How Microsoft Is Leading The Response To The Climate Crisis

Many multinational companies have committed to net zero carbon goals. But with industrial activity producing too much carbon for life on Earth, corporations can’t simply look to repair the damage they’ve done – they need to reverse it. Microsoft has set the audacious goal of removing its legacy emissions.

Companies like Microsoft, Shopify and Ikea have announced bold plans to become carbon negative. This means they will remove more carbon from the atmosphere than they emit. This goal requires a new approach to carbon emissions. It will distinguish the companies that are serious about solving the climate crisis from those that are simply looking to manage their reputation.

Most Carbon Offsets Reduce Carbon Emitted, Not The Carbon In The Air

After companies cut out as much carbon as they can in their operations, they buy carbon offsets for the remaining emissions.

Carbon offsets are investments in carbon reduction or removal projects undertaken by another party that allow companies to “deduct” the emissions that they’re not able to eliminate themselves.

Yet, not all offsets are the same. Most offsets won’t actually avert the climate crisis, they simply slow it down. They fund green energy development, such as wind and solar farms, which increases the supply of green energy, but do not necessarily reduce the demand for carbon-intensive energy.

Companies can even inadvertently contribute to the crisis, as executives feel that purchasing offsets gives them the moral license to continue to emit carbon, as someone else is offsetting their emissions. It’s like Paul continuing to rob Peter over and over again to fund his growing spending habit. Companies that use offsets like this don’t internalize the disastrous costs of the carbon produced in their operations.

In a previous article, my research team found that 23 of the 50 largest companies in the S&P Index explicitly mentioned the use of offsets in their plans to meet their climate targets. Only a few disclosed the offsets they were purchasing.

Microsoft Seeks To Remove Carbon

In 2012, Microsoft became carbon net zero. In 2020, it decided that this wasn’t good enough and announced it would be carbon negative by 2030. If you don’t think this is audacious, then listen to this. By 2050, Microsoft says it will remove the equivalent of all of the Scope 1 and Scope 2 emissions it had emitted since it was founded in 1975. Everyone, even Microsoft, recognizes that this is a “moonshot.”

Its plan, as shown in the figure below, will cut operational and supply chain emissions in half. At the same time, it will scale investments to not just offset carbon, but remove it entirely. Given there are few projects that remove carbon, Microsoft is directing at least some of its $1 billion innovation fund to fund new carbon removal projects. Microsoft has not only embedded the carbon negative mindset into its operations but also made substantial investments.

Two years after announcing its goals, Microsoft has allocated $471 million of its billion-dollar commitment. Furthermore, it secured contracts to remove a cumulative 2.5 million metric tons of carbon dioxide.

Although that’s a significant amount of carbon, it’s very shy of its current emissions. Microsoft’s total emissions in 2021 were approximately 14 million metric tons. The company will need to scale its annual removals by at least five times to reach net negative.

So why is Microsoft moving so slowly, given its commitment? To understand this, it’s important to unpack how carbon removal works.

How Does Carbon Removal Work?

There are two main approaches to carbon removal: technologies that directly capture and sequester carbon and nature-based solutions that absorb carbon.

Removing Carbon Through Direct Capture

Direct capture technologies pull carbon dioxide from the air.

In Iceland, a company called Climeworks has begun operations at the largest direct air capture plant, in partnership with Carbfix. It’s the first plant of its kind that “translates the vision of industrial-scale direct air capture and storage into reality.”

How does it work? Large fans draw air into a collector, which passes through a filter that selectively binds carbon dioxide. After the filter saturates, the collector closes and unbinds the molecules using heat. The carbon dioxide can then be sequestered underground.

The Carbfix method at the Climeworks plant mixes the carbon dioxide with water and it is pumped underground, where it interacts with minerals to solidify. Other companies, like CarbonCure, inject the captured carbon dioxide into concrete, which has the added benefit of strengthening it. Concrete producers, then, need less cement – a carbon intensive product – for construction.

Although this approach seems promising, it’s a drop in the ocean. The Climeworks plant took 15 months to build and sequesters only 4,000 tons of carbon dioxide per year. Keep in mind Microsoft emits 14 million tons of carbon annually. Technology-based solutions are not enough. Companies also need to embrace nature-based solutions.

Absorbing Carbon By Regenerating Nature

By regenerating nature, plant life will absorb carbon and foster biodiversity. Restoring ecosystems is critical to reducing carbon over the long term and maintaining a carbon equilibrium.

The World Resources Institute reported that the world’s forests absorb 7.6 metric gigatons of carbon dioxide per year. But this tree cover has been declining significantly recently and is expected to continue to do so. The Amazon Rainforest, the largest forest in the world, is expected to lose 27% of its trees by 2030 given current rates of deforestation.

In Canada, a company called Taking Root is trying to reverse that trend. It helps companies like Microsoft remove carbon by regenerating nature. Taking Root works alongside Latin American smallholder farmers to grow trees on their farm land. What sets them apart from other “tree planters” is that they are not simply planting massive plots of trees that can wreak havoc with ecological systems and local communities. They work with landowners and local communities to ensure that the trees are integrated into habitat and support communities.

What’s more, Taking Root is using technology to scale their venture by providing farmers a digital platform that can streamline the management and accounting of planted trees and their growth over time. This platform also verifies the carbon the trees remove from the atmosphere, unlocking the global carbon market for local farmers.

This approach to regenerating nature ensures that farmers retain control over their land, empowering them to make decisions that are good for themselves, their local environment, and their communities. This approach is not only more socially just, it also fosters resilient outcomes.

Environmentally conscious companies can’t get enough of these projects. As of June 2022, 86% of Microsoft’s additions to their carbon removal portfolio have been forest-based initiatives.

But these regenerative approaches require deep long-term commitments. Taking Root’s approach takes time: time to build trust with local farmers, time for trees to grow, and time to learn and share local best practices.

The Climate Crisis Requires A Multi-pronged Approach

Thankfully, many companies are stepping up to the climate challenge. Earlier this year, McKinsey, Alphabet, Shopify, Meta, and Stripe announced an eight-year, $925-million partnership to accelerate carbon removal technologies. The initiative, Frontier, aspires to create a new supply of carbon removals by signaling to investors and future entrepreneurs the market’s potential. As Shopify writes: “the world needs more carbon removal entrepreneurs and investors to support them.”

Whereas the state of play for most companies is net zero, the true leaders are seeking net negative. According to the IPCC, by 2050, corporations need to remove 5-16 gigatons of carbon dioxide annually given current emissions. According to the IPCC, this requires companies to embrace carbon offsets, direct carbon capture and nature-based solutions. Only then can a seemingly inevitable climate crisis be averted.