doing field studies, every company that thinks they don’t have a [methane] problem does.

—Mark Brownstein, Environmental Defense Fund

Germain, too, says the “surge in ESG investing has driven significant interest from the financial services community.”

The New York–based non-profit Environmental Defense Fund (EDF) has spent more than a decade trying to measure and understand the methane over the Permian Basin, the world’s largest oil patch, in the southwestern United States. EDF research revealed that as much as three times more methane emissions have been identified than companies self-reported to the U.S. Environmental Protection Agency. To get a handle on emissions, the environmental group has used handheld devices, airborne spectrometers and NASA satellite data, which also had to be analyzed.

Now it’s launching its own satellite.

“We know from over 10 years of doing field studies, every company that thinks they don’t have a problem does. What’s been missing is the data to show,” EDF’s Mark Brownstein said in a 2021 interview. That led EDF to raise the US$88 million it would take to fund its own satellite project, MethaneSAT. The goal: “Making that data transparent to the public, to policy-makers, to their investors, to competitors,” Brownstein said. “Now everybody can see what’s going on out in the field.”

Cort has advised many companies on activist investor resolutions. “Those companies that are exposed by organizations like EDF, they get bad press … They get regulators breathing down their necks saying, ‘Why aren’t you dealing with your methane issues?’ They may not get as many permits or royalty holders signing up for their extraction activities.”

The most famous investor uses of satellites involve imagery that’s used to, say, count cars in Walmart parking lots or track shadows of Chinese oil tanks through Google Earth or web-geo platform Planet. A wide range of environmental groups also use visual imaging satellites: Global Forest Watch surveys forests for illegal logging; Global Fishing Watch surveys the open seas for illegal fishing. But methane satellites don’t provide visual imagery; they use spectroscopy.

Kelly Vaughn, spokesperson for non-profit Carbon Mapper (which runs a satellite program to track methane and CO2 emitters), explains that imaging spectroscopy “measures solar backscattered radiation, where methane and CO2 are known absorbers.” The rest is a lot of math work.

“For as much as people are focused on the hardware, the satellite, the sensor, what you get from the satellite is basically a set of ones and zeroes. And it’s a lot of data,” Brownstein said. “Equally important is the data science behind this.”

The California Air Resources Board is planning to use Carbon Mapper to strengthen and enforce its methane-reporting framework. When MethaneSAT and Carbon Mapper are up and running in 2023, that stream of continuous data should help rapidly advance greenhouse gas regulation and enforcement.

[We] aim to drive rapid methane emissions reduction through satellite-enabled transparency and engagement.

—Mark Kriss, co-founder and CEO of Geofinancial

Canada’s GHGSat will also be contributing its data sets, along with those of European satellites, to a global methane-monitoring clearing house called the International Methane Emissions Observatory (IMEO). As the world’s largest importer of oil and gas, the EU Commission created IMEO to gather the hard data on which to build its methane regulatory framework, which is currently further along than those of Canada and the United States.

EU demand for robust methane-emissions transparency is precisely the future investors are watching out for. And private companies like Geofinancial and GHGSat can best spur both non-profit and investor activism by providing crystal clarity in the data, unfogged by omissions. Even so, satellite-based climate activism is very much still in a nascent, unregulated stage.

“There are lots of loose ends that need to be tied up for successful activism with these data,” says Deborah Gordon, senior principal for the Climate Intelligence Program at RMI (previously the Rocky Mountain Institute). RMI has launched a platform specifically geared to facilitating reporting of oil and gas emissions data and related planning.

“What will regulators do when a super emitter is spotted?” says Gordon. “And what emissions level constitutes a super emitter?”

Regulation of greenhouse gases has been slow. In California, Carbon Mapper data will ease its way into an ongoing regulatory framework that has been in the making for more than 15 years. Investors have recently heard from financial regulators in Canada, the United States and the EU putting forth greenhouse gas disclosure proposals. But in the United States at least, the Securities and Exchange Commission’s proposed disclosure rule is expected to meet a lengthy trial by litigation.

“I think the lawsuits are already lining up,” Cort says.

With regulatory signals up in the air, conservative institutions aren’t approaching satellite data as actionable yet.

“Most companies are biding their time,” Gordon says. “But there is general interest.”

At a time when scientists are pinning hopes on reducing methane emissions as a Hail Mary pass to avert climate disaster, keeping an eye on elusive emissions is critical. As the activist investors of tomorrow turn to the skies, methane emissions will have nowhere to hide.

Marianne Messina is a freelance journalist focusing on sustainability and conservation issues, particularly where systems and remote technologies are involved.

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It’s not the purported $40 trillion of assets invested in environmental, social and governance strategies or that leading Republican candidates for the U.S. presidential nomination are railing against ESG as a left-wing Trojan horse, or even that the world’s richest man has taken to his favourite medium to tweet that ESG “is an outrageous scam.”

The most tell-tale sign that ESG has hit the big time is that ESG “data requirements and reporting standards” are keeping executives “up at night.”

