EP71. Is climate neutral beauty possible?

Carbon or climate neutral. Beauty is the hottest term on the scene at the moment. And every new beauty brand launching should be thinking about how they incorporate their sustainability credentials into their mission and their formulations. But what does it actually mean to become climate neutral? What's involved and how do you know a brand is doing the right thing unless they're certified in some way? Luckily, a new certification scheme has arrived to help indie beauty brands with exactly that issue. Climate Neutral was founded in 2019 with the intention of helping businesses in every sector become certified to their standards. And in today's podcast, I talk to Austin Whitman, Climate Neutral CEO and passionate advocate for climate neutrality in the business community. If you've ever thought about what it takes for a beauty brand to become climate neutral, you don't want to miss this episode. Welcome to Green Beauty Conversations, the podcast that challenges you to think about how you buy, use, make, make and sell your natural beauty formulations. We tackle topics that will make you think and encourage debate about green beauty with your friends, followers or customers. I'm your host, Lorraine Dallmeier. I'm a chartered environmentalist, biologist and the CEO of award winning online organic cosmetic formulation school, Formula Botanica. We have thousands and thousands of students in over 175 countries around the world who study with us to become organic beauty formulators and entrepreneurs. Visit our website@formulabotanica.com to try our free online formulation course. So today's episode is an interview with Austin Whitman, CEO of certification scheme Climate Neutral and advocate for the decarbonisation of global emissions. Climate Neutral has created what they call an achievable certification framework. This framework certifies brands, including indie beauty brands, who measure their carbon footprint, offset it with verified offsets and create future reduction strategies. Welcome to the podcast, Austin. It's lovely to have you here.

Thanks, Lorraine. It is good to be here.

Awesome. Well, let's dive straight in. My first question to you then is what is climate neutral and why are you focusing on beauty brands?

We are a two year old nonprofit organization that started because there was no great way for consumers to understand the climate impacts of things that they purchase. And that's a real problem, especially at a time when governments are pretty slow to get on top of the climate challenge. So we launched a label which we call Climate Neutral Certified, which applies to products and brands that have gone through our certification process. And we're doing this as a nonprofit because we're trying to make it as accessible to companies as we possibly can, not just the Fortune 100 companies or the Biggest companies in every market, but sort of every company up into down the value chain. And we do a handful of things a little bit differently, I think, than what people tend to do when they approach carbon neutrality. We require a lot of kind of deep analysis of companies value chains. So the products and the ingredients that go into products, we also look relatively comprehensively at scope 3 emissions that are other than the purchased materials. So anyway, I'm sure we'll get into all that. But fundamentally there's a consumer label that we've launched and we've got about 320 brands that are going through our certification process right now. You asked why health and beauty. Health and beauty is definitely one of our top focus segments. We launched in the outdoor industry, which we kind of quickly branched out from there into durable consumer goods, the things that you sort of buy but will have for a while, Clothing, fashion and apparel, home goods, furnishings, that kind of thing. And then the other two areas that we've moved into are food and beverage and health and beauty. And health and beauty, as you mentioned, is having a huge movement toward sustainability and understanding the impacts, just broadly speaking. And it's great. And the nice thing about health and beauty products is that consumers who purchase them or they really care about what they're purchasing, right? They pay a lot of attention to the companies, they pay a lot of attention to the brands. And when there's a stronger kind of more, I guess I'll call it an emotional association in that purchase, that's an opportunity for us with the climate label to come in and kind of, in essence, sort of start a very simple conversation about the climate impacts of things that people buy.

That's awesome. And you're absolutely right. There is a real revolution at the moment in the beauty industry where people are talking about sustainability. So it sounds to me as if you're in the right place at the right time. Now, I've spent some time on your website and I've been looking through the process of how climate neutral actually works in terms of the certification. And what I'd really like to do actually is walk through the individual steps to try and understand them a little bit better. So I can see from your process that the first stage is measurement. So I guess my question to you is how do you accurately measure the carbon footprint of a beauty brand, particularly when there is often quite a sizable supply chain involved in terms of ingredients and packaging and shipping and more. So how does that work?

