July 2007 - HSBC claimed the title of "the world's first carbon neutral major bank" in Sept. 2005, less than a year after publicly announcing its plans to achieve that goal. The high-profile success is part of the company's wider corporate social responsibility efforts that have drawn a growing list of accolades. To help attain and then maintain HSBC's self-imposed standards, Tony Pilcher, HSBC's head of global business travel and expense management, and the company's travel sourcing and management teams enacted and renewed a slew of policies and procurement practices. They range from pre-trip authorization and viable videoconferencing facilities to aggressive supplier management and thorough data collection. It has been a daunting task and much work remains.
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Company:
HSBC, one of the world's largest banking and financial services organizations, with offices in 82 countries and territories, headquartered in
London |
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Volume:
Total business travel of 1.2 billion kilometers (746 million miles) and business travel-related carbon dioxide emissions of 179,000 tonnes in 2006 |
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Challenge:
Devise ways for travel procurement to contribute to the company's corporate social responsibility goals, including carbon neutrality, carbon emissions reductions and other sustainability initiatives |
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Approach:
Apply the company's three-pronged carbon management plan to travel procurement and travel management practices by managing and reducing direct emissions, using "green electricity" to reduce carbon intensity and offsetting remaining emissions |
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Solution:
Create baseline measurements and ongoing tracking of the environmental and social impacts of travel; internally develop new travel policies and procedures; encourage travel suppliers to incorporate CSR principles into their operations |
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"We in group travel were engaged and involved right from the start, going back almost three years now," said Pilcher, who reports to the company's chief procurement officer. "We made a statement that we'd be carbon neutral in a few years, which meant engaging corporate real estate, purchasing and so on, as well as other key stakeholders."
HSBC's carbon management plan was designed to manage three-quarters of a billion tonnes of carbon dioxide emitted each year by the company's overall activities. That plan includes managing direct emissions; reducing carbon intensity by using cleaner and renewable energies when possible; and offsetting the remaining carbon dioxide.
Between 2004 and 2005, HSBC reduced carbon dioxide emissions per employee to 2.62 tonnes from 2.66 tonnes. It then rose to 2.81 tonnes in 2006, due partly to "an increase in air travel," which accounted for 14 percent of HSBC's total emissions--the second-largest portion behind electricity--according to the company's latest annual corporate social responsibility report. "Road and other business travel" accounted for another 9 percent.
Overall, from 2005 to 2006, business travel increased to 1.2 billion kilometers from 850 million, and to 4,155 kilometers per person from 3,361. Business travel-related carbon dioxide emissions grew to 179,000 tonnes from 124,000 tonnes overall and to 0.62 tonnes per full-time equivalent from 0.49. "We have programs in place to reverse this trend," according to the CSR report. "For a growing business, it is a challenge to reduce emissions constantly."
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"It is more interrogation now rather than just acceptance."
— TONY PILCHER, HSBC HEAD OF GLOBAL BUSINESS TRAVEL AND EXPENSE MANAGEMENT, REFERRING TO SUBSTANTIATING TRAVEL SUPPLIER CLAIMS ON SUSTAINABILITY INITIATIVES
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Because HSBC now is aspiring to actually lower its total emissions output, the company's travel procurement and management teams must build on the work they have done thus far.
For starters, that requires constantly improving data collection in order to establish baselines and measure progress. Internally, "It is about breaking down data into manageable chunks, understanding the protocol of the business and the cost center, and interrogating on that," Pilcher explained. "That is how we do it to have an impact, because then you can be more focused." The approach has helped HSBC develop consistent metrics, uncover previously unreported data and more easily include data from acquired companies.
Externally, data collection begins with supplier requests for proposals, in which HSBC is beginning "to ask questions where the answers are not just that tick in the box," Pilcher said, referring to inquiries on sustainability. "What sits behind the answers? How did you arrive at that? What measurement sources did you use? It is more interrogation now rather than just acceptance. At least the process is there, where it was not previously.
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"We try to choose our suppliers by picking those that have the same methodologies and principles as we do. That's extremely difficult in the business travel arena, especially hotels."