Those are the words written last year by Stefan Hoops on his LinkedIn profile. Hoops was recently named CEO of DWS, Deutsche Bank’s majority-owned asset manager, which has just under $1 trillion in assets under management. Hoops knows what he’s talking about, as his predecessor was the first major CEO to be fired for greenwashing after DWS’s Frankfurt offices were raided by 50 German police and financial regulators this June in relation to an investigation into DWS’s potentially misleading claims about the ESG-friendliness of their investments.

Although ESG was a term cooked up by two friends of mine in 2004 (former tabloid journalist Paul Clements-Hunt and Australian punk rocker James Gifford), I have no idea what it means.

But there is something larger going on here. It is that we have reached an inflection point where a critical mass of people are now serious about having their investments respect their values. Most people value taking care of people and the planet that makes life possible.

Somehow, we slapped this technical ESG label and narrative on what is really just a base human sentiment for protecting life.

There was a reason for this. Back in the 2000s, when integrating extra-financial values into investments was a fringe activity, the thinking was that we needed to overcome the perception that investing for good would be bad for returns. By refocusing on ESG as a means for managing social and environmental issues to reduce risk and enhance returns, the financial-sacrifice bugaboo could be shed.

We have reached an inflection point where a critical mass of people are now serious about having their investments respect their values.

For a while, this was a beautiful thing for the burgeoning mostly well-intentioned ESG research shops that were already creating mountains of analytics out of molehills of data of highly variable quality and comparability, that mostly supported the “garbage in, garbage out” thesis. ESG risk scores enabled another layer of abstraction, further blurring accountability feedback loops.

None of this was much a problem for the trillion-dollar asset management industry. As long as they had some kind of score in the Excel sheet, they were good to go. This created some headscratchers. For example, S&P scored Exxon higher than Tesla. Sure, Exxon ticks more boxes on good governance along with detailed disclosure of operational metrics in comparison to the free-wheeling Tesla, but that is losing the plot of the real impact these companies have on people and the planet through their products, which should receive the lion’s share of weight in any reasonable analysis.

Fortunately, watchdogs and investors have started to cry foul when they realized there was no coherent answer to the question: how is my portfolio making the world a better place? This has attracted the regulators, and there are now detailed standards in place in Europe (and soon in North America) requiring that the fund industry clearly justify how their ESG products are avoiding harm and enhancing positive impact, which will necessarily trickle down to the company level.

This is heading toward a happy ending, but we are not there yet.

The first step is to be honest about our purpose. It’s not to manage risk or returns, but to help preserve our environment and keep our society thriving. This is not as heroic as it sounds.

For two decades, Corporate Knights sustainability ratings have placed zero emphasis on risk or return and 100% emphasis on companies’ impact on people and planet, and through the principle of obliquity, our flagship Global 100 Most Sustainable Companies Index has also financially outperformed all of the other global ESG indices. And the stock market performance of the Best 50 Corporate Citizens has outperformed its peers, earning 499% gross return since it was first launched in June 2002, versus 366% for S&P/TSX Composite.

This sounds like we are tooting our own horn, but sometimes that’s OK if it’s a tune whose time has come.

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The technology, known as direct air capture, has lately gathered steam as climate scientists warn that, without it, humanity stands little chance of limiting global warming to acceptable levels. In its latest report, the Intergovernmental Panel on Climate Change said that using carbon removal – which also includes measures such as planting trees or enriching the soil with minerals – will be “unavoidable” if the world wants to hit net-zero emissions.

Buoyed by those predictions, the industry has already gathered serious momentum. U.S. President Joe Biden’s infrastructure package allocated $3.5 billion for several direct-air-capture hubs last year, and plans are underway to build the first truly large-scale plant in the southwestern United States, which will eventually trap up to one million tonnes a year.

Private investors have also piled in: Climeworks, a Swiss company that is one of the burgeoning industry’s biggest players, bagged US$650 million in its latest round of fundraising. And corporations from tech giant Alphabet to payments company Stripe recently committed close to US$1 billion to buy removals from innovative start-ups in the space.

That is not to say direct air capture is without its critics. Some point out that the vast amounts of energy needed to draw heavily diluted carbon out of the air is better used elsewhere. Others fear that relying on so-called negative emissions technologies is merely giving high-emitting companies an excuse to keep on polluting, with catastrophic consequences for the climate.

Although it may sound high-tech, drawing carbon from the air is surprisingly straightforward in practice. At Climeworks’s flagship facility in Iceland, the largest in the world, stacks of giant fans suck in the ambient air; inside, it passes over a filter that collects the carbon dioxide, which is then released under high heat. (Other companies separate the carbon by passing air through chemical solutions instead.) Nearby, another plant run by the Icelandic company Carbfix mixes the concentrated carbon with water inside a group of pentagonal spheres that lend the site the eerie look of a space colony. The mixture is then pumped deep underground, where it reacts with basalt rock and turns solid within a few years.