We don't accurately measure it, and I think that's part of the way We've approached things that are a little bit different from what other people say. We measure or we estimate carbon emissions. And the only way to estimate value chain emissions is to estimate them and specifically not to try to calculate them to the, to the last gram of carbon, because it's impossible and you'll spend years doing it. And part of our theory of change is that the more we can get people comfortable with the idea that there's going to be uncertainty in any value chain carbon footprint, the faster we'll move people toward actually thinking about it. You don't need to know whether your carbon emissions from the chemicals that go into your products are 301 or 302 tons. What you need to know is whether they're, you know, 5% or 50% or 90% of your carbon footprint, because then it shows you where to focus. And the amazing thing is just how much we've been able to show people about their relative impact of the things that they do in ways that they just never even comprehended. And we've been able to do that just a fraction of the time that a typical sort of lifecycle analysis process would involve. Which isn't to say the companies shouldn't do lifecycle analyses, but if you look out at there, the number of companies who have any inkling of what their carbon footprint is, most companies have no idea. And most companies have no idea in particular about the relative scale of things in their value chain. So we're just trying to give people that sort of. You know, I sometimes liken it to the process of starting a diet. It's like you get on the scale, you can't start doing anything until you get on the scale and sort of understand what your starting point is. And so we're trying to do that with companies in a way that leverages technology to take a process that typically involves a lot of consultants and boils it down to something that anybody in a company can do themselves. And so the software tool that we built does this. It uses lifecycle assessment techniques and a few other approaches to come to a reasonably good estimate of your footprint. And that sets you off on a course to then start to do things.

About it that makes perfect sense. So can you give me an example of. Because obviously you have worked with beauty brands. I mean, you said 320 brands so far. In terms of the total companies you've worked with, I'm guessing quite a few of those have been in the health and beauty space. Can you give me any examples of how that has actually worked in Terms of them estimating their carbon footprint so far.

Yeah. So it's interesting, you know, most companies get into it thinking that their footprint is going to be so different and so unique because of the nature of their business. But if you look at what any company does and break it down into its component pieces, whether you make shoes or whether you make soda or whether you make lipstick, really, you know, it doesn't so much matter because the core components of your carbon emissions are going to look just about the same. We all use energy to heat, power and light our office buildings, whether it's a home office or an actual office office. I hear that people sometimes go to offices. Not sure. And then we all, you know, we have cars that we drive and vehicles, we have shipping for products, packaging. All these things are common elements across companies that make physical products. And every company has material components that go into the products and then they have processing that happens of those products. And so if you distill it down to some of the kind of the higher level activities that are involved in going from the very top of your value chain to delivering products to your customer, it doesn't so much matter what you make. It's just a question of breaking them down into groups of things that are similar, like the miles that you drive in a car. I'll go into your commuting budget and then there's airline flights, all go into your business travel budget and so forth. Then, you know, you use widely available emission factors to turn the business activities that you conduct and create a footprint out of it. With the health and beauty space. Probably the biggest difference to other companies that we work with is that the raw materials are chemicals. And to the extent possible, we try to get down to at least the major sources of raw materials for the chemicals that go into any product and use that as the basis for, you know, most of the ingredients that go into the finished good. And you know, that looks a little different from, you know, say the rubber and nylon that goes into a pair of shoes. But, you know, beyond that it's again packaging, transportation, you know, marketing services and so forth.

Okay, so then let's move on to the second stage that I understand is part of certification, which is offsetting in your case. Now here on the podcast, we've discussed carbon neutral beauty before and beauty miles. And one of the things that I've talked about with some of my guests before is that offsetting obviously isn't a panacea for the beauty industry. Although we have seen quite a few beauty brands make carbon or Climate neutral claims by only offsetting and then continuing with business as usual. The interesting thing I found about your certification scheme is you offset last year's emissions first once you've undertaken the calculation. So what's the rationale for doing that? And if you're going historical, why only stick with one year?

