So says Mike Wallace of Trucost, an research firm that focuses on quantifying the impact of business on the environment. In this SLM interview, Mike explains what's holding some companies back, why the U.S. businesses continue to lag behind their European counterparts, and why that might soon be changing - and faster than you think. (To listen to our conversation with Mike, click here.)

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SLM: So calculating a company’s carbon footprint is fairly straightforward stuff, huh?

Mike: There's a real push on the part of companies toward either reducing their carbon output or striving to become carbon neutral - despite the fact that "carbon footprint" is still often considered an intangible, vague concept. It's great to see all these qualitative statements from companies - visionary goals to, say, be carbon neutral by 2020 - but when you ask some of these companies what their carbon footprint is today, many can't tell you. So it's interesting to see these commitments being made, but ultimately we should expect to see some concrete data to back them up.

Many companies don't realize that the negative environmental impacts of everyday business activities can be quantified. Trucost's mission is to help businesses and investors and government agencies understand how to measure corporate environmental impacts and how then manage those impacts. It boils down to the popular phrase, "What gets measured gets managed." Trucost measures dozens of other environmental impacts from water use to use of natural resources to toxic emissions but, increasingly, carbon is the measure that most of our clients seek to understand. Our goal is to help get hard, comparable numbers into the marketplace.

SLM: How do you do that?

Mike: If you know what type (or types) of product a company is producing, you have a pretty good idea of what kinds of natural resources are going into the product, what processes are required, and what emissions come out the back end as a result of the manufacturing process. What we do is help companies understand, based on an input/output economics model, the relationship between what they're creating and what they're emitting. The more detailed the information, the more finely tuned the measurement, so a company can actually discover how many tons of CO2 are being emitted per year, per unit of production, or per dollar of revenue.

SLM: Is quantifying emissions really that simple or is there a little art to it as well?

Mike: That's where defining the boundaries becomes so important – are these direct or indirect emissions?. You've got to look both upstream to your suppliers and downstream to your end users and think about where your responsibility begins and ends. Those gray areas are still being determined. But in the grand scheme of things, if you're looking at direct emissions - those emissions that your business creates as a direct result of its operations - then yes, it's a fairly straightforward process. It takes time, resources and details, but it is a very achievable measure.

SLM: If it's so straightforward, what keeps so many companies from quantifying their emissions? Is it the prospect of collecting all that data or the difficulty in determining the boundaries for responsibility?

Mike: I think companies do have the ability to measure, there just hasn't yet been a real willingness - in North America, at least - to do so. U.S. businesses have been essentially hedging their bets, waiting until there is some indication that a global carbon market will emerge, or that carbon legislation is definitely on the way. There's been a sense that "we'll take care of that when its necessary."

SLM: I'm guessing, though, that U.S.-based multinationals are well past the "wait and see" stage, given the tightening restrictions on corporate emissions in Europe.

Mike: Absolutely. Those companies that are dealing with a global regulatory scheme have recognized for some years that instead of chasing every individual regulation, it makes most sense to find the highest common denominator and reach for that level of compliance. Generally the largest companies with the most brand recognition and/or reputational exposure are the ones that are leading in this space.

SLM: A lot of multinationals have made the news lately for requiring suppliers to report carbon emissions data. Is that a good indication that companies may soon be expected to include supply chains in their own emissions calculations?

Mike: Most global approaches for measuring and reporting carbon emissions seem to be harmonizing around the Greenhouse Gas Protocol (developed by the World Resources Institute and the World Business Council for Sustainable Development), and part of that protocol includes the measurement of supply chain impacts. As a result, many companies are beginning to realize that their supply chains actually account for a large portion of their emissions. That's why we're beginning to see more efforts to work with suppliers on reducing their carbon footprint.

SLM: Measuring carbon footprint opens up a whole can of worms, doesn't it? Are some companies tempted to avoid measuring so they can maybe avoid the thorny question of how then to actually reduce climate impact?

Mike: At a certain point - and we're fast approaching it - companies that fail to measure and report their emissions will start to stand out amongst their peers. Through our data collection clients can quickly see the disclosure patterns across an entire sector. While U.S. companies in a sector may not be reporting their CO2 emissions, we can quickly look at their peers in Europe, the U.K., and Japan and see that CO2 is being measured and reported. Now that stakeholders (especially shareholders) are becoming more interested in corporate environmental disclosures, this ability to quickly compare and contrast companies on quantifiable performance metrics like CO2 is venturing into the area of corporate governance.  For instance, if all your peers (competitors) can measure and report on CO2 but you can’t (or won’t), what’s your rationale?

SLM: Which companies do you think are leading the pack on measuring and reporting climate emissions?

Mike: We see a lot of transparency in the the more impactful sectors, such as petroleum, energy and mining - companies that have been under the microscope on these issues for a long time. Now that CO2 has become the top issue, we’re seeing a lot of action and statements from companies in all sectors. Again, this is often more qualitative in nature, but it is a start.

We’d expect to hear a company state emissions in a manner similar to their financial reporting, "We produced X tons of CO2 emissions per year on a global basis." You'd think that would be a pretty straightforward number, but what we actually see many companies normalizing their data in a variety of different ways, for example, tons of CO2 per product, per store, per factory, or tons of CO2 per employee. If I'm looking at your corporate performance, I'm looking at corporate performance on an annual basis and global basis, then I will be comparing that to other standardized metrics like revenue. In our approach, we typically normalize data to revenue, therefore providing the end user (investor, consumer, etc.) with a ratio that explains how many tons of C02 is produced for every $1 million dollars of revenue. Normalizing like this allows you to compare companies within and across sectors and gives you a point of reference for carbon efficiency.SLM: A lot of companies seem to be focusing on emissions per unit - tennis shoes - and some are even posting this information on their product labels. Isn't this approach a bit more accessible to the average consumer?

Mike: The goal is not just communication but also comparability. Unless all the tennis shoe manufacturers are posting their carbon emissions on a per-pair basis, using the exact same approach to their measurements, that communication is meaningless to me as a consumer. How will I know what's high or low?

What Trucost focuses on is revenues. All publicly traded companies report on their annual revenue, and we put CO2 output in relation to that number. How many tons of CO2 were emitted per million dollars of revenue each year? That allows you to compare an airline to a shoe manufacturer to a telephone company. You can see which companies are more or less carbon efficient and identify which companies are most at risk if some form of carbon legislation or tax takes effect sometime in the future.

SLM: What advice do you have the company that knows it will have report on carbon emissions eventually, but hasn't yet begun the process of measuring its footprint?

Mike: If you're a large firm, know that many entities are already analyzing your environmental performance. Whether you choose to report on it doesn't matter anymore, because there's enough publicly available information out there to put a story together about you. As a company, you want to make sure that story is accurate, and the best way to do that is to be accurate about your own measurements first and then start to publicly disclose that information. Not only is it a good management approach - remember that "what gets measured gets managed" - but it's also a good reputational approach because you're demonstrating a commitment to issues that are very important to your stakeholders and shareholders, and your demonstrating an additional aspect of corporate governance.