Microsoft’s ‘Carbon Negative’ Problem
Fiddling with ‘carbon math’ while ignoring carbon accelerants. Examining their climate of contradiction.
UPDATED: May 14th 2020
When Microsoft announced, with some humility, it would go ‘carbon negative’ and account for 'Scope 3' emissions (raw materials, manufacture, transport, storage, sale, use and disposal) it was met with some initial praise. Later reporting couched it in uncertainty. Some called BS.
Microsoft has positioned itself as a climate leader while aggressively pursuing Big Oil. It spent years claiming to be ‘100 percent carbon neutral’ while offsetting only three percent of its emissions.
In this post I’ve questioned Microsoft’s new 'carbon math’; examined misuses of the term 'carbon neutral’; built the most detailed list of fossil fuel partnerships yet reported; weighted the reputational cost; and reviewed the Board’s not-so-progressive views on divestment. The results are wonky.
DISCLOSURE: I’m a former documentary filmmaker now specializing in the uses of Virtual Reality in Architecture / Production Design. I do forensic consultation and write in my spare time. Nobody paid me to write this. I don’t run ads. I have no position on $MSFT.
Microsoft’s Voluntary Pledge (In Specific Terms)
Many news outlets have incorrectly reported that Microsoft will remove all its historical carbon. This is incorrect. Microsoft pledged:
- Full-scope carbon negative in 2030 (Scope 1, 2 & 3);
- Partial removal of historical carbon by 2050 (Scope 1, 2 + business & air travel)
Microsoft plans to achieve these targets with an internal carbon fee (not a shadow fee) — currently set at $15 per ton. It also has climate-related investments and will expand beyond the 105 suppliers currently reporting through Carbon Disclosure Project (CDP).
Changing Previous Reports
In an effort to extract historical emission data, I noticed their ‘pathway to carbon negative’ graph showed emissions 40% lower than previously reported. The graph peaks at ~13M instead of ~19M as reported in their Carbon Disclosure Project and Environmental Factsheet.
I posed the question to ‘Microsoft on the Issues’ Twitter account and Lucas Joppa, Microsoft’s Chief Environmental Officer, who was tagged responded via DM, requesting I send an email so he could connect me with the right people. In an email (full communication here), Lucas confirmed that the numbers were different “because of an accounting methodology update”.
I pushed back saying their factsheet was already specific about over-reporting in some categories “by as much as 25 percent” and that it would look bad if Microsoft were to “choose an accounting methodology that happens to be financially favorable”. I said an adequate response would involve “explaining why the previous method was wrong and why the new one is right.”
Elizabeth Willmott, Microsoft’s Carbon Program Manager, responded mostly rephrasing what was written in their press release. Adding that “the business units themselves [Windows, Azure, Xbox, LinkedIn etc.] have actually embraced being charged the fee […] and they were not actually the ones updating the methodology.” Explaining that total CO2e “went down because we had overestimated them in the past, to be conservative.” Their current methodology involves “more precise mapping of supplier invoices to business units (including de-duplication), better categorization of those invoices to their relevant sectors, and a shift, where possible, from industry average emissions factors to supplier-specific emissions information.”
Unfortunately, Lucas and Elizabeth would not provide the data that produced their pathway graph. Saying only they would update their Carbon Disclosure Project and Environmental Factsheet at the same time of year they usually do. “It’s inefficient for us to make off-cycle updates”.
1+2 = 100 (Microsoft 2015–2019)
Microsoft was offsetting about three percent of its total emissions while claiming “100 percent carbon neutral”. It achieved this by narrowing their accounting methods.
Rob Bernard, Chief Environmental Strategist, aware of the 15 subcategories of Scope 3 reporting signed off (approved) the Carbon Disclosure Project reports from 2011 to 2014. He appears to be the first of several to make this sloppy definitional change in 2015.
In a deep dive on Microsoft’s blogs and whitepapers I found that Rob began describing Microsoft as “100 percent carbon neutral” in 2015. From that point forward Larry Cochrane, Brad Smith, Vincent Sigh, Lucas Joppa, Chris Nickerson and Lucas Velush all made the same claim — some adding the descriptive word “operations” an uncommon technical distinction that few would understand.
Timeline of “Carbon Neutral” at Microsoft:
- 2012: TJ DiCaprio, Chief Architect of Microsoft’s carbon neutral fee detailed in a whitepaper a plan to “become carbon neutral […] for our data centers, software development labs, offices, and employee air travel”.
- 2015: Rob Bernard, Microsoft’s Chief Environmental Strategist wrote “We have been 100 percent carbon neutral since July 2012.”
- 2016: TJ DiCaprio, Chief Architect of Microsoft’s carbon neutral fee, added the descriptor “operations” to Rob’s “100 percent” claim saying “Microsoft’s global operations have been 100 percent carbon neutral since July 2012”. Later, speaking at a TEDx event she presented the fee as “a model […] to be able to reverse climate change […] to have the best of both worlds”.