Yeah, so the rationale for requiring companies to offset their emissions from last year is you can't claim that you're carbon neutral for future emissions because those emissions haven't happened yet. So in order to make a carbon neutrality claim, we had to pick a period of time. And a year feels like kind of the most logical unit to analyze a business. And we do this on a rolling basis. So when somebody's in their third or fourth year of certification, they will have then a history of offsetting over the last three or four years. To support the carbon neutrality claim, we have to get companies to carbon neutral today. And the way I sort of separate things out is people probably hear net zero and climate positive and carbon negative and climate neutral and all kinds of different things. And I think of carbon neutrality as kind of a snapshot in time. It's sort of like the balance sheet of an organization. Over the course of a year, how much carbon did you create, how much carbon did you destroy? What was the balance? In the same way you had revenues and costs and the result or the difference between them is your profits.

Right.

So carbon neutrality is sort of like the snapshot of your business activity over the course of a year. That's not the same as net zero, which people are generally kind of coming together to agree that net zero is sort of a long term view as to how a business is going to get to its own net zero point by 2050, which is when the whole world needs to get to net zero by. So year by year, carbon neutrality to us makes a lot of sense. Because if you just put a long term, a 30 year goal out there toward net zero, the chances of everybody reaching that magic point at the same time to me seem extremely remote. And that that strategy is far too risky given the threat of climate change. And so we require companies to offset emissions so that we can specifically drive investment in carbon reducing projects today, even before it's clear how a company is going to get to its net zero point in the future. What that does is it in essence kind of cleans up your emissions over time. Because if you don't do that on your path to net zero, you're still accumulating a lot of carbon as you go along as you gradually trend down toward NET 0 By 2050, you can look at it as above and beyond net zero choice that businesses are making to neutralize their carbon emissions year by year. And then I think you asked me another question, but I've forgotten it.

No, I think you've answered it actually, because I wanted to know what the rationale was and why you were going back only one year. But you answered that perfectly. So moving on from that, then, what sort of schemes do you use in order to offset? How does that work?

Yeah, so we support a wide range of projects. We sort of, I think in the offsetting world, I think you can kind of say that there's a lot of discourse around it right now. There's kind of the folks who support, you know, only the most permanent technologically based removals, and then there's people who say, like anything is workable. We're sort of in the middle somewhere where we believe that the early days of the carbon market didn't produce the highest quality carbon credits, that what's out there today is generally pretty solid. But you have to pick and choose your projects somewhat carefully. So we have a set of standards that we keep that get updated every year with the help of a group of about a dozen external advisors. And we try to get diversity in the projects that we support. And there's a lot of logic to that. Partly it's risk mitigation, partly it's just kind of like investment portfolio theory. The more stocks you have in a bundle on average, the better you're going to do. Partly it's because climate change is a multifaceted problem and we want our collective investment with all the brands that we work with to go into a range of projects. We don't want them to just go into tree planting projects because that misses the entire problem of the energy sector, which needs to be decarbonized. We have a range of projects that we support. Some brands do invest on their own in projects and that's fine, but they still have to meet the standards that we publish. And we don't make any money. We don't sort of consider offsetting part of our business necessarily. But what we do is we work extensively with providers in the marketplace and over time we'll probably get down to the project level where we'll, we'll pick a few projects that we want to support on a longer term basis. And yeah, so I say kind of diversity of project types. This year we're doing energy efficiency, we're doing some electric vehicle credits, which is Kind of a newer emerging category, renewable energy, forestry, and on and on. Everything you might expect.

Awesome. Okay, so then you've walked us through the first two stages. Measurement, offsetting. Now we come to the meaty part, I suppose, when we're going to talk about reduction. That's the third stage of the process, as I understand it. And you require all brands that work with you to create a reduction action plan to reduce emissions over 12 to 24 months. So let me start by asking, how hard is it to write one of these reduction action plans and what's actually involved?

Yeah, someone has to file at least two things that they're going to do to reduce their emissions. And the footprint is a natural starting point for coming up with that plan. And what we do is we give people resources throughout the certification process, and the resources that they get at that point in the process is a list of ways, common ways to reduce emissions that are tied to the different sources of emissions. We use the Greenhouse Gas Protocol. So everything is in terms of scope one, Scope two, and the subcategories of scope three, which, you know, two years ago when we started this, I could say scope one, scope two, scope three, Greenhouse Gas Protocol, and people would just glaze over. And now, like, you just nodded your head, which to me says maybe you know about scope one, Scope two, Scope three, and the Greenhouse Gas Protocol. And that's great.