That the plant sits in Iceland is no accident: the country has plenty of clean geothermal energy for the power-hungry process, as well as suitable geological storage to permanently sequester the carbon. Under those conditions, direct air capture can have a much higher impact than capturing emissions from factories or power plants, since it traps CO2 without releasing any emissions in the first place.

That promise and the potential to use the captured carbon for a range of low-carbon technologies – mixing it into cement or producing jet fuel and feedstocks for plastics, for example – has attracted big names from sectors that are notoriously hard to decarbonize. United Airlines has directly invested millions in the first large-scale project being built in the United States, which is being developed by Houston-headquartered oil firm Occidental and will partly use the captured carbon to make jet fuel. Other major companies from Shell to Apple also rely on carbon removal in their net-zero plans. And 18 of the 50 countries that have submitted long-term climate strategies to the UN specifically mention technological carbon removal.

One caveat to direct air capture’s climate potential is the type of energy used. Researchers have found that rapid, large-scale deployment of the technology could require up to a quarter of global energy demand by 2100, underscoring the need to use renewable energy or waste heat.

It’s absolutely not a magic bullet; it’s absolutely not an alternative to mitigation. But we do need this … to undo the damage that we’ve done.

—Niall Mac Dowell, Imperial College London

For now, the technology is also still expensive: Occidental estimates that it will cost between US$300 and $425 to sequester each tonne of carbon at its plant. Companies throughout the industry are confident that successive projects will drive costs down quickly. Nevertheless, even some of the industry’s champions are skeptical of the slew of start-ups that have sprung up.

“You are seeing lots of people making big promises right now, and they don’t quite know how to keep them,” Klaus Lackner, the director of Arizona State University’s Center for Negative Carbon Emissions and a pioneer in direct air capture technology, told the MIT Technology Review.

Perhaps the most common criticism of carbon removal, and one that has dogged direct air capture for years, is that it could afford companies a fig leaf to keep pumping out CO2 by relying on technology that is not guaranteed to become commercially successful.

Executives at direct-air-capture companies are quick to echo what experts have long emphasized, however: that cutting emissions first should be every company’s priority. “The best way is not to clean up your mess; the best way is to not cause the mess in the first place,” says Andreas Aepli, Climeworks’s CFO.

Aepli thinks the relatively high cost of direct air capture means most companies still have every incentive to prioritize emission cuts. But he also points to growing scientific consensus around carbon removal, with most assessments estimating that we will ultimately need to remove between five and 15 billion tonnes of carbon a year by 2050 to keep global warming to 1.5°C. Under the International Energy Agency’s net-zero scenario, direct air capture alone is projected to sequester close to one billion tonnes a year.

Nature-based carbon removal, such as planting trees, is certain to play a larger role, too. But there are limits to growing forests, and wildfires can quickly release all that trapped carbon. That means technological carbon removal will likely be necessary to compensate for emissions from hard-to-abate sectors like aviation or heavy industry, as well as to draw down already accumulated emissions in the atmosphere.

“It’s absolutely not a magic bullet; it’s absolutely not an alternative to mitigation,” says Niall Mac Dowell, a professor at Imperial College London who studies carbon removal. “But we do need to do this … to undo the damage that we’ve done.”

That also leaves the companies that are championing carbon removal with a daunting task. For now, Climeworks’s flagship plant in Iceland traps only about 4,000 tonnes of carbon per year; altogether, the roughly 20 direct-air-capture pilot plants operating around the world have capacity for around 10,000 tonnes – far from making a meaningful impact.

You are seeing lots of people making big promises right now, and they don’t quite know how to keep them.

—Klaus Lackner, director of Arizona State University’s Center for Negative Carbon Emissions

Another question is what to do with the captured carbon. Early projects have focused on selling it for use in a wide range of consumer goods, from fizzy drinks and vodka to diamonds and watches, and start-ups focusing on niche applications now abound. But experts and executives at direct-air-capture companies agree that the most effective pathway will be storing it away permanently.

“We can make yoga pants out of carbon,” says Lori Guetre, head of business development at British Columbia–based Carbon Engineering, which is providing the technology for Occidental’s plant. “But each one of those markets is small. And what we find, even when we talk to cement production plants, is they only need a really small amount of CO2 per plant.”

That’s not to say the explosion in so-called carbon tech is not useful to help kickstart the industry. Lauren Riley, head of sustainability at United Airlines, says sustainable jet fuel will play a large role in the company’s reaching its net-zero goal. But since it could be decades until that is available at the necessary volume and price, financing carbon removal in the meantime makes sense. “It’s a very practical solution to enable that transition,” she says.

“Obviously, if you’re talking about battling climate change, you’re going to ultimately need some level of sequestration,” says Fred Moesler, chief technology officer at Global Thermostat, another direct-air-capture company that is building its own plant in Colorado. “But I really think we should be doing everything at this point in time to encourage technologies like ours to develop.”