- 2016: Brad Smith, Microsoft President, wrote “100 percent carbon neutral in our operations and business air travel” later that month he wrote the forward on a document titled Beyond Carbon neutral: Expanding beyond our carbon neutral operations to accelerate global and local good that said Microsoft “operated at 100 percent carbon neutrality — or climate neutrality”. By 2017 he shortened things down (his hyperlink, not mine) “operate 100 percent carbon neutral” linking to an internal blog that did not, in any way contain the words “100 percent carbon neutral”.
- 2017–2019: Larry Cochrane, Brad Smith, Vincent Sigh, Lucas Joppa, Chris Nickerson Miri Rodriguez and Lucas Velush all repeat the bold “100 percent” carbon neutral claims with the similarly vague descriptor (eg: operate, operates, operating, operations).
- Dec 2019: Brad Smith, at the Annual Shareholder Meeting asked about Climate change said “Microsoft became really the first large company in the United States to become carbon neutral. That was in 2012, and that applies to all of the company and its operations.”
- Current: Topline descriptor on Microsoft’s Sustainability Fund Power BI Dashboard
Noteworthy sources of “100 percent carbon neutral” externally:
- 2012 article on Earth911 titled “Microsoft to go 100 Percent Carbon Neutral”. It is unclear if this was native advertising (according to a 2017 Media Kit is sold for ~$5000) Author was reached for comment over LinkedIn and email but did not respond.
- 2015 NY Times author David Gelles wrote “In 2012, Microsoft said it would become 100 percent carbon-neutral.” I asked the author for the source of the quote and whether Microsoft requested a correction for the story. David Gelles said he could not recall the source of the quote nor did he recall any request for correction.
- 2016: NY Times published “Microsoft says it has been 100 percent carbon neutral since 2014”. Author did not respond to a request for comment.
“We have oil and gas initiatives in more than 70 countries […] Accelerate the process of innovation to improve time-to-oil […] Over the past seven years since Microsoft created a business dedicated to the oil and gas industry” -Albrecht Ferling, Managing director, Worldwide Oil and Gas Industries for Microsoft (2009)
Offsets + Accelerants = ?
If Microsoft counts carbon offsets, do they count carbon acceleration? Lucas Joppa and Elizabeth Willmott did not respond for a request for comment (will update if provided a response).
Carbon Offset Math
Microsoft’s green investments, for lack of a better word, are tracked in a Power BI dashboard and split into “Investment Types”: offsets, renewable electricity, sustainability grants and water replenishment.
- $250 Million per year between 2021–2025. Climate Innovation Fund to “accelerate the global development of carbon reduction, capture, and removal technologies.[…] We understand that this is just a fraction of the investment needed, but our hope is that it spurs more governments and companies to invest in new ways as well.”
- ~$2 Million per year on offsets between 2016 and 2018. (When offsets are purchased in bulk they cost around $2–5 per mtCO2e. I multiplied that by the scope 1, 2 and Business Air Travel which, according to CDP reports was about ~550,000 mtCO2e per year for that time period.)
- ~$55 Million per year in energy. According to a 2015 (FY) document that wrote “The Microsoft facilities team was facing annual energy costs upwards of $55 million”
- $10 Million per year for AI for Earth in cloud-computing grants. This 5-year commitment began in 2017. (One example is species classification [and it works ok])
Rough total: $317 M per year
Carbon Accelerant Math
Partnerships with the fossil fuel industry geared to accelerate fuel extraction. Microsoft is not secretive about the existence of these deals but they do not have a public Power BI dashboard, they do not mention them in their Corporate Social Responsibility report (aka: Sustainability or ESG report). There has been a change in public-facing descriptions between 2003 and now. From overt descriptions of trying to accelerate oil exploration and production (E&P) to fluffy cloud jargon and vague references to AI.
One engineer shared an unvarnished look at one part of a recent, multi year Microsoft-Chevron deal in Logic Magazine. An engineering team sent to Khazakstan to explain to oil executives how the Azure cloud could gather and process seismic data using ML/AI to help with E&P. Tengizchevroil project covers a 20x21km oil field with 40,000 workers. The Microsoft engineers were asked by oil executives if AI could be used to monitor worker safety, but occasionally the veiled language was dropped indicating it was more about spying on workers to gather productivity information in a country where privacy rules are relaxed.
Too many to detail here so I have compiled them in a spreadsheet. Microsoft’s exploration and production work includes:
- Creating an E&P conference
- Giving speeches and keynotes at E&P conferences
- Booths and sponsored rooms at E&P conferences
- Partnerships with E&P software companies
- Contributions to the E&P-aligned politicians
- Multi-year contracts with fossil fuel companies
Big Oil accounts: BP, Chevron, Devon Energy, Equinor (formerly Statoil), Exxon, Halliburton, Phillips 66, Petrobas, Saudi Aramco, Schlumberger, Shell.
Low confidence estimate: $1–2 B per year (of $125 B revenue)
“There was this great cartoon, well, not-so-great internally” -Microsoft’s Managing Director, Worldwide Oil & Gas (IIoTOilGas 2018)
The Reputational Cost to Microsoft
Greenwashing reduces overall customer base and increases employee churn which results in a higher payroll and lower revenue. It’s my contention their E&P actions are bad for business.