I'm guessing most of our listeners won't, though. So do you want to just give us a brief sort of a simple breakdown of what that means?

Yeah, it's pretty straightforward. So Scope one emissions are emissions that are direct from combustion of energy. So it's emissions from fuel that's burned in company vehicles and say, natural gas from your heating system in your building, or fuel oil. Here in the northeast of the US There's a lot of fuel oil still, which is basically just diesel being burned in a furnace. Scope two is electricity for all intents and purposes. In some cases, there's some steam generation that you count there as well. And then in scope three, it's all of the stuff that happens sort of off your company premises. So it's all of the embedded emissions in the things that you have in your supply chain. It's the corporate travel, it's shipping of your products, and we count eight of the 15 subcategories of scope three emissions. I won't go into the details there, but basically anything where you're buying something from somebody else and they're in essence, causing the emissions, but you're indirectly the cause of those emissions because you're the one buying the thing from them. That's all scope three. So yeah, so we tie the reduction recommendations back to this framework, which is kind of very simple, clean way of thinking about the different sources that you should go after. And we ask people to pick some things that they're going to work on. Reductions are important, but you know, they always by definition are forward looking. You're trying to reduce from what you would have admitted would have emitted. And so we're always getting people to say what are the reductions steps you're going to take? And then when somebody recertifies, they tell us how it's going. So say it was a two year project to install solar panels. They'll say, well, we're 50% of the way done that. Or it was a project to improve energy efficiency at a factory. Oh well, we're 100% done that. And now we're going to replace that reduction measure with something else that we're doing.

So what sort of things do you see brands in the health and beauty space choose then? Because you said you file two things to get started with your reduction action plan. Can you give me examples of what you might see in this particular sector?

People focus on packaging a lot because in addition to the container for the product itself, there's often packaging of the packaging and then packaging of the packaging of the packaging. You know, multiple layers of packaging and not the packaging is the greatest source of emissions, but for something that's relatively low weight, like a health and beauty product, low weight per dollar of revenue, that is. And just to be more specific about that, you know, a vial of, I don't know, what is it on the shelf behind you? Arnica gel or something like that? I don't know what that is.

Oh, I have lots of things behind me. Serums, cleansers, toners, shampoos, you name it.

Okay, so a vial of serum or toner, right. You know, might cost, let's say it costs $30 or something like that, but it only weighs 3 ounces compared to a chair or a backpack or something else. You know, you tend not to see much of the carbon, as much being of the carbon being tied to the shipping of the product because it just doesn't weigh as much. And so the chemical inputs, the raw material inputs to the product and then the packaging are kind of the two major things that we see people focus on. And that's because going back to that scope 1, 2, 3 framework, most emissions from most products are in scope 3 and so we encourage people to focus on the things in scope three that are going to make a big difference. So people are looking at switching out higher greenhouse gas petroleum based chemicals for more natural products or natural ingredients and then reducing packaging. Air shipping compared to ocean shipping is massively different in terms of its carbon intensity. So you know, we encourage people to use as little air shipping as possible. So those are some of the things that we see.

So how does climate neutral then monitor that the reduction action plan is implemented and that it actually works? So I can see from what you've got on your website that you encourage quantitative reduction goals, although I understand they're not mandatory and you expect brands to report about their emissions. But what does your organization do with that information then?

Well, at a very basic level, when somebody recertifies, they have to recompute their footprint. So we're just in our second year, we have 150 brands who are recertifying and really have no historical data to point to where we had a year over year comparison. But in four weeks we'll have 150 brands footprints that we can look back and compare from year one to year two, which is super exciting. And then we'll have another some odd certifying for the first time. So next year we'll be recertifying north of 300 companies. And so we'll start to accumulate this year over year analysis of the footprint that allows us to go down at the relatively detailed level and sort of see how things change from year to year. That's the truest test of how a reduction action is working because that's the kind of the output based metric, the certification world, they're kind of process and input based certifications which tell you how you should do something. And you know, think of ours as more of an output based certification where we're looking at just the emissions that came out of your process and what you're doing about them. Yeah, so I don't actually have a ton of hard data to give you as far as the effect of the reduction requirement. One of the things that is a reality of any growing business is that your footprint may increase in absolute terms from year to year, but it may decrease in relative terms because you found better ways to make your products. And so for every dollar or gram of product that you sold, the carbon intensity is going down. And that's exactly the direction that we want to see the product world go in. And as sales increase, we want those products to be displacing the sales of products that aren't Made aren't getting certified. So ultimately we're sort of trying to shift consumer spending into categories of products that are made with climate considerations in mind.