Despite the explosion in corporate interest, companies in the industry say direct air capture will take off only if governments incentivize it by creating mandatory markets. Occidental’s plant in the Permian Basin, which combines carbon sequestration with jet fuel production and enhanced oil recovery, is taking advantage of tax credits and low-carbon fuel standards. Incentives have also ramped up in Canada, where the most recent budget proposed a 60% tax credit for direct-air-capture projects. Most promisingly, recent bills introduced by Democratic lawmakers at the U.S. federal level and in New York State would see the government directly procure carbon removal.

“We’re super excited about the voluntary market, but we see it as a means to accelerate how quickly we can get going,” says Guetre. “It’s not going to do the heavy lifting over time for these projects.”

Jennifer Wilcox, principal deputy assistant secretary for the Office of Fossil Energy and Carbon Management at the U.S. Department of Energy, acknowledges that available tax credits are still “a drop in the bucket” for direct-air-capture projects. But she says it’s still premature to discuss public procurement of carbon removals, since metrics for measuring the sustainability of emissions savings still need to be ironed out.

“I think we still have a lot of work cut out for us with the investments that we’ve already been making,” Wilcox says.

In the meantime, Occidental is already planning dozens of plants alone and Carbon Engineering has struck similar partnerships with developers in Canada, the United Kingdom and Norway. Climeworks is planning to use its own design in a series of larger installations over the coming years, ultimately reaching its own megatonne plant. That’s not to mention all the smaller companies waiting in the wings.

With many experts now saying that direct air capture will be necessary to rein in climate change, the biggest challenge for the technology, arguably, is growing quickly enough before it is too late.

“There’s really no way to get to net-zero without carbon removal, both natural and technological,” says Katie Lebling, a carbon removal expert at the World Resources Institute. “And the need for it will only increase.”

Yannic Rack is a journalist based in London and mainly writes about business, climate change and the environment.

The post Is capturing carbon from the air an effective climate solution? appeared first on Corporate Knights.

They are now building what they say will be Canada’s first carbon-negative brewery in Peterborough, Ontario. Just as concerns over the climate crisis were mounting, the popularity of craft beer exploded. Craft beer now makes up around a quarter of the American beer market, and a growing number of brewers have started focusing on shrinking their environmental footprints. The process of brewing beer is notorious for being energy- and water-intensive, but sustainability hasn’t always been a priority for many brewers in their first years of operations.

That’s a trend Karbon Brewing is hoping to reverse by designing a brewery with sustainability in mind at every step.

“I really like the challenge of flipping the focus from ‘How do we become this big brand by selling the most beer possible, and then worrying about sustainability?’ to ‘Let’s put sustainability first’ and ‘How do we do a brewery right?’” says Bernardo Zamora, Karbon’s brewmaster.

A big question will be how to scale Karbon’s production while maintaining its green brewing chops. Zamora may be comforted to know that sustainability experts say large, well-established beer companies tend to lead the pack when it comes to sustainability within the industry. As more consumers look to local micro-breweries, they may be surprised to learn that it isn’t always the most sustainable route.

“The larger brewers, from an environmental sustainability perspective, in general, outperform craft brewers. They’re producing fewer product types and have very efficient systems,” says Barry Ness, an associate professor at the Lund University Centre for Sustainability Studies in Sweden.

In a 2018 paper, Ness analyzed 70 craft breweries and found that those that opened decades ago tended to prioritize sustainability more than others. “It showed that maybe you need to get to a certain stage of growth … before you can start working on sustainability initiatives,” he says.

The larger brewers, from an environmental sustainability perspective, in general, outperform craft brewers. They’re producing fewer product types and have very efficient systems.

–Barry Ness, associate professor at the Lund University Centre for Sustainability Studies in Sweden

In Canada, Ronald Morrison, a sustainability consultant who offers his services to craft breweries, says many smaller breweries aren’t tracking metrics like their water-to-beer ratio. This is an important first step in figuring out where there’s room for improvement. “You can’t manage what you can’t measure,” he says, adding that American craft breweries tend to be a bit more advanced on sustainability than Canadian ones. According to a trade association called Beer Canada, the Canadian breweries that have been tracking those metrics have cut greenhouse gas (GHG) emissions by 57.3% and energy use by 48.1% since 1990.

In stark contrast to some of North America’s largest food companies, the three largest beer companies by sales in the United States – AB InBev (which owns Budweiser), Molson Coors and Constellation Brands (which owns Corona) – all at least partially track and disclose emissions that come from their supply chains (in addition to those of their operations and energy use). According to AB InBev’s 2021 ESG report, the company reduced its overall emissions from a 2017 baseline by almost 14% and has pledged to be net-zero by 2040. Molson Coors plans to reduce emissions from its direct operations and its supply chain by 50% and 20%, respectively, by 2025 (from a 2016 baseline).