— TONY PILCHER, HSBC HEAD OF GLOBAL BUSINESS TRAVEL AND EXPENSE MANAGEMENT
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"There is no point in putting something in an RFP if you cannot analyze the response and ongoing management of that," Pilcher continued. "It is about understanding and working with suppliers so they actually work and feel the same way your company does. We try to choose our suppliers by picking those that have the same methodologies and principles as we do. That's extremely difficult in the business travel arena, especially hotels."
The hotel industry outwardly has embraced eco-friendly projects and other CSR initiatives through accreditation programs, renewable energy pursuits, waste management and other mechanisms, but from the travel buyer perspective, there is a multitude of data required to determine the complete environmental impact.
That goes well beyond measuring such metrics by the room or by the traveler. For example, some hotels have pools, fountains and golf courses, requiring much more water than those that do not. Properties differ on the sources of food for their restaurants and catering, and differ in their hiring practices. Their supply chains, therefore, are tough to compare.
Some of the details range from the somewhat plain to the not so obvious. "Simple things like using keycards for room lights (so when you go out, the lights go out) have a major impact on energy usage," Pilcher noted. But "where are hotels actually purchasing that wood furniture from? Is it from a sustainable source?"
Given all the details and variations, Pilcher acknowledged that HSBC thus far has "only scratched the surface" on measuring hotel sustainability metrics. Complicating the company's efforts, "there are some major chains at the moment that are making statements, but at the end of it, they have to be taken at face value because there is no way to substantiate it," he said.
Integrating sustainable practices into airline purchasing also is challenging, but for different reasons. Though there is no consensus on the exact level of carbon dioxide emitted by air travel--given such factors as airplane and engine types, flight profiles, airline load factors, etc.--at least the airlines and therefore their corporate clients can build a general picture.
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"HSBC's RFP process requires confirmation of adherence to socially responsible and sustainable business practices from any third-party supplier and forms a key part of any contractual arrangement."
— HSBC 2005 CORPORATE SOCIAL RESPONSIBILITY REPORT
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"We are setting up a structure so we can collect the data, recognize the impact and break it down--route by route, supplier by supplier," Pilcher said. "Then you can understand if there is an option, both in terms of supplier and type of plane. From there, it comes down again to [traveler] education, which is not always easy."
For car rental and ground transportation, HSBC seeks fleet profiles from suppliers. "The RFP has the usual questions, but part of our decision-making for a U.K. taxi company was that after they had said they were carbon-neutral, part of the process was auditing that statement and understanding if what they were offering was substantiated," Pilcher said. "It fit into our profile strategy, so therefore we chose them."
A common theme in HSBC's supplier management--across all materials and services, including travel service providers--is creating partnerships that include sharing detailed information and leading practices. According to company sustainability principles, "We look for suppliers who share our commitment to CSR and stipulate environmental criteria in tenders. HSBC's RFP process requires confirmation of adherence to socially responsible and sustainable business practices from any third-party supplier and forms a key part of any contractual arrangement."
The company's 2006 CSR report specifically described how it works "with our travel providers to manage and reduce the impacts of our business travel,"favoring those that can provide "robust and verifiable information" to help HSBC monitor its progress.
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2006 |
2005 |
2004 |
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| Total business travel (million km) |
1,200 |
850 |
635 |
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| Business travel per person (km/full-time equivalent) |
4,155 |
3,361 |
2,886 |
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| CO2 emissions from business travel (tonnes) |
179,000 |
124,000 |
88,000 |
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| CO2emissions per person from business travel (tonnes) |
0.62 |
0.49 |
0.40 |
Source: HSBC
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"If we are working with a supplier for goods or services, it is about understanding what sits behind their supply chain," Pilcher said. "That has proven to be difficult, but we are now closer to our main suppliers."
Getting closer has meant, at times, pushing suppliers to understand questions "that they had not thought of or had not admitted to thinking about," Pilcher said. " 'We will tell you what we are looking for. How can you put that into your operation?' That cuts across all procurement principles.
"Some of the larger chain hotels have now started, even more so, bringing [CSR measurements and information] to our attention, whereas before, we were pulling it from them," Pilcher continued. "Now they are going out on their own initiatives, whereas before we said, 'This is what you should start thinking about.' Now they have developed that within their own organizations and are spreading the word. That is a partnership principle."