And that's very exciting to hear because I think that's also what consumers want. So you've worked with quite a few brands now, obviously, I mean, you've been talking about the different brands that have come through. What advice would you give to an indie beauty brand? Because that's who we work with mainly wants to become climate neutral, but doesn't know where to start.

Yeah, I mean, that's kind of what we hear from a lot of people is I'd like to start talking with my customers about climate change, but don't know what to say. Or I'd like to start implementing a framework, but don't know where it begins. I think the first step is just don't be too overwhelmed by the thought of having to try to understand your carbon emissions, even if you're not an expert and don't have a tremendous amount of time to dedicate to it. It's not all that complicated. If you think about globally where emissions come from, it's mostly in energy, followed by industrial production processes that emit other types of greenhouse gases. Then there's land use, and those are the main categories of emissions. And then there's a bunch of smaller things on top of that. As you think about your own business, just think where are the parts of your business that require significant amounts of energy use? And if there are any kind of what parts of your business also depend on land use and then in particular in healthy and beauty. Think about the chemicals. Think about the extent that your products are made out of petroleum derivatives. Those have a pretty significant carbon footprint because taking a barrel of crude oil and turning it into through kind of chemical processes requires a lot of energy to turn it into something that's usable and safe to put on your face.

So yeah, thankfully most of our listeners won't be working with those since we work mainly with natural ingredients. But nonetheless those too have a carbon footprint, as you absolutely rightly pointed out.

Yep, they do.

So let me then finish with this last fairly big question. Is it possible for a beauty brand to be truly climate neutral without offsetting? Or in your opinion, will offsetting always.

Play a role today? So that's a two part question, because is it possible today to be climate neutral without offsetting? No, simply no. I mean, our global economy depends on high carbon energy production. So the only way to claim that your carbon, that you're climate neutral would be to just narrow what you count down to just a very, very limited amount of your footprint, which is kind of like saying my hand weighs a pound, so my body weighs a pound. Right. It's kind of, you know, it's just a fraction of what your total responsibility is. So, no, if you count the right stuff, you can't be climate neutral without offsetting. And the question then is at what point will the energy mix change in the regions where you manufacture and what point will sustainable fuels be used for shipping? At what point do we get to last mile delivery? That's lower carbon intensity. These things will take time. And every smaller company, unfortunately, is kind of subject to bigger system change. Subject to the holdup of bigger system change that is sort of out of their control. Which is precisely why we say do what you can right now, which is invest in projects both inside your value chain and then outside your value chain in the form of offsetting, because there's not a lot of time to waste.

Very true. So with those words then, if our listeners want to find out more about you and the climate neutral certification scheme, where can they do so?

ClimateNeutral.org is our website. We've got a social media presence where we try to engage with whoever wants to reach out to us, but the website's a great place to go. We've got a join us form, we've got some information on how the certification works.

Brilliant. Well, thank you very much for joining me on the podcast today, Austin. It's been really interesting and informative listening to you.

Thanks for having me.

So I hope you found this podcast episode eye opening and I hope it gave you an insight into what's required for a beauty brand to become climate neutral. I hope it's also demystified what's involved along the way and if you're a beauty brand owner, perhaps made you feel less concerned about the complexity of the process. I'd love to hear from what you think and if you're considering making your beauty brand climate neutral, please do come and leave us a comment on our social channels as both the Formula Botanica team and I love hearing from you. Thank you for joining Austin and I for this latest episode of Green Beauty Conversations. I hope you enjoyed it. Make sure you subscribe to our podcast on itunes or Spotify and stay tuned for the next episode. Follow Formula Botanica at Formula Botanica on Facebook, Instagram ClubHouse as Twitter, YouTube, Pinterest or LinkedIn. Visit our website at formulabotanica.com and sign up for our free online formulation course today.