Pints that prioritize planet

There are many ways breweries can alter their operations to make them more sustainable, from installing solar panels on their roofs (such as at Roadhouse Brewing in Wyoming) to sending their spent grain to bakers to make bread, like they do at Henderson Brewing in Toronto. And the 9,000 breweries in the United States are at varying stages of implementing these practices.

Researchers estimate that the production of alcoholic beverages, including beer, represents 0.7% of global GHG emissions. Packaging often makes up a large chunk of a brewery’s emissions (roughly 40% for big beer companies), but some brewers are working to tackle that by ditching plastic for biodegradable six-pack holders.

Some breweries have adopted carbon capture technology that sucks up the CO2 that’s a by-product of brewing and allows them to use it for other purposes. Molson Coors has installed a system at its facility in B.C.’s Fraser Valley that collects the CO2 and then liquefies it, before using it in other parts of the brewing process. “We’re less dependent on getting CO2 tankers coming in,” says David Hamel, general manager of operations for Western Canada at Molson Coors. “Very few breweries actually go through the process of installing that type of technology.”

Chuck Skypeck, director of technical brewing projects at the U.S. Brewers Association, estimates that only 40 to 50 smaller breweries in the United States are using carbon capture systems. He says filtering and compressing that CO2 for storage can take a lot of energy. So when it’s used on a smaller scale, it just doesn’t make sense from a sustainability perspective.

Roadhouse Brewing is one craft brewery that has installed a carbon capture system. Heralded as one of the most sustainable craft breweries in the United States, it has cut down its CO2 consumption by 70% since it opened in 2012, says co-founder Colby Cox. It has also reduced its ratio of the number of gallons of water needed to produce a gallon of beer to 4-to-1 (industry average is around 7-to-1), thanks to a system that recaptures the water vapour lost in the brewing process.

Is bigger always better?

Using local ingredients can also lower a brewery’s environmental footprint, cutting down on shipping and transportation emissions. Matron Fine Beer, in Bloomfield, Ontario, tries to use as many local ingredients in its beer as possible to support local farmers and the environment. The brewery even marks the percentage of local ingredients that goes into each beer on the bottom of every can (Matron’s Dapper Vienna lager, for instance, contains 95% Ontario-grown ingredients). Farm breweries (such as Meuse Brewing in Ontario and Bale Breaker in Washington State) take things one step further by growing their own ingredients onsite.

But two of the main ingredients in beer – barley and hops – need specific climate conditions to thrive. So there are limitations as to where these ingredients can be grown, says Skypeck. He adds that the small scale of farm breweries coupled with the fact that barley and hops need to be processed before being used in brewing offset any GHG advantage of their use of local ingredients.

We’re looking at the entire process with a holistic view as opposed to just slapping solar panels on the brewery.

–Karbon Brewing  CEO Stephen Tyson

When it comes to distribution, craft operations often have a sustainability edge over corporate ones, as most of them produce only enough beer to sell onsite. In Canada, 94% of breweries are small, local operations that produce less than 15,000 hectolitres of beer.

Half Hours on Earth has been delivering its beer locally in Huron County, Ontario, with the help of an electric vehicle. The small two-person operation, which brews fruity sours and funky farmhouse ales, opened its doors in 2016 and became Canada’s first certified carbon-neutral brewery.

Cox, of Roadhouse Brewing, notes that large beer corporations have centralized supply chain management with two or three facilities where they ship all their ingredients and brew all of their products, before distributing them across the country, increasing their footprint. “They may have more sophisticated systems. They might even spend more money on sustainability initiatives, but they have a huge logistics problem,” he says.

For Skypeck, contrasting the sustainability of corporate beer against craft brews is like comparing apples and oranges. “On one hand, you have multibillion-dollar international companies, brewing tens of millions of barrels of beer annually, that have resources to invest in new technologies. On the other hand, you have small craft breweries that might employ one person and brew only hundreds of [beers] a year.”

Tapping conscious consumers

The costs of retrofitting a brewery can often be a barrier for smaller brewers looking to become more sustainable, says Morrison. But greening processes can have huge benefits for the bottom line in terms of energy and water savings. They might also help brewers secure higher price points. A 2018 study from the University of Indiana found that a majority of American beer drinkers are willing to pay more for beer that’s environmentally friendly.

That market is one that Karbon Brewing is hoping to tap into. The company’s new facility is being constructed on the campus of Trent University. A research partnership with the university will help them develop green brewing technologies.

The Karbon team has a rare opportunity to build a green brewery from scratch. “We’re looking at the entire process with a holistic view as opposed to just slapping solar panels on the brewery,” says CEO Stephen Tyson.

For too long, brewing has been a wasteful and unsustainable industry. That’s beginning to change. Hopefully what’s happening at Karbon (and other sustainable breweries) can serve as a model for future brewers to prioritize the planet from the first pint.

Alex Robinson is the associate editor of Corporate Knights and an Ottawa-based journalist.

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Twenty years ago, Corporate Knights launched its quest for a more humane form of capitalism, placing people and planet ahead of profits, with the Best 50 Corporate Citizens sitting at the head of the roundtable to make business a force for good.