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"The supplier market is clamoring to work with those who are willing to pioneer and innovate,like an HSBC. That partnership is absolutely key."
— JONATHAN GREEN, SUSTAINABLE TRAVEL MANAGER FOR THE
UNITED KINGDOM'S DEPARTMENT FOR THE ENVIRONMENT, FOOD & RURAL AFFAIRS
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"The supplier market is clamoring to work with those who are willing to pioneer and innovate, like an HSBC," said Jonathan Green, sustainable travel manager for the United Kingdom's Department for the Environment, Food & Rural Affairs. Green, who is familiar with HSBC's travel procurement program and has built sustainable partnerships with his organization's travel service providers, added: "That partnership is absolutely key."
In turn, "suppliers can then use that as a marketing exercise to get more business by demonstrating the way they have worked with ourselves," Pilcher said. "Achieving our objective then becomes their objective. If they are not able to, let's understand why and not just dismiss it. You have to balance the business need against the passion. In no way dampen the passion, but bring in a little reality."
Thanks partly to efforts by such companies as HSBC, more travel suppliers are openly discussing their environmental impact. These days, hardly a week passes without an airline, a hotel company or some other industry player announcing a green initiative.
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PROJECTS IN WHICH THE COMPANY PURCHASED CREDITS IN LATE 2005 AS A MEANS TO OFFSET CARBON DIOXIDE EMISSIONS,IN TONNES
| Project |
Location |
Carbon Reduction |
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| Te Apiti wind farm |
New Zealand |
125,000 |
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| Organic waste composting |
Australia |
15,000 |
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| Sandbeiendorf agricultural methane capture |
Germany |
14,000 |
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| Vensa Biotek biomass co-generation |
India |
16,000 |
Source: HSBC
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Inside HSBC, travel-related CSR touches on much more than just supplier management. For example, the company recently reintroduced a pre-trip approvals process, though not primarily for cost-savings reasons. "We went through a phase where we only asked, 'Is your trip necessary?' and left it to the individual to decide," Pilcher explained. "Now we have gone back to a more robust travel authorization policy. People have to justify really why they are getting on a plane, or a train or in a car."
Meanwhile, the company is leveraging its facilities to help reduce travel where possible. Its London headquarters building, for example, now has dedicated facilities for videoconferencing. Similarly, HSBC in Hong Kong invested approximately HK$3.9 million (US$500,000) in videoconferencing facilities, which HSBC--
like many others--sees as an increasingly viable travel substitute.
In Mexico City, the company's relatively new Mexico head office building has 180 parking spaces allocated to those who car pool when traveling to work (of 1,129 total parking spaces). The company estimated that 360 fewer cars would be driven to work as a result.
To measure the effectiveness of all its sustainable practices, HSBC earlier this decade implemented "a global environmental reporting tool that tracks, consolidates and reports on energy and water consumption, waste production, carbon dioxide emissions and business travel across the group," according to company information.
As of 2005, the system was capturing information on 94 percent of the company's full-time equivalent employees in 41 countries and territories, up from 68 percent two years earlier.
That tracking helps identify progress in reducing emissions and determines what is left to be offset. On that front, HSBC carefully selected a number of offset programs. Testing in the last quarter of 2005 led to purchases of 170,000 tonnes of carbon offset credits, with an average price of $4.43 per ton.
Echoing the sentiments of many others, Pilcher said, "Offsets are only part of the solution. If we do have to offset our emissions, we look at creditable or auditable offset projects."
To facilitate that effort, HSBC hired Det Norske Veritas, a Norwegian risk management and certification company, to verify its carbon measurements, business travel's contribution to the total and the effectiveness of its carbon offsetting schemes, according to HSBC's 2006 CSRreport.
In any CSR initiative, including employee welfare and other social concerns, the key is effectively communicating, both internally and externally.
"You have a responsibility to raise awareness in your own companies. Communicate it, keep it fresh and have different initiatives going on to maintain interest," Pilcher said. "So many companies do not even know where to start. It is our responsibility to help others."
