Sustainable Travel

A Step-by-Step Guide to Managing Carbon Emissions Like Financials

January 31, 2024

In the era of heightened awareness towards sustainability and corporate responsibility, corporate travel leaders are in a prime position to make a significant impact on their organization's financial well-being and carbon footprint by managing carbon with the same rigor as financials.

In this blog post, we provide a step-by-step guide into the fundamentals of managing your business travel carbon emissions like you manage financials and ensure every trip is directly tied to your organization’s strategic goals and broader objectives.

Step-by-Step Guide to Carbon Planning and Management

Step 1: Establish a clear carbon goal aligned with business objectives

Just as financial planning begins with setting well-defined objectives, effective carbon management begins with a clear goal that aligns with and supports the company’s overall strategy. This could be a specific reduction target, such as reducing air business travel carbon emissions by 30% over the next five years, or it could be operational cost savings, compliance with federal regulations, or enhancing your organization’s reputation. This concrete goal will serve as your roadmap along your decarbonization journey.

Whatever the carbon goal is, ensuring that it’s in alignment with the organization’s business strategy is crucial. Here are a few examples of what that might look like:

Business Objective Carbon Goal
Research and innovation: Launch three new products within the fiscal year. Reduce the number of short-haul flights taken by R&D teams by 30%.
Market expansion: Enter a new international market and achieve a 15% increase in global market share. Minimize approved accommodation options to only those that support sustainability initiatives, such as hotels in the new market with recognized sustainability certifications.
Operational excellence: Improve operational efficiency by 10%. Enhance employee well-being by specifying in policies that travelers prioritize direct flights whenever possible.
Quality and compliance: Achieve 100% compliance with all regulations and quality standards Implement a system to track the emissions of business travel activities and share reports on a monthly basis with employees to raise awareness.
ESG: Reduce carbon footprint by 20%. Reduce low-value trips and reinvest those costs into employee well-being or community enrichment programs.

Step 2: Assess your carbon footprint

Understanding your starting point is crucial. Like conducting a financial audit to gauge the company’s financial health, the next step is to conduct a thorough carbon footprint assessment that analyzes all aspects of your historical business travel, including:  

  • Flights
  • Accommodations, including hotels, Airbnb, etc.
  • Rail travel
  • Ground transportation, including car rentals, public transportation, Uber/Lyft, etc.
  • Any other related emission sources
  • Trip purpose

The last item in the list is likely the most important because it provides context around why the trip happened and the specific business outcome it enabled. This baseline data will be your benchmark for measuring progress.  

Step 3: Forecast emissions of business objectives

Just as you use forecasts to predict financial outcomes, you need to forecast anticipated growth of emissions based on a series of operational and emissions variables (e.g. headcount, costs, etc) to understand the likely path ahead. Using this foundation, you can then inform the right strategies to drive different outcomes by deploying the scenario analysis described in the next step.  

Step 4: Conduct scenario analyses of business activities

Similar to financial scenario planning, model different carbon-related scenarios that test assumptions to see what the potential impact would be on your carbon goals and your business objectives, such as:

  • Replacing short-haul flights with rail
  • Limit business class flights to only those over 5 hours long
  • Eliminate one low-value trip per full-time employee
  • Set carbon budgets for different departments or teams
  • Reducing low-value trips
  • Aligning trip spending more closely with travel priorities

For instance, you might model the impact of enforcing that all short-haul flights be replaced by train service when available, which could reveal a 7% reduction in emissions and 4% reduction in costs.

Running scenario models on different potential drivers, strategies and variables is critical to build confidence in the right path forward.

Step 5: Create a budget for sustainability initiatives

In Financial Planning and analysis (FP&A), you create a detailed budget to estimate how much money you’ll need to reach your financial goals, including estimated revenue from sales for existing products, revenue projections for new products, as well as all expenses for research and development, manufacturing, marketing, compliance and so on.

The same holds true for your carbon; you must allocate a budget to support the initiatives that will enable you to meet your carbon goal(s) and business objective.

This could include funding for:

  • Employee education initiatives
  • New incentive program for lower-emission travel
  • Partnerships with organizations that share similar values
  • Sustainable Aviation Fuel (SAF)
  • Investing in carbon offset programs

Step 6: Monitor key performance Indicators (KPIs) in real-time

To ensure the effectiveness of your business travel programs, you need to establish KPIs that align your carbon objectives with the organizational goals and regularly monitor the impact travel activities are having on these goals.

Some example KPIs you might consider include:

  • Percentage reduction in carbon emissions per trip compared to the baseline
  • Total cost of corporate travel expenses
  • Total carbon emissions (CO2 equivalent) from corporate travel
  • Vendor cost-effectiveness

Step 7: Continuously adapt and refine your strategy

In both financial planning and carbon management, your recurring performance analyses help you determine if you need to adjust your strategy throughout the year. For instance, if you’re not on track to reach a projected 7% reduction, you could set more aggressive policies that limit first-class air travel to only international flights over six hours long.

Pro tip: Also consider the potential cost savings from the reduced first-class travel expense and where you can re-allocate it to other areas.

Step 8: Collaborate and communicate

Just like the financial team communicates regularly with company executives and shareholders, providing reports on financial performance and explaining strategies and decisions to meet the goals, you must regularly collaborate with functional leaders and executives to provide reports on travel-related emissions reduction progress and share best practices to help drive desired behavioral changes across the organization.

Who to collaborate with:

  • Human Resources
  • Finance
  • Sustainability or ESG team
  • Legal counsel
  • Policy champions
  • Senior leadership and key stakeholders

Step 9: Continuous improvement

Over time, you continuously refine budgeting processes and financial strategies. Apply this same philosophy to your carbon management. Optimizing travel policies and procedures, investing in training employees on sustainable travel options, exploring innovative transportation solutions, and engaging with new industry partners are just a few of the ways you might continuously improve and find new ways business outcomes can be achieved through emission reduction outcomes.  

Step 10: Future-proof your carbon management

Incorporate a forward-thinking approach to your carbon management by extending your plans beyond your initial targets. Explore cutting-edge technologies to streamline carbon tracking and reporting that lives alongside business activities, anticipate and adapt to evolving regulations, and actively seek opportunities to spend better, travel smarter, and reach net zero faster.  

By managing your business travel emissions with the same diligence and strategic approach as your financials, you’ll not only reduce your carbon footprint but will also create opportunities for cost savings, enhanced reputation, and competitive advantages that extend far beyond your bottom line.

Begin your journey toward strategic carbon planning and management today. Set up a time with one of our experts to learn how Clarasight can help you manage your carbon like you manage your financials.

Stay in the loop

Get the latest Clarasight insights,
delivered straight to your inbox