A lot has changed for the better in that time and a lot hasn’t.

Thankfully, the glass ceilings in Canada’s corporate boardrooms have been breached, with non-male members now making up almost a third of directors, double their one-sixth share in 2002. Based on current trends, we are on track for 40% of directors to be non-male by 2030. In order to meet the Government of Canada’s 50% challenge to reach board gender diversity by 2030, we will need to double the pace this decade at which we add non-male directors to boards.

Racial diversity on large corporate boards has also improved: 9% of members are now non-white, double the 4% level in 2011, when we first started tracking this metric. This number still needs to double for it to more fairly reflect Canada’s total population mosaic (27% of which is racially diverse including Indigenous peoples, as of the most recent census). That means adding non-white directors at an annual clip that is three times faster this decade than we did last decade.

While one workplace fatality is too many, it is encouraging that on a national level, a third less people died on the job in 2019 than was the case in 2002, when 465 people paid the ultimate price because of a workplace accident. Reducing the number of workplace deaths (now 335 per year) to zero by 2030 means getting a lot more vigilant about safety.

Over the last two decades, corporate profits have doubled, workers have been left behind and emissions have stalled, but the Best 50 firms are leading the way with 50% more gender diversity and triple the investments aligned with the clean economy.

While high profits at a firm level can indicate economic vitality, at a national level it’s usually a sign of economic rot and oligopolistic market structures (five big banks, four big grocery stores, three big telcos, one big fertilizer company serving 36 million people). In Canada’s case, sky-
high profits have been accompanied by meagre investment and poor productivity in relation to our G7 peers. Instead of making Canada wealthier, these profits have mostly been flowing to a tiny fraction of the population that owns the majority of company shares, half of whom are foreign investors.

While taxes are the price we pay for civilization, large Canadian companies are getting a better bargain than ever, paying a quarter less taxes as a percentage of their profits than they were 20 years ago.

The average CEO of a large company is making out better than ever, too, taking home $5.6 million in total compensation, or about 106 times as much as their average employee (a ratio that has grown by more than 50% since 2002). For reference, in 1977, the late management thinker Peter F. Drucker suggested the pay ratio between CEOs and employees be a maximum of 25-to-1 (later revising that to 20-to-1, saying at the time, “I have often advised managers that a 20-to-1 salary ratio is a limit beyond which they cannot go if they don’t want resentment and falling morale to hit their companies.” Getting to 20-to-1 in Canada by 2030 would mean slimming down average CEO pay to a quarter of today’s levels and boosting average worker pay by 50% over that time period (or 5% per year).

On the one measure we have put the most emphasis, greenhouse gas (GHG) emissions, there is good news and bad news. The bad news is our national emissions have barely budged since we began our mission 20 years ago (nudging up 2% from 724 million tonnes in 2002 to 738 in 2019 – the most recent base year before the COVID pandemic). But it could be a lot worse. Had emissions grown at the same clip in the past 20 years as they did in the 1990s, Canada’s GHG emissions would be over one billion tonnes today. That is some consolation, but to achieve Canada’s 2030 goal (roughly cutting emissions in half by 2030), we will need to reduce emissions 15 times faster than we are at the moment.

To sum things up, profits have surged, people have been left behind (albeit boardrooms are a little less pale and male), and we’re stuck in neutral on the planetary issue of GHG emissions.

It has never been more possible to make a radical shift.

Those are the facts we cannot ignore.

And at the same time, it has never been more possible to make a radical shift: to harness the engine of business to put our economy in service of people and the planet. It is a tall order, but there’s no reason why we could not right this ship by the end of this decade.

The solutions are on the shelf: thanks to engineers, the price of solar, wind and storage has plunged by 90% over the past 20 years, finally making it economical to end our addiction to burning fossil fuels.

As the standard bearers for sustainable capitalism, the Best 50 Corporate Citizens in Canada have a special role to set the pace. This year’s Best 50 is leading the way with 50% more gender diversity, and almost triple the rate of investment and sixfold the proportion of revenues aligned with the clean economy, as compared to the other large Canadian companies.

The pay gap between Best 50 CEOs and their average worker is less than half that of run-of-the-mill big businesses. And their carbon productivity (which measures how much revenue a company generates per tonne of emissions) is double their peers. This approach has stood the test of time, proving that better corporate citizens can beat the market year over year. The Best Corporate Citizens’ stock market performance has outperformed its peers earning  499% gross return since it was first launched in June 2002, versus 366% for S&P/TSX Composite.

The 2022 Best 50 Corporate Citizens vs. the rest*

Meet this year’s Best 50 Corporate Citizens in Canada

Corporate Knights’ 2022 ranking of the world’s 50 Best Canadian corporate citizens is based on a rigorous assessment of nearly 7,000 public companies with revenue over US$1 billion. Who made the cut in 2022?