“As Microsoft workers, we’ve been made complicit. […] We stand with the Amazon and Google by supporting their demands: (1) Zero emissions by 2030. (2) Zero contracts for fossil fuel companies to accelerate oil and gas extraction. (3) Zero funding for climate denying lobbyists and politicians.“ — Microsoft Workers for Climate Justice (Sep 2019)
The average Microsoft salary is ~$119,000 plus ~19% in bonus and stock (on par with Apple and Google). Nearly half of respondents, in a tech industry survey commissioned by Swytch [n=1000] “were willing to accept a smaller salary to work for an environmentally and socially responsible company.[…] 30% have left a company due to its lack of a corporate sustainability agenda and over 11% have done so more than once”. These results were in line with a similar 2016 study by Conecomm and a comprehensive 2019 survey by Deloitte [n=16,425].
I don’t have access to Microsoft’s books but it’s likely they spend over $15 B on payroll. It would seem bad business to take on $1–2 B in E&P fossil fuel contracts only to: increase revenue by ~1%; pay a billion a year more in salary; reduce employee hiring pool and reduce customer base by a third.
Deloitte, in a study of people under 40, showed the environment was the top concern.
- 42% have started/increased a relationship with a business for environmental reasons.
- 38% have stopped/lessened a relationship with a business for environmental reasons.
With a policy shift, Microsoft could be carbon neutral now. Offsets would only cost about $700 per employee and it could save itself ten more years of reputation damage. If another large tech company takes up the contracts: great, let them suffer an increased representational damage instead.
Fossilized Policies Fueling Microsoft
Microsoft’s Regulatory and Public Policy Board reviews and provides guidance to the Board and management about environmental sustainability. (Microsoft Charter 2019) All members believe climate change is real and caused by humans. Only Ms. Pritzker has written about it.
In a review of SEC filings, I see no active board members with fossil fuel holdings (now that Bill Gates has stepped down). Nobody on the Regulatory and Public Policy Board has a public position on fossil fuel divestment. I messaged Mr. Thompson and Mr. Stanton via LinkedIn; and Ms. Walmsley and Ms. Pritzker by email. Unsurprisingly, nobody has yet responded. (view my letters here).
UPDATE May 14th: VP of Trust and Global Health from GlaxoSmithKline responded on behalf of Emma Walmsley. Their response did not address my question about divestment. Only responding to an observation I made about GSK’s reduced carbon targets. The spokesperson wrote that GSK’s carbon targets remain “in line with a level of decarbonisation required to keep the global temperature increase to 2°C”.
My review of Microsoft’s Board with quotes can be found here. It focuses mostly on Regulatory and Public Policy members.
The math is simple. There is more fossilized biomass underground than can be absorbed above ground. Therefore, only a small fraction of known fossil fuel reserves can be combusted to stay within 1.5 degrees of warming. All political and financial levers must be pulled. (See En-ROADS MIT Interactive Simulation)
Carbon Capture Sequestration (CCS) is a technology solution usually floated without concrete numbers attached. The cheapest forms of sequestration are projected to go down to $30 per ton by 2030. Cheap CCS technologies rely on sequestering gasses from existing industrial processes. Direct Air Capture Carbon Sequestration (DACCS) is the type illustrated in Microsoft’s video and talked about on CNN. DACCS doesn’t piggyback off existing industrial processes, uses large amounts of electricity and costs $500-$800 per ton. It expected to decrease to $100 at scale (Global CCS Institute 2019). All known and planned sequestration technologies for the next ten years are higher than Microsoft’s internal carbon fee of $15 per ton.
Conclusion
To reach net-zero without shenanigans Microsoft either needs to disengage from fossil fuel contracts or it needs to account for it (the fossil fuel companies with whom they do business don’t have ‘Scope 3’ carbon targets). Microsoft stopped responding to my questions when I asked if they account for carbon acceleration.
In my opinion, Microsoft is unlikely to put the brakes on E&P contracts in the next 10 years. The Board members who could suggest policy changes regarding fossil fuel divestment probably think it’s a business taboo.
While no longer on the board, Bill Gates is not an ally in this regard either. Despite leaving the board to ‘tackle’ climate change, he ignored a divestment petition signed by 230,000 people back in 2015. He continues to be the largest individual stakeholder in a mostly-coal energy company that doesn’t sequester its carbon is projected to be dirtier than America’s grid into the foreseeable future.
Simply put, Microsoft will continue to have its feet on the accelerator and break for years to come.
I hope I’m shown to be wrong. Microsoft has ten years to make good on their promise. Ten years to develop a transparent and robust way to quantify carbon: offset, removal and acceleration.
“[Children] are not telling you to keep reaching ‘net zero’ emissions or ‘carbon neutrality’ by cheating and fiddling around with numbers. […] We must forget about ‘net zero’ we need real zero.” Greta Thunberg (DAVOS Jan 2020)
ABOUT THE AUTHOR
Daniel Voshart works in the Canadian film industry and is therefore funemployed due to social distancing. You can can follow his eclectic rants on Twitter. If anything is missing: DMs open, email is easy to find.