DOWNLOAD THE COMPLETE 2022 BEST 50 EXCEL SCORECARD »

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2022 Best 50, Summer 2022Canada’s top corporate citizen of 2022 wants to become North America’s battery June 29, 2022 Hydro-Québec tops the Best 50 list again with big plans to expand its supply of hydropower in the United States Read Article

2022 Best 50, Summer 2022These are Canada’s top international corporate citizens of 2022 June 29, 2022 These 10 companies with a subsidiary in Canada are leaders in sustainability Read Article

 

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The provincially owned utility is pursuing two of the continent’s largest decarbonization projects, that would supply hydropower to Massachusetts and New York City, displacing natural gas in those markets. In both cases, the transmission projects needed to complete the deals have run into local opposition that could derail Hydro-Québec’s export plans.

It’s also participating in talks on a project called the Atlantic Loop. The regional grid would bring hydropower to the Maritimes to displace coal-fired power and avoid the need for new natural gas plants to complement growing supplies of wind power.

If all parties can agree, new transmission lines would flow electricity from Quebec to the south and the east to provide baseload power and to back up intermittent generation of renewables. They would, in turn, allow American and Atlantic Canadian producers of renewable energy to sell to Quebec when there is a surplus of wind power.

However, even as it looks to increase electricity trade with its neighbours, Hydro-Québec faces a huge challenge in serving as the linchpin for the province’s ambitious decarbonization plans, which could result in as much as 50% more electricity demand in 2050.

The utility’s original focus was on selling hydroelectric power to Quebecers and keeping rates low for the province’s industrial and residential consumers. While that core mandate remains, Hydro-Québec chief executive Sophie Brochu says, the corporation is now determined to advance regional co-operation in decarbonization while investing more heavily in energy efficiency, wind power, and new, smarter grid technology.

The “North Star” for all electricity systems operators and utilities in North America is to deliver the low-carbon energy transition at the lowest cost possible to their customers, Brochu says.
“We have a responsibility to, obviously, serve our respective markets,” she said. “We [also] have a collective responsibility to see how we can work in common with our respective infrastructures and means of production to access this North Star.”

For the third year, Hydro-Québec ranked first among the Corporate Knights Best 50 Corporate Citizens in Canada. Its ranking was based not only on the low-carbon nature of its immense electricity business, but on water productivity, taxes paid, CEO-to-average-worker pay, executive and board gender diversity, and clean revenue.

Brochu herself is the personification of both Hydro-Québec’s progress and its deep connections with the province’s business culture. When she took over in 2020, she became Hydro-Québec’s first female CEO. The appointment interrupted the sabbatical she had planned for herself when she resigned after serving 12 years as chief executive officer at Montreal-based Énergir, the former Gaz Métro.

Keeping the home fires clean-burning

In March, Hydro-Québec released its strategic plan for 2022 to 2026. It laid out the challenges ahead and warned that pricing structures would have to change to encourage energy efficiency and conservation. In other words,  if Hydro-Québec is to succeed in its ambition of becoming the renewable “battery” for a large swath of North America’s northeast, it would have to restructure its rates, especially at peak hours, to get Quebecers to stop wasting so much power.

Between 2020 and 2029, it projected that Quebec’s own demand for clean power would increase by 20 terawatt-hours (TWh), or roughly 10% of current levels. By 2050, decarbonization efforts – including a dramatic increase in electric vehicles – would result in an increase of 100 TWh, or a 50% rise.

Brochu says they expect to meet that 2029 demand through an aggressive energy-efficiency program; the refurbishment of existing hydro facilities; and growth in wind power, including as much as 3,000 megawatts of capacity provided by a recently announced partnership between Hydro-Québec, Énergir and Borealis.

Even with that higher demand in Quebec, the utility is pursuing deals to increase exports by some 20 TWh annually to the United States under firm contracts. (By way of comparison, Nova Scotia’s power demand was 10 TWh in 2019.)

Eyeing expansion to the south

American politicians and systems planners – and a number of power sector analysts – are looking to Quebec to provide relatively low-cost, low-carbon power to help drive states’ own decarbonization plans. Hydro-Québec is moving on two separate deals: the 9.45 TWh New England Clean Energy Connect, to serve Massachusetts, and the New York City–bound Champlain Hudson Power Express, with a capacity of 10.5 TWh. The US$4.5-billion New York project was approved by state regulators in April, but further legal fights are possible.

A study from the Massachusetts Institute of Technology in 2020 concluded that increased reliance on hydropower from Quebec provides the most cost-effective route to decarbonization for northeastern states, especially when coupled with a bidirectional trade in which the Canadian province purchases surplus renewable power when generation is high but demand is low.

In the longer-term, Quebec could serve a battery function, recharging its reservoirs when there is a surplus of renewable power and flowing hydropower when intermittent renewables cannot fill demand, the author of the MIT study, Emil Dimanchev, said in an email.

Brochu says Hydro-Québec is eager to expand the combined benefits of wind and hydro. However, the current agreements with Massachusetts and New York are for a set capacity, which would flow regardless of the availability of wind power.

Proposals for Quebec to expand power exports to Ontario have long failed to materialize, in part because Hydro-Québec wants to sell firm capacity and its neighbour wants a more flexible purchase of energy to backstop renewables. The Quebec utility could face a better reception in the United States if it “reframed” the New England and New York projects “along the lines of the battery concept by bundling new transmission with large-scale renewable expansion in the U.S.,” Dimanchev says.

Opposition to U.S. expansion plans brewing

As it is, Hydro-Québec is facing tough opposition to the massive transmission projects needed to complete the American deals.

In Maine, voters rejected a US$1-billion transmission plan to bring power from Quebec in a referendum last November. Hydro-Québec’s contractor is continuing with some site preparations as the utility and its partners seek a court ruling that would allow completion.

Several groups unsuccessfully opposed the New York transmission line that would be buried under the Hudson River. They include the environmental group Riverkeeper, which submitted a brief arguing that Quebec’s hydropower is not as low-carbon as Hydro-Québec claims and that the utility is disregarding Indigenous concerns.

Damming and flooding large areas can indeed cause the release of methane and carbon dioxide as vegetation dies off. Hydro-Québec argued that the Riverkeeper analysts cherry-picked data, in part by focusing on near-term effects, while for the life of the project, its hydropower has among the lowest carbon intensity in the world.

The Riverkeeper submission included statements from a handful of Indigenous representatives, who complained that Hydro-Québec’s hydropower has damaged their traditional territory.

Brochu acknowledges that Hydro-Québec has had longstanding problems in acknowledging and addressing Indigenous concerns but says the utility is working to address its faults.

“Things need to improve, and we are improving them,” she says, while adding that there are many different perspectives within the Indigenous communities. Brochu recently participated in a ceremony marking Hydro-Québec’s commitment to bring power to the village of Kitcisakik, the last Indigenous community that was unconnected to the grid. “It is as thrilling to bring power to Kitcisakik as it is to [bring it to] Queens in New York,” she says.

Hydro-Québec is also working with a Mohawk community that wants to invest as partners in a transmission line that traverses their traditional territory on its way to New York. However, Hydro-Québec faces myriad lawsuits and other challenges from Indigenous groups stemming from its long history of damming rivers across the province and in Labrador dating as far back as the development of Churchill Falls in the 1960s and ’70s.

The Indigenous complaints have so far not derailed Hydro-Québec’s export plans.

Pierre-Olivier Pineau, an energy expert at the HEC business school in Montreal, says rejection of Quebec power would only hurt American consumers. At the same time, the loss of export sales would mean less supply pressure and lower prices at home, he says.

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At the time, the Canadian CEO and water technology expert was 63 years old and hoping to retire to academia. Benedek took a job at Scripps Research in San Diego, where he was briefly a professor. But while at Scripps, he quickly became passionate about the next problem he wanted to tackle through the private sector: climate change.

“Governments around the world are failing to protect us from catastrophe,” he says. “And things will change, as they usually do, when the catastrophe gets unbearable.” Benedek hopes that things won’t get to that point and that his current company, Anaergia, can be part of the solution in weaning the world off fossil fuels. The corporation is one of Canada’s fastest-growing sustainable companies.

In 2007, Benedek left his academic job and founded Anaergia, which converts organic food waste into biofuels, such as renewable natural gas. This technology reduces the amount of methane, a potent greenhouse gas, being emitted into the atmosphere from landfills. The company went public last summer, and in March, Anaergia announced it planned to raise $60 million by offering 4.8 million subordinate voting shares.

A current that flows through both Benedek’s old venture and his new one is his pursuit to solve environmental problems using technology. He worried that the world would face some nasty water shortages and sought to put a dent in water pollution through ultrafiltration membranes he developed with Zenon.

Governments around the world are failing to protect us from catastrophe. And things will change, as they usually do, when the catastrophe gets unbearable.

-Andrew Benedek

Benedek came to Canada from Hungary in 1956 during the Hungarian Revolution. He became a professor at McMaster University, before fleeing academia a first time to start Zenon in 1980. During that first stint as a professor, he grew restless to make an impact on big problems.

That drive led him to found the company that topped our first list of the 50 Best Corporate Citizens 20 years ago (Zenon ranked first in 2002 and 2004). Back then we wrote, “Zenon provides one of the most basic of human needs: clean H2O, while conducting itself in the most chivalrous of fashions. Is it the Ideal Corporate Citizen? For 2002, it’s King of the Castle.”

Benedek came from a long line of shoemakers in Hungary, an occupation he was expected to fall into, but he was bound for bigger things. He hopes that his company will be part of a larger constellation of corporations that will help solve humanity’s greatest challenge.

“I get up every morning with the hope that I [can] find a new way, [and] I think about … how to get there. And then I also go back in history and I find examples where, [against] impossible odds, [problems were] resolved and humanity survived,” he says.

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